Still shouting London metal traders brace for China

Traders continue to set the prices for metals by shouting it out loud to one another at London Metal Exchange for 137 years now (Photo by Viktorija Rinkeviciute).

The only major international market in Europe where traders still agree on a price by eye-to-eye shouting and bidding – the London Metal Exchange (LME) – has survived a two-decade competition of electronic trading. Its new Chinese owners agreed to keep a century old tradition of setting benchmark prices for metals by such a method, but it is not clear for how long. Experts, however, say keeping the open-outcry trading is the least of LME’s issues in comparison to getting ahead of Shanghai Metal Exchange in the race for China.

The clock in a circular room at 56 Leadenhall Street in London, in the heart of the old financial district of the city, shows 12:30 p.m. Contrary to the general relaxed lunch atmosphere on streets outside of the London Metal Exchange, tension is building up in the red pit.

This is where ten ring-trading members from such companies like JPMorgan Chase & Co or Societe Generale SA will set the daily benchmark prices for 11 widely used metals, like copper, aluminum and zinc. The price negotiated on the trading floor will serve as basis for most physical metal contracts of today.
An open-outcry system, involving shouting and special hand gesturing to convey information for price negotiation, say LME experts, faces the same challenge as every futures market: how to come to a representative settlement price.

More transparent
LME’s open-outcry method “concentrates liquidity at the second morning ring and that prevents any particular trader from influencing the settlement price too much,” explained professor Christopher Gilbert from University of Trento in Italy, who has been following the LME for decades.

However, introduced more then two decades ago, electronic trading is perceived by some as a faster, cheaper and more effective method of trading for users.

Yet the old-fashioned open-outcry system is seen as more robust, informative and transparent than electronic trading by its participants. “It allows them to feel how trading is taking place by observing the identities and the behavior of other traders on the flour, since traders are seeing each other and maintain physical contact with their seats,” explained Lina Datkunaite, Economic Researcher, Statistician and Analyst, researching the LME’s aluminum market.

“This may be particularly important for large traders, where transparency of the process and trustworthiness are crucial for large orders,” she said in an email interview.

Open-outcry is going
A loud gong announces the second ring trade for copper. The ring – a set of red leather sofas, arranged in a six-meter diameter circle – fills up with men in suits immediately.

“25!” – someone cries out in a pit and the echo of similar shouts ripples around a closed-off room with 22 booths.

As if they were jugglers, 5 to 10 people in every booth manage to hold at least one telephone receiver to each of their ears, a pen and a notepad. Together with 2-3 people just outside the ring, frantically making hand signals to each other as if auditioning for a leading role in a shadow theatre, they form a team every pit-trading member has behind his back. The team gets orders from company’s headquarters by phone and passes it to the trader in the pit.

Yet, only half of the booths are filled in. According to the Financial Times, from a high of about 30 ring-dealing members in 1980s, only one third of that number is still taking advantage of LME’s open-outcry trading system.

Since the LME opened up to electronic trading in 2001, the relevance of open-outcry trading diminished and, according to various sources, now accounts for only 5 percent of all LME operations.

Two years ago Hong Kong Exchanges & Clearing Ltd. bought the LME for $2.2 billion. It has recently promised to keep the nearly extinct tradition of eye-to-eye bidding running for as long as the market needs it.

“The LME came back into existence after the war and it’s been working for 67 years without problems,” Trento University’s Gilbert said of LME’s open-outcry importance in a Skype interview. “If it’s not broke, don’t fix it.”

“The switch is inevitable,” argued Datkunaite. “It will not necessarily come up soon or will be implemented quickly, because electronic platform will have to be adapted accordingly with the LME participants’ needs of preserving and retaining transparency besides liquidity costs or transaction’s speed concerns.”

Shanghai battle
In Gilbert’s opinion the LME should now focus on “the biggest competition it ever faced” – winning against Shanghai Metal Exchange in the race for China’s metals market.

“Shanghai is the market within mainland China and the LME is the market outside of mainland China. Because it is not easy to get copper or any other metal in and out of China due to taxes, government control and foreign exchange, China is not yet completely open,” said Gilbert.

Therefore, the world can’t use Shanghai to get the benchmark prices for metals and, equally, Chinese companies don’t use the LME.

“But when China opens up completely, Shanghai and LME will compete for setting that price. Who gets the Chinese market will have the world,” Gilbert said. “LME needs to make sure it is the winner of the battle with Shanghai.“

UK may slam the door to Lithuanian immigrants

The updated version of this article was published in the Lithuanian online news site tiesa.com, where it broke 3 records of readership at once. It became the most read analytical article of a week ever; the site reached its biggest readership in history; and there were most people on the site at once.

