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OT Gross eom
OT - does Koi taste like Chilean Sea Bass?
.......98cents to go, good luck to your Koi
Penson said that my ATNO div will be cleared to sell next time Haleys comet rolls around jk
SBSH is certainly going to walk this towards .01 at the open IMO. But, as SBSH has shown us all it can 'generate' electronic shares to sell to hold it down as its(?) bid accounts feed and cover(?). Its such a dissapointment that ATNO hasn't reported a 10Q with some actual business revenues in it, even if it was losing its guts at the bottom line it would show actual enterprise instead of mindlessly creative PR's (the mortgage triage centers still has me laughing) and endless forward splits of an empty paper bag IMO.
(9.16 AM pre PPS--- 0.0065 / .035)
The Company claims it cannot draw any of the massive $120,000,000 line because the Company and its helpful consultants cannot get the $120,000,000 debenture investment registered or posted onto Euroclear (A condition of closing). The Company further claims that Euroclear has refused to register the Debenture after Euroclear registration officials performed due diligence on both the Debenture and the Issuing corporation. Euroclear cannot fathom why anyone would invest $120,000,000 at 0% interest until 2012, with a conversion feature of $50.00 per share and the corporation seemingly was not able to conclusively answer this line of questioning.
I was unable to find any reference or prior dealings from alleged funder/financier 'Jain Vasant'. Judging by the lastest 8k/10Q announcing several new consultants who coincidentally joined the company within a day or two of the 8K disclosing the Jain Vasant $120,000,000 0% Convertible Debenture of Sept 4th 2012, curiously even though the company allowed unlimited piggy back registration rights on its effective Sb-2 to the debenture holder, the company has been unable to draw down from the debenture. It appears to me that this troubled energy alternative company remains distressed.
Correction: ATNO PPS Pre Market open .005 / .05 (Pre Split $1.50 / $15.00). As I expected SBSH is the first market maker registered this morning. This should get interesting.
Post split PPS pre market-$.0047/$.0057 (equivilant pre split 100x3 = $1.41/$1.71,down from $2.35) IMO conclusion: Someone's been selling this wholesale, UNLESS of course ATNO bulls back to .01+, in which case my earlier posts regarding the confusing math,dates,cusip could work out to be a quick trade opportunity. Maybe that's what hypehype is suggesting?
a BUCK?! (I think that's a typo) hilarious eom
Atlantis Technology Group (OTCBB: ATNO) announced
today that the record date of the three-for-one forward stock split has been changed to November 27, 2007 due to a delay in processing the necessary paperwork due to the Thanksgiving Holiday.
As of Wednesday, November 28, 2007, shareholders of Atlantis Technology Group will automatically receive two additional shares of common stock for each share of record held on November 27, 2007,constituting a three-for-one forward stock split.
The forward stock split will occur automatically to Atlantis Technology Group shareholder accounts from the company treasury on November 28, 2007, at the applicable market price as of that date.
It's not split in my account, anyone else??!!
At first glance one could easily dismiss ATNO as a TRADE, but the math from the previous 100 : 1 forward split and the confusion with symbol changes and cusip changes produced a amazing high of the day. Completly dismissing all of the news and PR's so far, someone's ringer got rung and they've been busting this shaking a tree harder than most trees get shook.
added bonus which might be nothing - ATNO 'used' to be a BDC.
ATNO seems real confused about its Record Date and Pay date IMO
This is the best boxing I seen since Ali Vs Frazier II.
This has been through a war *I found this old Rimini Report from 2006, makes interesting reading.
INVESTMENT HIGHLIGHTS
SYNGAS INTERNATIONAL CORP.
SYNI – NASD: OTCBB: US$0.47 SEPT 29, 2006
Working Today to Power Tomorrow
RECOMMENDATION: STRONG BUY
Per Share Data US$0.50
Price (9/29/2006): $0.50
Basic Shares O/S: 39.1mm
Target Price (Q1/06): $2.97 Fully Diluted Shares: 39.85mm
Restricted Shares: 30.16mm
Projected Return: 561% Market Cap: US$18.2million
52 week range: $0.26 - $0.83
Syngas International Corp. is a US based international alternative energy company. During 2005, SYNI restructured from its old oil and gas focus to alternative energy.
The shareholders authorized a reverse split of 25:1 on December 31, 2004. The split was effective as of March 2005.
Syngas acquired its technology by purchasing 100% of Syngas Energy Corp., an alternative energy company specializing in gasification based in Edmonton, Alberta Canada – home of North America’s Energy Source.
Syngas already has one working prototype that converts any carboniferous material to heat energy, electrical energy or synthetic natural gas.
Next Syngas Energy Corp. acquired the world wide rights to PyStR, a proprietary technology capable of producing near pure Hydrogen at costs lower than any presently available technology utilizing the Syngas gasification process.
For the duration of 2006 and into 2007 Syngas intends to further increase yields and begin commercialization.
We are initiating research coverage on Syngas International Corp. with a STRONG BUY recommendation. Although the anticipated growth in the production of natural gas along with sustained high prices for the commodity is attractive, we feel the potential of the results of their Hydrogen research will have a huge impact on the value of the enterprise. Our target price range of $3.46 - $8.94 by the middle of the second quarter of 2006 is based upon the PyStR project and on the potential impact to net asset value of the successful commercialization of the Hydrogen research.
HISTORY/BACKGROUND
Syngas International Corp. was formed on June 20th, 1997 as Goanna Resources, Inc. Initially engaged in mining, management changed the focus of the Company in 1999, when it became apparent the mining opportunities previously thought available in Australia would not be forthcoming, from mining to internet marketing of anit-aging and anti-arthritic products. As part of the change in focus, Syngas entered into an agreement with Praxis Pharmaceuticals to provide Praxis with 2,600,000 shares and $250,000 for Praxis to conduct research on behalf of Syngas.
In February 2001, Syngas and Praxis mutually terminated the research and development agreement after Syngas had funded $162,500. As part of the termination Agreement, Syngas was entitled to a maximum of $250,000 from sales of Praxis products over its first three years in the sales cycle. Praxis was entitled to keep the 2,600,000 shares of Syngas it had already received as part of the funding for research and development.
In April 2001, Syngas entered into an agreement with Hunter Exploration Group to acquire a 100% interest in certain lands encompassed by a special exploration permit located in Northern Manitoba Canada encompassing approximately 280,000 acres. Syngas was obliged to pay US$30,000 and issue 400,000 shares for its portion.
In June 2001, the Company entered into an “Initial Option Agreement” with Indicator Explorations Ltd. for $2,500 and 200,000 shares of stock. The agreement entitled Syngas to earn a 100% interest a potential diamond property that encompassed approximately 78,725 acres in an area where several major diamond producers were active.
In June 2001, the Company acquired a 5% working interest in a gas prospect called the Coalinga Nose Property with Greka Energy Corp. and Micron Enviro Systems.
In August 2001, further to an agreement with Brothers Oil and Gas and Dasher Energy Corp., for a one time payment of US$50,000, Syngas increased its net revenue interest in the Coalinga Nose Property prospect.
