Archive for the ‘haha’ Category

… [W]hen Bush was last in Riyadh in January, his appeals to the Saudi government to increase oil production were quickly, albeit politely, rebuffed, allowing his political opponents at home to criticize him and accuse him of “begging.”

But this time around, a plan appears to have been in store between the Bush administration and the Saudi government. The Saudi announcement allows Bush to return home and claim that his influence worked in getting the Saudis to bend. In reality, however, an additional 300,000 bpd is unlikely to have much of a global impact on crude oil prices. …

Moreover, Saudi Arabia took 300,000 bpd of its crude offline for maintenance back in April. This move was typical for the season, …. By mid-May, that cycle is complete, allowing major energy producers like Saudi Arabia to adjust their maintenance schedules accordingly. In all likelihood, Saudi Arabia has simply completed its own maintenance and was scheduled to bring 300,000 bpd back online anyway to meet the summer demand. …

That would explain the announcement’s complete lack of impact on crude prices (I presume it was decided before close of markets today). Pure PR.

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That’s what happens when you have someone like Fred Thompson run a fraudulent, stalking-horse campaign solely to fracture the southern white/ evangelical vote.

People don’t just “take” a limitation of choices, as Thompson inflicted upon the party. They stay unhappy.

Voters may be dumb. Just not as dumb as GOP strategists think. Black turnout across the South will be through the roof, and white evangelical turnout will be depressed. November will bring nasty surprises for the GOP, not least of which will be a crippling “blue shift” in North Carolina and Virginia.

That said, considering idiotic posts like this, I don’t blame the GOP strategoi for appraising the Republican grasstops as the useful idiots they are:

This morning, Senator John McCain speaks at Wake Forest University. The speech begins at 10:00 a.m. Present with him will be Senator Fred Thompson. That’s important.

We’ve seen already that Thompson has been more visible in recent weeks. Why? Well, he’s decided to come out and support his friend. He is for conservatives what Joe Lieberman is for moderate squishes — a reassurance that John McCain will hear us. And given Thompson’s track record of getting McCain to listen to him, which is very good, we should take comfort in his presence by McCain today and on the campaign trail.

No, I don’t think this signals “Thompson as Veep.” In fact, I’m positive it does not. What I do think this signals is that Thompson is the guy McCain will listen to on conservative issues — Thompson will be the judge sherpa, making sure there are no Harriet Miers moments and plenty of John Roberts moments. …

I can practically hear the DCers laughing from here …

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“Greenspan came onto my radar screen in the late sixties as a seller
of economic and financial advice to the investment industry. To be
brutally honest, he was considered run of the mill by anyone I knew
then or have met later who knew his service then. His high point in
most memories, was a famous call in January 1973 that, “it is rare
that you can be as unqualifiedly bullish as you now can,” a few days
before a market decline of over 60% in real terms, second only to the
Great Crash in a century, accompanied also by a bitter recession.
This was one of the first of a long line of terrible prognostications
for which he has remarkably not been remembered, except by a handful
of us amateur historians. “

–Jeremy Grantham, on Alan Greenspan

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Not sure where they got the ‘reluctant’ from …


Comrade Ben is determined that there will be no financial meltdown and no depression while he is in command,” economist Ed Yardeni wrote to clients. “Given the initial reaction [on Wall Street], I suppose this means we are all financial socialists now.”

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Chase mortgage memo pushes ‘Cheats & Tricks’

The bank says it never backed the strategies, which detail how to get an iffy loan approved
Thursday, March 27, 2008


The Oregonian Staff

A newly surfaced memo from banking giant JPMorgan Chase provides a rare glimpse into the mentality that fueled the mortgage crisis.

The memo’s title says it all: “Zippy Cheats & Tricks.”

It is a primer on how to get risky mortgage loans approved by Zippy, Chase’s in-house automated loan underwriting system. The secret to approval? Inflate the borrowers’ income or otherwise falsify their loan application.  … (link)

Sorry, I’m having flashbacks to Henry Blodget and pushing “total crap” onto investors …

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New derivation of equations governing the greenhouse effect reveals “runaway warming” impossibleMiklós Zágoni isn’t just a physicist and environmental researcher. He is also a global warming activist and Hungary’s most outspoken supporter of the Kyoto Protocol. Or was.That was until he learned the details of a new theory of the greenhouse effect, one that not only gave far more accurate climate predictions here on Earth, but Mars too. The theory was developed by another Hungarian scientist, Ferenc Miskolczi, an atmospheric physicist with 30 years of experience and a former researcher with NASA’s Langley Research Center.

After studying it, Zágoni stopped calling global warming a crisis, and has instead focused on presenting the new theory to other climatologists. The data fit extremely well. “I fell in love,” he stated at the International Climate Change Conference this week.

“Runaway greenhouse theories contradict energy balance equations,” Miskolczi states. Just as the theory of relativity sets an upper limit on velocity, his theory sets an upper limit on the greenhouse effect, a limit which prevents it from warming the Earth more than a certain amount.

How did modern researchers make such a mistake? They relied upon equations derived over 80 years ago, equations which left off one term from the final solution.