A record number of Lithuanians have immigrated to UK in 2013 (Photo courtesy of Flickr)

The United Kingdom remains the number one destination for Lithuanian immigrants due to availability of jobs and family network. But with a May general election approaching, some Britons are strengthening their negative rhetoric towards immigrants. A once wide open door for immigrants from Lithuania or other European Union countries is about to be shut hard.

“Maybe you or your friends know a vacant job in England or Scotland? Since I am a teacher by profession, I don’t have any experience in construction or anywhere else, but I could do simple unskilled jobs in cleaning, post office or factories.”

This is part of Ernestas Pranaitis’ email that he sent to the Lithuanian media in London in November. A 33-year-old history teacher from Vilnius was determined to immigrate to United Kingdom immediately after the New Year.

And he’s not the only Lithuanian keen to live in the UK. According to the latest data from Statistics Lithuania, UK remains the number one destination for Lithuanian immigrants.

Statistics show that during the last decade almost half a million people left

Lithuania and almost one tenth of them chose to make the UK their new home.
“The choice of destination country is determined by a better job market situation in the UK and the network of family and relatives already living there,” says Birutė Stolytė from Statistics Lithuania, explaining the attractiveness of the UK to Lithuanians.

More jobs
“I commit to return 20 percent of my salary for your help, because I really need a job,” Pranaitis promised in his email to pay back those fellow Lithuanians who might help him.

According to Eurostat data, the unemployment rate in Lithuania was 11.3 percent in September, a ‘dark’ number still showing the impact of the financial crisis.

In contrast, the jobless rate in the UK was 6 percent in October – the lowest level of unemployment in six years, the Office of National Statistics (ONS) reported.

And the situation is about to get even better, British politicians have promised.

“On average, for every day the government has been in office, 1,000 new jobs have been created,” George Osborne, the Conservative Chancellor of the Exchequer, said in his Autumn Statement in December.

“1,000 new opportunities for people. New economic security for 1,000 families every single day. Britain’s long term economic plan is working,” he assured.

But the long-term economic plan of the major partner in the current coalition government no longer includes the newcomers. With a general election approaching in May, the Conservative Party, which leads a coalition government with the smaller, more centre-left Liberal Democrat Party, is pushing hard on curbing numbers of immigrants coming to the UK. And those from the EU are also on the black list.

No benefits
Britain’s Prime Minister, David Cameron, has suggested putting a cap on the number of EU immigrants allowed to enter the UK.

This has sparked a wave of dissatisfaction, mainly expressed by the German chancellor Angela Merkel as the UK is still a member of the EU and such a cap would go against the fundamental principle of the free labor movement in the Union. But Cameron says he is ready to exit the EU, if necessary.

“This is nonsense,” says Professor John Salt, the director of the Migration Research Unit at University College, London, who has been researching the immigration of eastern Europeans to the UK, bluntly.

According to him, the referendum needed for the UK to exit the EU would not come in the near future anyway, as Cameron promised the referendum in 2017. And even if it would reveal results Cameron wished for, how would the authorities stop EU immigrants from coming?

“What happens to a quarter a million Britons living in Spain – are they going to be told to get out?” Salt asks.

Cameron also suggested that all new EU immigrants worked in the country for at least four years before they could apply for state benefits or get access to social housing. In addition to this, the EU immigrants would no longer get child benefits or tax credits for children living somewhere else.

The “Daily Mail”, one of the right-wing British newspapers most vocal in its opposition to the EU and immigration, reported that 24,000 people are currently claiming benefits of £89 a month for more than 30,000 children living abroad. This costs the British economy £30 million a year, it said.

Also, according to Cameron’s plan, those immigrants who are not able to get a job within half a year will be kicked out  of the country.

“People want grip. I get that … They don’t want limitless immigration and they don’t want no [sic] immigration. They want controlled immigration. And they are right,” Cameron was quoted by Russia Today, state supported foreign new at the end of November.

One of  Conservatives competitors in May’s election, the Labour Party, has a  more gentle or, as quoted by the BBC, “sensible approach” towards immigration.

Labour’s leader, Ed Miliband, has suggested newcomers from the EU should wait for 2 years before claiming benefits. He also put more emphasis on tackling illegal work by immigrants, as it undercuts the wages of the British people.

