Bill and Hillary Clinton's daughter Chelsea is engaged to Goldman Sachs man Marc Mezvinsky.
Between 2007 and 2008, he donated $4,800 to Hillary's presidential campaign.
He seems to be climbing the corporate ladder rapidly at Goldman. In 2007, on his political contribution form he listed himself as "Associate", then "trader" and then just "Goldman Sachs". Marrying Chelsea should help his ascent, it's just the kind of "God's work" Lloyd Blankfein likes to see.
Monday, November 30, 2009
California Looks for $1B in Cyber Monday Taxes
Let me tell you how it will be;
There's one for you, nineteen for me.
'Cause I?m the taxman,
Yeah, I?m the taxman.
Should five per cent appear too small,
Be thankful I don't take it all.
'Cause I?m the taxman,
Yeah, I?m the taxman.
(if you drive a car, car;) - I?ll tax the street;
(if you try to sit, sit;) - I?ll tax your seat;
(if you get too cold, cold;) - I?ll tax the heat;
(if you take a walk, walk;) - I'll tax your feet.
-The Beatles
On Cyber Monday, Betty Yee, head of California’s Board of Equalization, told people in her state to keep receipts from their online shopping because they may owe taxes on those purchases.
“The consumer is required to pay use tax when the out-of-state retailer does not collect sales tax,” said a statement from Yee’s office.
There's one for you, nineteen for me.
'Cause I?m the taxman,
Yeah, I?m the taxman.
Should five per cent appear too small,
Be thankful I don't take it all.
'Cause I?m the taxman,
Yeah, I?m the taxman.
(if you drive a car, car;) - I?ll tax the street;
(if you try to sit, sit;) - I?ll tax your seat;
(if you get too cold, cold;) - I?ll tax the heat;
(if you take a walk, walk;) - I'll tax your feet.
-The Beatles
On Cyber Monday, Betty Yee, head of California’s Board of Equalization, told people in her state to keep receipts from their online shopping because they may owe taxes on those purchases.
“The consumer is required to pay use tax when the out-of-state retailer does not collect sales tax,” said a statement from Yee’s office.
Bernanke Tops List of 100 Global Thinkers
Just in time for this weeks Senate confirmation hearings, the establishment has spoken. Foreign Policy magazine has announced that Ben Bernanke is the top "global thinker" in 2009.
FP writes:
Ranked fourth was Nouriel Roubini, followed by Larry Summers at 14 and Mohamed El-Erian, the director of Pimco, at 16.
FP is published by the Carnegie Endowment for International Peace.
UPDATE: FP's web site has appeared to have crashed following news of Bernanke being named to the top of FP's 100 Global Thinkers list. Get it? Crash-Bernanke.
FP writes:
The Zen-like chairman of the U.S. Federal Reserve might not have topped the list solely for turning his superb academic career into a blueprint for action, for single-handedly reinventing the role of a central bank, or for preventing the collapse of the U.S. economy. But to have done all of these within the span of a few months is certainly one of the greatest intellectual feats of recent years.President Obama came in #2.
Ranked fourth was Nouriel Roubini, followed by Larry Summers at 14 and Mohamed El-Erian, the director of Pimco, at 16.
FP is published by the Carnegie Endowment for International Peace.
UPDATE: FP's web site has appeared to have crashed following news of Bernanke being named to the top of FP's 100 Global Thinkers list. Get it? Crash-Bernanke.
Testing Ben's Tool
This is just a test. Should the Fed really need to fight inflation, they have no idea how they will do so without sending interest rates through the roof. But for now, more make believe triparty reverse repos are ahead.
Or as the Fed put it:
Or as the Fed put it:
As noted in the October 19, 2009 Statement Regarding Reverse Repurchase Agreements, the Federal Reserve Bank of New York has been working internally and with market participants on operational aspects of triparty reverse repurchase agreements to ensure that this tool will be ready if the Federal Open Market Committee decides it should be used. In the coming weeks, as an extension of this work, the Federal Reserve Bank of New York plans to conduct a series of small-scale, real-value transactions with primary dealers. Like the earlier rounds of testing, this work is a matter of prudent advance planning by the Federal Reserve. It does not represent any change in the stance of monetary policy, and no inference should be drawn about the timing of any change in the stance of monetary policy in the future.
These forthcoming operations are being conducted to ensure operational readiness at the Federal Reserve, the triparty repo clearing banks, and the primary dealers. The operations have been designed to have no material impact on the availability of reserves or on market rates. Specifically, the aggregate amount of outstanding transactions will be very small relative to the level of excess reserves, and the transactions will be conducted at current market rates.
The results of these operations will be both posted on the Federal Reserve Bank of New York’s public website where all temporary open market operation results are posted and reflected as a liability in tables 1 and 9 in the Federal Reserve System’s consolidated balance sheet statements.
Phil Swagel Advises Ben Bernanke
I am continuing to work my way through Andrew Ross Sorkin's Too Big To Fail. One section had me rolling on the floor laughing. I'm sure it wasn't written to come off that way, but if you know a little background, it's the tale of a slapstick routine if I ever heard one.
Sorkin details a visit to Fed chairman Ben Bernanke, at the height of the financial crisis in 2008, by Neel Kashkari, then-Interim Assistant Secretary of the Treasury for Financial Stability, and Phillip Swagel, then-Assistant Secretary for Economic Policy under Paulson at the Treasury. Sorkin goes into their jumping into the car to get to the Fed and their seeming awe at making a presentation to Bernanke,a "break the glass" solution to the crisis.
Now what is totally absurd about this is that in my view Swagel (and probably Kashkari) were in brain freeze. They are both smart guys, but they were at the Treasury to carry water for Treasury Secretary Paulson and that was it. Like Geithner, these are the types Paulson seemed to surround himself with. Generally smart guys who Paulson could intimidate into not thinking for themselves and working as technocrats to carry out whatever he wanted.
When I questioned Swagel earlier this year about the summer of 2008, he admitted to me that he had no idea there was no money growth that summer. Money growth dropped from a 12% annualized rate early in the year to 1.4% during the summer,in the midst of a housing crisis.
Got that? The Treasury's top economist had no clue that Bernanke had stopped printing money in the summer of '08. Brain freeze. Thus, time for a mad cap caper over to the Fed.
Their recommendation to Bernanke was to auction off the mortgages and get the Treasury to buy them (It's not exactly clear from the book how this contradiction was to take place). But, as part of the plan, the Treasury wouldn't pay cash for the mortgages at the discounted price, but a newly created special Treasury security.
Of course, when you realize that the problem was a liquidity crisis for the banks, a newly created Treasury security was the last thing banks needed. They needed cash. Secondly, a markdown of the mortgages to market prices would have bankrupted most of them.(Something I would have been in favor of, but certainly not Kashkari/Swagel)
One can only imagine what Bernanke was thinking when this presentation was made. He did ask Kashkari/Swagel where they came up with the figure of $500 million as the amount of this new Treasury security that would be required. The answer they gave seemed to suggest they picked the number out of a hat, which was probably what Bernanke suspected.
Last we read about the plan from Sorkin is that Bernanke put it on a shelf in his office. Maybe after he has a tough grilling from Congress, he heads back to the office, grabs the plan, reads an excerpt and has a little chuckle to himself.
Sorkin details a visit to Fed chairman Ben Bernanke, at the height of the financial crisis in 2008, by Neel Kashkari, then-Interim Assistant Secretary of the Treasury for Financial Stability, and Phillip Swagel, then-Assistant Secretary for Economic Policy under Paulson at the Treasury. Sorkin goes into their jumping into the car to get to the Fed and their seeming awe at making a presentation to Bernanke,a "break the glass" solution to the crisis.
Now what is totally absurd about this is that in my view Swagel (and probably Kashkari) were in brain freeze. They are both smart guys, but they were at the Treasury to carry water for Treasury Secretary Paulson and that was it. Like Geithner, these are the types Paulson seemed to surround himself with. Generally smart guys who Paulson could intimidate into not thinking for themselves and working as technocrats to carry out whatever he wanted.
When I questioned Swagel earlier this year about the summer of 2008, he admitted to me that he had no idea there was no money growth that summer. Money growth dropped from a 12% annualized rate early in the year to 1.4% during the summer,in the midst of a housing crisis.
Got that? The Treasury's top economist had no clue that Bernanke had stopped printing money in the summer of '08. Brain freeze. Thus, time for a mad cap caper over to the Fed.
Their recommendation to Bernanke was to auction off the mortgages and get the Treasury to buy them (It's not exactly clear from the book how this contradiction was to take place). But, as part of the plan, the Treasury wouldn't pay cash for the mortgages at the discounted price, but a newly created special Treasury security.
Of course, when you realize that the problem was a liquidity crisis for the banks, a newly created Treasury security was the last thing banks needed. They needed cash. Secondly, a markdown of the mortgages to market prices would have bankrupted most of them.(Something I would have been in favor of, but certainly not Kashkari/Swagel)
One can only imagine what Bernanke was thinking when this presentation was made. He did ask Kashkari/Swagel where they came up with the figure of $500 million as the amount of this new Treasury security that would be required. The answer they gave seemed to suggest they picked the number out of a hat, which was probably what Bernanke suspected.
Last we read about the plan from Sorkin is that Bernanke put it on a shelf in his office. Maybe after he has a tough grilling from Congress, he heads back to the office, grabs the plan, reads an excerpt and has a little chuckle to himself.
A Country With No Debt (And How It Got That Way)
By Alf Field
In February 2009 Zimbabwe was the only country in the world without debt. Nobody owed anyone anything. Following the abandonment of the Zimbabwe Dollar as the local currency all local debt was wiped out and the country started with a clean slate.
It is now a country without a functioning Central Bank and without a local currency that can be produced at will at the behest of politicians. Since February 2009 there has been no lender of last resort in Zimbabwe, causing banks to be ultra cautious in their lending policies. The US Dollar is the de facto currency in use although the Euro, GB Pound and South African Rand are accepted in local transactions.
Price controls and foreign exchange regulations have been abandoned. Zimbabwe literally joined the real world at the stroke of a pen. Money now flows in and out of the country without restriction. Super market shelves, bare in January, are now bursting with products.
I recently visited Zimbabwe in the company of a leading Australian fund manager. As a student of monetary history, I was interested to see what had happened to a country that had suffered hyperinflation. How did the people cope? How is the country progressing now? The current Zimbabwean situation is complicated by the fact that President Robert Mugabe is determined to stay in power whatever the cost.
The first part of this article deals with economics, the hyperinflation and current situation, which is a picture of recovery and potential vigorous growth. The second part deals with politics, both the historical aspects as well as current developments, which are extremely fluid.
We were fortunate to have private interviews with the Prime Minister, Morgan Tsvangirai, and a wide range of business leaders. This provided a quick picture of Zimbabwe past and present.
There are common denominators in all hyperinflations. Generally government finances reach a point where large budget deficits cannot be financed by taxes or borrowings. The choices come down to austerity (with the government cutting back its spending) or by funding the deficit by creating local currency through the printing press, leading to the inflation tax. This is always a political decision, but the line of least resistance is the printing press. Cutting government expenditures and laying off bureaucratic staff is anathema to most politicians.
In Zimbabwe, Robert Mugabe has made it his mission to remain President for life. This has caused him to infiltrate his supporters into the army and police force. He also used Government finances as a way of funding patronage. His use of the printing press was liberal and nobody was prepared to stand up against him. This eventually led to inflation gathering momentum to the point where the armed forces were getting rebellious – they wanted more money. When Mugabe caved in to these demands, the Zimbabwe Dollar plunged.
Shortly after Mugabe was elected President in 1980, the Zimbabwe Dollar was worth more than the US Dollar. The ongoing abuse of the financial system eventually produced a runaway inflation. The largest bank note issued in Zimbabwe was for One Hundred Trillion Dollars...
Read the full fascinating account here.
(ViaLRC)
In February 2009 Zimbabwe was the only country in the world without debt. Nobody owed anyone anything. Following the abandonment of the Zimbabwe Dollar as the local currency all local debt was wiped out and the country started with a clean slate.
It is now a country without a functioning Central Bank and without a local currency that can be produced at will at the behest of politicians. Since February 2009 there has been no lender of last resort in Zimbabwe, causing banks to be ultra cautious in their lending policies. The US Dollar is the de facto currency in use although the Euro, GB Pound and South African Rand are accepted in local transactions.
Price controls and foreign exchange regulations have been abandoned. Zimbabwe literally joined the real world at the stroke of a pen. Money now flows in and out of the country without restriction. Super market shelves, bare in January, are now bursting with products.
I recently visited Zimbabwe in the company of a leading Australian fund manager. As a student of monetary history, I was interested to see what had happened to a country that had suffered hyperinflation. How did the people cope? How is the country progressing now? The current Zimbabwean situation is complicated by the fact that President Robert Mugabe is determined to stay in power whatever the cost.
The first part of this article deals with economics, the hyperinflation and current situation, which is a picture of recovery and potential vigorous growth. The second part deals with politics, both the historical aspects as well as current developments, which are extremely fluid.
We were fortunate to have private interviews with the Prime Minister, Morgan Tsvangirai, and a wide range of business leaders. This provided a quick picture of Zimbabwe past and present.
There are common denominators in all hyperinflations. Generally government finances reach a point where large budget deficits cannot be financed by taxes or borrowings. The choices come down to austerity (with the government cutting back its spending) or by funding the deficit by creating local currency through the printing press, leading to the inflation tax. This is always a political decision, but the line of least resistance is the printing press. Cutting government expenditures and laying off bureaucratic staff is anathema to most politicians.
In Zimbabwe, Robert Mugabe has made it his mission to remain President for life. This has caused him to infiltrate his supporters into the army and police force. He also used Government finances as a way of funding patronage. His use of the printing press was liberal and nobody was prepared to stand up against him. This eventually led to inflation gathering momentum to the point where the armed forces were getting rebellious – they wanted more money. When Mugabe caved in to these demands, the Zimbabwe Dollar plunged.