Miskolczi’s story reads like a book. Looking at a series of differential equations for the greenhouse effect, he noticed the solution — originally done in 1922 by Arthur Milne, but still used by climate researchers today — ignored boundary conditions by assuming an “infinitely thick” atmosphere. Similar assumptions are common when solving differential equations; they simplify the calculations and often result in a result that still very closely matches reality. But not always.

So Miskolczi re-derived the solution, this time using the proper boundary conditions for an atmosphere that is not infinite. His result included a new term, which acts as a negative feedback to counter the positive forcing. At low levels, the new term means a small difference … but as greenhouse gases rise, the negative feedback predominates, forcing values back down.

NASA refused to release the results. Miskolczi believes their motivation is simple. “Money”, he tells DailyTech. Research that contradicts the view of an impending crisis jeopardizes funding, not only for his own atmosphere-monitoring project, but all climate-change research. Currently, funding for climate research tops $5 billion per year.

Miskolczi resigned in protest, stating in his resignation letter, “Unfortunately my working relationship with my NASA supervisors eroded to a level that I am not able to tolerate. My idea of the freedom of science cannot coexist with the recent NASA practice of handling new climate change related scientific results.”

His theory was eventually published in a peer-reviewed scientific journal in his home country of Hungary.

The conclusions are supported by research published in the Journal of Geophysical Research last year from Steven Schwartz of Brookhaven National Labs, who gave statistical evidence that the Earth’s response to carbon dioxide was grossly overstated. It also helps to explain why current global climate models continually predict more warming than actually measured.

The equations also answer thorny problems raised by current theory, which doesn’t explain why “runaway” greenhouse warming hasn’t happened in the Earth’s past. The new theory predicts that greenhouse gas increases should result in small, but very rapid temperature spikes, followed by much longer, slower periods of cooling — exactly what the paleoclimatic record demonstrate.

However, not everyone is convinced. Dr. Stephen Garner, with the NOAA’s Geophysical Fluid Dynamics Laboratory (GFDL), says such negative feedback effects are “not very plausible”. Reto Ruedy of NASA’s Goddard Institute for Space Studies says greenhouse theory is “200 year old science” and doubts the possibility of dramatic changes to the basic theory.

Miskowlczi has used his theory to model not only Earth, but the Martian atmosphere as well, showing what he claims is an extremely good fit with observational results. For now, the data for Venus is too limited for similar analysis, but Miskolczi hopes it will one day be possible.

Common sense 1, pseudoscientific mumbo-jumbo 0.

Climatologists obviously never respected what they could not know. Anyone who tells you that they understand the moving parts of a dynamic system infinitely bigger and more complex than any one human being, well enough to forecast it 50 years into the future, is a liar, an idiot, or a lying idiot. It’s common sense. Climatologists are too overconfident, too hysterical, and too frequently wrong to be credible. Next.

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Click to access Prostitution%205.pdf

Quite informative, actually. For example:

“… We estimate that prostitutes are officially arrested only once per 450 tricks, with johns arrested even less frequently. Punishment conditional on arrest is limited – roughly 1 in 10 prostitute arrests leads to a prison sentence, with a mean sentence length of 1.2 years among that group.5 For many johns, perhaps the greatest risk is the stigma that comes with having a mug shot posted on the Chicago Police Department web page. There is a surprisingly high prevalence of police officers demanding sex from prostitutes in return for avoiding arrest. For prostitutes who do not work with pimps (and thus are working the streets), roughly three percent of all their tricks are freebies given to police.”

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Apparently, “Study shows …” is today’s equivalent of “The Bible says.” It allows you to frame an utterly ridiculous finding, such as “200 million people to be displaced by 2020 due to flooding caused by global warming” “steroids have no effect on baseball performance,” or as Drudge is broadcasting today, “1 in 4 American teen girls has sex transmitted disease” as reasonable and grounded in thorough, dispassionate analysis.

Of all girls ages 13 to 19, let’s assume the average age of loss of virginity to be at 16. That means that 50% of American teens have never had sex at all under a normal distribution. So this study is basically saying that half of all teen girls are STD-positive.


How much you want to bet that Trojan funded this ;-)

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I invite all fellow foes of prosecutorial-fascist state Aspiring Governors Attorneys General to join me in an solemn toast, to whatever mole nailed Eliot Spitzer to a bunch of hookers.

And my biggest, most heartfelt congratulation goes out to the hookers themselves. Who wouldn’t be honored to partake in the destruction of the nation’s leading (non-federal, alas) prosecutorial tyrant?

The more “involved” they were with “infecting” Spitzer with this scandal, the greater they are, as patriotic Americans who single-handedly lowered the cost of doing business in the late great US of A.

How long till the ringleader gets her advance for a steamy bestseller about it? (And make no mistake, that would be a hell of a bestseller.)

Then the ringleader and her coterie could open their own joint in NV and be booked solid for two years immediately.

Btw, when can I reserve a copy?


Also: Say hello to Governor/ Tranzfatfuehrer Michael Bloomberg …

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MBIA has kept up a game of begging for massive ratings concessions from Fitch in private, while trash-talking the ratings agencies (especially Fitch, which is by far the most aggressive of the three) in public.

Fitch is not amused.


