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Bank of Saga
12 сентября 2013, 15:06

News Summary: Futures Flat In Absense Of Overnight Ramp

For the second day in a row non-US markets are largely unchanged and US equity futures begin the session where they ended (that they will close much higher is a different question). The AUD responded adversely following news that Australia saw a substantial drop in job creation, with 10.8K jobs lost, roughly the same as was estimated should be gained: perhaps that Chinese "recovery" is not trickling down because it is purely on Excel? Europe continued to inch closer to the German elections by the look of the increasingly worse economic data, which today showed Industrial Production for the Eurozone slid -1.5% on expectations of a -0.3% drop, down from a revised 0.6% print. But as long as people are buying the peripheral success story all is well: supposedly that will continue until Greece gets at least its next bailout. Italian FTSE-MIB underperforming as market participants look forward to the resumption of hearing by Italian lawmakers on the (never-ending) Berlusconi saga. The under performance is also evident in the bond market, where IT/GE 10s are wider by 3bps, whereas SP/GE 10s is actually trading tighter by 1.5bps.  Jitters from Syria still abound, as confirmed by reports from the Israeli army that two shells had hit the Southern Golan region. Despite the reports that the shelling appeared to be errant, WTI remains near session highs as markets remain sensitive ahead of the meeting between US Secretary of State Kerry and Russian Foreign Minister Lavrov in Geneva over the next two days. Buying of the 10Y is also prevalent and the yield on the benchmark bond was has dropped below 2.90%, or at 2.88% at last check. Today's key economic news in the US session will be the weekly claims report, the Fed buying 10 Year bonds at 11 am followed by the Treasury selling 30 Year bonds at 1 pm (this follows the Fed buying 30 Year bond yesterday: yes ironic). Overnight news bulletin from BBG and Ran: Russian President Vladimir Putin commented that no one doubts that poison gas was used in Syria and that there is every reason to believe it was used not by the Syrian Army, but by opposition forces, to provoke intervention by their powerful foreign patrons, who would be siding with the fundamentalists. Treasuries extend gains seen after yesterday’s well-bid 10Y reopening; week’s auctions end with $13b 30Y bonds. WI yield 3.830%; stopout at that level would be highest in over two years. Euro-area industrial output fell 1.5% in July, more than forecast, after increase of 0.6% in June Australian jobs fell for a second month in August, with the number of people employed falling 10,800 from the previous month, more than forecast New Zealand’s central bank said interest rate increases “will likely be required next year” as the economy strengthens and inflation picks up Bank of England Governor Mark Carney said BOE tightening will begin with a rate increase; “our exit strategy from QE would be that we would look to adjust base rates first before we would consider a sale of assets” Vodafone Group Plc’s EU7.7b takeover of Kabel Deutschland Holding AG is under threat amid speculation that a hedge  fund that boosted its stake in the target did so to squeeze extra cash from the deal Slovenia may need ESM funds to help banks as the government may not be able to stabilize financial industry without help from outside, Handelsblatt says Sovereign yields lower, EU peripheral spreads tighter. Nikkei falls 0.26% as JPY gains to trade 99.35.  Shanghai Composite +0.6%. European stocks, U.S. equity-index futures fall. WTI crude higher, gold, copper decline Deutsche Bank have upgraded their Euro area GDP growth expectations to -0.2% in 2013 (prev. -0.4%) and 1.2% in 2014 (prev. 1.0%). Asian Headlines Bank of America have raised their Chinese 2013 GDP forecast to 7.7% from 7.6%. There were conflicting reports in Japanese press overnight on a domestic sales tax hike, with Yomiuri writing that PM Abe is to raise the rate in April as scheduled, however this was denied by the Japanese chief cabinet secretary Suga, who said no agreement has been reached. EU & UK Headlines In spite of political risks surrounding the Italian government, where lawmakers are to reconvene over the political future of Silvio Berlusconi after allies of the billionaire media tycoon threatened to bring down Prime Minister Enrico Letta's unstable ruling coalition, the Italian Treasury successfully sold EUR 5.5bln in BTPs this morning (in line with aim). - Sold EUR 4bln in 2.75% 2016, b/c 1.52 (Prev. 1.34) and gross yield 2.72% (Prev. 2.33%) - highest yield since Oct'12. - Sold EUR 1.5bln in 4.75% 2028, b/c 1.36 (Prev. 1.73) and gross yield 4.88% (Prev. 4.67%) Deutsche Bank have upgraded their Euro area GDP growth expectations to -0.2% in 2013 (prev. -0.4%) and 1.2% in 2014 (prev. 1.0%). Eurozone Industrial Production SA (Jul) M/M -1.5% vs. Exp. -0.3% (Prev. 0.7%, Rev. 0.6%) Eurozone Industrial Production WDA (Jul) Y/Y -2.1% vs. Exp. -0.2% (Prev. 0.3%, -0.4%) ECB's Asmussen said it is too early to tighten accommodative monetary policy. Elsewhere, ECB's Hansson said the ECB has discussed another LTRO, but so far the policy package the ECB has seems appropriate. BoE's Carney says expected that yield curve would steepen after introduction of forward guidance, central bank has not dropped 2% medium term inflation target. BoE's Carney says will keep QE at GBP 375bln at minimum until 7% hit; will not begin to consider tightening until 7% reached. BoE's Miles said policy can be more expansionary if needed and forward guidance says the BoE is not looking to tighten. Miles said when the time comes to tighten policy, would prefer to raise interest rates before selling QE gilts. UK DMO sold GBP 3.75bln in 2.25% 2023 gilts, b/c 1.59 (Prev. 1.76) and tail of 0.4bps (Prev. 0.2bps), yield 2.976% - highest since June 2011. US Headlines US foreclosure filings declined 34% as property prices declined, which is the 35th month of declines on an annual basis, according to RealtyTrac. Equities Equities failed to sustain a marginally higher open and are seen lower across the board, with the Italian FTSE-MIB underperforming as market participants look forward to the resumption of hearing by Italian lawmakers on the (never-ending) Berlusconi saga. Utility related stocks fared poorly this morning, with EDF shares under pressure amid share placements (UBS/Norges bank), while RWE in Germany was seen as the worst performing stock following reports by Handelsblatt, citing people close to supervisory board, that the CEO plans to suggest a dividend below last year's payout of EUR 2 per share. FX Cautious sentiment, which in turn supported USTs meant that unfavourable interest rate differential flows weighed on USD/JPY this morning. Technically, the pair looks set to make a test on the 100DMA line at 99.02 and then the 50DMA line at 98.80. Elsewhere, with EUR/GBP trading close to its lowest levels since mid-Jan meant that GBP/USD outperformed EUR/USD, albeit marginally, with EUR/USD testing the 21DMA line to the downside at 1.3290. RBNZ Official Cash Rate (Sep 12) M/M 2.50% vs. Exp. 2.50% (Prev. 2.50%) - RBNZ Governor Wheeler said he expects to keep key rate at 2.5% through 2013 and is likely to raise interest rates in 2014. Wheeler further added NZD remains high and that the 90-Day bill forecasts indicates rates rising in H1 2014. Commodities Russian President Vladimir Putin commented that no one doubts that poison gas was used in Syria and that there is every reason to believe it was used not by the Syrian Army, but by opposition forces, to provoke intervention by their powerful foreign patrons, who would be siding with the fundamentalists. Putin added that reports of militants preparing another attack — this time against Israel — cannot be ignored. OPEC Secretary General Abdalla El-Badri commented that the oil market is well supplied. IEA raised 2013, 2014 world oil demand forecasts by 70,000bpd, adding that it sees less need for OPEC crude in 2014 as US supply booms. Furthermore, IEA sees emerging-market currency changes affecting oil demand and that Mexico's oil reforms may lead to higher production. Israel says two shells from Syria hit Southern Golan, initial evidence shows shelling was errant. * * * We conclude with the overnight event recap from DB's Jim Reid The probability of some kind of tapering next week has probably been getting ever higher since September started due to the rebound in markets. The S&P 500 (+0.31%) climbed for the 7th successive day yesterday as markets continue to welcome the back-down in Syrian tension and hopes are also being raised that last Friday’s weaker-than-expected nonfarm payrolls will deliver nothing more than a “mini-taper” at next week’s FOMC. On the Syrian situation, Russian President Vladimir Putin penned an interesting Op-Ed in the NY Times which was published overnight. In the Op-Ed, Putin challenges the arguments put forward by Obama, writing that “No one doubts that poison gas was used in Syria. But there is every reason to believe it was used not by the Syrian Army, but by opposition forces, to provoke intervention by their powerful foreign patrons”. So while military action seems more distant at the moment, the global political debate looks likely to rumble on in the background for a while. While the S&P500 continues its march back towards the 1,700 mark (now less than 11pts away) it’s important to emphasise that the improved sentiment has also benefited EM in a significant way. Indeed, the positive momentum that started at the beginning of this month continued as the ZAR, MXN and BRL added 1.1%, 0.3% and 0.3% against the USD yesterday. Against this backdrop the yields on Brazil, Colombia and Mexico dollar bonds collapsed by 16bp, 9bp and 5bp respectively yesterday. Looking at our screens this morning, some of the positive sentiment from the US session has rolled over into Asian markets. The improvement in sentiment in LATAM markets continues to help Asian EM sovereigns and we are seeing 0.25% to 0.5% gains across most Asian equity indices. In the FX market, AUDUSD is down 0.8% after disappointing Australian labour market data. Outside of the credit markets, there was another round of lukewarm US mortgage application data which fell 13.5% in the week ending September 6th leaving us wondering whether at some point this will translate in weaker housing data. Amongst the detail, the refinancing index slumped 20%, now off 71% since its 2013 high in May and at its lowest level since June 2009. This seems to be having an effect on the major US mortgage lenders, including Citigroup, Wells Fargo and Bank of America who have all announced staffing cuts in their mortgage origination businesses in recent weeks. In spite of the firmer sentiment in equity and credit markets, US treasuries managed to unwind all of Tuesday’s losses, with 10yr yields firming 5bp to 2.91%. A very solid 10yr treasury auction spurred most of yesterday’s gains but we are also seeing a further 3bp tightening in 10yr yields in Tokyo trading this morning (2.88% as we type). Off the back of the moves in treasuries, Global bond yields firmed yesterday with the notable exception of Portugal (10yr +5bp) after the country’s Deputy PM said the country is trying to persuade the troika to further ease budget targets for 2014. Looking at the day ahead, perhaps the most watched data will be US jobless claims heading into next week’s FOMC. The ECB publishes its monthly report today and Draghi will be speaking at an event in Latvia. Data on Euroarea industrial production for July and Euroarea consumer inflation for August are scheduled for today. Italy will be auctioning 3yr, 5yr and 15yr bonds.        