Shortly after Mugabe was elected President in 1980, the Zimbabwe Dollar was worth more than the US Dollar. The ongoing abuse of the financial system eventually produced a runaway inflation. The largest bank note issued in Zimbabwe was for One Hundred Trillion Dollars...
Read the full fascinating account here.
(ViaLRC)
Thirty Financial Groups on Systemic Risk List
Thirty global financial institutions make up a list that regulators are earmarking for cross-border supervision exercises, according to FT.
The list includes six insurance companies – Axa, Aegon, Allianz, Aviva, Zurich and Swiss Re – which sit alongside 24 banks from the UK, continental Europe, North America and Japan.
The list, which is not public, also contains many of the multinational bank names that would be widely expected: Goldman Sachs, JPMorgan Chase, Morgan Stanley, Bank of America Merrill Lynch and Citigroup of the US; Royal Bank of Canada; UK groups HSBC, Barclays, Royal Bank of Scotland and Standard Chartered; UBS and Credit Suisse of Switzerland; France’s Société Générale and BNP Paribas; Santander and BBVA from Spain; Japan’s Mizuho, Sumitomo Mitsui, Nomura, Mitsubishi UFJ; Italy’s UniCredit and Banca Intesa; Germany’s Deutsche Bank; and Dutch group ING.
The list has been drawn up by regulators under the auspices of the Financial Stability Board. The FSB is headed by Mario Draghi, who is also governor of the Bank of Italy. In his capacity as governor capacity, he is a member of the Governing and General Councils of the European Central Bank and a member of the Board of Directors of the Bank for International Settlements. He is also governor for Italy on the Boards of Governors of the International Bank for Reconstruction and Development and the Asian Development Bank.
He also was vice chairman and managing director of Goldman Sachs International and a member of the firm-wide management committee. In other words, a major insider.
(Thanks2Lori)
The list includes six insurance companies – Axa, Aegon, Allianz, Aviva, Zurich and Swiss Re – which sit alongside 24 banks from the UK, continental Europe, North America and Japan.
The list, which is not public, also contains many of the multinational bank names that would be widely expected: Goldman Sachs, JPMorgan Chase, Morgan Stanley, Bank of America Merrill Lynch and Citigroup of the US; Royal Bank of Canada; UK groups HSBC, Barclays, Royal Bank of Scotland and Standard Chartered; UBS and Credit Suisse of Switzerland; France’s Société Générale and BNP Paribas; Santander and BBVA from Spain; Japan’s Mizuho, Sumitomo Mitsui, Nomura, Mitsubishi UFJ; Italy’s UniCredit and Banca Intesa; Germany’s Deutsche Bank; and Dutch group ING.
The list has been drawn up by regulators under the auspices of the Financial Stability Board. The FSB is headed by Mario Draghi, who is also governor of the Bank of Italy. In his capacity as governor capacity, he is a member of the Governing and General Councils of the European Central Bank and a member of the Board of Directors of the Bank for International Settlements. He is also governor for Italy on the Boards of Governors of the International Bank for Reconstruction and Development and the Asian Development Bank.
He also was vice chairman and managing director of Goldman Sachs International and a member of the firm-wide management committee. In other words, a major insider.
(Thanks2Lori)
Meet the Future Death Panel Czar
Health and Human Services Secretary Kathleen Sebelius will determine what medical treatments are and are not available to you under the Senate health bill. It is quite possible she will determine if you live or die.
A serach of the Senate health bill will bring up "secretary" 2,500 times, according to Susan Ferrechio, Chief Congressional Correspondent for the Washington Examiner.
Ferrechio continues:
Health and Human Services Secretary Kathleen Sebelius would be awarded unprecedented new powers under the proposal, including the authority to decide what medical care should be covered by insurers as well as the terms and conditions of coverage and who should receive it.Destabilizing the private insurance sector is part of the plan to "nudge" everyone into a public plan. It will take time to pull off, but that is the goal. In the meantime, Sebelius will be able to control treatments via capping of price, any treatment she deems unecessary she can mark the price down so low that any health provider won't be able to provide it without losing money.
"The legislation lists 1,697 times where the secretary of health and humans services is given the authority to create, determine or define things in the bill," said Devon Herrick, a health care expert at the National Center for Policy Analysis.
For instance, on Page 122 of the 2,079-page bill, the secretary is given the power to establish "the basic per enrollee, per month cost, determined on average actuarial basis, for including coverage under a qualified health care plan."...And the bill even empowers the department to establish a Center for Medicare and Medicaid Innovation that would have the authority to make cost-saving cuts without having to get the approval of Congress first.
"It's a huge amount of power being shifted to HHS, and much of it is highly discretionary," said Edmund Haislmaier, an expert in health care policy and insurance markets at the Heritage Foundation, a conservative think tank.
Haislmaier said one the greatest powers HHS would gain from the bill is the authority to regulate insurance. States currently hold this power, and under the Senate bill, the federal government would usurp it from them. This could lead to the federal government putting restrictions and changes in place that destabilize the private insurance market by forcing companies to lower premiums and other charges, he said.
Once most are in public plan the real cost cutting will begin, including cutting back on treatments that will prolong your life.
US Senator Opposes Fed Chief Bernanke Renomination
Is this the Ron Paul effect in action?
U.S. Senator Bernie Sanders (I-VT) said on Sunday he will not vote to reconfirm Ben Bernanke as chairman of the Federal Reserve.
Sanders on ABC's Sunday talk show, This Week, said he would not vote to confirm Bernanke. "No, I absolutely will not vote for Mr. Bernanke. He is part of the problem. He's the smartest guy in the world? Why didn't he do anything to prevent us from sinking into this disaster that Wall Street caused and which he was a part of? No, I will not vote for Bernanke to stay on as chairman."
Even Republican Senator Lindsey Graham who sputtered the nonsense on ABC that Bernanke has made bold decisions "that kept the economy from going into a depression," added, "We need more transparency and accountability ... The Fed needs to be looked at closely."
U.S. Senator Bernie Sanders (I-VT) said on Sunday he will not vote to reconfirm Ben Bernanke as chairman of the Federal Reserve.
Sanders on ABC's Sunday talk show, This Week, said he would not vote to confirm Bernanke. "No, I absolutely will not vote for Mr. Bernanke. He is part of the problem. He's the smartest guy in the world? Why didn't he do anything to prevent us from sinking into this disaster that Wall Street caused and which he was a part of? No, I will not vote for Bernanke to stay on as chairman."
Even Republican Senator Lindsey Graham who sputtered the nonsense on ABC that Bernanke has made bold decisions "that kept the economy from going into a depression," added, "We need more transparency and accountability ... The Fed needs to be looked at closely."
Moody's: Contagion Effect for Abu Dhabi Will Be Unavoidable
News that Dubai will not back up government owned Dubai World will have contagion effects for Abu Dhabi , Moody's said.
"The contagion effect for Abu Dhabi will be unavoidable, as doubts will be raised as to how Dubai is going to finance its growth," Moody's analysts said in a weekly note.
"The form of the proposed debt restructuring could increase the likelihood of downgrades of bank financial strength ratings (BFSRs) for the (UAE) banks that are already on review."
Moody's said the potential default of quasi-sovereign Dubai World "changes long-held market assumptions regarding implicit government support of local credits".
Moody's rates the UAE and Abu Dhabi at Aa2. It does not rate Dubai.
"The contagion effect for Abu Dhabi will be unavoidable, as doubts will be raised as to how Dubai is going to finance its growth," Moody's analysts said in a weekly note.
"The form of the proposed debt restructuring could increase the likelihood of downgrades of bank financial strength ratings (BFSRs) for the (UAE) banks that are already on review."
Moody's said the potential default of quasi-sovereign Dubai World "changes long-held market assumptions regarding implicit government support of local credits".
Moody's rates the UAE and Abu Dhabi at Aa2. It does not rate Dubai.
Geithner Testifies Wednesday
Treasury Secretary Tim Geithner is scheduled to testify Wednesday starting at 9:30 AM ET before the Senate Agriculture Committee, on over-the-dounter derivatives reform and systemic risk.
Dubai to Dubai World Creditors: Drop Dead
The Dubai government disclaimed responsibility for the debts of its Dubai World conglomerate on Monday, crushing earlier assumptions by creditors that the Arab emirate would guarantee its liabilities, according to Reuters.
"Creditors need to take part of the responsibility for their decision to lend to the companies," said Abdulrahman al-Saleh, director general of Dubai's department of finance. "They think Dubai World is part of the government, which is not correct."
"The government is the owner of the company, but since its foundation it was established that the company is not guaranteed by the government," Saleh explained on Dubai Television.
"It deals with all parties on this basis and it borrows based on ... its projects and not the guarantee of the government," he said.
"The restructuring is a wise decision that is in the interest of all parties in the long term but might bother creditors in the short term," he declared.
"Creditors need to take part of the responsibility for their decision to lend to the companies," said Abdulrahman al-Saleh, director general of Dubai's department of finance. "They think Dubai World is part of the government, which is not correct."
"The government is the owner of the company, but since its foundation it was established that the company is not guaranteed by the government," Saleh explained on Dubai Television.
"It deals with all parties on this basis and it borrows based on ... its projects and not the guarantee of the government," he said.
"The restructuring is a wise decision that is in the interest of all parties in the long term but might bother creditors in the short term," he declared.
Wen Rails at ‘Unfair’ Renminbi Pressure
China’s premier Wen Jiabao showed his mercantilist colors on Monday as he lashed out at the growing number of countries pressuring Beijing to strengthen its currency, making it clear that European officials made little headway in their efforts over the past two days to persuade the country to allow the renminbi to appreciate.
Speaking at the conclusion of an EU-China summit in the eastern Chinese city of Nanjing, Wen said: “Some countries on the one hand want the renminbi to appreciate, but on the other hand engage in brazen trade protectionism against China. This is unfair. Their measures are a restriction on China’s development.”
The premier repeated the standard form of words Beijing uses to describe its currency policy. Mr Wen said: “We will maintain the stability of the renminbi at a reasonable and balanced level ... maintaining the basic stability of the renminbi exchange rate has benefited China’s economic development and benefited world economic recovery.”
While China's continued efforts at propping up the dollar hurt Chinese consumers and fuel price inflation in China, it is truly absurd for the U.S. to be concerned about Chinese mercantilist activities. China's propping of the dollar has suffocated U.S. price inflation and has been a major benefit to U.S. consumers.
Speaking at the conclusion of an EU-China summit in the eastern Chinese city of Nanjing, Wen said: “Some countries on the one hand want the renminbi to appreciate, but on the other hand engage in brazen trade protectionism against China. This is unfair. Their measures are a restriction on China’s development.”
The premier repeated the standard form of words Beijing uses to describe its currency policy. Mr Wen said: “We will maintain the stability of the renminbi at a reasonable and balanced level ... maintaining the basic stability of the renminbi exchange rate has benefited China’s economic development and benefited world economic recovery.”
While China's continued efforts at propping up the dollar hurt Chinese consumers and fuel price inflation in China, it is truly absurd for the U.S. to be concerned about Chinese mercantilist activities. China's propping of the dollar has suffocated U.S. price inflation and has been a major benefit to U.S. consumers.
Punishment Day in the UAE
From FT:
Stock markets in the United Arab Emirates fell sharply on Monday, as worries over defaults in the region’s business hub of Dubai depressed sentiment and sent local and international investors heading for the exit.
Meanwhile, Nakheel, the company at the centre of Dubai’s financial woes, on Monday asked for all three of its sharia-compliant bonds worth $5.25bn to be suspended from trade “until it is in a position to fully inform the market” in its first statement to investors since last week’s shock request from Dhubai World, its parent, for a bond payment to be delayed for six months...
Gulf markets, which had been closed since Wednesday’s late announcement due to the Muslim Eid al-Adha holiday, fell sharply on Monday...
The Dubai Financial Market, which trades in local currency, slumped more than 7 per cent in early afternoon trading, and the Abu Dhabi Stock Exchange, the third bourse in the United Arab Emirates, lost more than 8 per cent in heavy trading.
The mood among traders returning to work after the religious holiday was sombre.
“We are very disappointed – we had expected the market to drift down. Instead it fell down ... just like that ,” said Muhammed, a private investor, as he looked at a ticker covered in red.
“This is punishment day. Why didn’t we sell last week? This is punishment for the unexpected news from Dubai World last week,” he added.
Stock markets in the United Arab Emirates fell sharply on Monday, as worries over defaults in the region’s business hub of Dubai depressed sentiment and sent local and international investors heading for the exit.
Meanwhile, Nakheel, the company at the centre of Dubai’s financial woes, on Monday asked for all three of its sharia-compliant bonds worth $5.25bn to be suspended from trade “until it is in a position to fully inform the market” in its first statement to investors since last week’s shock request from Dhubai World, its parent, for a bond payment to be delayed for six months...
Gulf markets, which had been closed since Wednesday’s late announcement due to the Muslim Eid al-Adha holiday, fell sharply on Monday...
The Dubai Financial Market, which trades in local currency, slumped more than 7 per cent in early afternoon trading, and the Abu Dhabi Stock Exchange, the third bourse in the United Arab Emirates, lost more than 8 per cent in heavy trading.
The mood among traders returning to work after the religious holiday was sombre.
“We are very disappointed – we had expected the market to drift down. Instead it fell down ... just like that ,” said Muhammed, a private investor, as he looked at a ticker covered in red.
“This is punishment day. Why didn’t we sell last week? This is punishment for the unexpected news from Dubai World last week,” he added.
Geithner's After Thanksgiving Day Monday
On Monday afternoon, Treasury Secretary Geithner will meet with Australian Prime Minister Rudd at Treasury. Later, Secretary Geithner will attend the President’s Economic Daily Briefing at the White House
Sunday, November 29, 2009
U.A.E. Removes Sunday London Times From Newsstands
The Sunday London Times newspaper was removed by authorities from shelves in the United Arab Emirates on Sunday amid intensive reporting of Dubai's debt problems, an executive at the paper said.
The National Media Council ordered the paper blocked by distributors without providing a reason, an executive at the paper in Dubai told Zawya Dow Jones.
Here's the article that got the paper banned.