MBI MBIA Inc: Follow up on Fitch’s response to MBIA; willing to continue ratings without charge to MBIA (11.01 -0.98) -Update

From today’s letter from Fitch Ratings to MBIA: ” I am writing in response to your letter to Fitch Ratings delivered to us this past Friday requesting that we withdraw MBIA’s Insurer Financial Strength rating, but maintain MBIA’s debt ratings. Regarding the commercial relationship between MBIA and Fitch, as I suggested to you in our meeting on Friday, we are empathetic to the financial and operational stress MBIA is presently undergoing and are aware of the significant cost containment measures you are initiating. We are, therefore, willing to continue our ratings without charge to MBIA. I assume, in the interest of your stakeholders, that you will be seeking and will receive equal concessions and/or sizable fee reductions from both S&P and Moody’s.

In addition, I would like clarification of your intentions regarding cooperation with our rating process. You stated in your March 7 press release, and in your letter to us of the same date, that you would like us to withdraw our IFS ratings, but continue rating MBIA’s debt securities. Separately, by email sent a day later on March 8 (a copy of which is attached hereto) you requested that we return or destroy key portfolio information and discontinue all use of that information in proceeding with our rating analysis. It seems disingenuous at best to assert in your letter to investors published yesterday, March 9 (footnote 1), that you “intend to work with Fitch to perform the analysis needed to rate [MBIA’s] debt securities”, while privately demanding return of the portfolio information and materials that you freely provided to support our ratings and that of other rating agencies for many years. It would appear that rather than “work with Fitch” your intention could be to emasculate our opinion by withholding information and subsequently discredit our opinion as being uninformed. In your letter, you also state that the value of IFS ratings in today’s volatile capital markets is disconnected from individual instruments insured by MBIA and “overwhelmed by the forces of trading markets in unrelated securities.” If you believe that, then you should request withdrawal of all rating agencies’ IFS ratings.

Your conflicting views lead me to question whether it is the Fitch capital model, rating process or fees that you object to or rather is it that you are aware we are continuing our analytical review and may conclude that, in our view, MBIA’s insurer financial strength is no longer ‘AAA’. I believe the central issue is MBIA’s financial strength and the value of your insurance policies to investors, not the value of an IFS rating. It seems an unusual first step in attempting to rebuild MBIA’s reduced credibility with investors to limit information, decrease transparency and restrict “informed opinions” (which I believe Fitch has) just because we may not conclude that MBIA is a ‘AAA’ company. I believe that the best way forward for MBIA to reestablish the value of its products in the market is to make more information available to more rating agencies rather than just aligning MBIA with Standard & Poor’s and Moody’s.”


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Barry Ritholtz has a bullseye Bloomberg screenshot showing that a single buyer pumped up ABK’s share price 25 percent, at 4:05 pm. I’m sure it’s a “complete” coincidence that that day happened to be the day before Ambac’s “$1.5 billion” share offering. The picture really says it all: this is the most obvious pump (as in “pump and dump”) I have ever seen of a major stock. I’m sure the SEC won’t investigate it, because the SEC doesn’t make it its business to investigate pumps which actually matter (and which inflate asset prices).

What a corpse of a company.

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As we predicted, the massively CNBC-hyped “Ambac bailout” has been revealed to be nothing but smoke and mirrors. Kudos to whomever duped Charlie Gasparino of CNBC so that the HF manager could slough his garbage upon credulous speculators. Barry Ritholtz gloats:

Riddle Me this Batman:  Over the past 2 months, we have seen at least 3 rallies predicated on the rumor of an Ambac (ABK) rescue — either through a capital infusion, or a direct purchase of the company.

Let me remind you that just a week ago their triple-A rating was confirmed by the (choose one a. criminally negligent; b. technically incompetent) organizations known as Moody’s and S&P.

To you can imagine my surprise when the stock was halted today. WSJ Marketbeat announced “Ambac Bailout Imminent! Maybe! Possibly!

Then we learn that the deal was dead, and that Ambac needs to raise $1.5 billion dollars. Thus, all of those rumors and CNBC appear to have been patently false.

But here’s the question that keeps coming up: Who are the people leaking this information? And, is this legal? Now, we have learned that all of these attempts at manipulating the market were based on rumors that proved to be false.

I think that a lot of trading isn’t an issue of “genius” so much as detachment your thinking from the herd, and diversifying your sources of information away from it. This wasn’t that tough to figure out …

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Sounds like everyone’s favorite bank needs more cash – soon.

March 4 (Bloomberg) — Citigroup Inc., the biggest U.S. bank, may need additional capital from outside investors as losses stemming from the collapse of the U.S. subprime mortgage market increase, the head of Dubai International Capital LLC said.

Citigroup received $7.5 billion in November from Dubai’s neighbor, Abu Dhabi, after record mortgage losses wiped out almost half the company’s market value and led to the departure of Chief Executive Officer Charles Prince. The New York-based company said in January it was getting another $14.5 billion from investors, including the governments of Singapore and Kuwait.

“It will take a lot more than that to rescue Citi and other financial institutions,” said Sameer al-Ansari, the chief executive officer of Dubai International, at a private-equity conference in Dubai today. Dubai International is among the investment funds controlled by Dubai ruler Sheikh Mohammed bin Rashid al-Maktoum.