In February 2002, it appeared that initial reports from Coalinga revealed the formation may not be economically viable.
In April 2002, Syngas entered into a Farmout Agreement with Olympic Resources (Arizona) Inc. The agreement called for Syngas to pay 5% of the drilling costs to earn a 3.75% undivided interest in five test wells. The agreement also called for Syngas to have the option to earn a reduced 2.025% on a further test well for 2.7% of the drilling costs, as well as a 3.75% interest in other lands upon payment of its share of the drilling costs to December 2003. The agreement also obligated Syngas to pay 5% of the proposed fees payable in common stock.
In June of 2002, the CEO of Syngas changed from Robert Grace to George Tsafalas.
In December 2002, Syngas entered into a participation agreement with Patch Energy Inc. The agreement allowed Syngas the right to earn up to a 1/3 share of the interest Patch had in certain farm out lands by contributing 1/3 of Patch’s expenses pursuant to its farm out agreement with True Energy Inc, and Arsenal Capital Inc.
In February 2003, Syngas entered into a second farm out agreement with Patch Energy Inc. The agreement called for Syngas to earn a 1.75% interest in a 10 well drill program for a proportionate payment of costs.
In April 2003, Syngas was informed that to earn its 1.75% interest in the farm out agreement with Patch, it would have to pay 2.5% of the drilling costs, reflecting the increased costs to which Patch was subject.
In April 2003, Steel & Co. were replaced by Morgan and Co. as auditors. Syngas also moved its offices to 666 Burrard Street.
In February 2004, Syngas and Praxis signed a letter confirming their mutual termination agreement from February 2001, provided that Syngas had been paid $59,423 of the $250,000 called for under the termination agreement.
In December 2004, Syngas underwent a complete restructuring. As part of its restructuring the shareholders approved a 25:1 reverse split. New management was elected; old management was given a 2 month consulting contract to ensure a smooth transition.
In February 2005, the reverse split became effective with Syngas trading under its new symbol, SYNI.
In April 2005, Syngas announced it would purchase 100% of Syngas Energy Corp., a company actively engaged in the alternative energy sector.
In April 2005, Syngas divested all interests in natural resources that were still active.
In April 2005, a defect in the contract between Syngas and Syngas was detected. As certain of the shareholders of Syngas were unwilling to abide by the intent of the agreement, the closing of Syngas was postponed and an action in Supreme Court was started against certain shareholders of Syngas.
In July 2005, the defect in the contract between Syngas and Syngas was cured, the transaction closed as contemplated in the agreement and the action in Supreme Court was withdrawn.
In August 2005, new management was elected as outgoing management had determined they could no longer add value.
In September 2005, the first audit of Syngas Energy Corp., Syngas’ wholly owned subsidiary was completed.
In October 2005, Syngas Energy Corp. acquired the world wide licenses to a revolutionary technology called PyStR. PyStR was developed by an American inventor, partially under a DoE grant. Proven to produce Hydrogen at one third the cost and up to 98% pure, Syngas intends to commercialize the production of Hydrogen and Hydrogen derivatives in the energy and commodities markets.
In January 2006, Syngas entered into a joint venture agreement with Global Envirotech to upgrade and operate a medical waste facility in Beiseker Alberta.
In January 2006, Syngas identified three capital projects for 2006, of which Beiseker was one.
In February 2006, Syngas unveiled its PyStR technology to industry, government and academia at the Big Hydrogen show in Calgary AB. The show was hosted by The Canadian Hydrogen Association and EnergyiNet. The Company aroused interest from all the major hydrogen producers present.
In March 2006, Syngas learned that Global Envirotech’s contract with the previous owner was frustrated and began negotiations to purchase the facility without a joint venture partner.
In July 2006, Syngas began negotiations to purchase Salmon Arm Plastics Ltd. (“SAPL”). SAPL is a plastics extruder using RPET to produce plastic sheeting located in Salmon Arm BC, a tourist hotspot, and in the middle of BC’s multibillion dollar forestry industry. Syngas plans to build a PyStR unit on site to demonstrate the technology’s varied uses, utilizing the nearby wood waste as feedstock.
TECHNOLOGY REVIEW
GASIFICATION TECHNOLOGY
Gasification breaks down virtually any carboniferous feedstock into its basic components. The process allows separation of pollutants and greenhouse gases to produce clean gas for efficient electricity generation and production of chemicals and clean liquid fuels. In a time of power and fuel-price increases, flexible gasification systems provide a solution utilizing lowcost, widely available, and varied feedstocks.
Gasification technologies differ in design and process, but certain production characteristics remain constant across the different technologies. Basically, a raw material such as coal, petroleum based materials (crude oil, high sulfur fuel oil, petroleum coke, and other refinery residuals), gases, or materials that would otherwise be disposed of as waste is prepared and input into the gasifier. The feedstock reacts in the gasifier with steam and oxygen or air at high temperature and pressure in a reducing (oxygen starved) atmosphere. This produces the synthesis gas, or syngas, made up primarily of carbon monoxide and hydrogen and smaller quantities of carbon dioxide and methane.
The inorganic materials in the feedstock (such as ash and metals) are converted into a vitrified, inert material called slag. The slag has important, economically viable uses in the construction and building industries. With some feedstocks, valuable metals are concentrated and recovered for reuse.
The syngas can then be used to power turbines to produce electricity, typically using an integrated gasification combined cycle (IGCC) power generation configuration. Byproducts from this process include sulfur or sulfuric acid, both marketable commodities.
The syngas can also be further processed using commercially available technologies to produce fuels, chemicals, fertilizer, methanol, synthetic natural gas or other industrial gases.
The Company is further developing the PyStR process to utilize the synthetic gas it produces from its gasification process to produce Hydrogen. There also exists the potential to process the PyStR output into the next generation of gasoline.
SYNGAS’ GASIFICATION TECHNOLOGY
Syngas has improved on traditional gasification technology by allowing gasification on a fluidized bed in a configuration that actually sequesters, captures or eliminates all net CO2 emissions, at virtually no extra costs. The system is proprietary, and a prototype has been built and tested. The Company will soon be ready to go to market by building a commercial scale model. The following simplified schematic explains the technology:
The Syngas Gasifiers are low cost, high value added, high margin power production units. The economics of the process have very attractive margins and are a socially desirable alternative to traditional fossil fuel power plants, including the majority of coal-fired gasification plants around the world.
Although the gasifier can use any carboniferous material to produce its synthetic natural gas, coal is quickly becoming the feed stock of choice due to its abundance and low price point. It is also, however, the dirtiest fossil fuel in the world. The Syngas gasification process can utilize coals abundance and low price point as a feed stock, while eliminating its “dirty” qualities, a market phenomenon known as “clean coal” technology.
Syngas Energy Corp’s chief engineer and chief operating officer began his career in the industry over forty years ago. While others sought to improve fossil fuel extraction rates, Syngas (through its predecessor company) began seeking ways to improve gasification technology. Because of this, the Syngas process is much more developed than other gasification technologies. The Syngas process can produce energy at a lower cost, with a higher output and less environmental damage than most mainstream gasification technologies.
The Company has developed a working prototype. A demonstration for the public, industry and analysts is planned for later this year.