(ViaJohnCarney)
Double Dip Hits NYC Real Estate
NyPo reports:
Just when New Yorkers thought housing prices here might have finally hit bottom, there's fresh evidence of a nasty double dip recession for Gotham's residential real estate -- which some feel can drag down already shredded housing prices by another 10 percent-to-15 percent...
After showing slight improvement beginning in the spring, housing prices in New York dipped in September, according to research from S&P/Case-Shiller, which reported last week that its housing price index for the city slipped to 174.38 from 174.89 in August, after posting four straight months of improved prices.
In addition, Stan Humphries, chief economist at Zillow.com, a real estate research firm, appeared to back up this gloomy forecast with his own expectation of a double-dip recession for metro New York housing prices.
"A classic W-shaped recovery is a decline followed by an increase followed by another decline. Arguably, while the metro New York level has been in positive territory slightly, it does look like a W-shaped recovery."
Humphries expects metro New York home prices to plummet because the rising tide of foreclosures drags down prices and because the constellation of economic problems that sparked the initial housing downturn have not yet been resolved.
Meanwhile, New York City's unemployment rate came in at 10.3 percent in September for the second straight month, higher than the state and national level.
The housing price decline coupled with the nasty unemployment rate has resulted in a 13 percent jump in pre-foreclosure condominium court filings -- known as lis pendens -- in the third quarter across the city compared to the previous quarter, according to preliminary statistics from PropertyShark.com.
Initial notices of default on condo mortgages are up more than threefold over the last four years -- a trend that foreshadows more pressure on local housing prices.
The fresh wave of local price declines is likely to be steep and long lasting, a range of experts told The Post. PropertyShark CEO Bill Staniford forecasts housing prices will plummet another 10 percent-to-15 percent in the next six months -- deepening the already steep 25 percent slump from the top of the market.
"It seemed as though the market was starting to come back, but . . . it certainly looks in New York City like another wave of distress is coming," said Staniford, adding, "This wave is worse than the first, which happened over a year ago."
Read the full article here.
Just when New Yorkers thought housing prices here might have finally hit bottom, there's fresh evidence of a nasty double dip recession for Gotham's residential real estate -- which some feel can drag down already shredded housing prices by another 10 percent-to-15 percent...
After showing slight improvement beginning in the spring, housing prices in New York dipped in September, according to research from S&P/Case-Shiller, which reported last week that its housing price index for the city slipped to 174.38 from 174.89 in August, after posting four straight months of improved prices.
In addition, Stan Humphries, chief economist at Zillow.com, a real estate research firm, appeared to back up this gloomy forecast with his own expectation of a double-dip recession for metro New York housing prices.
"A classic W-shaped recovery is a decline followed by an increase followed by another decline. Arguably, while the metro New York level has been in positive territory slightly, it does look like a W-shaped recovery."
Humphries expects metro New York home prices to plummet because the rising tide of foreclosures drags down prices and because the constellation of economic problems that sparked the initial housing downturn have not yet been resolved.
Meanwhile, New York City's unemployment rate came in at 10.3 percent in September for the second straight month, higher than the state and national level.
The housing price decline coupled with the nasty unemployment rate has resulted in a 13 percent jump in pre-foreclosure condominium court filings -- known as lis pendens -- in the third quarter across the city compared to the previous quarter, according to preliminary statistics from PropertyShark.com.
Initial notices of default on condo mortgages are up more than threefold over the last four years -- a trend that foreshadows more pressure on local housing prices.
The fresh wave of local price declines is likely to be steep and long lasting, a range of experts told The Post. PropertyShark CEO Bill Staniford forecasts housing prices will plummet another 10 percent-to-15 percent in the next six months -- deepening the already steep 25 percent slump from the top of the market.
"It seemed as though the market was starting to come back, but . . . it certainly looks in New York City like another wave of distress is coming," said Staniford, adding, "This wave is worse than the first, which happened over a year ago."
Read the full article here.
Dubai World's New York City Assets
Among the assets held by Dubai World that may end up on the auction block, as a result of Dubai's financial crisis, are these New York City based trophies:
Barney's Department store
The Jumeirah Essex House, a 43-story luxury hotel on Central Park South
The Knickerbocker Hotel in Times Square on the southeast corner of 42 Street and Broadway
The New York W hotel
The New York Mandarin Oriental hotel
Barney's Department store
The Jumeirah Essex House, a 43-story luxury hotel on Central Park South
The Knickerbocker Hotel in Times Square on the southeast corner of 42 Street and Broadway
The New York W hotel
The New York Mandarin Oriental hotel
UAE Central Bank Will Protect Banking System
In an emergency announcement, the United Arab Emirates' central bank is saying it "stands behind" local and foreign banks operating in the country, offering them access to money following the recent announcement out of Dubai that they will be delaying payments on some Dubai World debt.
According to the Associated Press, the UAE's official WAM news agency said Sunday the central bank issued a notice to Emirati banks and foreign banks with branches in the country saying it would make available "a special additional liquidity facility linked to their current accounts at the central bank."
According to the Associated Press, the UAE's official WAM news agency said Sunday the central bank issued a notice to Emirati banks and foreign banks with branches in the country saying it would make available "a special additional liquidity facility linked to their current accounts at the central bank."
Top Ten
Below are the Top Ten most viewed posts for the week ending Saturday November 28, 2009.
#1 HOT: Dubai Halts Payments on Dubai World Debt
#2 Who Knew?
#3 HSBC to Retail Gold Buyers: "Get Your Gold the Hell Out of Here"
#4 Dubai World Owns 50% of Las Vegas' MGM Mirage's CityCenter
#5 How Nicolas Cage Spent His Way To The Poorhouse
#6 How They Crashed President Obama's State Dinner
#7 Jim Rogers on Gold and Why Geithner Is Toast
#8 One in Four Borrowers Under Water
#9 WAR TAX!!
#10 Shock: Inside the Healthcare Bill (19th Week in Top Ten)
#1 HOT: Dubai Halts Payments on Dubai World Debt
#2 Who Knew?
#3 HSBC to Retail Gold Buyers: "Get Your Gold the Hell Out of Here"
#4 Dubai World Owns 50% of Las Vegas' MGM Mirage's CityCenter
#5 How Nicolas Cage Spent His Way To The Poorhouse
#6 How They Crashed President Obama's State Dinner
#7 Jim Rogers on Gold and Why Geithner Is Toast
#8 One in Four Borrowers Under Water
#9 WAR TAX!!
#10 Shock: Inside the Healthcare Bill (19th Week in Top Ten)
Tiger Woods: "I Need a Kobe Special"
Following news that Tiger Woods argued with his wife, after tabloids linked Woods with another woman, TMZ reports that Tiger Woods told a friend his wife had "gone ghetto" on him.
During the phone conversation on Friday, Tiger told his friend, "I have to run to Zales to get a 'Kobe Special.'" The person on the other end of the phone asked Tiger what a "Kobe Special" was. The reply -- "A house on a finger."
(Above Kobe Bryant's wife)
Does This Look Like an $80 Haircut to You?
Maybe it shouldn't be such a surprise that Geithner has cut such bad deals that favor Wall Street firms. He can't even negotiate a decent price for a haircut (or get a decent haircut).
Andrew Ross Sorkin in his new book, Too Big To Fail, reports that the normally frugal Treasury Secretary splurges for his haircuts and pays $80 for them.
Did Paulson Disuade Warren Buffett from Investing in Lehman Brothers?
It looks like it to me.
I am just starting to work my way through Andrew Ross Sorkin's new 600-page book, Too Big To Fail. I'm not sure there is much in the way of deep analytical insights in the book, but he clearly had access to major players. It will definitely fill in many pieces to the puzzle.
The first thing that really popped out for me from the pages occurred on page 56. To me it is pretty clear from what Sorkin writes that Warren Buffett was considering an investment in Lehman Brothers and then-treasury Secretary Hank Paulson called Buffett and nixed the deal.
With Lehman desperately needing to raise cash, Lehman CEO Dick Fuld was keeping Paulson abreast of what he was doing. At one point he tells Paulson that he is going to approach Buffett and ask him for funds. With Fuld knowing that Paulson was close to Buffett, he asked Paulson to call Buffett and put in a good word for Lehman.
Buffett had started reading Lehman Brothers' annual report after Fuld's proposal when Paulson called Buffett, and this is where things get interesting as reported on page 56 of Sorkin's book. Paulson pitches Buffett on Lehman, but Buffett notes Paulosn is not overly enthusiastic. He felt Paulson was talking "code." Now, I have written before on how the elite talk code. They are very careful with their words so no one can nail them on anything. But the person on the receiving end of the code knows full well the meaning behind the subtle clues in the message.
Buffett got the message from Paulson. Suddenly, after the call, Buffett continues to read the Lehman annual report and now sees all kinds of questions, too many, he concludes, to invest in Lehman.
Lehman, at that point in time, found some money from other sources, but as Sorkin notes it wasn't like getting money from Buffett and getting that stamp of approval.
Eventually, of course, Lehman collapsed, and Paulson's old firm, Goldman Sachs, went to Buffett and got an investment from him.
I am just starting to work my way through Andrew Ross Sorkin's new 600-page book, Too Big To Fail. I'm not sure there is much in the way of deep analytical insights in the book, but he clearly had access to major players. It will definitely fill in many pieces to the puzzle.
The first thing that really popped out for me from the pages occurred on page 56. To me it is pretty clear from what Sorkin writes that Warren Buffett was considering an investment in Lehman Brothers and then-treasury Secretary Hank Paulson called Buffett and nixed the deal.
With Lehman desperately needing to raise cash, Lehman CEO Dick Fuld was keeping Paulson abreast of what he was doing. At one point he tells Paulson that he is going to approach Buffett and ask him for funds. With Fuld knowing that Paulson was close to Buffett, he asked Paulson to call Buffett and put in a good word for Lehman.
Buffett had started reading Lehman Brothers' annual report after Fuld's proposal when Paulson called Buffett, and this is where things get interesting as reported on page 56 of Sorkin's book. Paulson pitches Buffett on Lehman, but Buffett notes Paulosn is not overly enthusiastic. He felt Paulson was talking "code." Now, I have written before on how the elite talk code. They are very careful with their words so no one can nail them on anything. But the person on the receiving end of the code knows full well the meaning behind the subtle clues in the message.
Buffett got the message from Paulson. Suddenly, after the call, Buffett continues to read the Lehman annual report and now sees all kinds of questions, too many, he concludes, to invest in Lehman.
Lehman, at that point in time, found some money from other sources, but as Sorkin notes it wasn't like getting money from Buffett and getting that stamp of approval.
Eventually, of course, Lehman collapsed, and Paulson's old firm, Goldman Sachs, went to Buffett and got an investment from him.
Saturday, November 28, 2009
The Relationship Between Dubai and Dubai World
There have been a couple of comments left at EPJ and comments throughout the media suggesting that the government of Dubai is not responsible for debt of Dubai World, and this is technically correct. In a number of DW debt raising documents, it is clearly stated that the government of Dubai is not responsible for the debt of DW. That said, it is unlikely that DW would have been able to raise a cent if the expectation wasn't there that Dubai was back stopping the debt.
Indeed at DW's web site they at one point promote the fact that they are 100% owned by the government of Dubai
This is a de facto default by Dubai, and has serious implications for its future money raising abilities.
Istithmar is an alternative investment house based in the United Arab Emirates. It is 100% owned by Dubai World, which is in turn wholly owned by the Government of Dubai.The current situation isn't a case of legal technicalities where Dubai has the money to backup DW and doesn't want to pay up. Dubai doesn't have the funds, if they did they would backstop DW.
This is a de facto default by Dubai, and has serious implications for its future money raising abilities.
Dubai's Impact on Ireland (and Beyond)
Simon Johnson explains:
The credit default swap spreads for Irish banks have widened signficantly — even relative to HSBC, with its direct Dubai involvement. In part, this is hedge funds betting that others will want to insure against the rising risk of an Irish default, but what’s the connection?
The thinking is that a partial bailout – with creditor losses – for Dubai from Abu Dhabi implies something about how Ireland will be treated within the European Union (and the same reasoning is also more vaguely in the air for Greece).
This may make sense for three reasons.
If Dubai can effectively default or reschedule its debts without disrupting the global economy, then others can do the same.
If Abu Dhabi takes a tough line and doesn’t destabilize markets, others (e.g., the EU) will be tempted to do the same (i.e., for Ireland and Greece). “No more unconditional bailouts” is an appealing refrain in many capitals.
If the US supports some creditor losses for Dubai (e.g., because of its connections with Iran), this makes it easier to impose losses on creditors elsewhere (even perhaps where IMF programs are in place, such as Eastern Europe).
The credit default swap spreads for Irish banks have widened signficantly — even relative to HSBC, with its direct Dubai involvement. In part, this is hedge funds betting that others will want to insure against the rising risk of an Irish default, but what’s the connection?
The thinking is that a partial bailout – with creditor losses – for Dubai from Abu Dhabi implies something about how Ireland will be treated within the European Union (and the same reasoning is also more vaguely in the air for Greece).
This may make sense for three reasons.
If Dubai can effectively default or reschedule its debts without disrupting the global economy, then others can do the same.
If Abu Dhabi takes a tough line and doesn’t destabilize markets, others (e.g., the EU) will be tempted to do the same (i.e., for Ireland and Greece). “No more unconditional bailouts” is an appealing refrain in many capitals.
If the US supports some creditor losses for Dubai (e.g., because of its connections with Iran), this makes it easier to impose losses on creditors elsewhere (even perhaps where IMF programs are in place, such as Eastern Europe).
Bernanke: Don't Take Away My Power
Ben Bernanke writes in the Washington Post:
For many Americans, the financial crisis, and the recession it spawned, have been devastating -- jobs, homes, savings lost. Understandably, many people are calling for change. Yet change needs to be about creating a system that works better, not just differently. As a nation, our challenge is to design a system of financial oversight that will embody the lessons of the past two years and provide a robust framework for preventing future crises and the economic damage they cause.