Citigroup probably will report a first-quarter loss of $1.66 a share after $15 billion of mortgage-related writedowns, Merrill Lynch & Co. analyst Guy Moszkowski said in a report issued today. The company also may have $3 billion of markdowns from loans used to finance leveraged buyouts and commercial real estate, Moszkowski estimates.

Sovereign Funds

Citigroup slumped 54 percent in New York trading during the past 12 months. The stock fell 30 cents today to $22.79 in German trading.

Moszkowski also cut his earnings estimates today for Bank of America Corp., the second-largest U.S. bank by assets, and Wachovia Corp., the country’s No. 4 bank, because of the deteriorating credit markets. Both companies are based in Charlotte, North Carolina.

Arab states led by Qatar, Kuwait and the United Arab Emirates, which are loaded with cash from record oil and gas revenue, have purchased stakes in U.S. and European financial institutions, including Merrill Lynch & Co., Morgan Stanley and UBS AG, as losses mounted from the U.S. mortgage market.

In all, banks and securities firms have so far raised about $105 billion from sovereign wealth funds, governments and public investors, according to data compiled by Bloomberg. Dubai International has invested in companies including London-based HSBC Holdings Plc, Europe’s biggest bank by market value, and New York-based hedge fund Och-Ziff Capital Management Group LLC.

“Gulf sovereign wealth funds will continue to be interested in the major U.S. financial institutions,” said Giyas Gokkent, the head of research at National Bank of Abu Dhabi, the third- largest bank in the United Arab Emirates by market value. “The scope for investments is going to be more limited than what we have seen so far.”

Prince Alwaleed

Qatari Prime Minister Sheikh Hamad bin Jasim bin Jaber al- Thani said Feb. 18 that the emirate is buying shares of Zurich- based Credit Suisse Group and plans to spend as much as $15 billion on European and U.S. bank stocks in the next year.

Abu Dhabi is Citigroup’s largest shareholder, ahead of Los Angeles-based Capital Group Cos. and Saudi billionaire Prince Alwaleed bin Talal, Bloomberg data show.

The assets of state-managed funds have increased to $3.2 trillion, fueled by record oil prices and rising currency reserves. Analysts at New York-based Morgan Stanley estimate the funds’ assets will reach $12 trillion by 2015.

Last week, there was massive buying support at the $25.00-05 mark. Somebody, probably Alwaleed or Dubai, was buying whatever was sold at $25. The dam crumbled this week, however, and C currently trades at $22.49. The biggest writedowns haven’t happened yet.

The credit recession, for the most part, is over.

The earnings recession hasn’t started yet.

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What the debt market believes, and what the ‘Save the Sheeple’ monolines/ banks/ realtors caucus believes, are clearly two very different things.

Feb. 27 (Bloomberg) — Moody’s Investors Service and Standard & Poor’s say MBIA Inc. has enough capital to withstand losses and justify its AAA rating. MBIA’s debt investors aren’t so convinced.

Credit-default swaps indicating the risk that Armonk, New York-based MBIA’s bond insurance unit won’t be able to meet its obligations are trading at similar levels to companies such as homebuilder Pulte Homes Inc., which is rated 10 steps lower.

The discrepancy illustrates the skepticism debt investors have about the safety of MBIA’s rating after the company posted $3.4 billion of losses on subprime mortgages last quarter. Moody’s and S&P both said that while at least $4 billion of writedowns lie ahead, MBIA’s management has made enough changes to warrant the top rating.

Pardon me if I find this a little hard to believe,” said Richard Larkin, director of research at municipal-bond brokerage Herbert J. Sims & Co. in Iselin, New Jersey. “This is basically the same management that put MBIA into this hole in the first place.’

Moody’s yesterday ended a five-week review of MBIA, the world’s largest bond insurer, removing the threat of an imminent downgrade. S&P did the same a day earlier and also affirmed the top rating of New York-based Ambac Financial Group Inc., the second-biggest. Ambac is still under review from both S&P and Moody’s.

Credit-Default Swaps

Credit-default swaps tied to MBIA’s insurance unit rose 3 basis points today to 363 basis points, according to London-based CMA Datavision. The contracts, which rise as investors see increased risk and fall when confidence improves, have dropped 24 basis points the past three days. That’s still up from less than 100 as recently as October. The contracts rose above 720 last month as banks, securities firms and investors used them to hedge against the risk that the firm wouldn’t be able to make good on its insurance obligations.

Contracts on Bloomfield Hills, Michigan-based Pulte are trading at about 370 basis points, CMA price show. The BB+ rated homebuilder has reported five straight quarterly losses. The company is considered junk, or below investment grade.

Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company’s ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements.

A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

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The Drudgico:

EDINBURG, Texas – For all the positive press Barack Obama receives, as he moves closer to clinching the Democratic nomination he is establishing himself as the candidate who keeps the most distance from the national media.

Reporters covering Obama can no longer move freely among the thousands of zealous supporters at his events — unless the reporter receives a staff escort through the security gates. (In one city, that meant using a port-o-potty outside because the route to the indoor plumbing ran through the crowd.)

And the traveling press corps has been shut out of monitoring Obama’s satellite interviews with local media outlets, which is a normal practice on Sen. Hillary Rodham Clinton’s campaign.