08 сентября 2013, 02:15

“We Don’t Feel Any Impact Of Abenomics Here”

Wolf Richter   www.testosteronepit.com   www.amazon.com/author/wolfrichter For Japan’s three megabanks, lending has rebounded. But instead of funding industrial projects in Japan, they’re funding acquisitions overseas and highfalutin real-estate speculation in Tokyo and Osaka. They wrote up their stock holdings and extracted fees from the frenzied trading that Abenomics triggered. Their profits surged – 40% at Mitsubishi UFJ Financial Group during the last quarter, 35% at Mizuho Financial Group, and over 100% at Sumitomo Mitsui Financial Group. They’ve been the prime beneficiaries of Abenomics.  But smaller banks are not so lucky, particularly the vast network of community-based, cooperative shinkin banks. By law, they can only lend to individuals and businesses in their area, and these businesses can’t have more than 300 employees. Their distinctive characteristics: they are “close and convenient,” offer “fine-tuned and personalized services,” and have a “strong relationship of mutual trust with their customers and communities,” the Shinkin Central Bank points out. Yes, they have their own central bank, and its preferred shares – like the shares of the Bank of Japan – are listed on the Tokyo Stock Exchange. These shinkin banks have been stuck in a long-term quagmire: There are 270 of them around the country, down 31% from January 2000, with 7,505 branches, down 13% from January 2000, and with 115,480 employees, down 27% from 2000, according to the Shinkin Central Bank Research Institute. Their deposits however have climbed constantly: as of June 2013, at ¥127.4 trillion ($1.27 trillion), they were up 2.0% from a year ago and 24.8% from 2000. Yet their loan books have shriveled: at ¥63.16 trillion ($631 billion), they’re down 9.7% from 2000. And their all-important loan-to-deposit ratio has plunged from 68.6% in 2000 to 49.6% now. “There’s no demand for productive loans,” Masatoshi Masuda, president of Wakkanai Shinkin, told the SCMP. The bank is loaded to the gills with cash but can’t do anything productive with it. Its loan book is only about one-fifth of the ¥400 billion it has on deposit. So, instead of making loans to local businesses for productive activities, these banks invest their deposits in securities, mostly JGBs and corporate bonds from state-owned enterprises. Back in January 2000, all shinkin banks combined carried ¥2.80 trillion in JGBs and ¥8.85 trillion in corporates on their books. By June 2013, their holdings of JGBs had quadrupled to ¥11.1 trillion, and their holdings of corporates had nearly doubled to ¥16.2 trillion. Income from JGBs, with their near-zero yields, was small but stable over the last ten years, as yields have declined and the value of JGBs has risen. Now the reverse is taking place. Yields are rising, the value of JGBs is falling, and new volatility in the JGB market is wreaking havoc on these banks. The BOJ had urged banks to dump their JGBs, ostensibly so that they’d lend that money to businesses and stimulate economic activity, but in reality so that banks would get out from under that pile that is doomed to lose value and might threaten their survival. Large banks have done exactly that. The three megabanks got rid of ¥23.8 trillion in JGBs in the last quarter alone, most of it shuffled off to the BOJ. Sumitomo dumped about half of its JGBs in the quarter, after having already dumped a bunch in the prior quarter! Shinkin banks can’t do that; they don’t have another income-producing place for their depositors’ money. They can’t lend to big corporations for overseas adventures or fund real-estate gambles in Tokyo. So they put their money where they can put it. Hence, their holdings of increasingly toxic JGBs and bonds from state-owned enterprises have set new records. But their bread-and-butter income – the spread between the interest paid to depositors (just about zero) and the interest charged on loans – has been shrinking in parallel with their loan book. It reflects reality in Japan: governments and government-owned entities need a lot more funding than the private sector. And now, their survival has become a matter of doubt. Consolidation has been ballyhooed as the solution. It has been happening in large urban areas. But in smaller towns, it’s difficult. “We already have 50% of the local loan market,” said Wakkanai Shinkin president Masuda. “Simply, it’s too high a share.” So, for his bank, consolidation is not the answer. Wakkanai Shinkin is perhaps no worse off than other small-town banks. They all have their issues. The bank operates in Wakkanai, a town of 38,000 at the northern tip of Hokkaido, Japan’s largest island. Ferries go from there to the Russian island of Sakhalin, the next stop north. Wakkanai is closer to Vladivostok and Khabarovsk in Siberia than to Tokyo. But its dilemma is typical for small towns. Japan continues to urbanize. Young people head off to distant big cities, such as Sapporo, the capital of Hokkaido Prefecture. And “depopulation” is a real issue [my take... Japan’s Vacant Houses: Visions of Detroit]. “There is no business here,” lamented Satsu Sato. He runs a bar in Wakkanai. “We have to depend on fish and tourists but we’re not getting as many tourists as we used to.” The number of tourists has fallen by nearly 50% over the last decade. Hokkaido is still a popular tourist destination – a gorgeous one – but fewer people make it up to its northern tip. And the fishing industry in Wakkanai has seen its activities plunge to a fraction of what it once was. “We don’t feel any impact of Abenomics here,” Katsumi Ogawa, an official at the Chamber of Commerce in Wakkanai, told the SCMP. And this has become a common expression across much of Japan. Abenomics – particularly the BOJ’s drunken binge of printing and handing out trillions of yen on a regular basis – was designed to benefit the biggest banks and the elite of Japan Inc. These benefits aren’t trickling down because they weren’t meant to trickle down. The plight of Japan’s vast and crucial network of local banks, caught between slack loan demand from businesses and the treacherous currents of Abenomics, is just one more detail in that saga. It would be ridiculous if it weren’t sad: Facing exploding budget deficits and an uncircumnavigable mountain of debt, Japan’s two largest economic problems, the government in its blind devotion to the religion of Abenomics screams, “Damn the torpedoes, full speed ahead.” Read.... Abenomics Wins: Budget And Inflation Both Jump (Over The Cliff)    

01 апреля 2013, 07:06

Michael Winship: Watergate's Lessons, Washed Away

At moments, "The Lessons of Watergate" conference, held a couple of weeks ago in Washington, D.C. by the citizen's lobby Common Cause, was a little like that two-man roadshow retired baseball players Bill Buckner and Mookie Wilson have been touring. In it, they retell the story of the catastrophic moment during the bottom of the last inning of Game Six of the 1986 World Series, when the Mets' Wilson hit an easy ground ball toward Buckner of the Red Sox, who haplessly let it roll between his legs. That notorious error ultimately cost Boston the championship. As The New Yorker magazine's Reeves Wiedeman wrote of the players' joint public appearance, "It is as if Custer and Sitting Bull agreed to deconstruct Little Bighorn." Or those World War II reunions where aging Army Air Corps men meet the Luftwaffe pilots who tried to shoot them down over Bremen. So, too, in Washington, four decades after the Watergate break-in scandal that led to the downfall of President Richard Nixon. Up on stage was Daniel Ellsberg of Pentagon Papers fame, one of the first victims of Nixon's infamous "plumbers," the burglars who went skulking into the night to attempt illegal break-ins -- including one at the office of Ellsberg's psychiatrist. "I want to add something to the history here that I've never told," Ellsberg said, then asked. "Is Alex Butterfield still alive?" A voice shouted from a corner of the room, "I'm over here." And sure enough, it was Alexander Butterfield, former deputy to Nixon chief of staff H.R. "Bob" Haldeman, and a pivotal if accidental notable in the Watergate saga. In July 1973, Butterfield let slip to the Senate Watergate committee that Nixon made secret audiotapes of all his meetings at the White House, a revelation that cracked the scandal wide open. We never did hear the story Ellsberg wanted to tell; he decided he needed to clear it with Butterfield before he went public. The Common Cause event was filled with such slightly surreal moments, kind of like a Comic Con for history buffs and policy wonks. Just moments before Ellsberg spoke, I had been chatting with former Brooklyn Congresswoman Liz Holtzman, when Butterfield walked over, introduced himself and told Holtzman, "I was in love with you even when I was at the White House." Holtzman was a prominent member of the House Judiciary Committee that in July 1974 passed three articles of impeachment against Nixon. He resigned less than two weeks later. I was there in the hearing room that summer -- briefly -- while they debated one of the articles. My first TV job was working for public television in Washington, and while most of the time I was in the office or studio, a colleague lent me her credentials to see a bit of the action. The day Nixon quit, I was in Lafayette Park across from the White House taping promos for our coverage (somewhere I have a color slide of me working with our correspondent while Tom Brokaw teeters on an orange crate next to me, doing a standup). I returned to the park that night, after Nixon's resignation speech, where a jubilant crowd celebrated his departure. When a garbage truck rolled past, they began chanting, "The moving men are here!" Washington was a smaller town then and Watergate had become a cottage industry. Everyone you met had a rumor to spread or a story to tell. Books about the mess sold like crazy -- everything from Woodward and Bernstein's best-selling All the President's Men to transcripts of the White House tapes to collections of Watergate "recipes." A friend of mine and I led Watergate tours and peddled bumper stickers on the side: one read, "Nixon Bugs Me, Too." The other was the simpler yet eloquent "Impeach Nixon." In those days, D.C. didn't have cable television to entertain us. It didn't matter: We had Nixon. Yet make no mistake -- for all the general hilarity (and remember, to many, Richard Nixon had been the butt of jokes for decades before; Watergate was just the ultimate punchline), this was a true constitutional crisis. The abuse of presidential power was staggering, from the soliciting of illegal corporate campaign contributions used for hush money and delivered by bagmen, to the illicit actions of the aforementioned plumbers -- an operation, by the way, that traced its roots all the way back to the early months of Nixon's first term. Combined with the ongoing tragedy of Vietnam -- including the secret bombing of Cambodia and the violent squelching of antiwar protest -- Watergate shook the public's confidence in government as it hadn't been since the bleakest days of secession and the Civil War. But as several participants at the conference noted, the nation and its institutions did something about it. Committees in both the Senate and House, members of both parties cooperating with one another (!), conducted thorough investigations. In a more competitive, less consolidated news environment, a free press went on the attack (once the reporting of Woodward and Bernstein at The Washington Post, Sy Hersh at The New York Times, Jack Nelson at the Los Angeles Times and others awoke a moribund White House press corps). And the courts worked, from John Sirica, chief judge of the U.S. District Court for the District of Columbia, who cracked down on the Watergate burglars and demanded the White House turn over those audiotapes, to the highest court in the land. As Fred Wertheimer of the reform group Democracy 21 remarked at the conference, "The Supreme Court understood that citizens had a constitutional right to protect their democracy from corruption." People went to jail, lots of them -- even the former attorney general of the United States, John Mitchell. Think about that. Many of them did hard time. Today, we couldn't even get miscreant bankers to resign in exchange for their billions in bailouts, much less prosecute them for criminal behavior. The briefly restored public trust that followed Nixon's departure started turning back to the cynicism that endures today almost immediately, when his successor Gerald Ford absolved Nixon of his sins with a full presidential pardon. In the years that followed, the erosion has continued. The bagmen have become the banks and Wall Street. Gridlock and intolerance have replaced bipartisanship. The efforts at campaign finance reform that followed Watergate - crushed by Citizens United and other court rulings -- have dwindled to the point where, as conference panelist Trevor Potter of the Campaign Legal Center observed, we are "shockingly close again to no contribution limits." And with 9/11 and the war on terror, including ongoing drone attacks and threats to civil liberties, Morton Halperin noted, "The public is once again accepting an imperial presidency." During its conference, Common Cause presented what it called Uncommon Heroes awards to members of the House Judiciary Committee who served during the crisis, and saluted an Uncommon Heroes of Watergate Honor Roll, a bipartisan collection of "individuals from Richard Nixon's Enemies List, members of the prosecution team, journalists and House and Senate Committee staff." All could look back 40 years and be proud they took a stand. But the Lessons of Watergate are lessons learned and lost. We've got to organize, get our government back and make it accountable. Many believe it will take another scandal the size of Watergate, or worse, to get us back on track. Let's hope not. Instead, four decades in the future, let there be changes for the good America can celebrate, so we don't wind up like those old ballplayers on the road, reliving an unforced error, again and again.