The discussion on immigration appears to be one of the main issues of the political debate before the May election. This is not surprising having in mind that, according to the latest British Social Attitudes Survey, almost 80 percent want some sort of immigration reduction.

False promises
According to Professor Salt at University College of London  the Conservative Party got into power five years ago with promises to curb immigration. They got  into power by forming a coalition, a very unusual type of government for the UK in recent decades, with the Liberal Democrats. It was a coalition that has stopped them from introducing at least some of their right-wing policies.

“They have committed themselves to reducing the net migration from about a quarter of a million to below a hundred thousand,” says the professor. Net migration is the difference between people coming into the country and leaving.

“The figure was plucked from the air, but they said they’d do it,” says Salt.
But, according to latest figures from the ONS, last year until June the immigration increased by almost 80,000. It means a total of 260, 000 immigrants – twice the number Cameron promised – came to the UK.

Bring more than take
“There isn’t a great problem with respect to benefits – it’s been a political tool used by politicians here,” said Salt, rejecting a popular argument that immigrants take more from the UK than they give back.

But a recent study, published by Salt’s colleagues at UCL’s Migration Research Unit, counters the argument. Academics say  that during the last decade immigrants from the European Economic Area (EEA) have claimed less in benefits than the average Briton.

The research reveals that in 2001-2011 EU immigrants paid about one third more in taxes than they received in benefits, contributing £25 billion to the British economy.

Problems ahead
Cameron’s proposals for curbing immigration are mostly aimed at the low-skilled labor market and would affect 300, 000 EU immigrants currently working in the UK, the RT reported.

But studies suggest that the true picture of immigrants from Lithuania or other parts of Eastern Europe is quite different.

“Our research shows that in contrast with most other European countries, the UK attracts highly educated and skilled immigrants from within the EEA as well as from outside,“ Professor Christian Dustmann, one of the authors of UCL’s study, told “The Guardian”.

“What’s more, immigrants who arrived since 2000 have made a very sizeable net fiscal contribution and therefore helped to reduce the fiscal burden on UK-born workers.”

But Salt comments: “Migrants are very good as long as they are young, single, paying their taxes, not being ill and not making any demands on public services.” And that tends to change with immigrants getting older.

“When those single migrants are no longer single, they’ve settled and have children, who require education, then immigrants require more in maternity health services and other things and, of course, when they get older and particularly if they bring aging parents to join them, the costs begin to rise,” he explains.

Teacher’s hopes
A wanna-be immigrant to the UK, history teacher Pranaitis is still at home in Vilnius. He says he’s now considering a couple of job opportunities in factories, hotels or even as a teacher in the UK, as well as waiting to hear from a fish factory in Norway.

“I am not afraid to move to UK.  I believe there’s as much populism in British politics as it is in Lithuanian,“ he says.

“Everyone understands the welfare of England depends on immigration for the most part, otherwise, there would be no immigrants there at all. But I understand the claims of British politician about benefits – England is an indebted country, therefore, they must save.”

If the fish factory in Norway does not come through, Pranaitis hopes to move to the UK in February.

Joining Euro: Is Lithuania’s Price for Security from Russia Too Big?

This article was written in the mid-November, therefore, the newest developments of the situation in Lithuania and Eurozone are not reflected here.

Lithuania will be welcomed to Eurozone Jan 1, 2015 (Photo courtesy of Flickr).

Lithuania, the first country to break out of the Soviet Union, is to adopt the euro in January. But foreign economists question if Lithuania has chosen the right time to join the turbulent monetary club.

As three white trucks hurried through the locked up streets of Vilnius, secured by police escorts, snipers on roofs and helicopters in the air the country froze in anticipation.

Lithuania will be welcomed to Eurozone Jan 1, 2015 (Photo courtesy of Flickr).
Historically the biggest sum of money – 132 million euro notes – was delivered to Lithuania. The Lithuanian Mint continued to work night shifts to mint additional 370 million euro coins.

The last of the Baltic countries is set to join Eurozone January 2015 – the move the Lithuanian society is split upon. The move that also makes some foreign economists question if Lithuania has chosen a smart time to join.

“There is no question Lithuania should have waited,” said Phillip Booth, British economist and the Programme Director at the Institute of Economic Affairs in London. “What does it have to gain by joining the euro now?”

Gloomy prospects
In October, the International Monetary Fund (IMF) sharply downgraded its Eurozone growth forecasts from 1.1 percent to 0.8 percent in 2014 and 1.3 percent in the following year instead of 1.5 percent. IMF warned the monetary block might face a third recession after the financial crisis of 2008.