On top of that, the traveling media has been tussling with Obama aides to keep conversations with the candidate on his campaign plane on the record.

In any other campaign year, the media strategy might not raise eyebrows since it is standard practice for a front-runner. But this is a year when the likely Republican nominee, Sen. John McCain, has set a new standard for press accessibility, creating a potentially stark general election contrast between a reticent Democrat and the most accessible GOP nominee in decades.

Watch out, Barack — tell us what we want to know, or you will have a “stark general election contrast” to deal with!

Obama has received grudgingly ambivalent coverage throughout the campaign because he 1) presents himself frankly, humorously, and sometimes intelligently, as opposed to a latter-day Lady Macbeth; and 2) does not have any real dirt on him.

The press, especially CNN, ABC, and Fox-Drudgico, loved Hillary because, besides the fact that her weakness makes her easier to control, her advisers are devout acolytes of the “news cycle” “image management” school of politics: the candidate’s popular standing is all about the best possible connotations in the headlines. Which means they are all about sucking up to reporters, giving them what they want plus a few extra scoops, offering lavish expense accounts, and so on.

The Obama campaign treats the “image management” school of political consulting as half scam, half kabuki. They have never treated MSM reporters respectfully — which is a great thing. With reporters it’s all about openly extrapolating from something completely irrelevant — eg the stunningly ridiculous “Obama in Somali dress” boomlet — wondering about how this will be reported by a critical mass of the reporters themselves, and how many dumb hoi polloi will be subsequently misled. The internet has revealed to ordinary news junkies the pointless, self-referential nature of the entire process. The MSM has lost its power — and the Obama campaign knows it. Hillary’s campaign doesn’t.

It’s also true that press conferences with national media tend to veer into areas that do not necessarily underscore the campaign’s message of the day. The focus is often not on issues like the economy or health care, but on process and punditry, which campaigns loathe.

“The questions that seem to dominate now are superdelegates, pledged delegates, Florida and Michigan,” Gibbs said. “I just don’t know that they provide a tremendous insight into the type of president” he would be. …

Around the Super Tuesday primary elections on Feb. 5, the barriers around the press area at Obama events went from easily penetrable, fabric rope lines to interlocking metal gates manned by vigilant gatekeepers.

Bottom line: The media can no longer roam free.

For months prior to that, reporters could mingle among hundreds of supporters after rallies as Obama worked the rope line. It was a chance to see him interact with voters – and one of the few opportunities to squeeze in a question.

But camera crews and reporters often clogged the rope line, which annoyed Obama because he viewed it as his time to meet voters. Foreign TV crews would sometimes do stand-up shots there.

Now, reporters must usually flag down a staff member before entering the rope line area.

An outrage! An outrage!!

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From Merrill Lynch forecaster-in-chief David Rosenberg’s morning memo:

“… New York Times article by Louis Uchitelle in December 1990 on the housing and credit crunch. In the article, there is a quote that goes like this –

“This is different from the experience of the Great Depression, but something related to the 1930’s is beginning to happen”.

Guess who it was that said that…

“Ben Bernanke, a Princeton University Economist”

Is there a single “adverse feedback loop” that Bernanke didn’t think was the beginning of the next Great Depression?

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Any enviros want to refresh me on how well the 2007-8 temperature forecasts of Pope Al and the cardinals of climatology stacked up to reality?



Snow cover over North America and much of Siberia, Mongolia and China is greater than at any time since 1966.The U.S. National Climatic Data Center (NCDC) reported that many American cities and towns suffered record cold temperatures in January and early February. According to the NCDC, the average temperature in January “was -0.3 F cooler than the 1901-2000 (20th century) average.”China is surviving its most brutal winter in a century. Temperatures in the normally balmy south were so low for so long that some middle-sized cities went days and even weeks without electricity because once power lines had toppled it was too cold or too icy to repair them.There have been so many snow and ice storms in Ontario and Quebec in the past two months that the real estate market has felt the pinch as home buyers have stayed home rather than venturing out looking for new houses.In just the first two weeks of February, Toronto received 70 cm of snow, smashing the record of 66.6 cm for the entire month set back in the pre-SUV, pre-Kyoto, pre-carbon footprint days of 1950.And remember the Arctic Sea ice? The ice we were told so hysterically last fall had melted to its “lowest levels on record? Never mind that those records only date back as far as 1972 and that there is anthropological and geological evidence of much greater melts in the past.

The ice is back.

Gilles Langis, a senior forecaster with the Canadian Ice Service in Ottawa, says the Arctic winter has been so severe the ice has not only recovered, it is actually 10 to 20 cm thicker in many places than at this time last year. …

According to Robert Toggweiler of the Geophysical Fluid Dynamics Laboratory at Princeton University and Joellen Russell, assistant professor of biogeochemical dynamics at the University of Arizona — two prominent climate modellers — the computer models that show polar ice-melt cooling the oceans, stopping the circulation of warm equatorial water to northern latitudes and triggering another Ice Age (a la the movie The Day After Tomorrow) are all wrong.

“We missed what was right in front of our eyes,” says Prof. Russell. It’s not ice melt but rather wind circulation that drives ocean currents northward from the tropics. Climate models until now have not properly accounted for the wind’s effects on ocean circulation, so researchers have compensated by over-emphasizing the role of manmade warming on polar ice melt.