29 марта 2013, 18:00

Cyprus Postmortems: Part II

image sourceStephen LendmanActivist Post On March 28, Cyprus Mail said banks opened for the first time in almost two weeks. They did so at midday local time. Cypriots face draconian restrictions. How they'll react remains to be seen. Capital controls limit withdrawals, restrict non-cash transactions, freeze check cashing, and convert checking accounts into fixed-term deposits. Finance Minister Michalis Sarris "signed into law a temporary decree." It caps cash withdrawals "per person per bank at 300 euros." It "effectively ban(s) cheques and control(s) cash outflows from the country." It permits only 1,000 euros per person to travel abroad per trip. Higher amounts require special approval.Business payments are capped at 5,000 euros per day. Others up to 200,000 euros require approval of a "special four-member committee." Amounts above 200,000 require similar approval. Distributing company payrolls require supporting documents. They're needed for student tuition and living expenses. They're required to send funds to first degree relatives studying abroad. google_ad_client = "pub-1897954795849722"; /* 468x60, created 6/30/10 */ google_ad_slot = "8230781418"; google_ad_width = 468; google_ad_height = 60; Overseas payments or transfers by debit, credit or prepaid cards are allowed up to 5,000 euros per month per person per bank. The same goes for comparable amounts overseas by debit, credit or prepaid cards. "Other payments or transfer of funds require the prior approval of the committee, taking into account the liquidity buffer situation of each credit institution in question." It won't "be possible to prematurely break fixed-term deposits unless the funds are used to repay a loan within the same bank." As long as capital controls remain, when fixed deposits mature, depositors "will only have access to either 5,000 euros or 10 per cent of the total, depending which is higher." They're required to "put that amount either in a current account or a new fixed-term deposit in the same bank, depending on his (or her) choice." Residual amounts will be kept in the original deposit an extra month. Financial transactions, payments or transfers not finalized before controls were instituted are subject to the same restrictions. Banks are warned not to "execute cashless transfers that facilitate the circumvention of the restrictive measures." They apply to all accounts, payments and transfers regardless of currency.Exemptions include:new funds transferred from abroad; cash withdrawals or checks cashed from foreign institutions abroad; committee-authorized payments; and cash withdrawals from accounts banks held with Cyprus' Central Bank, the Cyprus Republic, and Central Bank operations. Central Bank internal audit head, Yiangos Demetriou, said measures in place will be reviewed after four days. Expect no loosening any time soon. Whether clever lawyers and accountants find innovative exits remains to be seen. Ahead of reopening, "truck loads of euro notes arrived at the Central Bank in Nicosia." They came "under heavy police escort." Helicopters hovered overhead. Cash will be distributed among Cypriot commercial banks and cooperatives. Depositors be warned. Eurozone banking is irrevocably broken. Bank-held deposits no longer are safe. Eurocrat diktats can be imposed anywhere. Economics Nobel Prize recipient Christopher Pissarides said "Cyprus finds not all nations are equal." He came home end of January. He helped President Nicos Anastasiades' campaign. He didn't expect what happened. The way Eurocrats treated Cyprus "shows that far from the currency bloc acting as a partnership of equals, it is a disjointed group of countries where the national interests of the big nations stand higher than the interests of the whole." "Meanwhile, the haphazard decision-making in the eurogroup continues." It reached "a new low." It "casts serious doubts on the ability of this group to make the decisions to push Europe forward to financial stability and economic growth." Nicosia looks "eerie." Streets are deserted. People are glued to television for late news. "There is total desperation. The smiles have gone. Nothing like this ever happened before." Stories circulate about wealthy Russians and others getting overseas calls to move assets and businesses there. "The future is indeed bleak. It is not clear what is coming next and from where." The Daily Telegraph's international business editor, Ambrose Evans-Pritchard, headlined "Cyprus has finally killed myth that EMU (EU Economic and Monetary Union) is benign."The punishment regime imposed on Cyprus is a trick against everybody involved in this squalid saga, against the Cypriot people and the German people, against savers and creditors. All are being deceived.It's not a bailout. Cyprus gets no debt relief. A potential "economic death spiral" looms. Capital controls "shattered" EMU monetary unity. "A Cypriot euro is no longer a core euro. We wait to hear the first stories of shops across Europe refusing to accept euro notes issued by Cyprus, with a G in the serial number." Violating insured bank deposit security means anyone's money can be stolen. It'll happen if creditor state leaders think doing so's in their best interests. "Monetary union has become a danger to property." Eurogroup chief Jeroen Dijsselbloem calls it a template for future EMU rescues. "(U)ninsured deposit holders" can expect eventual haircuts. The "Dijssel Bomb" confirms creditor powers. They'll impose them "if push ever comes to shove." At the same time, "the German bloc (lies) about the real cost of holding the euro together. The accord pretends to shield" EMU creditor states' taxpayers from future losses. The cost of Cyprus' new credit line shifts to the ECB. It "will have to offset the slow-motion (Cypriot) bank run with its Emergency Liquidity Assistance (ELA)." It's likely to be a large amount. Much will show up on the Bundesbank's balance sheet and its peers. It'll do so "through the ECB's Target2 payment nexus." Money "will leak out of Cyprus unless (Eurocrats) encircle the island with razor wire." According to Jeffries' Marchel Alexandrovich:In saving 5.8 billion euros, "the other euro area countries will likely be on the hook for four to five times more in contingent liabilities." But, of course, the former represents real money that gives politicians a headache; the latter is monopoly central bank money.Ahead of Germany's September elections, Angela Merkel "will do anything (to) disguise the true cost of the EMU project." Paul Krugman says "Cyprus should leave the euro. Staying in means an incredibly severe depression." Normura's Dimitris Drakopoulos believes no one knows what's coming. "The economy could go into a free fall." Cyprus lost its core industry. Its assets equal eight times GDP. Nothing's there to replace it. Tourism won't work. EMU membership made it "shockingly expensive." Prospective tourists won't know what to expect on arrival. Seizing money irresponsibly "was an act of state madness." What happened shows EMU went "off the rails." Stability's endangered. It "should be dismantled before it destroys Europe's post-war order." Southern European countries have their own crises. Their "denouement will arrive when (they) conclude that recovery is a false promise (and) break free of EMU's contradictory regime." Economist Yanis Varoufakis addressed "The Good, the Bad and the Extremely Ugly (Aspects of the Cyprus Deal)." The latter two way outweigh the former. "The Memorandum of Understanding" hasn't been presented. The "deal is utterly incomplete." It's unknown "what degree and type of austerity will be imposed upon a collapsing social economy." It's almost certain to be "an austerian package bound to crush weaker Cypriots…." Wiping out foreign depositors will devastate Cypriot banking and tourism. Transferring 9 billion of ELA money from Laiki Bank to the Bank of Cyprus "flies in the face of basic banking resolution principles." Doing so reflects Eurocrat tyranny. It's unclear how capital controls will be implemented. It's uncertain they'll work. Cypriot euros are no longer exportable. Restricting them to Cyprus flies in the face of monetary union. Eurocrat demands are "exceptionally ugly." They jeopardized sacrosanct deposit insurance guarantees. They compromised Eurozone integrity. They "sacrifice(d) the (EU's) single market principle according to which capital controls are" verboten. The ugliest part of the deal exposes the illusion of "genuine Eurozone-wide banking union." Dijsselbloem said so in no uncertain terms.The combination of (a) the denial of the need to effect public debt consolidation, (b) the derailing of a meaningful banking union and (c) the heavy-handedness with which Cyprus was treated over the past week, spell a new, uglier, state of affairs in Europe.Eurocrats spurned unifying moves. They chose authoritarian/divisive ones instead. Doing so pushes Eurozone countries "in precisely the opposite direction to that dictated by political and economic sustainability." "I would not be surprised" if what happened doesn't reflect "a major turning point." It may become "the moment in history when Europe moved beyond the pale." It might have been worse. Cyprus state broadcaster CyBC said German Finance Minister Wolfgang Schaeuble proposed a 40% haircut on all deposits. google_ad_client = "ca-pub-1897954795849722"; /* 468x60, created 7/28/12 */ google_ad_slot = "9833874419"; google_ad_width = 468; google_ad_height = 60; IMF managing director Christine Lagarde concurred. On March 26, Cypriot Finance Minister Michalis Sarris said large uninsured Laiki Bank depositors could lose up to 80% of their money. "Realistically," he added, "very little will be returned." Euro expert Bernard Connolly looks prescient. Before its introduction, he predicted the euro's failure. He called it a harebrained idea doomed to fail. He said one or more of Europe's weakest countries would face rising deficits, troubled economies, and a "downward spiral from which there is no escape unaided. When that happens, the country concerned will be faced with a risk of sovereign default." It only remains for it to happen. Expect perhaps eventual EMU collapse.Stephen Lendman lives in Chicago and can be reached at [email protected] new book is titled How Wall Street Fleeces America: Privatized Banking, Government Collusion and Class War. Also visit his blog site at sjlendman.blogspot.com and listen to cutting-edge discussions with distinguished guests on the Progressive Radio News Hour on the Progressive Radio Network Thursdays at 10AM US Central time and Saturdays and Sundays at noon. 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26 марта 2013, 20:14

Bankers Just Set Horrifying Precedent

Charlie McGrath from Wide Awake News covers additional details to what can be found in our latest update of the ongoing saga of Cyprus and the Eurozone. The European Stability Mechanism is the focus, which, as McGrath says, "is tyrannical government over the people of Europe." Cyprus cannot be disregarded due to its small size; it has every indication of becoming a template for the rest of Europe. And if Europe collapses, the rest of the world could quickly follow and be subjected to economic pillaging and draconian oversight by central bankers.http://usawatchdog.com/banks-are-now-...http://theeconomiccollapseblog.com/http://en.wikipedia.org/wiki/Jeroen_D...http://www.telegraph.co.uk/finance/fi...http://www.trilateral.org/go.cfm?do=P...Read articles by Activist Post Here Enter Your Email To Receive Our Newsletter Close var fnames = new Array();var ftypes = new Array();fnames[0]='EMAIL';ftypes[0]='email';fnames[1]='FNAME';ftypes[1]='text';fnames[2]='LNAME';ftypes[2]='text';var err_style = ''; try{ err_style = mc_custom_error_style; } catch(e){ err_style = 'margin: 1em 0 0 0; padding: 1em 0.5em 0.5em 0.5em; background: FFEEEE none repeat scroll 0% 0%; font- weight: bold; float: left; z-index: 1; width: 80%; -moz-background-clip: -moz-initial; -moz-background-origin: -moz- initial; -moz-background-inline-policy: -moz-initial; color: FF0000;'; } var mce_jQuery = jQuery.noConflict(); mce_jQuery(document).ready( function($) { var options = { errorClass: 'mce_inline_error', errorElement: 'div', errorStyle: err_style, onkeyup: function(){}, onfocusout:function(){}, onblur:function(){} }; var mce_validator = mce_jQuery("#mc-embedded-subscribe-form").validate(options); options = { url: 'http://activistpost.us1.list-manage.com/subscribe/post-json? u=3ac8bebe085f73ea3503bbda3&id=b0c7fb76bd&c=?', type: 'GET', dataType: 'json', contentType: "application/json; charset=utf-8", beforeSubmit: function(){ mce_jQuery('#mce_tmp_error_msg').remove(); mce_jQuery('.datefield','#mc_embed_signup').each( function(){ var txt = 'filled'; var fields = new Array(); var i = 0; mce_jQuery(':text', this).each( function(){ fields[i] = this; i++; }); mce_jQuery(':hidden', this).each( function(){ if ( fields[0].value=='MM' && fields[1].value=='DD' && fields[2].value=='YYYY' ){ this.value = ''; } else if ( fields[0].value=='' && fields [1].value=='' && fields[2].value=='' ){ this.value = ''; } else { this.value = fields[0].value+'/'+fields[1].value+'/'+fields[2].value; } }); }); return mce_validator.form(); }, success: mce_success_cb }; mce_jQuery('#mc-embedded-subscribe-form').ajaxForm(options); }); function mce_success_cb(resp){ mce_jQuery('#mce-success-response').hide(); mce_jQuery('#mce-error-response').hide(); if (resp.result=="success"){ mce_jQuery('#mce-'+resp.result+'-response').show(); mce_jQuery('#mce-'+resp.result+'-response').html(resp.msg); mce_jQuery('#mc-embedded-subscribe-form').each(function(){ this.reset(); }); } else { var index = -1; var msg; try { var parts = resp.msg.split(' - ',2); if (parts[1]==undefined){ msg = resp.msg; } else { i = parseInt(parts[0]); if (i.toString() == parts[0]){ index = parts[0]; msg = parts[1]; } else { index = -1; msg = resp.msg; } } } catch(e){ index = -1; msg = resp.msg; } try{ if (index== -1){ mce_jQuery('#mce-'+resp.result+'-response').show(); mce_jQuery('#mce-'+resp.result+'-response').html(msg); } else { err_id = 'mce_tmp_error_msg'; html = ' '+msg+' '; var input_id = '#mc_embed_signup'; var f = mce_jQuery(input_id); if (ftypes[index]=='address'){ input_id = '#mce-'+fnames[index]+'-addr1'; f = mce_jQuery(input_id).parent().parent().get(0); } else if (ftypes[index]=='date'){ input_id = '#mce-'+fnames[index]+'-month'; f = mce_jQuery(input_id).parent().parent().get(0); } else { input_id = '#mce-'+fnames[index]; f = mce_jQuery().parent(input_id).get(0); } if (f){ mce_jQuery(f).append(html); mce_jQuery(input_id).focus(); } else { mce_jQuery('#mce-'+resp.result+'-response').show(); mce_jQuery('#mce-'+resp.result+'-response').html(msg); } } } catch(e){ mce_jQuery('#mce-'+resp.result+'-response').show(); mce_jQuery('#mce-'+resp.result+'-response').html(msg); } } }