The Company is also in discussions to purchase a medical waste management company to utilize its technology so that the facility can capture the energy streams from the waste, eliminating the energy cost of the center and selling the excess energy to the grid. This will not only provide initial revenues, but be a real world test bed for the technology.
The Company is also in discussions to install a 3MW unit to a waste management company.
The Company’s units are more robust than presently available technology, able to utilize a greater variety of feedstocks without the need to first dry them or cut them to uniform size. Additionally, the units are not dependent on a certain feedstock; the feedstock can be changed very easily, enabling a different feedstock to be utilized should the first become non-viable or unavailable. The units are, therefore, by necessity, easily transportable. Also unique, the units are scalable, allowing clients to order smaller units and increase capacity as availability of feedstock or as demand for power increases.
SYNI’s proprietary Syngas Gas Generation process is revolutionary in that it converts any carbon based input into an energy output. The process allows the Company to provide enough energy to power a factory or an entire city. The units are scalable, portable and robust. Clients may buy or lease the unit or have the Company build units simply to provide power to clients to replace their existing utility company at cost and reliability rates that far surpass any potential competitor. The process is useful in recycling of municipal solid waste (MSW), the recycling of waste outputs of lumber mills, garbage fills and even farms. It saves money for users while significantly reducing the environmental impact currently being experienced in energy exploration, processing and generation.
The technology is proprietary. The process produces no harmful emissions, is self contained and produces synthetic natural gas and methane. The result is an energy efficient and environmentally sound energy generation process. Additionally, the range of inputs available to the process far surpasses any conventional method of producing energy, allowing nations not endowed with traditional natural resource energy inputs to participate in self-sufficiency.
The latest generation of our technology has the following advantages compared to conventional energy plants:
Advantages:
• Extremely high conversion efficiency
• Compact and transportable
• "Waste" heat recycled
Compared to conventional plants:
• Less expensive to build
• Less expensive to operate
• Less than 1/2 the CO2 production per gJ
• Simultaneous production of a pure CO2 waste stream
• Efficient combustion process
• No oxygen separation unit needed
• Feedstock are coal or other carbon containing fuels such as wood or peat, water (steam), and continuously recycled calcium oxide
OUTLOOK
The world today is dependent primarily on fossil energy. In energy forecasts from governments around the world, electricity and transportation fuels will continue to be fossil-fuel based for atleast the next 20 years.
As traditional oil and gas fuels become scarce, energy strategies are struggling to combine energy availability at reasonable prices with increasing environmental standards. The recent Hurricanes in the American Gulf states, the melting of the polar ice caps and the recent monsoons in south east Asia have served to highlight the world’s increasing concern with Global Warming. In the not too distant future, the cornerstone of the world’s energy will remain fossil-fuel based, but it will be cleaner, environmentally sustainable, and increasingly based on coal rather than oil and gas.
The basic drivers promoting government, commercial, and public interest in gasification systems reflect a demand from consumers for reliable clean power. Throughout the World, emission standards are tightening, and a keen sensibility to the environment is developing. Additionally, some of the largest power consumption markets are in areas where total allowable emissions are “capped,” requiring near-zero-emission plants. Gasification systems can process a wide range of materials, including hazardous wastes. Materials that would otherwise require waste treatment can be turned into benign or value-added byproducts.
Natural gas fluctuations, a shortage of refinery capacity, and electricity supply shortages highlight the need for a secure energy supply at stable prices.
As a reaction, more industries have become self-generators (often called “cogenerators”) of electricity, utilizing systems that enable electricity production with byproducts (fuels, chemicals, hydrogen, and steam). The majority of these industries are increasingly looking at gasification because of the technologies’ ability to remove CO2 from fossil-energy systems. Gasification is seen as an alternative because it negates the need to radically change energy systems based on fossil fuels and allows a much faster return on investment than switching to a non-fossil fuel based power system – if that were available.
Each of these drivers represents a major opportunity for Syngas International Corp. For example, improvements from its advanced gasifiers will yield improved efficiency and environmental performance, while improved integration and value-added byproducts will improve economics.
MARKETS
The main market opportunities for gasification based projects are in the USA, China and Canada.
It has been forecast that the USA will need to build between 1300 and 1900 new power generation plants to meet its future demand. In present power plants, natural gas or coal is usually utilized. These two feedstocks are a major concern among all countries: natural gas prices are very high and are predicted to remain high as demand is outstripping supply, while coal fired power plants are a concern to the environment. The USA has the worlds largest supply of coal estimated at around 250 years of reserves. Gasification of coal into syngas provides a much cheaper alternative to natural gas, and a much cleaner alternative to utilizing coal in its natural form. The USA has also expressed a significant interest in gasification technologies and in their desire to turn coal into ultra clean fuels, as witnessed by the new Energy Policy of August 2005.
The Chinese market has some similar requirements to the USA, for example increased power generation and the need to reduce dependency on imported oil. China is the fastest growing energy consumer in the world, with all the attendant pollution and energy supply problems implied. Although the United States emits about 20% of the worlds total CO2, more than any other country, China is quickly gaining and is estimated to become the number one emitter by 2020. It is already the world’s largest coal consumer. Ninety percent of China’s electricity demand is fueled by coal. A demand increasing so rapidly that China expects to build more than 300,000 MW of generating capacity over the next 30 years, or almost half of America’s current consumption. As it stands now, almost all that capacity will emit alarming levels of CO2 using traditional gasification technologies. Syngas offers a viable, affordable, clean solution the world can live with.
The Canadian market is primarily focused on the tar sands projects where gasification is considered to be a key element in reducing the costs and increasing the yield of low-grade tar sands into synthetic fuel.
Refineries are looking to find the most efficient and cost-effective way to dispose of their residual byproducts. Solutions based on gasification offer the ability to hit multiple targets: convert
residual waste products to high quality products, solve emission problems and increase overall plant efficiency.
GASIFICATION TARGET PROJECTS
Syngas has received interests in the following areas:
1. Beiseker: The Company is in final negotiations to purchase the facility and upgrade it at a capital cost of approximately $7 million for a large M-60 unit.
2. Australia: Syngas has been approached by a group of businessmen to acquire the exclusive right to the technology for Australia. Management is reviewing the proposal as well as the caliber of the group proposing the acquisition.
3. Several pulp and paper mills in British Columbia, Canada have approached the Company to provide proposals to gasify their pulp and paper waste. The new environmental legislation in Canada prevents these plants from burning the waste as they have done in the past. Gasification is the most promising solution.
4. The Company has developed a strategic relationship with a pioneer green energy firm in Chile.
5. Request for proposal pursuant to a directive from the Government of Pakistan, Sui Northern Gas Pipelines Ltd.
6. Interest has also been shown by the larger natural gas users in North America to use the gasifier as a possible substitute for expensive natural gas.