These matters are complex, and Congress is still in the midst of considering how best to reform financial regulation. I am concerned, however, that a number of the legislative proposals being circulated would significantly reduce the capacity of the Federal Reserve to perform its core functions. Notably, some leading proposals in the Senate would strip the Fed of all its bank regulatory powers. And a House committee recently voted to repeal a 1978 provision that was intended to protect monetary policy from short-term political influence. These measures are very much out of step with the global consensus on the appropriate role of central banks, and they would seriously impair the prospects for economic and financial stability in the United States. The Fed played a major part in arresting the crisis, and we should be seeking to preserve, not degrade, the institution's ability to foster financial stability and to promote economic recovery without inflation.
The proposed measures are at least in part the product of public anger over the financial crisis and the government's response, particularly the rescues of some individual financial firms. The government's actions to avoid financial collapse last fall -- as distasteful and unfair as some undoubtedly were -- were unfortunately necessary to prevent a global economic catastrophe that could have rivaled the Great Depression in length and severity, with profound consequences for our economy and society. (I know something about this, having spent my career prior to public service studying these issues.) My colleagues at the Federal Reserve and I were determined not to allow that to happen.
Moreover, looking to the future, we strongly support measures -- including the development of a special bankruptcy regime for financial firms whose disorderly failure would threaten the integrity of the financial system -- to ensure that ad-hoc interventions of the type we were forced to use last fall never happen again. Adopting such a resolution regime, together with tougher oversight of large, complex financial firms, would make clear that no institution is "too big to fail" -- while ensuring that the costs of failure are borne by owners, managers, creditors, and the financial services industry, not by taxpayers.
The Federal Reserve, like other regulators around the world, did not do all that it could have to constrain excessive risk-taking in the financial sector in the period leading up to the crisis. We have extensively reviewed our performance and moved aggressively to fix the problems.
Working with other agencies, we have toughened our rules and oversight. We will be requiring banks to hold more capital and liquidity and to structure compensation packages in ways that limit excessive risk-taking. We are taking more explicit account of risks to the financial system as a whole.
We are also supplementing bank examination staffs with teams of economists, financial market specialists and other experts. This combination of expertise, a unique strength of the Fed, helped bring credibility and clarity to the "stress tests" of the banking system conducted in the spring. These tests were led by the Fed and marked a turning point in public confidence in the banking system.
There is a strong case for a continued role for the Federal Reserve in bank supervision. Because of our role in making monetary policy, the Fed brings unparalleled economic and financial expertise to its oversight of banks, as demonstrated by the success of the stress tests.
Read the full Op-ed here.
For many Americans, the financial crisis, and the recession it spawned, have been devastating -- jobs, homes, savings lost. Understandably, many people are calling for change. Yet change needs to be about creating a system that works better, not just differently. As a nation, our challenge is to design a system of financial oversight that will embody the lessons of the past two years and provide a robust framework for preventing future crises and the economic damage they cause.
These matters are complex, and Congress is still in the midst of considering how best to reform financial regulation. I am concerned, however, that a number of the legislative proposals being circulated would significantly reduce the capacity of the Federal Reserve to perform its core functions. Notably, some leading proposals in the Senate would strip the Fed of all its bank regulatory powers. And a House committee recently voted to repeal a 1978 provision that was intended to protect monetary policy from short-term political influence. These measures are very much out of step with the global consensus on the appropriate role of central banks, and they would seriously impair the prospects for economic and financial stability in the United States. The Fed played a major part in arresting the crisis, and we should be seeking to preserve, not degrade, the institution's ability to foster financial stability and to promote economic recovery without inflation.
The proposed measures are at least in part the product of public anger over the financial crisis and the government's response, particularly the rescues of some individual financial firms. The government's actions to avoid financial collapse last fall -- as distasteful and unfair as some undoubtedly were -- were unfortunately necessary to prevent a global economic catastrophe that could have rivaled the Great Depression in length and severity, with profound consequences for our economy and society. (I know something about this, having spent my career prior to public service studying these issues.) My colleagues at the Federal Reserve and I were determined not to allow that to happen.
Moreover, looking to the future, we strongly support measures -- including the development of a special bankruptcy regime for financial firms whose disorderly failure would threaten the integrity of the financial system -- to ensure that ad-hoc interventions of the type we were forced to use last fall never happen again. Adopting such a resolution regime, together with tougher oversight of large, complex financial firms, would make clear that no institution is "too big to fail" -- while ensuring that the costs of failure are borne by owners, managers, creditors, and the financial services industry, not by taxpayers.
The Federal Reserve, like other regulators around the world, did not do all that it could have to constrain excessive risk-taking in the financial sector in the period leading up to the crisis. We have extensively reviewed our performance and moved aggressively to fix the problems.
Working with other agencies, we have toughened our rules and oversight. We will be requiring banks to hold more capital and liquidity and to structure compensation packages in ways that limit excessive risk-taking. We are taking more explicit account of risks to the financial system as a whole.
We are also supplementing bank examination staffs with teams of economists, financial market specialists and other experts. This combination of expertise, a unique strength of the Fed, helped bring credibility and clarity to the "stress tests" of the banking system conducted in the spring. These tests were led by the Fed and marked a turning point in public confidence in the banking system.
There is a strong case for a continued role for the Federal Reserve in bank supervision. Because of our role in making monetary policy, the Fed brings unparalleled economic and financial expertise to its oversight of banks, as demonstrated by the success of the stress tests.
Read the full Op-ed here.
The House of an Economic Textbook King
Write an economic textbook with plenty of Keynesian nuttiness and it has a chance to become the standard for the industry. That's what Harvard Pofessor Greg Mankiw has done. Here's the house that he bought with his millions:
Slideshow via the Harvard Crimson.
Well, at least it's big.
Slideshow via the Harvard Crimson.
Well, at least it's big.
Dissecting the Dubai Debt Crisis and Its Deeper Meaning
The first item to keep in mind is that the Dubai debt crisis is the result of the continued lack of liquidity in the financial system. The system as it stands can not support the old capital goods structure that was created by past money printing (Led by the Federal Reserve). As I have exhaustively pointed out, despite a supposed Federal Reserve policy stance of "quantitative easing", the money supply for all practical purposes has been flat since February. A flat money supply after years of money printing is simply going to continue to result in the liquidation of past investments where the money is simply not around to complete and maintain various projects based on the old capital structure.
Dubai is nothing but the latest evidence of this. These things don't happen during a central bank induced money growth period. Thus, the first lesson to take home, and to take home NOW, is that the recent stock market run is extremely vulnerable to collapse. The market run must continue to be viewed as knee-jerk dead cat bounce (with a Fed money printing kicker from Sept. 08 to Feb. 09) from the panic period during the Summer of 08, nothing more. The noted lack of strong volume in the current stock market climb is further evidence that this is not a strong market move. Any downside action could thus be fast and furious.
Of further note, is the activity of gold on first word of a halt in Dubai payments. Gold dropped nearly $45 per ounce. As I have consistently said, gold generally does not perform well during a period of slow money printing. The belief that gold always goes up in every crisis is a myth. The climb in gold during the Great Depression was a manipulated climb implemented by FDR at the instigation of John Maynard Keynes and Bernard Baruch, for their personal profit. Gold will go up during an inflationary crisis and will also go up in a panic if there is expectation that this will lead to government money printing. But it is extremely dangerous to be trading gold from the upside during a general period of panic. (Long term gold holdings are another topic--those positions should, in most cases, not be sold).
As for the Dubai crisis itself, speculation is rampant as to whether Abu Dhabi will step in to help out Dubai, and why Abu Dhabi didn't do so to prevent the crisis in the first place. Chief reasons as to why Abu Dhabi didn't step in initially range from (1)Abu Dhabi wanting to teach Dubai a lesson re: its free spending ways to (2)the problem is much deeper than the $60 billion that has surfaced.
Will Abu Dhabi step up to the plate now to bail out Dubai? That's a question only insiders know. If they don't step up, then the question becomes who is stuck with the $60 billion?
At most, HSBC And Standard Chartered control roughly $16 billion of the debt. That leaves $44 billion buried elsewhere. With that amount out there, the possibility of an entity or two taking a sizable hit is real, but in the grand scheme of the global economy, not something that is going to collapse the financial system. That said, the subsidiary with the current problem, Nakeehl, is only one tentacle of Dubai World. If DB itself had cash floating around, it is likely they would have floated it to Nakeehl, that they didn't indicates that DB overall is strapped for cash.
In addition to Nakheel, DB is
DP World, which is the Global Ports operation--not likely doing well in this period of slowed international trade.
Economic Zones World which is the global provider of sustainable industrial and logistics infrastructure solutions including the development and operation of economic zones, technology, logistics and industrial park--again not likely doing well at present
Dubai Maritime City still being constructed was planned to be the first ever purpose-built hub for maritime business and commerce.
Drydocks World is the leading and expanding international player in ship repair--again, likley sloed by less international trade.
Limitless is a global, integrated real estate master developer. Uh, real estate developer?
Leisurecorp an emerging golf company.
Istithmar is an investment company. Its investment portfolio comprises over 50 compaies.
Dubai Multi Commodities Trading brings commodity trading to Dubai.
Dubai Natural Resources World was established as a new business unit of Dubai World in September 2008. Its mandate is to build a diversified portfolio of strategic long-term investments in natural resources. Areas of interest include energy, mining and metals, and agriculture.
So there you have it, it is more disturbing that DB itself couldn't step up to the plate and fund any shortfall at Nakheel from these other operations. Does this mean there are cash flow problems through out DB that will surface at a later date? Or is DB simply trying to protect the remainder of its portfolio by letting Nakheel take a hit? Time will tell.
Dubai is nothing but the latest evidence of this. These things don't happen during a central bank induced money growth period. Thus, the first lesson to take home, and to take home NOW, is that the recent stock market run is extremely vulnerable to collapse. The market run must continue to be viewed as knee-jerk dead cat bounce (with a Fed money printing kicker from Sept. 08 to Feb. 09) from the panic period during the Summer of 08, nothing more. The noted lack of strong volume in the current stock market climb is further evidence that this is not a strong market move. Any downside action could thus be fast and furious.
Of further note, is the activity of gold on first word of a halt in Dubai payments. Gold dropped nearly $45 per ounce. As I have consistently said, gold generally does not perform well during a period of slow money printing. The belief that gold always goes up in every crisis is a myth. The climb in gold during the Great Depression was a manipulated climb implemented by FDR at the instigation of John Maynard Keynes and Bernard Baruch, for their personal profit. Gold will go up during an inflationary crisis and will also go up in a panic if there is expectation that this will lead to government money printing. But it is extremely dangerous to be trading gold from the upside during a general period of panic. (Long term gold holdings are another topic--those positions should, in most cases, not be sold).
As for the Dubai crisis itself, speculation is rampant as to whether Abu Dhabi will step in to help out Dubai, and why Abu Dhabi didn't do so to prevent the crisis in the first place. Chief reasons as to why Abu Dhabi didn't step in initially range from (1)Abu Dhabi wanting to teach Dubai a lesson re: its free spending ways to (2)the problem is much deeper than the $60 billion that has surfaced.
Will Abu Dhabi step up to the plate now to bail out Dubai? That's a question only insiders know. If they don't step up, then the question becomes who is stuck with the $60 billion?
At most, HSBC And Standard Chartered control roughly $16 billion of the debt. That leaves $44 billion buried elsewhere. With that amount out there, the possibility of an entity or two taking a sizable hit is real, but in the grand scheme of the global economy, not something that is going to collapse the financial system. That said, the subsidiary with the current problem, Nakeehl, is only one tentacle of Dubai World. If DB itself had cash floating around, it is likely they would have floated it to Nakeehl, that they didn't indicates that DB overall is strapped for cash.
In addition to Nakheel, DB is
DP World, which is the Global Ports operation--not likely doing well in this period of slowed international trade.
Economic Zones World which is the global provider of sustainable industrial and logistics infrastructure solutions including the development and operation of economic zones, technology, logistics and industrial park--again not likely doing well at present
Dubai Maritime City still being constructed was planned to be the first ever purpose-built hub for maritime business and commerce.
Drydocks World is the leading and expanding international player in ship repair--again, likley sloed by less international trade.
Limitless is a global, integrated real estate master developer. Uh, real estate developer?
Leisurecorp an emerging golf company.
Istithmar is an investment company. Its investment portfolio comprises over 50 compaies.
Dubai Multi Commodities Trading brings commodity trading to Dubai.
Dubai Natural Resources World was established as a new business unit of Dubai World in September 2008. Its mandate is to build a diversified portfolio of strategic long-term investments in natural resources. Areas of interest include energy, mining and metals, and agriculture.
So there you have it, it is more disturbing that DB itself couldn't step up to the plate and fund any shortfall at Nakheel from these other operations. Does this mean there are cash flow problems through out DB that will surface at a later date? Or is DB simply trying to protect the remainder of its portfolio by letting Nakheel take a hit? Time will tell.
But, I repeat, the lesson to be taken out of the Dubai Incident is that liquidity remains tight through out most of the world (perhaps not China). The Dubai incident, may or may not morph into something bigger, but there are likely to be other minefields around the globe. This is not the time to be long the stock market. Dubai could be the first domino that starts the descent into a double-dip recession.
Friday, November 27, 2009
What You Would Need to Understand to Know Who Has Exposure to Dubai World's Nakheel Debt
Dubai World's Nakeel Development Ltd which is at the core of the recent delay in debt payments is a workout lawyers dream. This is the flow chart you would have to understand to know who really has exposure to Nakeel (never mind what is going on in the rest of Dubai World):
Click for enlargement.
(ViaFT)
Click for enlargement.
(ViaFT)
More On the Timing of the Dubai Debt Payment Delay Announcement
Lila Rajiva notes:
The Dubai government made the announcement after the local stock market had closed and on the eve of the Eid holiday , [the Muslim "Festival of Sacrifice" ] that runs up to December 6.
BofA: Dubai Woes May Reach ‘Sovereign Default’ and Cause Emerging Market Problems
Dubai’s debt woes may worsen to become a “major sovereign default” that roils developing nations and cuts off capital flows to emerging markets, Bank of America Corp. said, according to Bloomberg.