26 марта 2013, 02:10

Daily ETF Roundup: Stocks Slip On Cyprus Worries

Financial markets across the globe got off to a rocky start this week as news on the latest developments in the Cyprus saga hit the streets. The small island nation agreed to impose taxes on bank deposits of more than 100,000 euro in the country’s largest banks. Commentary from the head of Eurogroup reflected investors concerns: Jeroen Dijsselbloem stated that the bailout could serve as a blueprint for dealing with other euro zone bank rescues. Though Dijsselbloem quickly backtracked on his commentary, investors still remained understandably cautious [see Free Member Report: How To Pick The Right ETF Every Time]. Global Market Overview: Stocks Slip On Cyprus Worries Following news concerning the Cyprus saga, all three major U.S. equity indexes fell to close in negative territory. The Dow Jones Industrial Average ETF slipped 0.48%, after its underlying index hit a fresh intraday high earlier in the session. The S&P 500 ETF lost 0.42%, while the tech-heavy Nasdaq ETF [...]Click here to read the original article on ETFdb.com.Related Posts:Daily ETF Roundup: Stocks Lower On European ConcernsDaily ETF Roundup: Stocks End Lower After Volatile SessionDaily ETF Roundup: S&P Closes Near All-Time HighDaily ETF Roundup: Stocks End Week On High NoteDaily ETF Roundup: Stocks Higher After Fed Decision

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22 марта 2013, 14:32

West Ham confirmed as main tenants of the Olympic Stadium

• West Ham agree 99-year lease and will pay £2m annual rent • Stadium will stage athletics, concerts and other sporting eventsWest Ham have been confirmed as the main tenants of the Olympic Stadium by the London Mayor Boris Johnson, marking a major milestone in a controversial seven-year saga.The club's vice chair Karren Brady said she was "delighted" to secure the deal, which is subject to planning permission, and would now embark on selling the idea to fans as new pictures of the 54,000 seat venue were unveiled."It was important to me that we struck the right deal that would stand the test of time that represented the right deal for West Ham United and our loyal and patient supporters," she said.Johnson said: "This is a truly momentous milestone for London's spectacular Olympic stadium ensuring its credible and sustainable future. Through this deal with West Ham we are defying the gloomsters who predicted this landmark would become a dusty relic."The Newham Mayor Sir Robin Wales insisted its £40m investment would "benefit Newham residents, London and the nation as a whole".The east end club will leave their Upton Park home and move into the £429m stadium in time for the 2016-17 season, but the decision has already sparked a wide ranging debate about whether an asset built with public money should be effectively handed to a Premier League football club.Both West Ham, who will pay £15m upfront towards conversion costs of at least £150m and an annual rent of £2m, and the London Legacy Development Corporation argue that the deal offers the best chance of a viable future for the stadium. West Ham have agreed a 99-year lease on the stadium with the LLDC, which is expected to unveil detailed plans for the new design on Friday, and will now embark on a concerted campaign to sell the scheme to fans.Ed Warner, the UK Athletics chairman, who said earlier this year that the process was becoming a "Stratford farce", said he was "excited that athletics will be a central part of a vibrant year-round solution to this iconic venue". The world athletics championship will take place in the stadium in 2017 and track and field is guaranteed 20 days use per year.Long running, often tense, negotiations between the club and the LLDC have resulted in a deal that both parties are understood to be happy with. For West Ham, it will give them a new, state of the art stadium at marginal upfront cost and expand their capacity to 54,000 as well as making the club an attractive investment opportunity.For the LLDC chairman Boris Johnson, who has long been convinced that a Premier League football team offers the best chance of success for the stadium, it will mean the reopened Olympic Park will have a guaranteed focal point and global profile. In addition to football and athletics, the stadium will also be used for pop concerts and other sporting events.Johnson wanted a clause in the contract ensuring that the public purse would be protected if West Ham was sold in the next 10 years. David Gold and David Sullivan, who between them own two-thirds of the club, have insisted that it is not for sale.West Ham say that they will offer 100,000 free tickets per season to local children and remain committed to "affordable family football".The proceeds from the sale of Upton Park for redevelopment will be used to help pay down the club's £70m debt. All the club's bank debt must be cleared by the time it moves to the Olympic Stadium for the 2016-17 season as it will no longer have an asset to secure it on.Conversion of the stadium to make it suitable for both football and athletics, with retractable seats and a new cantilevered roof to cover them, will cost at least £150m. Of that, the majority will come from the public purse including a £40m loan from Newham Council.An earlier deal to award the stadium to West Ham, following a bitter battle with Tottenham Hotspur, had to be abandoned when it became mired in "legal stasis" following challenges in the High Court and the European Union.The eyton Orient owner Barry Hearn has vowed to press on with his judicial review of the process, claiming it will "crush" his club if it is not allowed to share the stadium with West Ham. But he has also conceded that he is ultimately unlikely to be successful and is drawing up alternative plans to move to Essex.Hugh Robertson, the sports minister, said: "I thought there was a really obvious end to this, which was going to be a multi-use stadium with football at its heart. I always suspected that would be the way to get the stadium best used."He said he was confident a way could be found to accommodate matches for the 2015 rugby World Cup in the stadium, despite the complication of having to pause construction work to host them.West Ham UnitedOlympic StadiumBoris JohnsonOwen Gibsonguardian.co.uk © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

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08 марта 2013, 18:52

The Bank of China is suing Suntech ([[STP]] +2%) over its loan obligations, China's 21st Century Business Herald reports. Suntech's woes have been piling up ahead of March 15, when a $541M convertible bond the company won't be able to pay without a restructuring or new financing comes due. The Suntech saga is widely seen as a test of whether the Chinese government plans to make good on comments indicating it will no longer prop up money-losing domestic solar firms. (previous)

The Bank of China is suing Suntech (STP +2%) over its loan obligations, China's 21st Century Business Herald reports. Suntech's woes have been piling up ahead of March 15, when a $541M convertible bond the company won't be able to pay without a restructuring or new financing comes due. The Suntech saga is widely seen as a test of whether the Chinese government plans to make good on comments indicating it will no longer prop up money-losing domestic solar firms. (previous) Post your comment!

08 марта 2013, 04:05

Guest Post: North Korean "Insanity" Part of Geopolitical Game

Submitted by Jen Alic of OilPrice.com, North Korean leader Kim Jong-un may be colorful, but he isn’t crazy. There is logic behind the intensified war rhetoric, and while it may be convenient for the American public to believe that they are about to be attacked unprovoked by the unhinged dictator of an eerily isolated country, the truth of the matter is that the US and its allies have been doing some offensive posturing that has Pyongyang very much on edge. North Korea on Tuesday threatened to attack the US and South Korea with “lighter and smaller nukes”. This threat has prompted South Korea to threaten to strike North Korea’s military command if “provoked” and the UN to move closer to slapping new sanctions on Pyongyang’s banking sector and diplomats. The sanctions resolution was introduced by the US and China and specifically targets North Korean bankers and overseas cash mules. It also targets diplomats and seeks to lend added strength to air and sea cargo inspections going in and out of North Korea. While mainstream media outlets are wont to describe North Korea’s rhetoric as increasingly bold, the threats and recent tests of long-range rockets and nuclear weapons are not the result of bravado, rather of fear. The US and its East Asia allies (namely South Korea and Japan) have been preparing for an offensive on North Korea ever since the death of Kim Jong-il. They see a window of opportunity in the instability of the fragile succession.  Pyongyang has no choice now but to rattle its sabers--and rattling them at traditionally quiet South Korea is the most effective strategy. This is where North Korea can do the greatest damage, and if it feels that a US offensive is imminent, South Korea will come under attack. At the same time, an attack on South Korea will be the final justification for an all-out US-led offensive on North Korea. Right now, Pyongyang is hedging its bets on whether the US is willing to sacrifice its ally to this conflict. Is North Korea confident enough in its nuclear capabilities to act as a deterrent to a US-led regime change effort? The nuclear tests are meant to demonstrate that confidence, but they also demonstrate fear.  The North Korea saga has been a long one, and threats have waxed and waned, always with various talking heads tossing about the idea of a major regional war. What’s different this time is that the US has clearly gone on the offensive and pushed Pyongyang into a dangerous corner. But there’s another potential geopolitical twist to this saga … Sending NBA hero Denis Rodman to Pyongyang to entertain Kim Jong-un—a die-hard basketball fan—was said to be a goodwill gesture from Washington. Clearly, Washington’s policy decisions are nearly as colorful as Pyongyang’s. Denis Rodman, oddly enough, is a tool (in the instrumental sense of the word). This is where it gets interesting. The US can take its preparations for an offensive against North Korea to a certain point. This point must be impeccably balanced with the aim of upping the ante in negotiations with Pyongyang. Once this is achieved, Washington’s new “pivot” towards Asia plans can enter another more delicate phase—a phase that recognizes the geopolitical importance of North Korea as an ally against China. Certainly, this must be what the most cynically astute minds in Washington are thinking. At the same time that the US and South Korea undertake carefully designed war games that simulate an offensive on North Korea, Washington sends in Denis Rodman in a push and pull effort. China has to play along for now because it understands that a nuclear weaponized North Korea could be a formidable blackmailer. North Korea could capitalize on this new geopolitics, or it could choose to attack South Korea and start off a major war. The ball, it would seem, is in Denis Rodman’s court.