GASIFICATION UNITS AVAILABLE TODAY
Although Syngas is constantly producing new models, the following models are currently available:
Model M2-1.5 1.5 mm/BTU/HR
Model M2-3 3.0 mm/BTU/HR
Model M2-6 6.0 mm/BTU/HR
Model M2-10 10 mm/BTU/HR
Model M2-20 20 mm/BTU/HR
Model M2-30 30 mm/BTU/HR
Model M2-40 40 mm/BTU/HR
Model M2-60 60 mm/BTU/HR
Model M2-80 80 mm/BTU/HR
PYSTR TECHNOLOGY – ONGOING RESEARCH
PyStR was unveiled to the world during the Big Hydrogen Show in Calgary AB on February 13th, 2006 to critical acclaim from industry, academia and government agencies.
Although research is ongoing, a working model is complete. PyStR differentiates itself from other hydrogen production methods by using a net exothermic reaction technology in a one step process. The result is near pure hydrogen as proved out in the company’s initial laboratory tests. The evaluation was done by a third party laboratory to ensure no conflict of interest.
A typical reaction for the PyStR process would be:
C + 2H20 + CaO CaCO3 + 2H2
The reaction is produced netting -88kJ/mol indicating a better than parity reaction. In other words it produces more energy than it uses in the production of H2, allowing an inexpensive and profitable way to produce the hydrogen.
DRIVERS OF THE HYDROGEN ECONOMY
The Hydrogen Economy is, at present, driven by a universal belief that hydrogen will replace the fast depleting stocks of fossil fuels as the primary energy source of the future.
Indeed, the major oil companies have allowed that after spending close to four times their traditional expenditures on oil and gas exploration last year, it only increased reserves by one fifth of those traditionally discovered.
Nuclear fusion is considered an alternative, however the dangers of widespread uranium availability has caused a geopolitical storm that polarizes and hampers sustainable economic development of the resource (if it could in fact be found in economically viable quantities and prices).
Solar and Wind Power have inherent geographical limitations.
The governments of most nations have determined that hydrogen will be the fuel of the future and have started to build the infrastructure to support it.
• President Bush’s 2005 Energy Bill calls for $3 billion to research hydrogen production
• California Governor Arnold Schwarzenneger has signed into law the Hydrogen Highway
• Shell is testing a hydrogen filling station in Washington DC
• BC Hydro, one of the largest utilities in North America has already begun production of hydrogen tanks to be used in filling stations
• The first private hydrogen filling station is being built on British Columbia’s famous Sea-to-Sky highway, aptly renamed “The Hydrogen Highway” that will come to world attention in 2010 as it is the only gateway to the 2010 Winter Olympic Games.
• Ballard, whose investors include governments, Ford Motor Company, Daimler Chrysler and others is in the process of commercializing the fuel cell
• GM is already road testing the first of its hydrogen powered cars
The one thing all these applications lack is a reliable, affordable source of quality hydrogen. Reliable, affordable, quality hydrogen, according to the Company, is the promise of PyStR.
THE ECONOMICS OF HYDROGEN
Energy is often measured in terms of heat value, or British Thermal Units (Btu). Based on this, Hydrogen, using present technology, does not make economic sense:
Various Energy Costs Utilizing Traditional Technologies
(SouthEastern USA)
($/mil-Btu)
Electricity @0.12 / Kwh $35
Propane @$12 / 20lb tank $17
Gasoline @$2.25 / US gal $16
Heating Oil @$2.20 / US gal $16
Natural Gas @$6.50 / Therm $6
Hardwood @$1.50 / chord $6
Coal @$60 / ton $2
Wood Chips @$15 / ton $1
Hydrogen @$8 / equivalent gal $57
The Company estimates its cost for the production of Hydrogen at approximately $0.60 per kilogram. One kilogram of hydrogen is equal to a gallon of gasoline. Although this amounts to roughly $4.46 / mil Btu, the applications for hydrogen cannot be replaced by the lesser cost fuel sources above. For example, coal or wood chip burning automobiles or fuel cells do not exist.
TARGET MARKETS
Oil Sands and Heavy Oil Production:
Oil sands are composed of bitumen, sand, water, and clay, and must be physically separated by a flotation process prior to further processing. The separated bitumen is processed into sour synthetic crude oil. Heavy oil and sour synthetic crude have similar properties and can be processed in the same way. With the addition of hydrogen, the sour synthetic crude oil is then further refined into value-added products like gasoline and diesel fuel.
The Alberta Oil Sands sit in the Athabasca Basin. The primary hub for the region is Fort McMurray a small town about 600 miles north of Montana. Everything about the Oil Sands screams gigantic:
• The sands sit under forests the size of the state of Florida.
• The recoverable reserves are estimated to be in excess of 175 billion barrels – that’s second only to Saudi Arabia.
• The total reserves are estimated to be in excess of 2 trillion barrels – that’s eight times the size of Saudi Arabia.
• Two tons of Oil Sands yield about one barrel of oil…and that’s still profitable (crude extraction from oil sands is profitable as long as the price of oil stays above $40 per barrel).
• The dump trucks used to transport the sands routinely carry upto 400 tons.
• The crude oil yields garner a higher price because it’s a higher grade crude.
• Over $10 billion is expected to be invested into the sands in the next 10 years.
• Instead of using oil wells, an entire strip mining operation is used to mine the sands. As an alternative, in the shale portion of the oil sands, in-situ mining is used.
The recoverable reserves are hampered only by technology, a fact alluded to not only by the industry, but by both the Canadian and US governments. PyStR holds the promise of decreasing costs and increasing yields.
Each barrel of synthetic crude is extracted from two tons of oil sands. Each barrel of synthetic sour crude requires between three and four kilograms of hydrogen to upgrade it into the synthetic crude refineries are capable of refining.
Methanol, Biofuels and Cellulosic Ethanol:
Methanol and cellulosic ethanol production both depend on hydrogen. Currently the production relies on expensive natural gas for its hydrogen content. The high cost of natural gas has caused most new methanol production facilities to be located in foreign countries where labor is cheaper. PyStR can lower the cost of hydrogen significantly assisting the industry to stay in North America.
The biofuels and cellulosic ethanol industry’s growth is hampered by proper research and development. Although the USA’s new found enthusiasm for the alternative fuel has increased interest in recent years, and spurred additional research into the industry, most ethanol today is made from a fermentation process that doesn’t require hydrogen. The industry uses corn kernels as an input source, adds yeast and ferments in a process similar to the production of alcohol.
The availability of a low cost, reliable supply of hydrogen would allow the ethanol to switch to cellulosic ethanol – this allows the use of the whole plant, not just the kernels. It would also open up the ability to use multiple feed stocks, not just a “sweet crop”.
Syngas has already publicly announced its research project into cellulosic ethanol.
Ultra Low Sulfur Diesel:
Starting June 1, 2006, the US Environmental Protection Agency has mandated all diesel fuels to be “ultra low” in sulfur content. The allowable sulfur content (15ppm) is much lower than the previous U.S. standard (500 ppm), and aims to reduce emissions of sulfur compounds (blamed for acid rain), nitrogen oxides and particulates.
Sulfur acts as a lubricant in diesel, and by lowering the sulfur content there is a corresponding drop in the fuel's lubricity. To achieve the sulfur requirements for the new fuel standards, diesel manufacturers have to include an additive to keep the fuel flowing smoothly, and to prevent engine damage. Initial findings by Syngas indicate its biofuels to be a viable and inexpensive additive.