To add to the gloomy prospects, the European Central Bank (ECB) also slashed its economic outlook for the Eurozone in November. Brussels now predicts the Eurozone will grow by 1.1 percent next year, in comparison to its earlier growth prospects of 1.7 percent.

Dragged into crisis
This, according to Booth, indicates the old Eurozone crisis is essentially unresolved: banking and government debt crises fed off each other – states supporting banks and then ECB having to support government debt. The growth in Eurozone is now stalled by “over-regulation and high taxes.”

“Lithuania may simply get dragged into the crisis and with other countries have to assume a joint responsibility for the debts of other countries,” said Booth in an email interview.

According to him, non-Eurozone countries have shown they can prosper outside the euro. “Joining the euro is not necessarily the wrong decision for Lithuania in the long term, but it is risky to join now,” he explained.

Political victory
Yet, politicians and economists at home see Lithuania joining the exclusive monetary club as a victory.

Lithuanian Prime Minister Algirdas Butkevicius (left), Chairman of the Board of Lithuanian Central Bank Vitas Vasiliuskas and Minister of Finance Rimantas Sadzius introduce first Lithuanian euro coins (Photo courtesy “Lietuvos bankas”).

Lithuanian Prime Minister Algirdas Butkevicius (left), Chairman of the Board of Lithuanian Central Bank Vitas Vasiliuskas and Minister of Finance Rimantas Sadzius introduce first Lithuanian euro coins (Photo courtesy “Lietuvos bankas”).

Especially after Lithuania painfully failed its first euro exam, being the only EU country rejected to join the monetary club after its inflation level topped Maastricht requirement by 0.1 percent. The country is hoping to finally catch up with Estonia, which joined the euro in 2011 and Latvia, who became part of the club in 2014.

The Lithuanian people, however, are not as cheerful as politicians. According to the Eurobarometer report, released at the end of September, 47 percent of Lithuanians agree obtaining euro is a good idea, but 49 percent still disagree the country needs to drop its national currency Litas.

Costly insurance
Vitas Vasiliauskas, Chairman of the Board of the Lithuanian Central Bank (“Lietuvos bankas”) is trying to convince sceptics that the euro will bring economic benefits. He anticipates that within seven years, in addition to ordinary growth of the Lithuanian economy, the euro on average should bring an additional growth of 2 percent of the Lithuanian GDP.

However, one of the few euro-skeptic economists in Lithuania Romas Lazutka calculated that joining the club might be too costly right now, when “Eurozone is so unstable.”

One of the conditions for Lithuania joining the monetary union is paying into the European Stability Mechanism (ESM). The ESM functions as insurance policy, which gives out loans to those Eurozone members that, due to their economic struggles, aren’t able to borrow from other sources.

According to the calculations of “Lietuvos bankas”, Lithuania is bound to pay one billion Litas (~270 million EUR) into ESM over five years. It is a bit less than 1 percent of the Lithuanian GDP.

“Lithuania could wait with joining the euro,” said Lazutka, as, in comparison to southern Eurozone countries, Lithuania’s finances are in order and there’s not much chance the country will need help from ESM, but it might become the lender.

“Lending is risky. Especially, because Lithuania doesn’t keep such monetary reserves, therefore, it would have to borrow,” – Lazutka said in a phone interview.

Insurance against Russia
Insurance is expensive everywhere, sources familiar with the matter at the European Commission said. Especially when the risk is as big as Russia.

“Becoming a member of this club puts the final dot on the I and clearly states that this country, Lithuania, is no longer just a sliver from the shattered empire, but a member of a club in a quite different league”, said one of the economists at the European Commission in a phone interview.

Lithuania’s economy is very small and prone to outside shocks, therefore, with the Russian-Ukrainian conflict raging almost at the border, the country couldn’t have chosen a better time to join the Euro zone, the source said.

She, however, acknowledged that as it has only been couple of years since the Euro crisis, the Eurozone is still undergoing a “fragile recovery”. The slowdown of growth in Germany, Italy and France – the biggest economies of the EU – is “troublesome, but not a tragedy”. Structural reforms, necessary for the club, will take time and there’s nothing to be done, she stated.

“It is not enough to hope only monetary policy instruments will deliver, “ – said the European Commission economist. “However, we can clearly see new monetary policy steps should bring bigger credit flow and, accordingly, investment and growth,” said the source, pointing towards ECB President Mario Draghi’s plan to inject a trillion euros to rescue the Eurozone economy from stagnation.