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05 марта 2013, 06:57

China's Housing Bubble Goes Mainstream America

It has been four years since we first introduced the non-believing world to China's ghost cities. Two years later, we revisited to check on the widescale immigration that was expected to occur into these salubrious suburbs. Alas, another epic Keynesian fail as we so delicately described the 'if we build it, they will come' mentality. Now, four years after the news of the Chinese real estate bubble began to break on tin-foil hat-wearing blogs, the mainstream media (to wit, Sixty Minutes) have gone in depth - taking a wonderfully eery trip through these ghost cicties explaining the growing (and in some places popping) bubble in Chinese real estate markets. The incredulous host concludes this chilling saga, "Meanwhile, people who can afford it are still buying as much real estate as they can... potential buyers crowding buses to see new construction and new owners line up to register their new apts... Like us in our bubble, they just don't believe the good times will ever end."       CBS Sixty Minutes Transcript: If trouble comes in threes, then what'll be the next global market to melt down after the U.S. and Europe? Some are looking nervously at China. China has been nothing short of a financial miracle. In just 30 years, this state-controlled economy became the world's second largest, deftly managed by government policies and decrees. One sector the authorities concentrated on was real estate and construction. But that may have created the largest housing bubble in human history. If you go to China, it's easy to see why there's all the talk of a bubble. We discovered that the most populated nation on earth is building houses, districts and cities with no one in them.   IT'S EMPTY!! Lesley Stahl: So this is Zhengzhou. And we are on the major highway, or the major road. And it's rush hour.   Gillem Tulloch: Yeah -   Lesley Stahl: And it's almost empty.   Gillem Tulloch is a Hong Kong based financial analyst who was one of the first to draw attention to the housing bubble in China. He's showing us around the new eastern district of Zhengzhou, in one of the most populated provinces in China - not that you'd know it. We found what they call a "ghost city" of new towers with no residents, desolate condos and vacant subdivisions uninhabited for miles, and miles, and miles, and miles of empty apartments.   Lesley Stahl: Why are they empty? I've heard that they have actually been sold.   Gillem Tulloch: They've all been sold. They've all been sold.   Lesley Stahl: They've all been sold? They're owned.   Gillem Tulloch: Absolutely.   Owned by people in China's emerging middle class, who now have enough money to invest but few ways to do it. They're not allowed to invest abroad, banks offer paltry returns, and the stock market is a rollercoaster. But 15 years ago, the government changed its policy and allowed people to buy their own homes and the flood gates opened.   Gillem Tulloch: So what they do is they invest in property because property prices have always gone up by more than inflation.   Lesley Stahl: And they believe it will always go up?   Gillem Tulloch: Yeah, just like they believed in the U.S.   Actually, property values have doubled and tripled and more -- so people in the middle class have sunk every last penny into buying five, even 10 apartments, fueling a building bonanza unprecedented in human history. No nation has ever built so much so fast. REAL ESTATE IS CENTRAL TO THE CHINESE ECONOMY Lesley Stahl: How important is real estate to the Chinese economy? Is it central?   Gillem Tulloch: Yes. It's the main driver of growth and has been for the last few years. Some estimates have it as high as 20 or 30 percent of the whole economy.   Lesley Stahl: But they're not just building housing. They're building cities.   Gillem Tulloch: Yes. That's right. GIANT GHOST CITIES Lesley Stahl: Giant cities being built with people not coming to live here.   Gillem Tulloch: Yes. I think they're building somewhere between 12 and 24 new cities every single year.   Unlike our market driven economy, in China it's the government that has spent some $2 trillion to get these cities built - as a way of keeping the economy growing. The assumption is "if you build it, they'll come." But no one's coming.   Lesley Stahl: Wow. This is really completely, totally empty and it goes up -   Gillem took us to this shopping mall that's been standing vacant for three years.   Lesley Stahl: Can I find this all over China?   Gillem Tulloch: Yes, you can. They've simply built too much infrastructure too quickly.   Lesley Stahl: But I see KFC behind you. I see Starbucks over there. I see some other very recognizable American franchises coming in here. At least they-- does that mean they have faith that this is going to ignite?   Gillem Tulloch: No, these are all fake signs. Just to get potential buyers the impression of what it might look like if they moved in.   Lesley Stahl: They're not real? So I see KFC didn't-   Gillem Tulloch: They haven't--   Lesley Stahl: Buy this space or rent this space?   Gillem Tulloch: No, they haven't.   Lesley Stahl: Starbucks?   Gillem Tulloch: No.   Lesley Stahl: They just put the sign up?   Gillem Tulloch: That's right.   It's all make-believe -- non-existent supply for non existent demand.   Lesley Stahl: Look at that. Swarovski. Piaget. They're hoping for high end too.   Gillem Tulloch: H&M. Zara.   Lesley Stahl: And it's all Potemkin.   Gillem Tulloch: Yeah.   It's surreal and it's everywhere. Like the city of Ordos in Mongolia built for a million people who didn't show up. And no, you are not in England. You're in Thames town -- a development near Shanghai built like an English village.   Gillem Tulloch: And it was finished, I think, around five or six years. And it must have cost close to a billion U.S. dollars. And you'll see, it's still standing there empty.   Lesley Stahl: Well, I heard that there is some industry there or some business, one business there.   Gillem Tulloch: Marriage.   Lesley Stahl: Wedding pictures!   And what's more uplifting than a wedding -- or 10? You can see these empty developments on the edge of almost every city in China. WHAT ABOUT THE URBANIZATION? Lesley Stahl: What about the idea that China is urbanizing? People are flooding into cities by the hundreds of millions. And that this really is a smart move: build the housing to accommodate the urbanization process.   Gillem Tulloch: Well, so people are being moved into the cities. But that doesn't necessarily mean that they can afford these apartments which, you know, cost $100,000 U.S. or whatever. I mean, these are poor people moving into the cities, so they're building the wrong sort of apartments.   And what's worse, to build all these massive cities, they've had to tear down what was there before, clearing rice fields and displacing by some counts tens of millions of villagers. On the edge of Zhengzhou, Gillem and I came upon a strange sight.   Lesley Stahl: I'm just watching what they're doing, these-- do you have any idea?   Gillem Tulloch: I think they're trying to recycle the bricks.   These villagers were salvaging what's left of their homes, bulldozed to make room for more empty condos, already encroaching in the distance.   Lesley Stahl: There are all these empty apartments over here. Can they conceivably move into those up-scale places? NOONE CAN AFFORD IT SO THE BUBBLE BURTS Gillem Tulloch: Most people in China live on about less than $2 a day. And these apartments probably cost upwards of $50,000 or $60,000 U.S. So it's very unlikely.   Lesley Stahl: What will happen to them, do you think?   Gillem Tulloch: I mean, they'll be forced to relocate somewhere. I have no idea where they'll go.   These are the immediate casualties of the building boom. And there's another problem: analysts warn that all this building has created a bubble that could burst.   Lesley Stahl: So if the bubble bursts, who's left holding the bag?   Gillem Tulloch: There are multiple classes of people that are going to get wiped out by this. People who have invested three generations worth of savings -- so grandparents, parents and children - into properties will see their savings evaporate. And then, of course, 50 million construction workers who are working on all these projects around China.   The prognosis of a bubble about to burst isn't only coming from financial gloom-and-doomers. We heard it from the most unlikely source.   Lesley Stahl: Are you the biggest home builder in the world?   Wang Shi: I think. Maybe.   Lesley Stahl: You may be?   Wang Shi: Yes. Only the quantity, not quality.   Wang Shi is modest, but his company, Vanke, is a $53 billion real estate empire, building more homes than anyone in China. He was born on the frontlines of communism, and joined the Red Army. But he secretly read forbidden books about capitalism, so that when China liberalized its economy, he rushed to the frontlines of the free market. Even he thinks today's situation is out of control. HOW MUCH??? Lesley Stahl: Are homes in China too expensive today? Wang Shi: Yeah. Lesley Stahl: Here's a number I saw. A typical apartment in Shanghai costs about 45 times the average resident's annual salary. Wang Shi: Even higher, even higher. Lesley Stahl: What does that mean for your economy if it's just too expensive for the vast majority of people to buy? Wang Shi: I think that dangerous. Lesley Stahl: Dangerous. THERE'S THE BUBBLE Wang Shi: That's the bubble. So I think that's the problem.   Lesley Stahl: Is there a bubble?   Wang Shi: Yes, of course.   Lesley Stahl: There is a bubble and the issue is will it burst or not? That's the big issue--   Wang Shi: Yes, if that bubble - that's a disaster.   Lesley Stahl: If it burst?   Wang Shi: If it burst, that's a disaster.   To try and prevent the disaster the Chinese government decided to act. Heard of their one child policy? Since 2011, China has had what amounts to a one apartment policy, where it's very hard to buy more than one apartment in major cities. Because of this, prices plunged. The bubble was being tamed. And yet, the taming was creating all kinds of unintended consequences.   Lesley Stahl: Are many developers in debt?   Wang Shi: Yes, yes.   Lesley Stahl: And are many stopping development in the middle of projects 'cause they don't have the money to go forward?   Wang Shi: Yeah, that's problem. That's a huge problem.   A problem because the slowing down of construction led to a downturn in the overall economy. Unfinished projects dot China, and not just apartment buildings.   Lesley Stahl: Look at this. Can you believe it?   Analyst Anne Stevenson-Yang who has traveled across China showed us a giant project all but abandoned in the port city of Tianjin with concrete skeletons as far as the eye can see. The plan is to build a new financial district to rival Manhattan including a Lincoln Center and a World Trade Center, only taller. But it all seems frozen.   [Anne Stevenson-Yang: There's supposed to be a Rockefeller Center here.   Anne Stevenson-Yang: I hope they have a Christmas tree too. Skating rink.]   City officials told us everything stopped because developers want to build all the facades at once to match. But on the ground we heard a different explanation.   esley Stahl: Workers told us that many of these buildings haven't had any work done on them for weeks, months, as if the developers just don't have the money to go on.   Anne Stevenson-Yang: It's true. You see that happen first. The migrant workers will go home. That's often the first sign that the debt crisis is starting.   Lesley Stahl: The debt crisis?   Anne Stevenson-Yang: Well, when you stop paying your bills, then everything stops.   It could become a debt crisis because of the huge loans most of the developers took out. If they can't repay them, the whole economy'll seize up. AND THE CONSEQUENCES OF A REAL ESTATE BUBBLE??? The government's great fear is that all this could lead to social unrest and that's not hypothetical.   Last year when home prices fell, it infuriated all those owners of multiple dwellings, who watched the value of their nest eggs plummet.   esley Stahl: And there's already been some demonstrations over real estate around the country.   Wang Shi: Yes.   Lesley Stahl: Have you had demonstrations against your showrooms anywhere? You're company?   Wang Shi: Often!   So often, Wang Shi shudders to think what would happen if the bubble actually burst.   Wang Shi: If that bubble break, that maybe who know what will happened? Maybe that-- maybe--maybe the next Arabic Spring--   Lesley Stahl: Arabic Spring. You mean people coming out and demonstrating.   Wang Shi: Hmmm.   Lesley Stahl: A lot of economists say that it's too big for even this government to control.   Wang Shi: A ha. I believe that top leaders have enough smart to deal with that. I hope!   Lesley Stahl: You're doing this.   Wang Shi: But that's uncertain. Meanwhile, people who can afford it are still buying as much real estate as they can. They're even finding ways around the one apartment restriction in big cities. Can't buy in Beijing? Just cross the city line and the boom is in full swing. Flyers advertising new projects, potential buyers crowding buses to see new construction and new owners line up to register their new apts. Like us in our bubble, they just don't believe the good times will ever end.

04 марта 2013, 03:50

Did JPM's CIO Intentionally Start The Margin Call Avalanche That Crushed Lehman?