Coal fields:
America and China, the world’s two largest users of energy have an abundant coal supply. India, the world’s fastest growing middle income population also has an abundant supply of coal, as does Canada. Most electricity needs in the USA and China are supplied by coal. PyStR can utilize the coal to produce a clean burning synthetic gas which can then be used as a clean energy source for electricity production.
Carbon Sequestration:
Traditionally thought of as a pollutant, carbon dioxide, a waste gas from the gasification process, is now in demand to stimulate depleted oil wells into production. Conventionally, oil wells produce well in the beginning of their existence and then slow down, and eventually stop as the pressure required to draw the resource from the ground depletes. Industry estimates reveal that up to 70% of the resource is left in the earth.
The ability to sequester carbon, a feature of the PyStR unit, is now valuable for two reasons:
1. The carbon can now be pumped into a depleted well to replenish the pressure necessary to get the well flowing again;
2. The US and other governments are now issuing valuable, tradeable, carbon credits that are easily monetized.
The carbon is then trapped into the ground where over time, it fossilizes into rock, sparing the environment.
Biomass:
Biomass represents plant, wood waste and agro products. Presently, biomass is used in digesters (essentially fermenters) to create synthetic diesel. This is a somewhat time consuming method that is also constrained by certain types of feedstock in a similar way as cellulosic ethanol. PyStR allows for the use of multiple types of feedstock. Syngas has already conducted trial tests, successfully producing hydrogen, using elephant grass, a bamboo type of grass that can grow up to 11 feet per cycle, and is easily grown in most climates.
The market segments are large, with established players entering what was once the strict domain of the alternative energy company. However, where they are just starting research, Syngas has a working model of PyStR and could garner a first mover advantage.
REVENUE MODEL
The Company has several revenue models it intends to pursue.
1. Licensing: In large projects requiring hundreds of millions of dollars in capital expenditures, the Company intends to license applications. The number of applications the Company’s technology can pursue are virtually limitless. For example, one application would be for Tar Sands Mining in the Athabasca Basin in Alberta, another could be for Tar Sands Mining in non-Athabasca Basin regions in Alberta, etc. The licenses can be delineated by application, geography and technology – both Syngas’ and its partner company’s technology. For example, mining tar sands is a different technology than in situ tar sands reclamation.
2. Joint Venture: For small and midsize ventures with a producer or feedstock provider, a separate joint venture vehicle would be created where Syngas would provide the technological knowledge and the partner providing the capital expenditures.
3. Micro Power Plants: In small scale or remote projects, Syngas would build its own power plant to supply power to a particular customer or for a particular feedstock.
In this way, the Company intends to grow quickly without diluting its shares or relying on too much market financing.
VALUATION MODEL
We have developed a discounted cash flow (DCF) valuation model for Syngas. The primary assumptions of the model are:
• SAPL will achieve its forcasted cashflows (it is, at this writing, on schedule)
• SAPL will be expanded
• The first PyStR unit (5MW) will be operational within the next 12 months
• Feedstock is relatively abundant and inexpensive for the PyStR unit
Year 1 2 3 4 5
Sales
Salmon Arm $5,200,000.00 $7,200,000.00 $7,200,000.00 $10,800,000.00 $12,960,000.00
PyStR $2,608,653.60 $2,660,826.67 $2,714,043.21 $2,768,324.07 $2,823,690.55
Total Sales $7,808,653.60 $9,860,826.67 $9,914,043.21 $13,568,324.07 $15,783,690.55
Operating Cashflow $1,540,333.50 $1,583,043.29 $1,706,064.41 $2,568,893.80 $7,953,535.42
PV of CF $1,375,297.76 $1,261,992.42 $1,214,342.95 $1,632,578.45 $4,513,049.60
Cumulative CF $9,997,261.18
PV of Terminal Value at Year 5 $56,413,119.97
Intellectual Property Premium $50,000,000.00
Shares OS 39,136,364
Target Price $2.97
RISK FACTORS
Competition
Although Syngas’ gasification technology is unique, it does have some substantial competitors entering the gasification space. Major oil and gas companies have entered the alternative energy industry and will pose a threat to Syngas as they have substantial financial strength and technical resources. This threat is mitigated by the fact that Syngas’ research and development is atleast two decades ahead of any major starting from scratch today.
Biofuel companies have been springing up all over the US, as demand for lower cost fuel rises across the globe. The threat from the majority of these companies is mitigated by the fact that they use a fermentation process for producing biofuels that requires feedstocks rich in sugas such as corn, soya and sugarcane. The process is both more costly and more time consuming than the catalytic approach promoted by Syngas. Experts also doubt the viability of fuel sources that use food chain commodities to generate power.
Syngas’ laboratory tests prove its biofuels are a viable and inexpensive alternative. The company hopes to lower the cost of ethanol and other biofuel production by converting gases produced from its M2 gasifier and PyStR system. Substantial reductions in production costs are possible by replacing corn with less expensive cellulose based feedstocks. Cellulosic feedstocks include agricultural wastes, grasses and woods, and other low value biomass such as municipal waste. Syngas with its superior technology is a step ahead of its direct competitors.
Losses Incurred during Development
Although Syngas has completed its development stage work, it did suffer losses during the period. Despite its technologies, Syngas suffers from risks inherent in any startup enterprise. Mitigating Factors: Management is confident of building, commercializing and earning revenues in the next 12 months.
The Price of Oil
Recent interest in alternative energy technologies has risen from increased price of oil. If the price of oil decreases, interest in the sector in general could wane and the high valuations could falter. Mitigating Factors: Syngas isn’t only a substitute for oil. It produces hydrogen, as well as energy to produce electricity, both at lower cost than present technologies.
Need for Future Financing
Traditionally, Syngas uses a mix of debt and equity to finance its development. Commercialization of its technologies, further research and development and growth of the Company are only possible if it is able to raise money. There is no assurance that the Company will be able to raise funds as and when needed to finance operations and growth. Mitigating Factors: Syngas is acquiring Salmon Arm Plastics Ltd. (“SAPL”). SAPL provides Syngas with a mitigated downside risk in that its present revenues are not dependent on Syngas’ power producing technologies to turn a profit. It also provides Syngas with a location that is ideal for transportation and in the heart of Big Lumber in British Columbia. Recent legislative changes have made it possible for Syngas to acquire feedstock for PyStR virtually for free and also made it a necessity for its customers to buy its “green energy”.
Dependence on Key Employees
Syngas is a small company and relies on its key employees for the successful development and commercialization of the company’s technologies. Since the company is in a technology and knowledge driven business and all the employees handle key functions within the organization, any loss of employees will have an adverse effect on the company’s future performance. The company is in a highly competitive business and it faces stiff competition for highly skilled personnel. The ability of the company to recruit and retain highly qualified people will be critical for its future success. Mitigating Factors: Wilf Ouellette, CEO and chief engineer of the technologies is an insider with a substantial share position (approximately 25% of the Company is controlled by Ouellette). To date, Mr. Ouellette has not sold one share. Other insiders have continued to fund the Company through shareholders loans and through private placements.