“One cannot rule out -- as a tail risk -- a case where this would escalate into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s,” Bank of America strategists Benoit Anne and Daniel Tenengauzer wrote in a report.
A default would lead to a “sudden stop of capital flows into emerging markets” and be a “major step back” in the recovery from the global financial crisis, they wrote.
The BofA scenario is a very real possibility. The Dubai "problem" is the result of fewer dollars circulating because of Bernanke's halt in money printing. Someone had to come up short. This time it's not the pulverized US real estate market. It's the Nicolas Cage like spenders, Dubai.
Keep an eye on Greece and Vietnam for more signs of trouble.
“One cannot rule out -- as a tail risk -- a case where this would escalate into a major sovereign default problem, which would then resonate across global emerging markets in the same way that Argentina did in the early 2000s or Russia in the late 1990s,” Bank of America strategists Benoit Anne and Daniel Tenengauzer wrote in a report.
A default would lead to a “sudden stop of capital flows into emerging markets” and be a “major step back” in the recovery from the global financial crisis, they wrote.
The BofA scenario is a very real possibility. The Dubai "problem" is the result of fewer dollars circulating because of Bernanke's halt in money printing. Someone had to come up short. This time it's not the pulverized US real estate market. It's the Nicolas Cage like spenders, Dubai.
Keep an eye on Greece and Vietnam for more signs of trouble.
Rat Fink Seeks Billions for His Dirty Work
Lynnley Browning at NYT has the story:
Bradley C. Birkenfeld was sentenced to 40 months in prison for helping rich Americans dodge their taxes. Now he is hoping for a bit more — a few billion dollars more.
Mr. Birkenfeld, a former private banker at the Swiss bank UBS, won the enmity of his peers by violating the omerta of Swiss banking: He divulged the tax evasion secrets of UBS, the world’s largest bank by assets, and its well-heeled American clients. As part of a deal with federal prosecutors, he admitted to, among other things, helping to smuggle diamonds in a tube of toothpaste.
Now, as thousands of wealthy Americans seek amnesty for keeping illicit, offshore bank accounts, Mr. Birkenfeld and his lawyers hope to use a new federal whistle-blower law to claim a multibillion-dollar reward from the American government. If they succeed — and legal experts say the odds are pretty good — it would be the largest reward of its kind.
Mr. Birkenfeld, who is to begin his prison term as soon as January, is being represented by the executive director of the National Whistleblowers Center, Stephen M. Kohn. Mr. Kohn successfully represented Linda Tripp, who helped expose the Monica Lewinsky scandal of the Clinton years.
“We are seeking at least several billion dollars,” Mr. Kohn said.
Read the rest of teh story, here.
Bradley C. Birkenfeld was sentenced to 40 months in prison for helping rich Americans dodge their taxes. Now he is hoping for a bit more — a few billion dollars more.
Mr. Birkenfeld, a former private banker at the Swiss bank UBS, won the enmity of his peers by violating the omerta of Swiss banking: He divulged the tax evasion secrets of UBS, the world’s largest bank by assets, and its well-heeled American clients. As part of a deal with federal prosecutors, he admitted to, among other things, helping to smuggle diamonds in a tube of toothpaste.
Now, as thousands of wealthy Americans seek amnesty for keeping illicit, offshore bank accounts, Mr. Birkenfeld and his lawyers hope to use a new federal whistle-blower law to claim a multibillion-dollar reward from the American government. If they succeed — and legal experts say the odds are pretty good — it would be the largest reward of its kind.
Mr. Birkenfeld, who is to begin his prison term as soon as January, is being represented by the executive director of the National Whistleblowers Center, Stephen M. Kohn. Mr. Kohn successfully represented Linda Tripp, who helped expose the Monica Lewinsky scandal of the Clinton years.
“We are seeking at least several billion dollars,” Mr. Kohn said.
Read the rest of teh story, here.
Dubai Debt Insurance Now versus Morgan Stanley Insurance After Lehman Bankruptcy
The cost of insuring debt from the government of Dubai has soared to $709,000 per year for $10 million.
In the days following the bankruptcy of Lehman Brothers the cost of insuring Morgan Stanley debt climbed to $790,000.
(Thanks 2PeuReport for the heads up.)
In the days following the bankruptcy of Lehman Brothers the cost of insuring Morgan Stanley debt climbed to $790,000.
(Thanks 2PeuReport for the heads up.)
Dubai Featured in Wall Street 2 !!!
Talk about life imitating art.
Wall Street 2 is set 20 years from the original movie and begins with Gordon Gekko's (Michael Douglas) release from federal prison.
Shia LaBoeuf also stars in the movie. His character Jacob Moore partners with Gekko to alert the financial community to the impending credit crisis.
New York, London and Dubai feature as locations.
Oh yeah, Donald Trump has a cameo appearance.
(Thanks2Nick)
Cost of Dubai Debt Insurance Soars
The cost of insuring Dubai's sovereign debt against default rose sharply for the third straight day Friday as investors continued to flee Dubai assets in the wake of Dubai World's debt-restructuring announcement.
The spread on five-year Dubai credit default swaps soared to 708.96 basis points in early afternoon activity, up 167.75 basis points from Thursday's close, according to CMA DataVision. That means it would cost nearly $709,000 a year to insure $10 million in debt against default.
(ViaMarketWatch)
The spread on five-year Dubai credit default swaps soared to 708.96 basis points in early afternoon activity, up 167.75 basis points from Thursday's close, according to CMA DataVision. That means it would cost nearly $709,000 a year to insure $10 million in debt against default.
(ViaMarketWatch)
Possible Dubai Hidden Minefields
UBS analysts are raising the possibility that Dubai may have offshore debt in excess of the $80 billion to $90 billion known to exist.
Simon Kennedy at Marketwatch reports, on the UBS breakdown:
Simon Kennedy at Marketwatch reports, on the UBS breakdown:
Analysts at UBS said authorities will not have taken the decision to restructure Dubai World lightly and that there are three potential explanations for the decision. Firstly, UBS said, Abu Dhabi's support for Dubai might be less generous than assumed. "Perhaps Abu Dhabi has forced Dubai to tackle the problem of excessive corporate debt 'in-house' first before extending more financial support," the broker said. A second possibility is that corporate-sector problems might be more severe than assumed, UBS said. Thirdly, Dubai's debt might be higher than the generally assumed $80 billion to $90 billion due to potential off-balance sheet liabilities, it added
Dubai Sheikh: Debt Move 'Carefully Planned'
No kidding, that's why T-Bills paid a negative yield last week and why the announcement was made while US markets were closed for Thanksgiving.
Here is the full statement of Sheikh Ahmed bin Saeed al-Maktoum, chairman of the Supreme Fiscal Committee:
Here is the full statement of Sheikh Ahmed bin Saeed al-Maktoum, chairman of the Supreme Fiscal Committee:
Our intervention in Dubai World was carefully planned and reflects its specific financial position.
The government is spearheading the restructuring of this commercial operation in the full knowledge of how the markets would react. We understand the concerns of the market and the creditors in particular.
However we have had to intervene because of the need to take decisive action to address its particular debt burden.
Unprecedented growth, in Dubai and across the (United Arab Emirates), over the past decade has helped lay the foundation for what is now a broad-based sustainable economy beyond just natural resources.
Jim Rogers on Gold and Why Geithner Is Toast
By Maria Bartiromo
I was on assignment in Singapore on Nov. 24 when gold hit an all-time high of $1,174 an ounce. That was fortuitous because Singapore is the home base of commodities guru Jim Rogers, creator of the Rogers International Commodities Index. Meantime, back in the U.S., reports were surfacing about growing discontent in the halls of Congress over the performance of Treasury Secretary Tim Geithner and the possibility he might be replaced by JPMorgan Chase (JPM) CEO Jamie Dimon. When I rang up Rogers, he was his usual low-key self, with quiet opinions about the future of gold prices, commodities to watch, and why Obama should dump Geithner.
MARIA BARTIROMO
Gold, as you know, hit an all-time high today, with the Russian central bank buying bullion. How high can gold go?
JIM ROGERS
Well, I own gold and I have for a while. How high can it go? I fully expect it to be over a couple thousand dollars an ounce sometime in the next decade—I didn't say the next month, I didn't say the next year, I said the next decade—because paper money around the world is very suspect. But right now everybody's bullish on it, so I don't like to buy things when that's happening. But I'm not selling under any circumstances.
What's behind the runup? Has buying by the central banks changed the equation here? Or is this still a demand story?
Certainly a demand story because, as I said, everybody's printing so much money and people around the world are worried about that. But you also have central banks, which five years ago were selling gold, now buying. So that's a huge shift in the marketplace. Central banks are like lots of other people—they just follow the crowd. There are probably better commodities to buy than gold, but you can't tell that to central banks because they've got gold on the brain...
Tim Geithner has been under attack lately. How's he doing?
Listen, I have been a critic for years. Geithner should never have been appointed to anything. He's been wrong about just about everything for 15 years.
Do you think he'll lose his job?
Of course he's going to lose his job, because as Mr. Obama realizes that Geithner doesn't know what he's doing, he's going to look for somebody else because he doesn't want to take the heat himself. So he's going to look to blame somebody, and the obvious person is Geithner.
Read the full interview here.
I was on assignment in Singapore on Nov. 24 when gold hit an all-time high of $1,174 an ounce. That was fortuitous because Singapore is the home base of commodities guru Jim Rogers, creator of the Rogers International Commodities Index. Meantime, back in the U.S., reports were surfacing about growing discontent in the halls of Congress over the performance of Treasury Secretary Tim Geithner and the possibility he might be replaced by JPMorgan Chase (JPM) CEO Jamie Dimon. When I rang up Rogers, he was his usual low-key self, with quiet opinions about the future of gold prices, commodities to watch, and why Obama should dump Geithner.
MARIA BARTIROMO
Gold, as you know, hit an all-time high today, with the Russian central bank buying bullion. How high can gold go?
JIM ROGERS
Well, I own gold and I have for a while. How high can it go? I fully expect it to be over a couple thousand dollars an ounce sometime in the next decade—I didn't say the next month, I didn't say the next year, I said the next decade—because paper money around the world is very suspect. But right now everybody's bullish on it, so I don't like to buy things when that's happening. But I'm not selling under any circumstances.
What's behind the runup? Has buying by the central banks changed the equation here? Or is this still a demand story?
Certainly a demand story because, as I said, everybody's printing so much money and people around the world are worried about that. But you also have central banks, which five years ago were selling gold, now buying. So that's a huge shift in the marketplace. Central banks are like lots of other people—they just follow the crowd. There are probably better commodities to buy than gold, but you can't tell that to central banks because they've got gold on the brain...
Tim Geithner has been under attack lately. How's he doing?
Listen, I have been a critic for years. Geithner should never have been appointed to anything. He's been wrong about just about everything for 15 years.
Do you think he'll lose his job?
Of course he's going to lose his job, because as Mr. Obama realizes that Geithner doesn't know what he's doing, he's going to look for somebody else because he doesn't want to take the heat himself. So he's going to look to blame somebody, and the obvious person is Geithner.
Read the full interview here.
Thursday, November 26, 2009
Now Sovereign Risk Fears Plunge Stock Market in Greece
From Bloomberg:
Greek stocks plunged [on Thanksgivingday], posting their biggest loss in more than a year and dragging the country’s benchmark index into a so-called bear market, as shares in the nation’s lenders slumped.
The ASE Index fell 6.2 percent to 2,225.32 at the close in Athens, the worst performer among 18 western European benchmarks. The gauge extended its fall from last month’s high to 23 percent. A bear market is generally defined as a drop of more than 20 percent. The FTSE/ASE 20 Index of the country’s biggest companies slipped 7.3 percent to 1,153.29. The Cypriot General Index plummeted 11.4 percent to 1,432.3.
European stocks slumped today the most in seven months after Dubai’s attempt to reschedule its debt rattled investors from Shanghai to London. Greek stocks have fallen from their peak this year on Oct. 14 on wider concerns about the country’s economy. EU finance ministers will reprimand Greece next week for failing to take “credible and sustainable” measures to reduce its budget deficit toward the EU limit of 3 percent of output, a draft document shows.
“There is sovereign risk in Greece that is spilling over to corporate risk,” said Francisco Salvador, co-strategist at Dexia Iberian equities in Madrid. “The public deficit and macro situation is worrying not only European authorities but investors too.”
Read the entire report here.
Greek stocks plunged [on Thanksgivingday], posting their biggest loss in more than a year and dragging the country’s benchmark index into a so-called bear market, as shares in the nation’s lenders slumped.
The ASE Index fell 6.2 percent to 2,225.32 at the close in Athens, the worst performer among 18 western European benchmarks. The gauge extended its fall from last month’s high to 23 percent. A bear market is generally defined as a drop of more than 20 percent. The FTSE/ASE 20 Index of the country’s biggest companies slipped 7.3 percent to 1,153.29. The Cypriot General Index plummeted 11.4 percent to 1,432.3.
European stocks slumped today the most in seven months after Dubai’s attempt to reschedule its debt rattled investors from Shanghai to London. Greek stocks have fallen from their peak this year on Oct. 14 on wider concerns about the country’s economy. EU finance ministers will reprimand Greece next week for failing to take “credible and sustainable” measures to reduce its budget deficit toward the EU limit of 3 percent of output, a draft document shows.
“There is sovereign risk in Greece that is spilling over to corporate risk,” said Francisco Salvador, co-strategist at Dexia Iberian equities in Madrid. “The public deficit and macro situation is worrying not only European authorities but investors too.”
Read the entire report here.
Goldman on HSBC And Standard Chartered Exposure to Dubai World
Goldman's Roy Ramos and Gurpreet Sing Sahi say even on a worst case scenario HSBC and STAN have manageable exposure to Dubai World. They write:
Backdrop
Many investors have asked about HSBC/STAN exposure to Dubai World (a leading government-linked property developer/holding company) and its affiliates, amidst Nov 26 press reports of Dubai World’s request for a creditor standstill agreement on its c.US$59bn debts (source: Bloomberg). Both HSBC and STAN have declined to comment on individual firm exposures. However, press reports (Bloomberg, FT), past descriptions by both banks of their UAE wholesale banking businesses, and HSBC’s/STAN’s status as the largest and second largest foreign banks in the UAE would all suggest some level of exposure to Dubai World and other similar entities.