It is conventional wisdom that in the days leading to Lehman's bankruptcy filing on the night of September 15, 2008, sheer panic and utter confusion ruled ever back- and middle-office, over concerns that a counterparty, any counterparty, but especially Lehman, would end up being "not money good", and the result was that trigger-happy margin clerks had the potential to make or break a company, by demanding just enough variation margin that would send the notice recipient promptly into bankruptcy. It is also conventional wisdom, that it was precisely several such margin calls mostly out of JPMorgan that precipitated the Chapter 7 filing by Lehman brothers, as the firm was finally unable to mask the fact that it was terminally overlevered, and even more terminally illiquid. It is certainly conventional wisdom, that Lehman was certainly massively overlevered, holding billions of overmarked CMBS on its balance sheet, and was doing everything in its power to hold on to precious liquidity, taking every opportunity to window dress its balance sheet as far better than it truly was (Repo 105 at the end of every quarter promptly comes to mind), over fears of avoiding precisely such a margin call onslaught, where the first margin call would cascade into many, likely lethal, margin calls. Which is why, over four years after the filing of Lehman's bankruptcy and the fight for who was responsible for what in the Lehman Chapter 7 saga still waging, most actively between the Lehman creditor estate and tri-party repo stalwart JP Morgan, we were not surprised to learn that the Lehman estate had attempted to force yet another sworn testimony from a (former) employee of JP Morgan, in hopes of catching the firm as engaging in a malicious act of defrauding Lehman of precious liquidity in its final hours, or said in layman's terms, forcing it to liquidate. What did catch our attention was that Lehman named the infamous JPM Chief Investment Office, and specifically its very infamous trader Bruno Iksil, accountable along with others for the London Whale fiasco, as the person responsible for an initial margin call to the tune of $273.3 million, made the same day "that JPMorgan made its first of two demands that week each for $5 billion of extra cash collateral that it had no right to obtain and that drained Lehman of $8.6 billion" (as per the Lehman filing). One could make the argument that this initial margin call was the straw that broke the camel's back, as in the avalanche of money requests, every dollar flowing out of Lehman may have been the one that pushed it under. If, of course, the Lehman estate claim was credible. At this point, virtually everyone in the media said "no way" and moved on: this has to be just another desperate attempt by the Lehman unsecureds to force a settlement from JPM, and a few more cent recovery on the bonds. After all, how on earth can someone hold now former JPM employee Bruno Iksil accountable for what he did nearly 5 years ago (however still within the statute of limitations). We, too, almost ignored the story as just too incredible to be true. Almost. And then we decided to do some digging. What we found was stunning, and frankly shocking, because it appears that the Lehman estate was absolutely correct. In other words, a chronological forensic analysis of the events surrounding the margin call in question confirm, beyond a shadow of a doubt that the margin call issued by JP Morgan's CIO unit was absolutely unwarranted. But it gets worse - because the mistake that led to the issuance of what may have been the defining margin call that was the beginning of the end of Lehman, was so ridiculously naive, and idiotic, that we have a hard time believing it was made in good faith, even if it JPMorgan tries to put the blame on some 19 year old NYU intern as being responsible. In fact, we have an easier time believing that the margin call was purposeful, malicious and made with full intent to destroy Lehman, which in turn would mean that, despite the repeated mockery of even the sophisticated media, Lehman may well have been the mark of a JPM-spearheaded campaign to force the bank to shutter as margin call after margin call led it to lose all liquidity. So what exactly happened? Here are the events as seen by the Lehman side: On September 9, 2008, the same day that JPMorgan made its initial demand for $5 billion of additional collateral and extracted new one-sided legal agreements from Lehman, JPMorgan also insisted that Lehman post $273.3 million before close of business as derivatives variation margin. The $273.3 million derivative margin demand was primarily attributable to three disputed trades which Mr. Iksil managed or discussed with Lehman. Lehman was certain that JPMorgan's marks were erroneous and that in fact Lehman owed no additional margin. All three CDS referenced a well known and liquid index for which readily-available third party valuations corroborated Lehman’s marks, not JPMorgan’s, which were off by $273.3 million. Nevertheless, Lehman bowed to pressure from JPMorgan executives, including Investment Bank Chief Risk Officer John Hogan, to accept JPMorgan's marks and immediately post the requisite collateral. Accordingly Lehman sent the $273.3 million demanded.  That JPMorgan was able to force Lehman’s compliance is particularly telling considering JPMorgan’s marks were so clearly wrong.   The trades primary responsible for the $273.3 million derivatives margin dispute were 3 CDS index tranche trades booked through JPMorgan’s CIO, two of which were managed by Mr. Iksil. Lehman had repeatedly asked Mr. Iksil to correct the mark on the third large disputed trade throughout August and early September without success. Contemporaneous emails attached here reflect how JPMorgan’s mismarks grew into a multi-month ordeal due to the inaction and unresponsiveness of JPMorgan, and of Mr. Iksil in particular.    On September 10, 2008, Lehman’s relationship, operations, and trading personnel mobilized to resolve the mismarks of Mr. Iksil’s trades and secure the return of the nearly 300 million dollars in excess collateral they had been pressured to post to JPMorgan the day before.   Late in the morning on September 10, Lehman reached out once again to Mr. Iksil to request that he correct his marks. This time, Mr. Iksil immediately referred Lehman to a JPMorgan colleague who conceded within minutes that Lehman's marks were correct and an error on JPMorgan's side had caused the problem. Less than an hour later JPMorgan agreed in full to Lehman's September 10 collateral call, which included JPMorgan returning the entire $273.3 million Lehman had delivered to JPMorgan the day before.   That JPMorgan would run roughshod over Lehman’s objections and insist on getting collateral immediately based on marks that were so quickly seen to be erroneous provide a window into JPMorgan’s mindset and operating procedures the week prior to LBHI’s bankruptcy: Get cash now, ask questions later. JPMorgan has taken the position in this litigation that JPMorgan was solicitous of Lehman’s welfare and demanded collateral only after carefully calculating the amount required. Yet, JPMorgan failed to correct its marks despite weeks of requests to do so and allowed a valuation dispute to fester for nearly a month. And on September 9, 2008, although even the most minimal diligence would have revealed JPMorgan was in the wrong, JPMorgan demanded that Lehman accept JPMorgan’s marks and post $273.3 million in disputed collateral overnight. That demand came on the very same day that JPMorgan made its first of two demands that week each for $5 billion of extra cash collateral that it had no right to obtain and that drained Lehman of $8.6 billion. What, specifically, were the CDX trades in question? They were all three different CDX HY8 5 year 0-10 tranche index trades, which Lehman had bought from Bruno Iksil. Here they are, from one of the exhibit emails, also showing the massive MTM diveregence between the JPM and Lehman marks. Although perhaps the best way to show this is from this table which summarizes the email from Lehman's CDX trader (24 year old) Zahid Hassan who shows the drastic change in MTM between Lehman and JPM on the CDX tranches: Basically, what any credit trader can figure out happened here after looking at the table above for more than 5 seconds, and looking at the variation in Leh vs JPM marks, is that whereas Lehman was marking its HY8 exposure correctly, and in line with where MarkIt and other pricing databases would have it, what JPM did was take the upfront priced index and price at 1 par minus price! In other words, where Lehman had it priced at 83.05%, what JPM wanted to do was express a price of 1-19.42%, or 81.58; instead the JPM front, middle and back office chain of command made a mistake so rookie it is impossible it was an error, and it appears to have been maliciously intended to force a liquidity event. Because what drove this massive margin call on this very liquid (at the time) index is because JPM had it suddenly repriced in MTM from 83 to 19 when what JPM really wanted was to reprice it from 83 to 81! In other words, literally overnight, instead of pricing Lehman's paid upfront collateral at Price, JPM decided, for whatever reason, to revalue  it at 1-Price! The result, had JPM correctly calculated the MTM, would have been a variation margin call of just $6 million: some $257 million less than what JPM demanded from the cash-strapped company! While we do not know if the $257 million extra in cash that Lehman would have retained on its books would have avoided the subsequent $10 billion in JPM margin calls, or if it would have avoided the firm's bankruptcy as the final outcome, we know we are, and Lehman, are right in alleging that it was JPM's fault in completely screwing up the calculation that led to the massive margin call. Here is the Bloomberg Chat transcript (Lehman Exhibit M) between Lehman (again very, very young CDX trader) Zahid Hassan, and Bruno Iksil first, and then Iksil's supervisor in London, Luis Buraya: The chat above took place at 11:40 am on Wednesday, September 10: two days before the weekend which was Lehman's last.  What we learn from the transcript is threefold: first Lehman was incorrectly margined to the tune of $263 million. JPMorgan admits as much; second, by the time JPM admitted it was wrong, the margin request had already been satisfied, and margin clerks in other divisions were scrambling to come up with other comparably fictitious variation margin demands, such as those which saw JPM demanding extracting nearly $10 billion in liquidity from Lehman in the next 48 hours which culminated with Lehman's Chapter 7. FInally, the "guy" responsible was not "collateral" but CIO, meaning the division that was supposed to hedge, but did anything but when it blew up after attempting to corner the HY9 market last year, had other less noble uses too: to destroy the competition by commencing an avalanche of unjustified margin calls! Lehman's filing summarizes it as much in the following: The $273.3 million collateral dispute is highly relevant to this litigation over JPMorgan’s improper cash collateral demands that same week, which deprived Lehman of desperately needed liquidity and precipitated Lehman’s exigent bankruptcy filing. First, the backdrop to the dispute illustrates that there was a well developed market-standard practice for the calculation and exchange of collateral in support of derivatives transactions, which is specified in the ISDA Master Agreement and Credit Support Annex (“CSA”) executed between the parties and involves daily exchange of collateral based on the current net mark-to-market value of the positions. The daily collateral calls under the CSAs which were made and met throughout the week, and the procedures by which the $273.3 million dispute was ultimately resolved, indicate that during the week of September 8 – 12 JPMorgan adhered to the CSA framework for the collateralization of counterparty derivatives exposure to Lehman. Even the $273.3 demand, an example as unreasonable as they come, was tied to the marks (albeit incorrect) on particular trades and posted and returned via the CSA framework. JPMorgan’s demand for $5 billion on September 9, which JPMorgan claims it made in significant part to collateralize its purported derivatives exposure to Lehman, was entirely outside the ISDA/CSA framework and represented a dramatic departure from commercial practice for collateralization of derivatives exposure. Second, the episode shows that during the week of September 8 – 12 JPMorgan was willing to override standard commercial procedure by insisting that any collateral disputes be immediately resolved in its favor. Third, it illustrates Lehman’s complete vulnerability to JPMorgan’s bullying behavior. Just as with the $8.6 billion, Lehman lacked any choice other than to capitulate to demands it knew were baseless, in light of JPMorgan’s power to deal Lehman a death blow by ceasing to trade or clear. Finally, it shows that JPMorgan’s exposure calculation methods were highly suspect – a point with obvious relevance to this litigation over two demands for collateral in round $5 billion increments, unaccompanied by any calculation or documentation of exposure. To conclude: a variation margin call, which we now know beyond a reasonable doubt, was erroneous and had no basis in reality, launched by JPM's CIO is what started the cash outflow from Lehman, and was followed by two other comparable $5 billion margin calls, which may well have had the same totally erroneous justification to them. But Lehman had no choice: even then saying no to the uber-behemoth and tri-party repo guardian JPM was tantamount to suicide anyway. Any by the close of trading on Friday everyone else on Wall Street was doing what JPM did: demanding hundreds of millions and billions in margin from Lehman, at which point seeking the culprit for what 48 short hours later would be the biggest bankruptcy in history, was a moot point. By then the game was over, and JPM's CIO had won, courtesy of a ruse so pathetic it was either outright idiotic, or conceived with the most despicable of destructive intentions. And then we remember that it is the same uber-sophisticated CIO unit that for years was misreporting its VaR because of a simple excel transposition error which nobody had bothered to check! So we wonder: should we attribute to malice and Jamie Dimon's bloodthirst what sheer, brutal JPMorganite incompetence can explain far more simply? But then we also wonder: is it also purely a coincidence that JPM's largest gold vault in the world is located inches away from the gold vault of the New York Fed... And everything is once again crystal clear.

23 февраля 2013, 06:07

Unofficial Problem Bank list declines to 809 Institutions

Here is the unofficial problem bank list for Feb 22, 2013. This is an unofficial list of Problem Banks compiled only from public sources. Changes and comments from surferdude808: The FDIC released its enforcement action activity through January 2013, which led to several changes to the Unofficial Problem Bank List. In all, there were five removals and two additions that leave the list at 809 institutions with assets of $302.8 billion. A year ago, the list held 960 institutions with assets of $389.7 billion. Year-over-year, the institution count has declined by almost 16 percent was assets are down by about 22 percent. During February 2013, the list declined by a net 15 institutions after five additions, one failure, three unassisted mergers, and 16 action terminations. Assets fell by $6.2 billion, but not by enough to get under $300 billion. The FDIC terminated actions against Westbound Bank, Katy, TX ($143 million); New Market Bank, Elko New Market, MN ($85 million); and Cambridge State Bank, Cambridge, WI ($75 million). Unassisted mergers led to the exit of Community Bank of Central Wisconsin, Colby, WI ($91 million) and Bank 360, Beresford, SD ($40 million). The FDIC terminated a Prompt Corrective Action order against Rocky Mountain Bank & Trust, Florence, CO that was issued on May 26, 2010; however, the action was not on the UPBL as it cannot be found on the FDIC's website. The two additions this week were Commerce Bank of Arizona, Tucson, AZ ($229 million Ticker: CBOF) and Key Community Bank, Inver Grove Heights, MN ($52 million). Last week, we discussed the potential failure of Capitol Bancorp's banking unit in New Mexico given a deadline for a $1 million capital infusion. Yesterday, SNL Securities reported that a $1 million capital infusion was made by five outside investors and two insiders. The unnamed outside investors received a 14.8 percent stake in Capitol National Bank for $850 thousand. The Reid family, Chairman and CEO Joseph Reid and Corporate President Cristin Reid, provided $172 thousand of the infused capital. The combined stake of the Reid's in Capitol National Bank is now about 2.2 percent. Thus, the on-going saga of Capitol Bancorp continues. CR Note: The first unofficial problem bank list was published in August 2009 with 389 institutions. The number of unofficial problem banks grew steadily and peaked at 1,002 institutions on June 10, 2011. The list has been declining since then.