MANAGEMENT
Mr. Wilf Ouellette – Chief Executive Officer, CFO
Responsible for the development and integration of Gasification Solutions, Mr. Ouellette has been active in process combustion systems since 1965. He specializes in instrumentation and control systems design and applications, heating and ventilation equipment systems applications, burner management and/or flame safe guard systems, combustion processes, burner design and applications, waste incineration processes and air pollution engineering. Mr. Ouellette is not only the designer of but has in addition spearheaded the development of the Gas Generation System.
Ms. Margaret P. Hunt - Secretary
With over thirty years of accounting and administrative experience, Margaret has worked for a variety of industries. She worked for a defense contractor in research and development of various technologies that required Department of National Defense Classified security clearance. She has also worked with the behavioral sciences lab at Simon Fraser University. Her management and administrative experience includes 10 years in real estate management, and 11 years in industrial manufacturing in various accounting positions, including controller.
Mr. Robert Klein - Director
Mr. Robert Klein has over 23 years of executive experience. As well as consulting in the energy and mining industries, his most recent projects have included the drilling of a well in California, the acquisition of a heavy oil project in Wyoming on which $12 million has been spent to date, and an over-pressured gas prospect in Utah. Mr. Klein brings a record of administration success with early-stage, quickly growing companies. Mr. Klein held roles of increasing responsibility in other public companies and continues to serve as an active Director and Officer. He was also a Director of Yorkton Securities. Mr. Klein holds an Honors Bachelor of Mathematics (Applied) from the University of Waterloo.
Ms. Gloria Porter – SynGas Energy Corp.
Ms. Porter has 25 years experience in management with over 20 years, most recently, in the energy industry. Prior to that she held senior management positions in the construction phase as well as operations of three biomass fired power generating stations. Gloria was also co-owner and manager in an alternate energy manufacturing firm from 1980 until the firm was sold in the mid 1990’s. Prior to that, she held various positions in a financial institution.
ADVISORY BOARD
Mr. Richard Sadowski
Mr. Sadowski is the inventor of PyStR, an advanced low-cost Hydrogen production system whose world wide rights were recently licensed by Syngas. The technology is complimentary to Syngas’ gasification technology, however, will also allow for the production of Hydrogen using the Company’s gasification processes.
Mr. Sadowski’s credits include co-authoring a book on fluidized bed gasification technology to include shallow, deep, dual, and circulating fluidized bed combustion processes and over three dozen technical white papers. As well, he served as a Vice President with several large engineering companies. Mr. Sadowski has spearheaded over nine US Department of Energy initiatives for various companies and received research grants from the DOE for research involving gasification and hydrogen generation technologies. Mr. Sadowski graduated with a B.S. in Mechanical Engineering and has a military record serving in the US Armored Cavalry, where he was awarded two bronze stars, Army Commendation Medal and the Vietnamese Honor Medal.
CONCLUSIONS
If we look at all the ethanol IPO’s hitting the market recently, those in production are valued at roughly 200 times earnings. Ethanol producers are receiving valuations of 33 times sales. Alternative energy stocks that have one application (i.e. solar or wind) are not valued uniformly due to the speculative nature of the business.
We therefore value Syngas based on its technological assets, the size of the markets it can serve and the stage of development of the Company.
All its target markets are billion dollar markets. Its applications are out of the research stage and ready for commercialization. It has several revenue streams that are well thought out and planned. Management is used to dealing with large projects, large staff and licensing of power generation plants.
We give a speculative strong buy rating with a target price of $2.97.
what's an EFTAS? eom
ATNO - nice destruction job SBSH
Options Shorting? doesn't that mean that the stock needs to be marginable - or at least have a registered option to trade the bullet with?
FBI TOP PRIORITY
They are all at lunch! eom
It sounds like a recipe for disaster! Borrowing money to sell low class junk securities short, paying margin or loan fees for the 'created?' borrow stock (I dare say there are those that have found the illusive offshore brokers that 'USED TO' be able to sell without a locate or a borrow anything).
There is NO ECONOMICAL sense in paying margin and fees from some obscure offshore account to naked short a .04 cent stock.
I think it's all being done RIGHT IN THE STATES UNDER REGULATORS NOSES.
Offshore mumbo jumbo @!@!##@!@!@!
BTW - when NNTN trades with a decent dollar/volume IMO the picture will dramatically change
; >
Did I miss anything?
Understood, they dont exist. But someone bought them - no?
Do they exist when they are paid for?
They dont exist on nake short selling:
The illegal practice of short selling shares that have not been affirmatively determined to exist. Ordinarily, traders must borrow a stock, or determine that it can be borrowed, before they sell it short. However, some professional investors and hedge funds take advantage of loopholes in the rules to sell shares without making any attempt to borrow the stock.
http://www.investopedia.com/terms/n/nakedshorting.asp
good question, one possible answer - prohibitive cost?
But "who" is the owner of the stock they are selling?
http://investorshub.advfn.com/boards/board.asp?board_id=11246
Six more hard years tipped for subprime fallout
Benjamin Scent
Monday, November 19, 2007
The US subprime crisis will continue for years to come and America may be facing a permanent decline as an economic power, famed investment guru Jim Rogers said over the weekend.
"The situation is going to continue to deteriorate," he said in Hong Kong.
"When you have a bubble, it normally takes years to work out all the ramifications."
The subprime crisis is not over, Rogers said.
"I think we have a long way to go before it's finished," he said later at a conference. "When you have a bubble like this, it usually takes five to six years to clean it up."
Rogers said not many people have lost their houses yet despite a credit bubble that allowed Americans to buy a house with no down payment - a situation unprecedented in US history.
But he said many will lose their homes before the crisis is over.
"Inflation's going to get much worse. You are going to have more people losing money. You're going to have more bankruptcies," he said.
On top of his dire prognosis, Rogers said he does not see anything that could be done to save the day.
But, he said, any steps the US authorities take to try and stop a recession will not help the economy anyway.
"Let it happen," he said. "There are these bad elements in the economy that need to be cleaned out."
Rogers said that America's position as an economic power may be starting a permanent decline.
"The United States has certainly peaked," he said.
"America, in [my daughter's] lifetime, will certainly be a shadow of its former self." Rogers has one daughter, Happy, who is four.
China will be the "next great country in the world," following Britain's economic dominance in the 19th century and the United States after that.
He said of the ramifications of a devalued dollar: "You've got to figure out ways to protect yourselves. It's going to change, the world as we know it."
The dollar's decline is getting "very bad," he said.
He predicts many countries are going to stop using the US dollar.
In response to reports that Gulf countries, including the United Arab Emirates, are pondering dropping their currencies' pegs to the US dollar, he noted some countries had already done so and expects more to follow suit.
"In 20 years, very few [countries] will have their reserves in US dollars - very few," Rogers said. "You have to be nuts to buy US dollars in the twenty-first century."
Rogers also called on US Federal Reserve chairman Ben Bernanke to resign for devaluing the greenback.
"All he knows about is printing money, and he's doing it," Rogers said. "He doesn't know about the value of the dollar; he doesn't care about the value of the dollar."