But when Profs. Toggweiler and Russell rejigged their model to include the 40-year cycle of winds away from the equator (then back towards it again), the role of ocean currents bringing warm southern waters to the north was obvious in the current Arctic warming.

Last month, Oleg Sorokhtin, a fellow of the Russian Academy of Natural Sciences, shrugged off manmade climate change as “a drop in the bucket.” Showing that solar activity has entered an inactive phase, Prof. Sorokhtin advised people to “stock up on fur coats.”

He is not alone. Kenneth Tapping of our own National Research Council, who oversees a giant radio telescope focused on the sun, is convinced we are in for a long period of severely cold weather if sunspot activity does not pick up soon. …

Talk about being “anti-science” — I don’t care how sophisticated the climatologists’ quantitative models are. Calling climatology “science” insults science. A Roman priest forecasting weather with pig entrails would be a more reliable forecaster than climatological models.

Of course, both Beltway candidates, and the entire infrastructure of 2008’s favored party, have invested man-eons evangelizing this religion. The Beltway’s capacity as wealth-destroying contrary indicator stands unrivalled.

I still want to know the gas mileage of a Prius going 100 mph.

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Hans-Hermann Hoppe couldn’t have stated it any better.

Although a quiet, reflective man, the prince decided to take a rare public stand. Accused of aiding and abetting tax fraud – the banking principality does not recognise it as a criminal offence [where do I apply for citizenship?–ed] – he shot back that Germany had “trafficked in stolen goods.”

In an apparent allusion to Germany’s belligerent history last century, he added it “still” did not know how to treat friendly nations and obviously placed “fiscal interests above the rule of law”. If it were a more direct democracy with a better tax system perhaps its citizens would not cheat, he suggested.

Liechtenstein’s critics suddenly had to consider that the pocket state, wedged between the Rhine river and an Alpine precipice, might be not only of Lilliputian geopolitical clout but also Brobdingnagian media savvy. They were stunned by the attack.

“Totally out of order,” said Kurt Beck, leader of the Social Democrats, a junior partner in the German coalition government; “rogue state” muttered a senior Berlin lawmaker.

In Liechtenstein, however, Prince Alois was swept up on a wave of adulation. “It was sensational, what he said,” enthused Maria-Loreto Corbi, an assistant in a tobacconist in the pedestrian shopping area of the capital, Vaduz. “We all feel he said what needed to be said. I see much more of his father [Prince Hans-Adam II] because he buys his cigars here. But what I have seen of the prince, I’d say he was quiet and intelligent and maybe this was his way of proving to his people: I am ready to rule.”

Although governed by an elected parliament, this 160sq km country is home to the Liechtenstein dynasty, one of the oldest noble families with a lineage tracing back to the 12th century. The family watches over its 35,000 subjects from a mountainside castle in Vaduz, which it has owned since 1712.

Sure, the FT is dramatizing things, but it’s still good fare as European food fights go.

In the long run, free trade and government power are mutually exclusive. Germany is hemorrhaging tax revenue to tax-avoidance fiefdoms. The same legislators who drilled so many loopholes into the German tax code are now calling for economic jihad against Liechtenstein to punish it for “stealing” “German” money.

Of course, the large democracies could moot the entire issue by simplifying their tax codes. But how could the legal and political class make such a comfortable living, if not by selling opportunities for tax avoidance?

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I have not read a single article about the government’s eye-popping bailout of the American mortgage and banking sector, through the quasi-governmental Federal Home Loan Banks, other than a single article by Krishna Guha and Gillian Tett in the Financial Times more than two months ago. This is the most underreported story in today’s financial media, and infinitely more significant than all those worthless MLEC hype pieces, and all the “praise” of the Fed’s free money Term Auction Facility.

Kudos to John Cassidy of Conde Nast Portfolio for beating Bloomberg and the WSJ to this. The article is nakedly sycophantic, but hey, I’ll settle for what I can get. Besides, intelligent people can read between the lines.

Since the onset of the subprime crisis last summer, the White House has repeatedly rejected the notion of a government bailout, either for homeowners facing foreclosure or for the banks and mortgage companies that made the now souring loans. “There’s no bailout with government money, none whatsoever,” Treasury Secretary Hank Paulson emphasized. But even as the administration has stuck to its laissez-faire stance in public, behind the scenes a covert bailout has been under way, with a number of public and quasi-public agencies quietly dispensing vast sums to financial institutions saddled with worthless or near worthless mortgage securities. All the while, homeowners at the heart of the problem have been left largely to their own woes. The rescue operation brings to mind John Kenneth Galbraith’s dictum that in the United States, the only respectable form of socialism is socialism for the rich. (Read about some former government bailouts.)

Let’s start with the Federal Reserve. In addition to bringing down the federal funds rate from 5.25 percent last August to 3 percent—including a dramatic three-quarter-point cut one day in late January—the central bank recently introduced a new auction process that makes it easier (and cheaper) for cash-strapped financial institutions to borrow from the government. Through four auctions in December and January, the Fed lent dozens of financial firms $100 billion at rates well below the discount rate, the rate at which distressed lenders formerly had to borrow. Crucially, the Fed also expanded the range of collateral it accepts to include triple-A-rated asset-backed securities, the same toxic paper that institutions like Citigroup and Merrill Lynch have been unable to sell or even value because the market for it has dried up. In effect, the Fed has been acting as a benevolent pawnbroker, extending cash for illiquid goods and charging low interest rates.