Context on likely HSBC, STAN exposures
HSBC had US$15.9bn of loans/advances to the UAE as at end-June 2009. More specifically, HSBC had US$3.475bn of real estate and mortgage loan exposure to the UAE as of the same period, representing 25.9% and 2.7% of our 2010E net profit and shareholders’ equity projections for the group. STAN had US$12.3bn of cross-border loan exposure to the UAE as at end-June 2009 (and US$7.8bn of locally-booked loans to the UAE as at YE08). More specifically, STAN had US$1.674bn of real estate and mortgage loan exposure to the Middle East/South Asia region as of the same date. We estimate c.60% of this exposure, or US$1.0bn, was to the UAE, representing 22.4% and 3.4% of our 2010E NPAT and shareholders’ equity projections for STAN.
More clarity needed; first stab at worse-case loss estimates
Immediate questions include: how much actual exposure do HSBC, STAN have to Dubai World and other potentially similar situations, and what level of ultimate write-downs may need to be taken, what impact to EPS, BVPS? Key swing factors: level of continued support from other parts of the UAE, mode of loan restructuring undertaken by major creditors, degree of knock-on impacts to other UAE corporates, other emerging markets. Our first stab at potential worst-case loss estimates suggest a manageable impact: assuming a 50% NPL ratio/50% loss given default on commercial real estate loans, and a 20% NPL ratio/50% loss given default on mortgage loans, we estimate the potential credit losses to HSBC and STAN at US$611mn and US$177mn – or 4.6% and 3.9% of 2010E NPAT, 0.5% and 0.6% of 2010E equity.
Backdrop
Many investors have asked about HSBC/STAN exposure to Dubai World (a leading government-linked property developer/holding company) and its affiliates, amidst Nov 26 press reports of Dubai World’s request for a creditor standstill agreement on its c.US$59bn debts (source: Bloomberg). Both HSBC and STAN have declined to comment on individual firm exposures. However, press reports (Bloomberg, FT), past descriptions by both banks of their UAE wholesale banking businesses, and HSBC’s/STAN’s status as the largest and second largest foreign banks in the UAE would all suggest some level of exposure to Dubai World and other similar entities.
Context on likely HSBC, STAN exposures
HSBC had US$15.9bn of loans/advances to the UAE as at end-June 2009. More specifically, HSBC had US$3.475bn of real estate and mortgage loan exposure to the UAE as of the same period, representing 25.9% and 2.7% of our 2010E net profit and shareholders’ equity projections for the group. STAN had US$12.3bn of cross-border loan exposure to the UAE as at end-June 2009 (and US$7.8bn of locally-booked loans to the UAE as at YE08). More specifically, STAN had US$1.674bn of real estate and mortgage loan exposure to the Middle East/South Asia region as of the same date. We estimate c.60% of this exposure, or US$1.0bn, was to the UAE, representing 22.4% and 3.4% of our 2010E NPAT and shareholders’ equity projections for STAN.
More clarity needed; first stab at worse-case loss estimates
Immediate questions include: how much actual exposure do HSBC, STAN have to Dubai World and other potentially similar situations, and what level of ultimate write-downs may need to be taken, what impact to EPS, BVPS? Key swing factors: level of continued support from other parts of the UAE, mode of loan restructuring undertaken by major creditors, degree of knock-on impacts to other UAE corporates, other emerging markets. Our first stab at potential worst-case loss estimates suggest a manageable impact: assuming a 50% NPL ratio/50% loss given default on commercial real estate loans, and a 20% NPL ratio/50% loss given default on mortgage loans, we estimate the potential credit losses to HSBC and STAN at US$611mn and US$177mn – or 4.6% and 3.9% of 2010E NPAT, 0.5% and 0.6% of 2010E equity.
Thanksgiving Day Global Financial Panic
Thursday global trading following the announcement that Dubai World will not pay its current debt until May 2010 was panic like across the board (The Japanese market did not fall as much because there was a flight to the yen):
London's FTSE 100 Index down 170.68 points, or 3.2 percent, to 5,194.13
Germany’s DAX down 188.85 points, or 3.2 percent, to 5,614.17
France's CAC-40 down 129.93 points, or 3.4 percent, at 3,679.23
China's Shanghai index down 119.19 points, or 3.6 percent.
Hong Kong’s Hang Seng down 396 points 1.8 percent to 22,210.41.
Japan’s Nikkei 225 down fell 58.40 points, or 0.6 percent, to 9,383.24
Who knew in advance?
UPDATE: Greece was down 6.2%
London's FTSE 100 Index down 170.68 points, or 3.2 percent, to 5,194.13
Germany’s DAX down 188.85 points, or 3.2 percent, to 5,614.17
France's CAC-40 down 129.93 points, or 3.4 percent, at 3,679.23
China's Shanghai index down 119.19 points, or 3.6 percent.
Hong Kong’s Hang Seng down 396 points 1.8 percent to 22,210.41.
Japan’s Nikkei 225 down fell 58.40 points, or 0.6 percent, to 9,383.24
Who knew in advance?
UPDATE: Greece was down 6.2%
Who Knew?
There is sheer panic in international markets this Thanksgiving because of news that Dubai is delaying payment on debt of Dubai World until May 2010. The Financial Times index is down 3.18%. Is Dubai's delay in paying in paying the debt the reason Treasury Bills have been paying a negative yield over the last week or so?
This is what I wrote on November 19:
The release of such news late Wednesday on the day before Thanksgiving, which means US traders can't, for the most part, react, and where most traders are away until Monday, suggests a sophisticated PR timed release, not likely planned out of Dubai, more likely coming out of the US.
Markets don't lie. It sure looks like that mysterious downtrend in interest rates might have been anticipating the Dubai News Dump.
Who knew?
This is what I wrote on November 19:
Dow Jones reports that January and February T- bills hit a yield of -0.03% earlier.Were government leaders and some traders tipped off that Dubai would make an announcement on the evening before Thanksgiving when U.S. markets were closed? Did they trade on this information?
Got that? Negative .03%.
This is a very spooky sign. It means major players don't want to go further out on the yield curve to earn money. They are only willing to keep their funds very liquid and pay for the privilege as opposed to earning money. This means one thing and one thing only, they are real scared about something. On a best case scenario, they are thinking longer rates are headed higher, so why invest now. On a worst case scenario, they are thinking all hell is going to break lose and they want their funds liquid to meet withdrawal requests.
The release of such news late Wednesday on the day before Thanksgiving, which means US traders can't, for the most part, react, and where most traders are away until Monday, suggests a sophisticated PR timed release, not likely planned out of Dubai, more likely coming out of the US.
Markets don't lie. It sure looks like that mysterious downtrend in interest rates might have been anticipating the Dubai News Dump.
Who knew?
Dubai World Owns 50% of Las Vegas' MGM Mirage's CityCenter
WSJ reports on the developing Dubai World situation and its temporary suspension of payments:
This debt-laden city-state said Wednesday it would restructure its largest corporate entity, Dubai World, a conglomerate spanning real estate and ports, and announced a six-month standstill on the group's debt.
The surprise move quickly sapped investor confidence in Dubai 's ability to pay down its large debt load, sharply increasing the price of insuring against a default. It also represents the most significant fallout so far in the city-state's yearlong economic crisis, triggered by a collapse in its once-booming real-estate sector late last year.
In response to the news, both Moody's Investors Service and Standard & Poor's heavily downgraded the debt of various Dubai government-related entities with interests in property, utilities, commercial operations and commodities trading. In Moody's case, the downgrade meant that the affected agencies lost their investment grade status.
The government of Dubai said it appointed Deloitte LLP to spearhead the restructuring effort, naming an executive at the consultancy as the group's "chief restructuring officer." The move appeared to sideline, at least for the time being, the company's current management team, which had launched an internal corporate restructuring earlier this year.
Government officials, company executives and company representatives weren't available for comment Wednesday. Sultan Ahmed bin Sulayem, Dubai World's longtime chairman and a top lieutenant to Dubai's hereditary ruler, Sheikh Mohammed bin Rashid Al Maktoum, didn't respond to an email request for comment.
A spokeswoman for the Dubai government's Department of Finance, which issued the statement, said Sulayem and the rest of the current management team would remain in place and would be working with Deloitte.
Dubai World executives have "actually been trying to restructure themselves for awhile, and the Dubai government decided it needed to take a more proactive role," the spokeswoman said late Wednesday.
The government said its Financial Support Fund, a fund set up to manage Dubai's debt earlier this year, would start to assess and evaluate the extent of the restructuring required. As part of that assessment, it said officials intend to ask lenders for a debt "standstill" and request they extend debt maturities until at least May 30.
Dubai said the corporation's portfolio includes "strategically important businesses" and said "the restructuring will be designed to address financial obligations and improve business efficiency for the future."
Read WSJ's full report here.
This debt-laden city-state said Wednesday it would restructure its largest corporate entity, Dubai World, a conglomerate spanning real estate and ports, and announced a six-month standstill on the group's debt.
The surprise move quickly sapped investor confidence in Dubai 's ability to pay down its large debt load, sharply increasing the price of insuring against a default. It also represents the most significant fallout so far in the city-state's yearlong economic crisis, triggered by a collapse in its once-booming real-estate sector late last year.
In response to the news, both Moody's Investors Service and Standard & Poor's heavily downgraded the debt of various Dubai government-related entities with interests in property, utilities, commercial operations and commodities trading. In Moody's case, the downgrade meant that the affected agencies lost their investment grade status.
The government of Dubai said it appointed Deloitte LLP to spearhead the restructuring effort, naming an executive at the consultancy as the group's "chief restructuring officer." The move appeared to sideline, at least for the time being, the company's current management team, which had launched an internal corporate restructuring earlier this year.
Government officials, company executives and company representatives weren't available for comment Wednesday. Sultan Ahmed bin Sulayem, Dubai World's longtime chairman and a top lieutenant to Dubai's hereditary ruler, Sheikh Mohammed bin Rashid Al Maktoum, didn't respond to an email request for comment.
A spokeswoman for the Dubai government's Department of Finance, which issued the statement, said Sulayem and the rest of the current management team would remain in place and would be working with Deloitte.
Dubai World executives have "actually been trying to restructure themselves for awhile, and the Dubai government decided it needed to take a more proactive role," the spokeswoman said late Wednesday.
The government said its Financial Support Fund, a fund set up to manage Dubai's debt earlier this year, would start to assess and evaluate the extent of the restructuring required. As part of that assessment, it said officials intend to ask lenders for a debt "standstill" and request they extend debt maturities until at least May 30.
Dubai said the corporation's portfolio includes "strategically important businesses" and said "the restructuring will be designed to address financial obligations and improve business efficiency for the future."
Read WSJ's full report here.
Phones Crash on Dubai Related Conference Call
From Reuters
A conference call for bond holders of Dubai-owned property firm Nakheel was postponed on Thursday after phone lines were overwhelmed by too many people calling in.
The call was to establish the size of the bondholder group and to appoint legal advisers to liaise with Dubai World, which is asking to delay payments on debt held by its subsidiary Nakheel.
Organisers said they had a full list of bond holders, after being asked by one investor who said he had become a bond holder in the last few hours.
Nakheel’s Islamic bond prices extended losses, falling 14 points to 70, their lowest since February, according to Reuters data.
The debt , which was originally due to mature on Dec. 14, 2009, traded as high as 110 on Wednesday before the Dubai government said it would ask creditors to agree to a standstill on debt held by Nakheel and Dubai World and extend maturities until at least May next year.
US Mint Suspends Sale of American Eagle Gold 1-Ounce Coins
The U.S. Mint said Wednesday it will temporarily suspend sales of the popular American Eagle 1-ounce bullion coins as rising demand depleted its inventory.
"The United States Mint has depleted its current inventory of 2009 American Eagle 1-ounce gold bullion coins due to the continued strong demand for this product," the Mint told its authorized dealers in a memorandum on Wednesday.
November sales to date were at 124,000 ounces, higher than the 115,500 ounces sold in each month of September and October, the Mint said.
The Mint said it expects to resume sales in early December.
"The United States Mint has depleted its current inventory of 2009 American Eagle 1-ounce gold bullion coins due to the continued strong demand for this product," the Mint told its authorized dealers in a memorandum on Wednesday.
November sales to date were at 124,000 ounces, higher than the 115,500 ounces sold in each month of September and October, the Mint said.
The Mint said it expects to resume sales in early December.
HOT: Dubai Halts Payments on Dubai World Debt
The government of Dubai is in major financial trouble.
The government late Wednesday said it would restructure Dubai World and announced a six-month "standstill" on repayments of the state-run wide-ranging conglomerate's debt.
Government-owned Dubai World is a conglomerate with interests in real estate, ports and the leisure industry. The firm carries around $60 billion in liabilities. Credit agencies Moody's Investors Service and Standard & Poor's downgraded the debt of a range of government-related firms, including DP World, after the restructuring announcement.
The dollar amounts involved with Dubai are relatively small in this tranche (compared to the real estate debacle0, but this continues to indicate the shortage of dollars to support the current capital structure.
As one would expect, markets are reacting negatively. International stock markets are down across the board. The dollar is climbing.
Normally, an unimportant trading day, this year because of this news, the trading day after Thanksgiving is going to be something to watch.
The government late Wednesday said it would restructure Dubai World and announced a six-month "standstill" on repayments of the state-run wide-ranging conglomerate's debt.
Government-owned Dubai World is a conglomerate with interests in real estate, ports and the leisure industry. The firm carries around $60 billion in liabilities. Credit agencies Moody's Investors Service and Standard & Poor's downgraded the debt of a range of government-related firms, including DP World, after the restructuring announcement.
The dollar amounts involved with Dubai are relatively small in this tranche (compared to the real estate debacle0, but this continues to indicate the shortage of dollars to support the current capital structure.