The bow-tied investment sage, who helped launch the Quantum Fund with George Soros, said the yuan could replace the US dollar as the world's reserve currency in 15 years, after it becomes fully convertible.
"I don't suspect the euro's going to last 15 to 20 years from now," Rogers said.
"The yen will never be able to replace the dollar."
Soros, Greenspan, Gross: More subprime fallout ahead
Posted Nov 6th 2007 2:07PM by Joseph Lazzaro
Filed under: Bad news, China, Economic data, Housing, Federal Reserve
When financial world's mavens speak - - such as Alan Greenspan, George Soros, Bill Gross - - the markets usually take notice.
And when the mavens speak in unison regarding economic fundamentals, well, a word to the wise: be certain to record those data points before forming your own conclusion regarding the U.S. economy's health.
Soros, in a lecture at New York University, said the U.S. economy was on the verge of "a serious correction."
"I think we are definitely in for a slowdown that I think will be a bigger slowdown than (Federal Reserve Chairman Ben) Bernanke is seeing," Soros said, Reuters reported.
Soros also said that, for now, China is the "absolute winner" at the start of the globalization age, that its economy will continue to grow at a strong rate in the years ahead, but that in 10 years time "there could be a financial crisis in China." However, Soros refused to state what currency positions he held or where he thought the dollar, euro and the pound - - the world's primary reserve currencies - - were headed in 2008.
Meanwhile, former U.S. Federal Reserve Chairman Alan Greenspan said Tuesday that cutting the supply of excess homes in the United States is key to stabilizing the financial system at home and the rest of the world.
Greenspan told Tokyo business leaders via video conference from Washington, D.C. that the key to resolving the subprime issue, and by extension, the international financial system, rested on "getting rid of probably 200,000-300,000 excess units in inventory [unsold houses in the U.S.]," The Associated Press reported.
Further, PIMCO's Bill Gross, chief investment officer of the world's largest bond fund, mirrored Greenspan's statement, and argued that the worst of the subprime crisis is still ahead:
"We've only begun to see the pain from the standpoint of the homeowner in terms of those monthly payments," Gross told business news channel CNBC Tuesday. "Defaults and delinquencies will increase as we extend throughout 2007 and into 2008." Gross said he sees another $250 billion in defaults for the next two years, and that large lenders such as Citigroup (NYSE: C), Merrill Lynch (NYSE: MER), and Bear Stearns (NYSE: BSC) will be paying the price.
Economic Analysis: Taken as a whole, the three's comments do not represent a resounding affirmation of the soundness of economic conditions in the U.S., to say the least. Greenspan's comments appear to be the most illuminating and prescient: illuminating, in that they summarized the crux of the problem facing the financial system - -namely, unsold homes; prescient, in that they point to likely economic conditions, six- to nine-months ahead. Greenspan offered no recommendations regarding how to price and sell the up to 300,000 unsold homes in an orderly, systematic fashion, but with the core problem more-clearly identified, that will be the next compelling question facing policy makers [including the U.S. Federal Reserve], as well realtors and home owners alike.
Edit:OT hytawwhw 1 cuwuisj
lots of press, lots of trading,upcoming funky forward dividend split. Anyone got any information about what the company does?
I believe it used to be a BDC.
Give it time. Good turnarounds take time. Owners - don't be impatient - don't buy this to trade it IMO
Ramoras GLTA.
exactly
....at least not an American market eom.
Currency Carry Trade
A strategy in which an investor sells a certain currency with a relatively low interest rate and uses the funds to purchase a different currency yielding a higher interest rate. A trader using this strategy attempts to capture the difference between the rates - which can often be substantial, depending on the amount of leverage the investor chooses to use.
Here's an example of a "yen carry trade": let's say a trader borrows 1,000 yen from a Japanese bank, converts the funds into U.S. dollars and buys a bond for the equivalent amount. Let's assume that the bond pays 4.5% and the Japanese interest rate is set at 0%. The trader stands to make a profit of 4.5% (4.5% - 0%), as long as the exchange rate between the countries does not change. Many professional traders use this trade because the gains can become very large when leverage is taken into consideration. If the trader in our example uses a common leverage factor of 10:1, then she can stand to make a profit of 45%.
The big risk in a carry trade is the uncertainty of exchange rates. Using the example above, if the U.S. dollar were to fall in value relative to the Japanese yen, then the trader would run the risk of losing money. Also, these transactions are generally done with a lot of leverage, so a small movement in exchange rates can result in huge losses unless hedged appropriately.
http://en.wikipedia.org/wiki/Carry_trade
The carry of an asset is the return obtained from holding it (if positive), or the cost with holding it (if negative).
For instance, commodities are usually negative carry assets, as they incur storage costs, but in some circumstances, commodities can be positive carry assets as the market is willing to pay a premium for availability.
This can also refer to a trade with more than one leg, where you earn the spread between borrowing a low carry asset and lending a high carry one.
Carry trades are not arbitrages: they make money even if nothing changes, but things may change.
http://www.moneyweek.com/file/25745/the-carry-trade-a-tsunami-in-the-making.html
http://www.safehaven.com/article-1614.htm
http://www.fxwords.com/c/carry-trade.html
http://www.forbes.com/opinions/2007/06/27/croesus-chronicles-yen-oped-cz_rl_0627croesus.html
“twincrises” -
i.e. crises where a currency crisis and banking crisis occur simultaneously, and reinforce each other. The distinguishing feature of such crises is the spill-over effects across financial institutions through collateral constraints, declines in market values of assets, currency mismatches on the balance sheet and the endogenous amplification of financial distress throughasset sales.
We explore the role of liquidity, and the role of monetary policy in such crises. In particular, a central question is whether raising interest rates in the face of a twin crisis is the appropriate policy response.
Raising interest rates has two countervailing effects. Holding the domestic currency becomes more attractive (other things being equal), but the value of the domestic banking system falls due to the fall in asset prices.
When assets are marked to market, there is a potential for endogenously generated financial distress that leads to a collapse of asset prices, as well as the exchange rate.It is thus possible that raising interest rates can have the perverse effect of exacerbating both the currency crisis and the banking crisis.
http://www.nuff.ox.ac.uk/users/Shin/PDF/twincriseseconomicnotes.pdf
http://cowles.econ.yale.edu/P/cd/d14a/d1434.pdf
CREDIT DERIVATIVES
A financial contract that transfers the credit risk of a reference asset, also known as a “name,” from one counterparty to the other in exchange for payment. The protection buyer or originator makes a periodic payment (think of an insurance type risk premium) to the protection seller. In exchange, the protection buyer has the right, upon the occurrence of a credit event, to deliver loans or securities to the protection seller in exchange for an agreed upon amount (typically par) – or to cash settle the claim. A credit event is usually defined as the failure to perform on a scheduled payment, but might also be defined as a downgrade, bankruptcy filing or other such “event.”
Credit Default Swap (CDS)
The contract is structured so that one counterparty pays a constant payment or “insurance premium” to the other counterparty in exchange for protection from a specified credit event on a particular name or reference asset.