Euro brings trust
The threat that the Eurozone might face such fundamental problems as crack off of some countries, or total crumble of the monetary club, have diminished significantly, said Zygimantas Mauricas, a financial analyst at “Nordea Markets” in Lithuania.

“Being part of the united Europe, including the same currency, is more beneficial to Lithuania at this time,” – said Mauricas in a phone interview.

“We can already see that despite the armed conflict by our border or a very possible Russian economic crisis, our lending costs are in historic lows. The trust in Lithuania is big and it’s due to united Europe.”

In April, “Standard & Poor’s” improved Lithuania’s credit rating by two notches – it rose from BBB to A-, the same as Poland, Slovenia and Malaysia’s.

Last to join
Not all central and eastern European countries, which are bind by their treaty to join Euro, are following Lithuania’s suit though. The Eurozone would welcome Poland with a warm embrace, but the country seems reluctant to join.

Bulgaria, Croatia, Hungary, Romania and the Czech Republic are still to be offered euro membership, but, according to the source at the European Commission, that is not happening soon.

“The Baltic states are a clear example of how countries can make things work after extremely difficult crisis. Such success stories are undoubtedly very much needed to Eurozone now,” – said the economist from the European Commission.

Remembering Fantasy Records in the Mission

Dogpaw Carrilo checking the drawing on the wall of what used to be Fantasy Records studio in the Mission.

One of the most inspiring interviews I’ve done in San Francisco. Dogpaw Carrillo has told me all about the music scene of the Mission district in the 60s, as he grew up around the stars of legendary Fantasy Records.

“Other people show pictures, I only have records,” says Dogpaw as he pulls old vinyl records out of the bag. The names on the them match the ones on the posters. Most of them are signed personally for Dogpaw. “I’m always the fan,”  says the fan who grew up around the music stars who roamed the Mission in the late 1960s.”
Read the full story here.

Needles & Pens Celebrates 11 Years [video]

Needles & Pens at 3253 16th Street is celebrating its 11th year in the Mission District and we talked with owner Breezy Culbertson about starting the store of zines and art in 2003 with Andrew Martin Scott.

Lovely small business in the Mission. Definitely the nicest post cards I’ve seen so far.

Video on MissionLoc@l.

Supervisors To Consider Firefighting and Cancer Link

Policemen get their traditional donuts, Mission firefighters take their breaks with Peet’s Coffee.

The sound of an old fashion dial phone fills the kitchen at the local Mission neighborhood fire station. Laura Carvajal, 30, drops the glass she’s been drying and rushes towards the apparatus. “Fire department, how can I help you?”

Bomani, 42, a fire engine driver, beats her to it.

Carvajal’s father, a retired firefighter, didn’t approve of her choosing a profession  full of danger. Out on a fire, he knew, one could easily become disorientated, trapped or run out of air.  What’s worse, she now knows, is the danger that you can’t see – the cancer that affects firefighters at twice the rate than the general population, according to a study by National Institute for Occupational Safety and Health, published in October.

More on MissionLoc@l.

My newsroom

Academia is great… a pump of adrenaline just seconds before you go live on air with true professionals and friends around you – is just a drug. Missing LNK News. Will be back.

Documentary: Japan. Giant at Crossroad

More than 5 cities in 10 days, about 20 hours of raw footage, more than half a year of production work. Here’s the second “baby” from my trip to Japan in June. A documentary about Japan’s innovative ways to compete with China and rise after the biggest earthquake and tsunami in the country’s history.

You can watch the documentary here.

Japan. Giant at Crossroad

My second documentary about Japan, or, more precisely, its economic struggles, innovative ways to compete with China and the rise after the March 11, 2011 earthquake and tsunami, aired yesterday on one of the biggest Lithuanian TV networks LNK.

Until it’s online, here’s the teaser to the documentary [in Lithuanian].

DOCUMENTARY: Japan.Smart Cities

Our crew at what used to be a tsunami wall not far from Minamisoma city. Photo by Junko Takahashi.

10 days, 6 cities, nearly 20 hours of raw footage. Two documentaries to make.

The first documentary is about the smart every day life of the Japanese people. It’s about million tiny lights in a huge megapolis, where houses “earn” for utilities themselves. Where the only gardens grown are those on top of rooftops. Where taxi drivers spend hundred thousand dollars for electricity. Where dogs and cats are for rent.  It’s the story about the cities of the future today.

Produced by Viktorija Rinkevičiūtė, Vaidas Greičiunas, Aivaras Ablingis and Rolandas Agintas.

Watch here.