16 января 2013, 18:26

Bogus Mayfair property tycoon convicted of £750m fraud

Achilleas Kallakis has been found guilty of tricking Bank of Scotland and Allied Irish Bank into advancing millions in loansFormer Croydon travel agent Achilleas Kallakis, who posed as a super-rich Mayfair property tycoon, has been convicted of defrauding banks out of more than £750m in an audacious confidence trick involving actors, secretive offshore trusts, a fictional shipping empire and string of bogus references.The conviction marks a welcome end to an embarrassing saga for Bank of Scotland, now part of Lloyds Banking Group, and Allied Irish Bank which advanced millions in loans without spotting Kallakis was a charlatan.Together with an old university friend and forgery expert Alex Williams, Kallakis was found guilty on Wednesday morning of two counts of conspiracy to defraud by a jury at Southwark crown court.The Guardian revealed three years ago that the two men had been convicted in 1995 – at the same court – of selling bogus British feudal titles to hapless Americans and Australians. These earlier convictions had been reported at the time, but both men changed their names the following year. Kallakis had been convicted as Stephan Michalis Kollakis – with an 'o' – and Williams as Martin Lewis.Central to the banks' decision to advance hundreds of millions of pounds to Kallakis was the fraudster's claim to have secured financial guarantees from a far eastern investor on commercial property acquisitions, effectively removing the risk of tenants not renewing their leases. Kallakis told the banks these guarantees would fall apart if the investor – Sun Hung Kai Properties (SHKP) – was contacted directly.This explanation was accepted by the bankers who were desperate to lend to Mayfair tycoons such as Kallakis who appeared to be doing very well out of prime property deals in London. Years later, however, they were to learn the SHKP paperwork had been forged by Williams.Among the buildings Kallakis bought were the headquarters of the Daily Telegraph in Buckingham Palace Road, bought for £225m; and Lunar House, the Home Office's asylum processing centre in Croydon, bought from Vincent and Robert Tchenguiz for £100m. In addition he bought the 23-storey Market Towers in Vauxhall, from Simon and David Reuben, for a reported £75m.Kallakis said he wanted to turn property worth £120m, between Piccadilly and Pall Mall in St James's Square, into the world's most expensive penthouse.He had all the trappings of a super-rich property baron – a yacht, a private jet, a fleet of luxury cars, a Knightsbridge home and lavish Mayfair offices. He also became a minor celebrity on the super-rich poker circuit, where fortunes were won and lost in an evening. Around the tables of Las Vegas, he called himself "The Don".Heaping bogus claim upon claim, Kallakis at one point announced himself to be "ambassador of the Republic of San Marino to the Sultanate of Brunei".A paid-for listing on the website Who's Who in America suggests he was a patron of the English National Ballet, member of the development board for the National Portrait Gallery and recipient of the Churchill Award for Excellence from the "Churchill Enterprise Foundation" – all exaggerations or fabrications.Banks were provided with bogus references from the economist Lord Harris of High Cross, the former director of the Thatcherite thinktank the Institute of Economic Affairs. His widow gave evidence at the trial, insisting she knew nothing of the purported family friendship Kallakis claimed.In his defence, Kallakis clung to claims that his connections to establishment figures were genuine. His lawyers showed the jury a picture of the fraudster with Lady Thatcher which had appeared in a magazine produced by the American Chamber of Commerce in the UK.One of the few genuine connections Kallakis was able to build upon was that of his family link to wealthy Greek shipping tycoon Pantelis "Lou" Kollakis, his uncle. But when Lou Kollakis eventually attended a meeting with concerned AIB bankers in 2008 he told them he had no idea about the fictional business his nephew had persuaded the bank was real.The colossal fraud is particularly embarrassing for AIB bankers who dealt with Kallakis, several of whom were forced to admit in evidence that they had accepted lavish hospitality from Kallakis in between bankrolling deals for him between 2003 and 2008. They had been to the 2006 World Cup final; stayed on Kallakis's yacht for the Monaco Grand Prix; and been flown to Mauritius for three nights as a "thank you".Kallakis and Williams will be sentenced on Thursday morning.Real estateBankingPropertyCrimeSimon Bowersguardian.co.uk © 2013 Guardian News and Media Limited or its affiliated companies. All rights reserved. | Use of this content is subject to our Terms & Conditions | More Feeds

11 января 2013, 00:04

Martian Central Bank Interested in Buying 100 $1 Trillion Coins

Submitted by Charles Hugh-Smith of OfTwoMinds blog, The $1 trillion coin saga takes an unexpected twist.... The $1 trillion platinum coin saga took a surprising turn as the Central Bank of Mars has expressed interest in buying 100 of the proposed coins. Interpreters are puzzling over the meaning and subtexts of the Martian communique; since Martian is described as an often-ambiguous combination of Fortran and Hungarian, this is no easy task. Opinion on the Martian offer is divided. Some suspect the Martian Central Bank intends to buy the $100 trillion in platinum coins with electronically created quatloos, i.e. worthless currency. These observers believe the Martians intend to claim the $100 trillion in platinum coins constitutes a claim on the entire U.S.A., the purchase of which would effectively give the Martian Central Bank a massive beachhead on Earth. Others believe the Martian Central Bank is simply playing an interplanetary practical joke, showing that any central bank that issues its own currency can magically create phantom money and assets. What better way to illustrate this than to buy $100 trillion in phantom assets with equally phantom quatloos? A smaller cadre of analysts suspect the Martian Central Bank naively believes the fantasy that the arbitrary creation of assets, either via platinum coins or electronic entries in the Federal Reserve's balance sheet, creates actual value. Though this credulity borders on the fantastic, these analysts point to the many commentators in the U.S. who have bought into the platinum coin fantasy. If Paul Krugman et al. have swallowed the fantasy that something of real value can be created from nothing, then why not the Martian Central Bank?