Synthetic CDOs
Synthetic CDOs can be thought of a basket or a portfolio of credit default swaps (CDS). The term synthetic is used to distinguish them from a class of credit-linked structured securities called collateral debt obligations (CDOs). The key difference is that synthetics are pure derivatives and while the CDOs are securities with an actual (as opposed to a notional) principal that is attached to a credit derivative structure.
The risks and payments on these instruments are usually divided into segments called a “tranche” in order that they might better fit the needs of investors. The most junior tranche, known as the equity tranche, covers the first corporate names to suffer a credit event. The next level of risk is the mezzanine or intermediate tranche and covers the portion of names suffering a credit event after the equity tranche as been exhausted. The least risky is the senior tranche and is responsible for the last of such credit events.
The premia or protection payments for each tranche are set when the synthetic CDO is issued. In subsequent trading in the secondary market the tranches are priced as a percentage of their notional principle. As credit risk rises, the price might rise from say 5% to 10% of principal for the tranche that pays a fixed number of basis points in exchange for credit protection on that tranche.
CONCLUSION: THE FIRE NEXT TIME?
What is the extent of the fallout? Exact amounts cannot be known with any clarity or certainty. Actual losses at hedge funds and proprietary trading desks are not reported or at least not reported separately. The change in credit derivatives prices can be estimated from the iTraxx index for credit derivatives, however there is no reported information on the volume of trades and value of derivative and cash positions. Thus estimates of gains and losses to individual firms and the market cannot be determined.
Some anecdotal information can be gleaned from announced hedge fund closings. The well-known Marin Capital hedge fund closed doors after big losses in convertible arbitrage and credit arbitrage; and Aman Capital also closed shop at the end of the mid-year. GLG’s Neutral Group, which has credit derivative investments similar to that of Marin Capital, lost $2.5 billion or 17.2% in the first half of the year. Cheyne Capital’s hedge fund lost 4.8% in May alone. The huge hedge fund Bailey Coates Cromwell Fund, after being named Hedge Fund of the Year for 2004, announced in early June that it would close down.
What lessons might markets and policy makers have learned?
The financial sector maintained its customary stance. Either there is no problem or the limited impact of the problem proves that the system works. An exception comes from Louise Purtle of CreditSights, who stated "The combination of leverage, credit deterioration, event risk and illiquidity now bodes ill for how pervasive a period of weakness the corporate bond market will face."[7] And as an unfortunate coincidence in timing, ABN Amro and AXA Investment Managers chose this time to role out a credit derivatives fund aimed at attracting retail investors.[8]
Reaction by the official sector varied a great deal. Of US officials, SEC Chair Donaldson appeared the most alert and perceptive, stating, "Every week seems to bring another article in the press about the crowding of hedge funds into similar investment strategies and the difficulty that this implies for hedge fund managers eager to post market-beating returns. If history is any guide, it is just this sort of pressure that can lead otherwise well-intentioned professionals to pursue practices that can ultimately result in disaster for the investors they serve."[9] Unfortunately, this person is no longer helping to regulate financial markets.
In comparison, U.S. bank regulators appeared to have been drinking something caffeine free. Timothy Geithner, president of the New York Federal Reserve, equivocated with, "The growth of credit derivatives . . . seems to have made the system more stable" and at the same time these improvements have come "at the price of increasing uncertainty and potential losses".[10]
This position pretty well mimics the equivocation of Federal Reserve chair Alan Greenspan’s views on derivatives and credit derivatives especially. Greenspan gave a speech at the Chicago Fed’s annual banking conference on the very day of the downgrade and market panic. While expressing his concerns about hedge funds and credit derivatives and concentration amongst derivatives dealers, he also took the opportunity to restate his view that these markets should not be regulated.
This ambiguity about financial contagion and other threats to financial stability may very well be itself contagious. The IMF’s Global Financial Stability Report, released before the May events in April of 2005, also concluded that the role of large, complex financial institutions might or might not contribute to global financial stability or instability.
Federal Reserve Board vice-chair Roger Ferguson suffered from neither equivocation nor concern as he expressed his glowing assessment of the market. Speaking to the U.S. Financial Professionals and Global Corporate Treasurers Forum in San Francisco, he said "Hedge funds are not at this stage a source of instability, nor likely to become one," he said. "The market discipline of hedge funds has improved over what we have seen in the past." Reporters described him as also saying that the largely unregulated global hedge fund industry was improving market efficiencies.[11]
One last important item in the policy sphere deserves special attention. The Counterparty Risk Management Group II, formed in January of this year, released a related report entitled, “Towards Greater Financial Stability: A Private Sector Perspective” on July 27, 2005. Although the report does not mention the near-meltdown until page 239 of the 278 page report, it does address such issues and does provide a thoughtful and coherent analysis of financial disruptions and threats to financial stability. (Available at www.crmpolicygroup.org).
In contrast to its analysis, the report’s recommendations are weak. They are mostly non-regulatory and amount to an appeal for voluntary compliance to several trading, settlement, disclosure policies by the major financial institutions and their hedge fund counterparties.
“Most of the Recommendations and Guiding Principles relate to measures that are within the control and reach of individual institutions. Others entail collective actions by institutions and their so-called “trade groups.””
Even these recommendations face the daunting assumption of the role of such a entirely private, financial sector group:
It was clearly understood by all at the outset that these individuals were not representing nor speaking on behalf of their employers [Wall Street banks, brokers and fund managers] and that neither the individuals nor their employing agencies were being asked to endorse the Report or any of its component parts.
Nonetheless, a noteworthy exception is their call for a joint public and private sector effort to study the potential for a proper framework for regulating hedge funds.
47. Recommendation, Category II & III (pages 149 to 150)
CRMPG II recommends that the private sector, in close collaboration with the official sector, convene a high level discussion group to further consider the feasibility, costs and desirability of creating an effective framework of large exposure reporting at regulated financial intermediaries that would extend — directly or indirectly — to hedge funds. Using the indirect method, regulators would collect and aggregate large exposure data from traditionally regulated institutions and, through those institutions, collect data on hedge fund activity. Under the direct approach, hedge funds would, on a voluntary basis, provide large exposure data directly to the appropriate regulator.
Rumors are no way to lesson regulatory lessons…
It would be preferable to conclude on a positive note, but there really isn’t one. Perhaps two negatives ones will do equally well. The first note is that the details of the May events will not likely be assembled and made available to the public for analysis, scrutiny and fuel for good public policy deliberation. The second note is that both the public regulatory authorities in the U.S. (although the situation is different in Europe) and the powerful financial interests are dead set against taking regulatory measures to address these concerns. They cry out about the crushing cost of regulation, but they ignore the benefits or a more orderly market and they discount the costs of regulations emerging out of a realized as opposed to a near systemic meltdown.
http://www.financialpolicy.org/fpfspb26.htm
10/31/07 - IMO bad mistake FED .25 lower.
Selling ALL $ denominated securities and moving to EURO.
IMO a bank / hedge fund driven correction of unprecedented size sits lurking on the US stock market & dollar denominated securites.
GOLD hits $800
Dollar all time low to Euro
gotcha
;) IMO CYBL is going to get a text book ride.
I believe its an acronym for "Mother Of All Short Squeeze" but don't quote me.