Then there is the Federal Home Loan Bank system, an obscure institution that President Herbert Hoover set up in 1932 to stimulate mortgage lending. The F.H.L.B., actually 12 government-chartered but privately owned regional banks, exploits its semiofficial status to raise money cheaply in the bond market and lends the proceeds to its membership, including most of the nation’s big banks and investment firms. Since last summer, the F.H.L.B. has been extending low-cost credit at an unprecedented rate—$184 billion in the third quarter alone. Recipients include Citigroup, which owed the F.H.L.B. $98.7 billion at the end of September; Countrywide Financial, which owed $51.1 billion; and Washington Mutual, owing $43.7 billion.

Finally, there are Fannie Mae and Freddie Mac, which are also government-chartered but privately owned institutions. Fannie and Freddie do two things: They encourage other lenders to issue home loans to low- and middle-income families, and they raise money in the bond market to buy mortgage-backed securities. Despite losing money during the third quarter of 2007, the two mortgage giants stepped up their issuing and buying, often in tandem with the very Wall Street players that are now suffering. In fact, while many companies were drastically downsizing their mortgage divisions, Fannie and Freddie still did great business.

  As a result of all this government-sanctioned activity, total mortgage lending nationwide actually rose in the third quarter of 2007, according to Richard Iley, an economist at BNP Paribas. However, as he pointed out in a recent research note, simply increasing the volume of business was probably not the only goal. “It is no exaggeration to say that the mortgage market was effectively nationalized” in the third quarter, Iley wrote. “The F.H.L.B. acted as a forgiving lender of the last resort, providing the liquidity to sustain mortgage production while Fannie and Freddie acted as risk intermediaries of last resort with record purchases of mortgages.”

The government lending operation prevented the mortgage industry from seizing up, but it didn’t solve the underlying problems facing the housing market. The question is whether more drastic measures will be needed to help lenders as well as borrowers. For the past three months, the widely watched S&P/Case-Shiller home price index has shown prices sliding at an annual rate of more than 15 percent across the country, with bigger falls in some areas. One in five subprime mortgages is already in arrears, and the delinquency rate is rising. Even more worrying are recent developments involving products like option ARMs, adjustable-rate mortgages that allowed borrowers to make such small monthly payments that their loan balances sometimes increased. The Los Angeles Times reports that in many parts of California, delinquency rates on option ARMs have reached double digits. Even on old-fashioned fixed-rate loans, the number of foreclosures is edging up. “This is turning into a human calamity,” says Lou Ranieri, the Wall Street veteran who in the 1970s helped found the mortgage-backed-securities market. “We are looking at numbers that start to rival the Great Depression in terms of people hurt.” [Right, Lou. Today. The Great Depression. Same thing.]

In an election year, pressure for more action is sure to intensify. The stimulus package working its way through Congress includes a proposal to let Fannie and Freddie buy mortgages worth up to nearly $730,000.

Alan Greenspan has pointed out that rather than going through the trouble of negotiating with mortgage lenders and imposing rate freezes, the federal government could just send checks to distressed borrowers, which they could use to meet their monthly payments. The former Fed chairman, a free-market conservative, backed the handout nonetheless: He said that if the government wanted to bail out struggling homeowners, this would be a more efficient and transparent way to go, which is surely true.

A similar argument applies to the quasi-governmental agencies. Instead of relying on Fannie, Freddie, and the F.H.L.B. to ease the credit crunch, the federal government might be well advised to intervene directly in the financial markets. One solution is for the Fed, the Treasury Department, or a new official entity to buy large amounts of mortgage-backed securities, collateralized debt obligations, and other distressed paper from financial firms at bargain-basement prices. By purchasing these assets at a discount, the government could ensure that companies pay heavily for their reckless behavior, while also injecting much-needed liquidity into the system. [WTF do you think the Term Auction Facility is?–ed]

Such an initiative has historical precedents, and it wouldn’t necessarily break the federal budget. In 1933, President Franklin D. Roosevelt founded the Home Owners’ Loan Corp., which refinanced about a million troubled mortgages during the Depression. In 1989, Congress set up the Resolution Trust Corp. to take over more than 700 bankrupt savings and loans. Some experts predicted that the R.T.C. would end up spending $100 million or more, but by holding on to some of the S&Ls’ assets until the economy and property values rebounded, it was able to keep its net spending to $87.9 billion. Adding in other expenses, such as those incurred by the R.T.C.’s predecessor, the Federal Savings and Loan Insurance Corp., the total cost to taxpayers of resolving the S&L crisis was $132 billion—in today’s money, about $180 billion.

At this stage, the subprime crisis is still smaller than the S&L debacle: About 150 mortgage companies have been sold or gone under. Benn Steil, an economist at the Council on Foreign Relations, and Mark Fisch, a managing partner at Continental Properties, guesstimate that an R.T.C.-style subprime rescue could cost up to $75 billion. As part of the $3 trillion federal budget, this would be a perfectly manageable sum. There isn’t much political support for such a dramatic move, however, so Wall Street is hobbling along on a combination of gradual write-offs and capital injections from foreign governments.