07 января 2013, 06:54

Steve Clemons: Officials: Chuck Hagel Was a 'Gift From God' for the Israeli USO

Jason Reed/Reuters Admiral Ze'ev Almog, or Aluf Almog in Hebrew, speaks in a deep baritone, no-BS, command-authority voice that must have intimidated enemies and political rivals inside and outside Israel's command structure over the past decades. He exudes confidence, authority, and a compelling patriotism for the State of Israel for which he fought in so many wars. The nearly 78-year old former Commander-in-Chief of the Israeli Navy and former head of the Israel Shipyards fought in the Suez Crisis, the Six-Day War, the War of Attrition, the Yom Kippur War, the 1982 Lebanon War, and through the long-span of what is called the South Lebanon Conflict. Almog was commander of the battle-tested Naval Commando Unit, Flotilla 13, performing more than 80 combat operations ranging from penetrating Egypt's Port Said and raids on Adabiya coastal forts to sinking Egyptian torpedo boats. He is credited with dramatic transformation of Israel's sea-based military platforms and operations, and is one of those legendary leaders from whom many Israelis still have the benefit of learning about high stakes moments in the nation's history. Ze'ev Almog has also been a friend of and corresponding with former US Senator Chuck Hagel for decades. I tracked down the one-time naval commander-in-chief one late night by cell phone. First, I got his grandson, to whom I recounted why I wanted to speak to his grandfather. The young man responded by saying his grandfather would insist on me retelling everything again "exactly." Why was I calling? What was the purpose? What did I intend to do with my interview? Almog is cautious but forceful -- and a really busy man. I called four times in one night -- finally securing my interview at what was about 1 a.m. for him in Israel. And then we talked about Chuck Hagel. The reason I tracked down this acclaimed military leader is that he had also long been involved with the USO, which supports the well-being of US military personnel stationed around the world, and is chartered by the US government but funded entirely in the private sector. Many Americans who weren't soldiers or relatives of soldiers became aware of the USO because of the extraordinary profile that celebrity Bob Hope gave to the organization by performing for US troops during World War II, the Korean War, and more. Almog was selected in 1992 by the USO World Board of Governors to serve as the first USO President in Israel -- and he had been deeply involved with and supportive of USO activities inside Israel in the years before his assumption of the organization's presidency. I also tracked down Gilla Gerzon, the longtime former director of the USO's operation in Haifa, Israel. Why? An article recently appeared charging Chuck Hagel, who from 1987-1990 was the president & CEO of the USO, with an obsessive anti-Jewish compulsion to close the Haifa operation. The article, "The Saga of Hagel and Haifa," written by senior writer Adam Kredo for the Washington Free Beacon, quotes some who accuse Hagel of having an anti-Semitic fervor that drove him to want to close this facility. But after digging into this a bit -- both on the American side and Israel side of the debate -- there is ample evidence that this charge against Hagel is at best unsubstantiated by evidence and at face value completely untrue.When Hagel took over the USO in 1987, the organization was flat on its back and near bankruptcy -- and by the fall of 1989, it had more than $1.8 million in the bank, signifying a major reversal of fortunes. Hagel was compelled to shutter a number of under-performing or anachronistic USO platforms that no longer aligned with the habits and travel patterns of US military personnel. And thus when he came into office, he reviewed all of the USO facilities -- including the one in Haifa -- and decided to keep the Haifa operation open, expanding it in fact, while shuttering ten others in the Middle East region. Hagel's USO performance and challenges are well outlined in this segment of Charlyne Berens's book Chuck Hagel: Moving Forward. The Free Beacon article states that the USO's then-president Chuck Hagel "led the controversial charge to shutter the port [the Haifo USO operation] during his tenure with the organization." While on one hand, Kredo acknowledges that the USO reported to him that it has no evidence or records to suggest than an effort, or "charge," was made to close Haifa U.S.O. during Hagel's term, he quotes some who recall Hagel on a Haifa-closing crusade, making comments that at least one person felt bordered on anti-Semitism. In particular, the author cites Jewish Institute for National Security Affairs senior staff member Marsha Halteman who states that in a meeting with various concerned individuals and groups, Hagel said "Let the Jews pay for it." Halteman recounts that she confronted Hagel and told him that she "found his comments to be anti-Semitic." And the piece continues to generically cite others who believe that Hagel was hostile to Jews in general during this period. This is all remarkable if true, so I sought out those who actually helped run and had direct supervisory authority over and proximity to the Haifa USO operation. The collective view of Israeli voices directly involved with the USO is that the depiction of Hagel could not be more distant from their experiences and recollections. Former Israeli Navy Commander in Chief Ze-ev Almog said that Chuck Hagel "was completely positive towards us." He said that in "my experience with the USO, I have never heard a single word that he acted to close the USO in Israel. It happened later."Indeed, the Haifa USO port was closed in 2002 -- well after Chuck Hagel's tenure, during which Almog and others I interviewed said that Hagel and the USO Board kept Haifa open. He said that before he was nominated as the first Israeli president of USO, Almog did not know Hagel -- and then they became closely acquainted after -- meeting twice during trips Hagel made to Israel. Almog continued that they have corresponded over the years, exchanging views, sharing drafts of speeches given, and the like.Almog said that his experience with Hagel has always been "completely positive" and that he has never seen Hagel "act against Israel." He continued that while he became president of the Israel chapter of the USO after Hagel had left his position, he never heard, observed, or read anything about an effort by Hagel to close the Haifa operation -- with which Almog became intimately and directly involved. He said that from his vantage point, these assertions in the recent article by Adam Kredo are groundless. I was then interested in whether this obvious hero in Israel's military establishment had any reservations at all about Hagel's larger views about Israel:Clemons:  In your interactions with Chuck Hagel did you ever experience any negativity about Israel, or its people or institutions?Almog:  Not at all.   I must be fair.  I heard about, and even read some articles about, his negative attitude towards Israel and I never met such an occurrence. Look. One time one of my best friends from San Diego -- a very good friend of mine -- attracted my attention that Hagel was against signing a press request to release Jews from Russia. My friend is not Jewish. He said to me, "Look. See -- your friend -- see how he behaves!" He was the only Senator among the 100 that opposed the signature for that publication.I sent it to Chuck, and he sent me back his letter to President Clinton, and what President Clinton answered to him. Those two letters were sent to me showing that he thought it was rather better to do it that way than doing it through the press -- and he fully supported this claim to release the Jews, but to go through the President and not to the press. Although I understand he was the only Senator to take that position.What Almog shared by way of an interesting anecdote is that Hagel in this case avoided jumping on a media bandwagon and used his role as a United States senator to make a difference in a policy matter, forgoing personal vanity or media puffery.  It's unclear how many of the other 99 US senators sent private, compelling letters to Bill Clinton on this matter, but it's easy to presume that far more signed their names passively to a media vehicle on the issue -- rather than more proactively engaging in a serious exchange with the president of the United States on the matter.  Gilla Gerzon, fondly referred to by many US soldiers and Marines as the "mother of the 6th Fleet," was director of the USO Mission in the port of Haifa for nearly 20 years and served in that capacity when Hagel was the organization's CEO.  Gerzon is the first Israeli citizen to receive the U.S. Navy Commendation Medal.  I tracked her down to ask her to share her recollections of Hagel and the debate surrounding whether the Haifa USO mission would remain open or close.Clemons:  I am calling to ask your recollections of Chuck Hagel's tenure as president and CEO of the USO and the discussions in the late 1980s about closing the Haifa facility you directed.  Could you share your thoughts?Gerzon:  First of all, I must say that I admire him. I have great respect for him. Clemons:  When were you at the Haifa USO mission? [Subsequent reseach shows she was the founding director of the USO Haifa mission and served from its opening in December 1984 through its closing in September 2002].Gerzon:  I was the USO Director in Haifa -- So many years, almost 20 years. I was director during the time when Chuck Hagel was President of the USO. Clemons:  Do you remember Chuck Hagel trying to close the Haifa operation? Gerzon:  No. Look, I do not remember that he did anything like that. The issue is....OK, listen. He came to visit Israel with his wife. He came to see the operation, and that was the first time I met him, and he was very moved I think by what we were doing because he saw that for us this was a very, very important mission. The issue is you need to understand the importance of young people who are going overseas. They are -- I have, always been very patriotic to the USO mission and very patriotic toward the military, to the servicemen and women.  Here [in Israel] service is mandatory, but in America they volunteer to do it. They don't have an easy life. Imagine you are 18 or 19, and you are overseas, you don't know the culture, the people, the language, and you are coming off the ship. We felt very special towards the US Marines and Navy. In the Gulf War, we had the patriots from the Army. So, just imagine you are 19 years old, you are away from home, you have a birthday and someone gives you a birthday party. Maybe "Happy Birthday David"....and just 18 years old or 19. A small thing makes a big difference. For me, it was an absolute gift of God and for our volunteers when Chuck Hagel came to Israel. I think he felt that, the importance of those overseas here who were helping American men and women.  From this first moment I felt like he was a great supporter. He had the wisdom of his heart. You know every leader can be a leader, but you have to have wisdom in your heart to feel what is important. I think he was very wonderful for us by making the best decision to leave the doors open, and then he was a great supporter of us. He truly admired the USO Mission here and our work.The actual USO Director in Haifa during the late 1980s review of her facility says that Chuck Hagel's visit "was an absolute gift of God" and goes on to praise him effusively for his support.  This seems to be vital material missing from the Washington Free Beacon article charging Hagel with having been on a crusade to close the facility.On the US side, I spoke with Edward "Ned" Powell, former president & CEO of USO world headquarters who led the organization when the Haifa mission was closed.  He said that he had no idea whether Chuck Hagel had sought to close the mission earlier or not. He said he had never been given any word that he had worked to do that.  But Powell said that what is often not understood -- no matter the circumstanced about Haifa at that time -- is that the USO is a completely private organization, supported by private dollars though it was congressionally chartered as an organization.  Powell said that the world changes, that the location of American servicemen and women in the world has shifted from certain theaters of conflict to new ones.  He said that it made no sense in 2002, after the debacle of 9/11 and the US invasion of Iraq and Afghanistan, to preference USO facilities in Haifa when there was a massive troop deployment on the other side of the Middle East and in South Asia. Powell said "I closed Paris.  Believe me, I would have loved to keep visiting the USO Mission in Paris, but it would have been wrong.  There are no US service members there.  I closed England and others as well, but I'm not anti-British."Powell said that his and Hagel's job as CEO of the USO is to make sure that USO platforms are giving the most value for the private dollars that support them -- that the operations are "necessary and performing at a high standard."  He said that when Hagel came in as USO president, the organization was in "severe financial duress."  Powell said Hagel had to make tough calls.  In fact, while deciding to keep the Haifo USO facility open, Hagel closed 10 other operations in the region.While Hagel took the USO from the edge of bankruptcy to restoring its financial legs, Powell expanded the USO's operating budget from less than $40 million a year to nearly $250 million in 2008.Current USO President and CEO Sloan Gibson wrote this to me about Chuck Hagel's tenure at the organization:Senator Hagel has been a steadfast supporter of our troops and their families for more than three decades, well beyond his own military service. He personally brought that strong commitment to the USO as CEO and President of the USO from 1987 to 1990. Senator Hagel arrived at the USO during a fiscally tough time for the organization, and we have him to thank for leading the way back to financial health so that the USO could continue to provide its signature programs and services for America's troops and their families around the world. He kept the USO moving forward - just like the US military we serve.The bottom line: Chuck Hagel kept the facility open and expanded it when he was restructuring and shifting priorities inside the USO to keep it alive.  If Hagel had had a deep anti-Israel bias, others would have seen it and reported it -- and the near bankruptcy of the organization as a whole would have given him more than enough cover to close the place if he felt that was needed, or what he personally desired.A few years ago, I visited Hamburg, Germany as the guest of the Friedrich Naumann Foundation and its International Political Dialogue Director Claus Gramckow.  As we drove by a building in the now very wealthy city, he lamented the closing years before of what he called "America House," a US-government supported facility that hosted events, a library, and resource center for Germans interested in knowing more about America.  Gramckow said that we have to acknowledge that the world changes, that today that kind of center needs to shift to Kabul and Baghdad.  But still, some will lament and feel like a lesser priority when institutions like this close.  The same logic applies to America's USO operations -- loved or not -- in the parts of the world they are located.-- Steve Clemons is Washington Editor at Large at The Atlantic, where this post first appeared. Clemons is also editor at large of Quartz, a new global financial publication, and can be followed on Twitter at @SCClemons

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24 декабря 2012, 09:07

Fushi Copperweld: A Christmas present from the China Development Bank and Abax Captial to arb funds

For the record: I lost on this one. See SEC filing... Fushi Copperweld - a small cap Chinese stock specializing in bimetallic wire - is going private - purchased by "Green Dynasty" - a vehicle funded by Abax Capital and China Development Bank. The deal was supposed to close in the week of 11 December 2012 according to a press release filed with the SEC. It never closed. The following Monday (before market) Fushi released an update regarding the merger. The press release has so far not been filed with the SEC. To quote: "[b]ased on information provided by Green Dynasty, the Company anticipates closing of the transaction by or on Monday, December 24, 2012." If the deal closes it will be a nice Christmas present from the Chinese to various arb funds because this deal has had a fat spread for much of its existence.History of this transaction This transaction has history. It was first proposed by the chairman in November 2010 at $11.50 - but later withdrawn. The Chairman came back with a $9.25 offer and revised that offer to $9.50 which was accepted. The stock is not without controversy. Muddy Waters (of Sino Forest fame) has alleged Fushi is a fraud. Bronte was short a small amount well before the Muddy Waters announcement (and shorted the original $11.50 offer) because the accounts were a little unusual. This was a stock on which we won-some, we lost some. Even if the company is a fraud that does not mean the deal will not close. There were credible allegations of fraud against Harbin Electric and the accounts were decidedly funky - but the deal did close and many shorts (including Bronte) received a nastier than usual flogging. Moreover Harbin was taken private by Abax Capital backed by China Development Bank. The same combination taking Fushi private. That I am short again (and in this time in quantity) indicates that I am some kind of masochistic sucker for punishment.Why fraudulent Chinese companies were taken private There is a theory as to why some Chinese companies with fraudulent accounts were taken private. About a decade ago you could not buy industrial land around Shanghai and other cities unless you had a business to put on that land. So people invented fictional businesses to buy real land. Later they reverse merged those fictional businesses into the US and sold shares in the fictional businesses. In some cases the land appreciated enough to make the stock worthwhile even though the accounts are fictional. I know this to be true in at least one case (a case on which I lost money). I am not sure whether it is true of Harbin but Harbin Electric did own lots of land. There is another reason why Chinese companies are taken private. And that is the operation was originally the children of Chinese elites ripping off Western stock markets (by selling fraudulent stocks). When that no longer worked they had no shame. Now they ripped off Chinese banks by getting them to finance LBOs. I know of at least one fraud run by a child of a central committee member that received a bid from a well connected Chinese private equity fund.Back to Fushi Copperweld.  The Fushi Copperweld saga is long running. Now it is a simple question of whether the deal will close and today is the day of truth. It is likely to close. It is not over until the fat-lady sings - but she is clearing her throat. But imagine it does not close. Then it will likely be because the fraud allegations are substantially correct and the stock should eventually trade at pennies. There will be a few arb funds with some 'splaining to do. (See this disclosure from Centaurus Capital for an example.)Boiler plate When examining situations like this its best to read the boiler plate. The boiler plate in various disclosures has changed recently. A press release dated 28 June 2012 and filed with the SEC says categorically: There is no financing condition to completion of the merger. Mr. Fu and Abax have secured fully committed debt financing from China Development Bank Corporation Hong Kong Branch to finance the transaction. The press release of 11 December 2012 says that the deal will close "this week" (a week now well and truly past). However it introduces a new paragraph into the boiler-plate forward looking statements. A number of the matters discussed herein that are not historical or current facts deal with potential future circumstances and developments, in particular, whether and when the transactions contemplated by the Merger Agreement will be consummated. The discussion of such matters is qualified by the inherent risks and uncertainties surrounding future expectations generally and also may materially differ from actual future experience involving any one or more of such matters. Such risks and uncertainties include: any conditions imposed on the parties in connection with consummation of the transactions described herein; satisfaction of various other conditions to the closing of the transactions described herein; and the risks that are described from time to time in the Company's reports filed with the SEC. The press release of 17 December 2012 - the one not filed with the SEC - but which postpones closing until 24 December says: "As previously announced, on December 11, 2012, the Company's stockholders approved the Merger Agreement.  Green Dynasty has advised the Company that it is in the process of effecting the satisfaction of all conditions to draw all necessary funds pursuant to the facility agreement with the China Development Bank in order to consummate the proposed merger.  Based on information provided by Green Dynasty, the Company anticipates closing of the transaction by or on Monday, December 24, 2012." "Effecting the satisfaction of all conditions necessary to draw all necessary funds" is a somewhat weaker statement than "there is no financing condition to completion of the merger". All I can say for the arb funds involved. This better close. Or you are holding a very weak hand indeed. But then I have never seen a deal fail so near the line. It should close and by close of business today the stock will have disappeared and shareholders will be entitled to receive $9.50 per share from the clearing corporation. And I will have lost a few pennies on my short (just in time for Christmas). Whatever happens - I hope you all have a merry and safe Christmas (or festive season if Christmas is not your thing). John PS. After market now. So far the fat lady has not sung... PPS: On Friday - just before closing - the market got a little jittery about this. Check out the one-day chart. Someone panicked. (I was shorting earlier in the week.)