As one would expect, markets are reacting negatively. International stock markets are down across the board. The dollar is climbing.
Normally, an unimportant trading day, this year because of this news, the trading day after Thanksgiving is going to be something to watch.
How They Crashed President Obama's State Dinner
If you haven't heard, Tareq and Michaele Salahi gatecrashed President Obama's first White House state dinner. They have the pics to prove it. From Michaele's Facebook page:
The San Francisco Chronicle's Zennie2 has the best take on how they likely pulled it off:
...to write there was a "breach in security" is really culturally irresponsible. I can speculate with some accuracy how the Salahi's got into the dinner: they knew someone and perhaps Vice President Biden himself.Look, a little research will show this is a well-connected couple. A November 4, 2008 Washington Post article reveals as much. In an report on a winery sale dispute that involved the Salahi's, the Post reveals...
Tareq Salahi, 39, also a co-owner, and his wife, Michaele, a former Washington Redskins cheerleader who is now a Richmond lobbyist. The son, a member of the Virginia Tourism Authority, is hurrying to team up with investors to buy what he views as his heritage before someone else steps in.
She's a lobbyist and a former Redskins Cheerleader; he's co-owner of a winery. What happened was they knew someone within the chain of people who was assigned to vet who was to come into the event and they got them in.
Once at the State Dinner they were able to see a number of people they knew. In other words, invited or not, they belonged there because their network of informal connections got them in.
That's my story and I'm sticking to it. It's also a good lesson for anyone to follow and comes from "How to win friends and influence people". They are in a business where knowing people and maintaining relationships is vital and its obvious they do a great job of keeping ties with a good network of the Washington elite.
WAR TAX!!
First they make the noises, launch the trial balloons and see what they can get away with. This time it is House Appropriations Committee Chairman David R. Obey (D-WI) in charge of making the noises. LaTi reports:
Obey and several other senior Democrats have proposed a graduated surtax, beginning in 2011, to pay for the war. Their bill would impose a 1% surtax on people earning less than $150,000. The tax hike would be higher for people earning between $150,000 and $250,000 a year, and double that for people with higher incomes. The bill does not give exact figures for what upper surtax rates would be, but says that they would be high enough to cover the previous year's war costs.
It would exempt veterans of combat since Sept. 11, 2001, their families, and the relatives of those killed in action. The president could delay implementation of the tax for a year if he concluded that the economy was too weak.
In addition to Obey, Rep. John B. Larson of Connecticut, chairman of the Democratic Caucus, and the defense appropriations subcommittee chairman, Rep. John P. Murtha (D-Pa.), have come out in support of the surtax.
In a television interview this week, Sen. Carl Levin of Michigan, chairman of the Senate Armed Services Committee, also endorsed the idea of increasing taxes on people earning more than $200,000 to pay for sending additional troops.
This proposal doesn't have enough votes to come close to passing, right now. But give it time, the missile has been launched.
White House budget analysts have estimated that it may be as much as $1 million a year for each additional soldier, according to LaTi. President Obama is expected to announce next week that he will be sending somewhere around 40,000 additional troops to Afghanistan.
White House budget analysts have estimated that it may be as much as $1 million a year for each additional soldier, according to LaTi. President Obama is expected to announce next week that he will be sending somewhere around 40,000 additional troops to Afghanistan.
That's a lot of $$$$$$$, so if they don't tax it away, they'll just have to get Bernanke to print the damn money.
Happy Thanksgiving.
Happy Thanksgiving.
Me and My Cabbie
An EPJ Classic, I originally wrote this piece in April, 2004 for Stock News Direct, when gold was around $400 per ounce.
On a recent business trip to New York, I hailed a taxi at the airport to take me to my midtown Manhattan hotel. Upon entering the taxi, I gave the driver the address to my hotel and, in a perfunctory fashion, I asked the cabbie, "How's it going?"
In reply, he told me that prices were too high.
Gas prices for his taxi were climbing, he told me. Food prices were climbing. And they just raised the price at a storage locker facility where he was renting space.
Since I follow prices for a living, I knew of what he spoke. "Yeah," I agreed, "prices are climbing. Most people don't realize it yet, but they are climbing and it is only going to get worse."
"You should buy some gold to protect yourself, if you can," I advised.
He then proceeded to lecture me for the rest of the trip on why he would not buy gold. I didn't say anything. I just let him talk. Gold, he told me, has very little use. It has some use as jewelry but outside of that it has no use, was the gist of his argument.
"You can't even eat gold," he said. He labored on the fact that you couldn't eat gold, for some time. This seemed to prove to him that gold was nearly useless.
As we arrived at my hotel and since I had an unopened Nestle's Crunch bar in my briefcase, I offered to pay my fare with the bar. "Heh, heh," he laughed.
"No," I said "take it. Why would you want paper dollars? You can't eat them, you can't even make jewelry out of them."
He laughed nervously again. "No, no," he said "I don't eat candy."
"But you can't eat any dollars I give you either," I said.
I then decided to give him a short lecture in economics to help bail him out of his predicament.
"You see some things sometimes have value simply because of their exchange value," I said. " You and I both accept dollars in payment for our services because we know we can exchange them for other goods and services we want. When something is widely accepted in exchange, economists call it a medium of exchange. It doesn't necessarily have to to have any other use. Dollars are a medium of exchange. We can't eat them, but we accept them in exchange because once we have them, we can buy food with the dollars or we can exchange the dollars, as you know, for many, many other things."
"Now the one drawback of dollars is that the government can print more of them any time it wants. By printing more dollars and spending them, it is competing against you for things you want. That's where gold comes in. To increase the gold supply you have to dig it out of the ground.This is hard and expensive work. The government can't print more gold. The government can't produce gold at will. That is why the government has always maintained a propaganda campaign against it. FDR even made it illegal to own gold. This legislation stayed on the books for decades. But despite all this, many people still respect gold as the ultimate medium of exchange. And when the government begins to aggressively print more paper dollars, more and more people choose to hold some of their monetary reserves in the form of gold. That is why gold is valuable. No, you can't eat gold, but it's exchange value can't be corrupted by the government either, and exchange value is very important."
"Now again I am going to offer to pay this fare two ways. One with this bar which you can eat, or with these dollars which have no value outside of exchange value. Now if you accept these dollars, you are at least implicitly acknowledging that exchange value exists and I think you are a smart enough man to know that prices are going up because more of these dollars are being printed. Now if you are a real smart man, now that you understand exchange value, you should go and do something smart and hold some of your reserve funds in a medium of exchange that the government can't print at will. That's gold."
"Now, as far as this cab fare, will it be something you can eat or something that only has value in exchange?"
"I understand," he said "I see why dollars have value, and why gold has even more stable value."
I paid him the fare in dollars. As he counted it, he asked, "How many new dollars are they printing?"
"A lot," I said, " an awful lot."
On a recent business trip to New York, I hailed a taxi at the airport to take me to my midtown Manhattan hotel. Upon entering the taxi, I gave the driver the address to my hotel and, in a perfunctory fashion, I asked the cabbie, "How's it going?"
In reply, he told me that prices were too high.
Gas prices for his taxi were climbing, he told me. Food prices were climbing. And they just raised the price at a storage locker facility where he was renting space.
Since I follow prices for a living, I knew of what he spoke. "Yeah," I agreed, "prices are climbing. Most people don't realize it yet, but they are climbing and it is only going to get worse."
"You should buy some gold to protect yourself, if you can," I advised.
He then proceeded to lecture me for the rest of the trip on why he would not buy gold. I didn't say anything. I just let him talk. Gold, he told me, has very little use. It has some use as jewelry but outside of that it has no use, was the gist of his argument.
"You can't even eat gold," he said. He labored on the fact that you couldn't eat gold, for some time. This seemed to prove to him that gold was nearly useless.
As we arrived at my hotel and since I had an unopened Nestle's Crunch bar in my briefcase, I offered to pay my fare with the bar. "Heh, heh," he laughed.
"No," I said "take it. Why would you want paper dollars? You can't eat them, you can't even make jewelry out of them."
He laughed nervously again. "No, no," he said "I don't eat candy."
"But you can't eat any dollars I give you either," I said.
I then decided to give him a short lecture in economics to help bail him out of his predicament.
"You see some things sometimes have value simply because of their exchange value," I said. " You and I both accept dollars in payment for our services because we know we can exchange them for other goods and services we want. When something is widely accepted in exchange, economists call it a medium of exchange. It doesn't necessarily have to to have any other use. Dollars are a medium of exchange. We can't eat them, but we accept them in exchange because once we have them, we can buy food with the dollars or we can exchange the dollars, as you know, for many, many other things."
"Now the one drawback of dollars is that the government can print more of them any time it wants. By printing more dollars and spending them, it is competing against you for things you want. That's where gold comes in. To increase the gold supply you have to dig it out of the ground.This is hard and expensive work. The government can't print more gold. The government can't produce gold at will. That is why the government has always maintained a propaganda campaign against it. FDR even made it illegal to own gold. This legislation stayed on the books for decades. But despite all this, many people still respect gold as the ultimate medium of exchange. And when the government begins to aggressively print more paper dollars, more and more people choose to hold some of their monetary reserves in the form of gold. That is why gold is valuable. No, you can't eat gold, but it's exchange value can't be corrupted by the government either, and exchange value is very important."
"Now again I am going to offer to pay this fare two ways. One with this bar which you can eat, or with these dollars which have no value outside of exchange value. Now if you accept these dollars, you are at least implicitly acknowledging that exchange value exists and I think you are a smart enough man to know that prices are going up because more of these dollars are being printed. Now if you are a real smart man, now that you understand exchange value, you should go and do something smart and hold some of your reserve funds in a medium of exchange that the government can't print at will. That's gold."
"Now, as far as this cab fare, will it be something you can eat or something that only has value in exchange?"
"I understand," he said "I see why dollars have value, and why gold has even more stable value."
I paid him the fare in dollars. As he counted it, he asked, "How many new dollars are they printing?"
"A lot," I said, " an awful lot."
The True Meaning of Thanksgiving
Richard Ebeling emails:
I have posted a new piece on Northwood's "Defense of Capitalism" blog on , "The True Meaning of Thanksgiving: The Birth of Private Enterprise in America."
The Pilgrim Fathers came to colonial America to escapte religious persecution in Great Britain, but also to establish a new type of society in the wilderness. They were determined to follow Plato's model in "The Republic," and create a communist utopia.
It lead to economic disaster, which was only overcome through the Plymouth Colony elders admitting their error, and instead "privatizing" the colony's property. By doing so they set loose individual initiative and market-based incentives. The result: a bounty in the wilderness rather than starvation.
It was this bounty for which they gave thanks. It was the birth of private enterprise in the New World.
At a time when belief in collectivism and paternalistic government is threatening to diminish even more of our shrinking freedom, we need to recall that this has all been tried before. And how it is the free individual, secure in his right to life, liberty, and honestly acquired property that is the basis of any and all the prosperity that we have in America and around the world.
Read the article here.
I have posted a new piece on Northwood's "Defense of Capitalism" blog on , "The True Meaning of Thanksgiving: The Birth of Private Enterprise in America."
The Pilgrim Fathers came to colonial America to escapte religious persecution in Great Britain, but also to establish a new type of society in the wilderness. They were determined to follow Plato's model in "The Republic," and create a communist utopia.
It lead to economic disaster, which was only overcome through the Plymouth Colony elders admitting their error, and instead "privatizing" the colony's property. By doing so they set loose individual initiative and market-based incentives. The result: a bounty in the wilderness rather than starvation.
It was this bounty for which they gave thanks. It was the birth of private enterprise in the New World.
At a time when belief in collectivism and paternalistic government is threatening to diminish even more of our shrinking freedom, we need to recall that this has all been tried before. And how it is the free individual, secure in his right to life, liberty, and honestly acquired property that is the basis of any and all the prosperity that we have in America and around the world.
Read the article here.
Wednesday, November 25, 2009
CNBC's Bill Griffeth Taking A Year Off
One of the old guard is taking a year off. Will he be back?
Bill Griffeth was originally with the Financial News Network. FNN was the CNBC of the late 1980's. Then GE came in with its deep pockets and bought up all FNN's high Q scoring anchors, including Griffeth and Sue Herera. It was a scorched earth tactic that killed FNN.
Now Griffeth is gone for 52 weeks. I wonder what his Q scores are like now?
Here's what Griffeth has to say about his vacation:
Bill Griffeth was originally with the Financial News Network. FNN was the CNBC of the late 1980's. Then GE came in with its deep pockets and bought up all FNN's high Q scoring anchors, including Griffeth and Sue Herera. It was a scorched earth tactic that killed FNN.
Now Griffeth is gone for 52 weeks. I wonder what his Q scores are like now?
Here's what Griffeth has to say about his vacation:
First let me address all of the conspiracy theories: I'm not sick, I'm not being pushed out, and I'm not going on Dancing With The Stars. It's pretty straightforward. My wife and I are new empty-nesters, so after 28 years of doing business on TV now seems like a good time to take a break, do some traveling, work on a couple of book projects, and shave strokes off of my golf handicap. I will probably turn up on the air from time to time during the year, so I'll still see you around.It's curious that CNBC buried this announcement on the Tuesday of Thanksgiving week at 4:15 PM, after many traders are already gone for the holiday. Did they think everyone would come back after the holiday and not notice Griffeth wasn't around?
No Economists at the State Dinner, but Plenty of Oligarchs
Goldman was represented, GE's top man was there, and what's a party without union head, and my former buddy, Andy Stern.
PEU Report has a great breakdown on the olgigarchs that attended the state dinner, here.
China Behind Garlic Price Bubble; Climbing Faster Than Gold
The price of garlic in China has nearly quadrupled since March. It is climbing faster than the price of gold and faster than Chinese stocks.
The trigger for the bull run may have been the idea that the potent bulb can ward off H1N1 swine flu, according to a Morgan Stanley report.
The China Daily reported last week that a high school in Hangzhou, a prosperous city in eastern China, had bought 200 kg of garlic and forced students to eat it every day for lunch to stay healthy.