But one big financial collapse or near-collapse could change the climate overnight. How likely is such a catastrophe? Consider Merrill Lynch, one of the worst offenders in the subprime mess but an instructive example nonetheless. Last summer, before the credit crunch began, Merrill had total assets of roughly $1.1 trillion perched on top of equity capital of roughly $40 billion. With a leverage ratio of 25.3, it was in a situation where a mere 4 percent fall in the value of its assets would wipe out all of its capital. Such thinly capitalized financial firms are at the mercy of their lenders. If a crisis of confidence develops, funding can dry up and the firms can unravel with stunning rapidity.

Fortunately for Merrill, the full scale of its exposure to the subprime problem emerged gradually, and so far it has been able to secure fresh capital and stabilize its finances. The next casualty might not be so lucky. Much depends on the degree to which credit problems extend from subprime to other areas in which securitization was popular, such as home-equity loans, commercial real estate, corporate loans, credit-card receivables, and auto loans. If these sectors deteriorate—and recent reports from American Express, Citigroup, and other firms indicate some disturbing trends—more big financial firms will find themselves with holes in their balance sheets, and persuading others to bail the firms out may be difficult. (Presumably, even the governments of Dubai and Abu Dhabi have limits on their largesse.)

Since letting a major bank or Wall Street firm fail in the current environment could easily lead to contagion, the federal government would have little option but to launch a formal rescue. This is what happened in May 1984 when Continental Illinois, which was stuffed full of bad loans that had been extended to the oil patch, found itself shut out of its usual funding markets. The Federal Deposit Insurance Corp. injected $4.5 billion into Continental, removed the senior management, and took an equity stake of 80 percent. The bank continued to do business, albeit in a scaled-back manner; eventually it was sold to Bank of America.

GaveKal, a Hong Kong economics consultancy, says that this financial crisis, like those that preceded it, began with government at arm’s length. But as in past rescues, that government resistance eventually begins to soften. “In each of these cases, the interventions were undertaken by doctrinaire free-market governments—and in each case, they worked,” GaveKal’s report states. Evidently, in order to save capitalism, it is sometimes necessary to administer a stiff dose of socialism.

(h/t Barry Ritholtz)

The thesis (if not the subject) of this article is pretty stupid. Free Lunch Capitalism has discouraged private investors from sitting out the most feverish stages of the boom in order to move in after asset prices become depressed. They knew that they would be competing with a panicky, uninformed government, for whom “ever higher asset prices” is religion.

The author also, incredibly, fails to ask: “Who pays?” Everyone with faith in the United States Treasury paid. Everyone who saw the Federal Reserve, and US financial authorities, as credible, paid. Everyone who held cash paid.

The fourth-to-last and second-to-last paragraphs are symptomatic of the sycophancy that infects today’s reporting. “Imagine what would happen if we didn’t bail out the banks!” Well, let’s see. The Arabs and Chinese would have larger stakes in the banks that had screwed up. A lot of senior citizens would not have seen their purchasing power eroded by ideological reflationism from the Fed and the government. And — get ready for this — a few capitalists would have actually had to pay the consequences of failure!

The last paragraph is the best of all, though. It’s so great, I’m going to highlight it again:

GaveKal, a Hong Kong economics consultancy, says that this financial crisis, like those that preceded it, began with government at arm’s length. But as in past rescues, that government resistance eventually begins to soften. “In each of these cases, the interventions were undertaken by doctrinaire free-market governments—and in each case, they worked,” GaveKal’s report states.

What happens to you when you are a permabull who blows off the worries of all those “pessimists,” kids? That’s right — you become GaveKal. You betray your principles, and you become a beggar living on a government handout. Maybe GaveKal should just refund everybody what they paid for that new-paradigm, “unfettered” capitalism-uber-alles sheaf, The End Is Not Nigh.

Speaking of, I received some numbers on GaveKal’s January performance. Now we all know that I promiscuously make this stuff up, so it has no relevance whatsoever to anything, but anyway, here’s what I heard:


Clicking on the Fund Names below will automatically open the latest
newsletter of the corresponding fund and will allow you to access all
the previous newsletters and research documents that are posted on our

GaveKal advises two funds that invest in Asian bonds, equities and currencies.

GaveKal Asian Absolute Return
Fund (USD)
Performance YTD
-10.96% -10.96%
GaveKal Asian Absolute Return
UCITS Fund (Euro)
Performance YTD
-11.88% -11.88%

In addition, GaveKal also advises a long only equity fund which
invests in Asia, Russia and Middle Eastern Equities.

GaveKal New World Fund (USD)
Performance YTD
-7.40% -7.40%

GaveKal also advises a fund which aims to identify and invest in the
world’s leading platform companies.

GaveKal Platform Company Fund (USD)
Performance YTD
-12.14% -12.14%

Yours Truly,

Louis-Vincent Gave

GaveKal Capital Limited
Suite 3903, Central Plaza
18 Harbour Road
Wan Chai, Hong Kong

Tel: +852 28698363
Fax: +852 28698131

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