"I don't know about H1N1, but it can prevent ordinary colds," Zhang Ping, 74, told Reuters at a vegetable market in Beijing. "Take me. I've not had cold for many years and every year I buy several dozen pounds of garlic."
On the other hand, maybe Chinese oligarchs are behind the move.
China Business News said coal mine bosses -- who are often depicted as being both extremely rich and nefarious speculators -- have been playing the garlic market, hoarding bulbs and hauling them between storehouses.
Garlic prices were extremely low last year, convincing many farmers that it was not worth planting the crop again, a wholesale trader was quoted as saying in the Nanfang Daily. Farmers cut back garlic planting by 50%. Thus, a great opportunity arose to attempt to corner the market.
Nevertheless, you only see these types of attempts to corner a market when a lot of money is being printed to support the acquisition binge.
Morgan Stanley used the garlic price surge as a case study of the asset price appreciation going on in China right now.
In some parts of Shandong province, the wholesale price of garlic is up as much as 40-fold.
"Too much liquidity in any market can lead to speculation," Morgan Stanley analyst Jerry Lou said in a research note this week. "The most recent evidence of asset speculation in China's commodity markets has been for garlic."
The liquidity, of course, is caused by China's continued printing of Chinese money to prop up the dollar. Sometimes this money pumping can go on for years, but when it stops watch out below.
Naturally, the climb in price is not limited to China, as trade will bring about something of a global price. Here in the states, I found this comment at GardenWeb.com, which was made in early August:
The trigger for the bull run may have been the idea that the potent bulb can ward off H1N1 swine flu, according to a Morgan Stanley report.
The China Daily reported last week that a high school in Hangzhou, a prosperous city in eastern China, had bought 200 kg of garlic and forced students to eat it every day for lunch to stay healthy.
"I don't know about H1N1, but it can prevent ordinary colds," Zhang Ping, 74, told Reuters at a vegetable market in Beijing. "Take me. I've not had cold for many years and every year I buy several dozen pounds of garlic."
On the other hand, maybe Chinese oligarchs are behind the move.
China Business News said coal mine bosses -- who are often depicted as being both extremely rich and nefarious speculators -- have been playing the garlic market, hoarding bulbs and hauling them between storehouses.
Garlic prices were extremely low last year, convincing many farmers that it was not worth planting the crop again, a wholesale trader was quoted as saying in the Nanfang Daily. Farmers cut back garlic planting by 50%. Thus, a great opportunity arose to attempt to corner the market.
Nevertheless, you only see these types of attempts to corner a market when a lot of money is being printed to support the acquisition binge.
Morgan Stanley used the garlic price surge as a case study of the asset price appreciation going on in China right now.
In some parts of Shandong province, the wholesale price of garlic is up as much as 40-fold.
"Too much liquidity in any market can lead to speculation," Morgan Stanley analyst Jerry Lou said in a research note this week. "The most recent evidence of asset speculation in China's commodity markets has been for garlic."
The liquidity, of course, is caused by China's continued printing of Chinese money to prop up the dollar. Sometimes this money pumping can go on for years, but when it stops watch out below.
Naturally, the climb in price is not limited to China, as trade will bring about something of a global price. Here in the states, I found this comment at GardenWeb.com, which was made in early August:
I am wondering whats up with garlic this season?? How are the prices around the country? I am experiencing very high prices at the wholesale auctions, 2 weeks ago I was getting $36 per peck,that's $180 per bushel. this past Tuesday I received $45 per peck; I am taking a bunch more tomorrow and hope the prices are at least as good as Tuesday. I wonder what is driving the prices, no California or Chinese on the market yet?? I must say i am presenting some very nice garlics but even the cull types are fetching 3-4 bucks per quart, tiny ugly stuff, some not at all well presented or even cleaned with the stalks still on them are doing ok too..
How Nicolas Cage Spent His Way To The Poorhouse
Well, for starters, he owned two albino King Cobras, as well as “an antidote serum on the wall, so that if you got bit by a snake you could save yourself.”
Clusterstock has put together a slideshow of the cars, the mansions and the jet, here.
A Second Look at the Lower Initial Jobless Claims Number
The media is reporting that for the week ending Nov. 21, the figure for initial jobless claims was 466,000, a decrease of 35,000 from the previous week's revised figure of 501,000 that has been released by the Labor Department.
But this is a seasonally adjusted number.
Without the Labor Departments special "seasoning" the number of actual initial claims under state programs totaled 543,926 in the week ending Nov. 21, an increase of 68,080 from the previous week.
But this is a seasonally adjusted number.
Without the Labor Departments special "seasoning" the number of actual initial claims under state programs totaled 543,926 in the week ending Nov. 21, an increase of 68,080 from the previous week.
Thus, the Labor Department numbers have swung the jobless claims picture by over 100,000 for the last week, from a decrease to an increase.
Which means, if you applied for unemployment last week there is a one in five chance your claim has been seasonally adjusted from the data.
Happy Thanksgiving.
Orders for Durable Goods Fall
New orders for manufactured durable goods in October decreased $1.0 billion or 0.6 percent to $166.2 billion, the U.S. Census Bureau announced today. This was the second monthly decrease in the last three months. This followed a 2.0 percent September increase. Excluding transportation, new orders decreased 1.3 percent.
Machinery, after two consecutive monthly increases, had the largest decrease, $1.9 billion or 8.0 percent to $21.8 billion.
Unfilled orders for manufactured durable goods in October, down thirteen consecutive months, decreased $3.0 billion or 0.4 percent to $730.4 billion. This is the longest streak of consecutive monthly decreases since the series was first published on a NAICS basis in 1992 and followed a 0.4 percent September decrease.
Year-to-date all sectors are down except military spending.
YTD Defense Aircraft and parts shipments are up 21.1%
YTD Defense Aircraft and parts new orders are up 8.8%
YTD Defense Capital goods shipments are up 16.2%
YTD Defense Capital Goods new orders are up 1.0%
YTD shipments for all sectors are down 18.0%
YTD new orders for all sectors are down 23%
Bottom line: The military-industrial complex is alive and well.
Machinery, after two consecutive monthly increases, had the largest decrease, $1.9 billion or 8.0 percent to $21.8 billion.
Unfilled orders for manufactured durable goods in October, down thirteen consecutive months, decreased $3.0 billion or 0.4 percent to $730.4 billion. This is the longest streak of consecutive monthly decreases since the series was first published on a NAICS basis in 1992 and followed a 0.4 percent September decrease.
Year-to-date all sectors are down except military spending.
YTD Defense Aircraft and parts shipments are up 21.1%
YTD Defense Aircraft and parts new orders are up 8.8%
YTD Defense Capital goods shipments are up 16.2%
YTD Defense Capital Goods new orders are up 1.0%
YTD shipments for all sectors are down 18.0%
YTD new orders for all sectors are down 23%
Bottom line: The military-industrial complex is alive and well.
The Destructive Force of Predatory Capitalism
By John Perkins
The first book by John Perkins, Confessions of an Economic Hit Man, was awesome. He truly took you into the world of the elites and showed how they manipulate on a global scale. I was not as impressed by his second book, The Secret History of the American Empire. It seemed to be warmed up leftovers. I haven't had a chance to read his new book, Hoodwinked, yet. I did glance through the book in Barnes & Noble and notice that he gives props in the book to the two great economists, Ludwig von Mises and Friedrich Hayek. I don't recall him mentioning either in his first two books, so he is learning.-rw UPDATE: I have had a chance to take a further look at Perkin's new book and, though he uses the term predatory capitalism, he doesn't seem to differentiate between "predatory capitalism" and simple free market capitalism. At points he condemns them both as though they are the same thing. He makes the same mistakes that Michael Labeit pointed out Michael Moore makes.
Whenever I hold my two-year old grandson, Grant, in my arms I wonder what this world will look like six decades from now, when he is my age. I know that if we "stay the course" it will be ugly. The current economic meltdown is a harbinger.
Panama's chief of government, Omar Torrijos, foresaw this meltdown and understood its implications back in 1978, when I was an economic hit man (EHM). He and I were standing on the deck of a sailing yacht docked at Contadora Island, a safe haven where U.S. politicians and corporate executives enjoyed sex and drugs away from the prying eyes of the international press. Omar told me that he was not about to be corrupted by me. He said that his goal was to set his people free from "Yankee shackles," to make sure his country controlled the canal, and to help Latin America liberate itself from the very thing I represented and he referred to as "predatory capitalism."
"You know," he added, "what I'm suggesting will ultimately benefit your children too." He explained that the system I was promoting where a few exploited the many was doomed. "The same as the old Spanish Empire -- it will implode." He took a drag off his Cuban cigar and exhaled the smoke slowly, like a man blowing a kiss. "Unless you and I and all our friends fight the predatory capitalists," he warned, "the global economy will go into shock." He glanced across the water and then back at me. "No permitas que te engañen," he said ("Don't allow yourself to be hoodwinked.")
Three decades later, Omar is dead, likely assassinated because he refused to succumb to our attempts to bring him around, but his words ring true. For that reason I chose one of them as the title of my latest book, Hoodwinked.
We have been hoodwinked into believing that a mutant form of capitalism espoused by Milton Friedman and promoted by President Reagan and every president since - one that has resulted in a world where less than 5% of us (in the United States) consume more than 25% of the resources and nearly half the rest live in poverty - is acceptable.
In fact, it is an abject failure. The only way China, India, Africa and Latin America can adopt this model is if they find five more planets just like ours, except without people.
Most of us understand what my grandson does not--that his life is threatened by the crises generated during our watch. The question is not about prevention. It is not about retuning to "normal." Nor is it about getting rid of capitalism.
Read the rest here.
The first book by John Perkins, Confessions of an Economic Hit Man, was awesome. He truly took you into the world of the elites and showed how they manipulate on a global scale. I was not as impressed by his second book, The Secret History of the American Empire. It seemed to be warmed up leftovers. I haven't had a chance to read his new book, Hoodwinked, yet. I did glance through the book in Barnes & Noble and notice that he gives props in the book to the two great economists, Ludwig von Mises and Friedrich Hayek. I don't recall him mentioning either in his first two books, so he is learning.-rw UPDATE: I have had a chance to take a further look at Perkin's new book and, though he uses the term predatory capitalism, he doesn't seem to differentiate between "predatory capitalism" and simple free market capitalism. At points he condemns them both as though they are the same thing. He makes the same mistakes that Michael Labeit pointed out Michael Moore makes.
Whenever I hold my two-year old grandson, Grant, in my arms I wonder what this world will look like six decades from now, when he is my age. I know that if we "stay the course" it will be ugly. The current economic meltdown is a harbinger.
Panama's chief of government, Omar Torrijos, foresaw this meltdown and understood its implications back in 1978, when I was an economic hit man (EHM). He and I were standing on the deck of a sailing yacht docked at Contadora Island, a safe haven where U.S. politicians and corporate executives enjoyed sex and drugs away from the prying eyes of the international press. Omar told me that he was not about to be corrupted by me. He said that his goal was to set his people free from "Yankee shackles," to make sure his country controlled the canal, and to help Latin America liberate itself from the very thing I represented and he referred to as "predatory capitalism."
"You know," he added, "what I'm suggesting will ultimately benefit your children too." He explained that the system I was promoting where a few exploited the many was doomed. "The same as the old Spanish Empire -- it will implode." He took a drag off his Cuban cigar and exhaled the smoke slowly, like a man blowing a kiss. "Unless you and I and all our friends fight the predatory capitalists," he warned, "the global economy will go into shock." He glanced across the water and then back at me. "No permitas que te engañen," he said ("Don't allow yourself to be hoodwinked.")
Three decades later, Omar is dead, likely assassinated because he refused to succumb to our attempts to bring him around, but his words ring true. For that reason I chose one of them as the title of my latest book, Hoodwinked.
We have been hoodwinked into believing that a mutant form of capitalism espoused by Milton Friedman and promoted by President Reagan and every president since - one that has resulted in a world where less than 5% of us (in the United States) consume more than 25% of the resources and nearly half the rest live in poverty - is acceptable.
In fact, it is an abject failure. The only way China, India, Africa and Latin America can adopt this model is if they find five more planets just like ours, except without people.
Most of us understand what my grandson does not--that his life is threatened by the crises generated during our watch. The question is not about prevention. It is not about retuning to "normal." Nor is it about getting rid of capitalism.
Read the rest here.
John Perkins is former chief economist at a major international consulting firm. His Confessions of an Economic Hit Man spent 70 weeks the New York Times bestseller list. His website is www.johnperkins.org and his Twitter ID is www.twitter.com/economic_hitman.
India Negotiating Purchase Of Remaining IMF Gold
It appears India may be buying more gold from the IMF.
The Financial Chronicle of India reports:
(ViaZeroHedge)
The Financial Chronicle of India reports:
It would really be interesting to know if India was involved in any gold leases with the Fed or Treasury, to determine if their gold purchases from the IMF are to cover the mother of all short positions. Or has Reserve Bank of India decided holding foreign currencies is too risky a game?
India is open to buying more gold from the International Monetary Fund (IMF). It bought 200 tonnes for $6.7 billion on November 3. The Reserve Bank of India (RBI) may well buy IMF’s remaining hoard of 201.3 tonnes on acceptable terms, which are now under negotiation.
A government official said that the additional purchase would depend on the “successful pitching by RBI”. “RBI is an independent body, and the government does not interfere in its affairs. It will get the gold if its bid is successful and at the price it has offered,” said the official.
RBI did not respond to Financial Chronicle questions if it was bidding for the remaining IMF gold. The purchase of the first lot of 200 tonnes, RBI had said at the time, was a part of its foreign exchange reserves management operations.
Responding to query from FC, an IMF spokesperson said the gold sale process was still under way and “there is no fixed timetable for completing the sale”. Its spokesperson further said that “the fund does not wish to comment on discussions with individual members.”...
RBI bought the 200 tonnes at $1,045 an ounce. The transaction, from IMF to RBI, involved daily sales that were staggered over a two-week period, October 19-30, with each daily sale conducted at a price set on the basis of that day’s market price.
(ViaZeroHedge)
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