Daily Digest

Daily Digest - April 1

Thursday, April 1, 2010, 9:45 AM
  • Pay of Hedge Fund Managers Roared Back Last Year
  • Why We're Broke
  • The Pain To Come
  • Greek Bank Governor Warns About Economy Shrinking Further
  • Bank of Greece: Economy To Contract 2% in 2010
  • Failed Banks And Failed Billions
  • Stock & Bond Returns Will Be Below Normal for Years: Gross
  • PIMCO Fears UK 'Debt Trap'
  • Bank Lobbyists Fought For Very Thing They're Now Trying To Kill, Says Elizabeth Warren
  • King World News: Andrew McGuire and Adrian Douglass
  • King World News: GATA 
  • Hard-Luck Stories Hit Home
  • Much Ado About Debt
  • U.K. Treasury Relases FOIA On Gordon Brown's 1998 Gold Sale, Catches Tony Blair Lying, Questions U.S. Treasury's Good Delivery Standards
  • Obama Administration Cops to Likelihood of Looming Global Oil Shortage


Pay of Hedge Fund Managers Roared Back Last Year (jdargis)

The Lazarus-like recovery of the nation’s big banks did not benefit just the bankers — it also created huge paydays for hedge fund managers, including a record $4 billion gain in 2009 for one bold investor who bet big on the financial sector.

Why We're Broke (mhoop)

Mayor Bloomberg showed a firm grasp of the obvious yesterday, responding to a Post exclusive detailing the $242,000-a-year pension just awarded to a retiring FDNY deputy commissioner. "The issue that we have is that the whole pension system is something that we cannot afford," Mike said.

The Pain To Come (mhoop)

As Britain prepares to go to the polls, its sick economy is uppermost in voters’ minds. With good reason. There are fundamental doubts that it can ever recover fully from a banking crisis and recession that laid Britain lower than many other rich countries. In the short term, the worry is whether a feeble recovery reliant on fiscal and monetary life-support can develop its own driving force. Looking ahead, there are fears that the strong, steady growth rate in the 15 years before the financial crisis is no longer Britain’s default mode. And casting a dark shadow over the next parliament are public finances that have veered wildly into deficit and will need to be hauled back harshly from the brink.

Greek Bank Governor Warns About Economy Shrinking Further (Dorrian)

The only way out of this crisis is through urgent drastic changes, decreases in the budget deficit and a turn to growth projects, he stressed, while presenting the bank's yearly monetary policy report to the parliament, which will on Monday evening hold another debate on the Greek Stability and Growth Program.

Bank of Greece: Economy To Contract 2% in 2010 (Dorrian)

n an annual report, the central bank approved of the government's austerity measures worth (EURO) 4.8 billion ($6.5 billion) aimed at controlling the high budget deficit, but said they would prolong an already deep recession.

Its forecast compares with the center-left government's prediction for a contraction of 1.2 to 1.7 percent this year, while the EU Commission projects a 2.25 percent contraction.

Failed Banks And Failed Billions (hucklejohn)

The 10-year Treasury note may well be telling us something and that is that higher rates are on the way. It certainly doesn’t auger well for any recovery. If credit spreads widen watch out. Such a development would mean the dollar would begin to retrace its recent gains. Dollar gains are over at 82 on the USDX. We await its correction.

Stock & Bond Returns Will Be Below Normal for Years: Gross (SolidSwede)

As part of the firm's forecast of a "new normal" in the slow-growth economy, Gross, co-CIO at the largest bond management firm in the world, said returns probably will be half of the normal 8 percent or so annualized profits to which investors have become accustomed.

PIMCO Fears UK 'Debt Trap' (SolidSwede)

The flood of British debt is likely to "lead to inflationary conditions and a depreciating currency", lowering the return on bonds. "If that view becomes consensus, then at some point the UK may fail to attain escape velocity from its debt trap," he wrote in his April monthly note.

Mr. Gross said the UK is not yet in crisis but gilts are sitting on a "bed of nitroglycerine" and must be handled delicately. Spreads on 10-year gilts have crept up to 14 basis points above those of Spain, itself in some difficulty.

Bank Lobbyists Fought For Very Thing They're Now Trying To Kill, Says Elizabeth Warren (SolidSwede)

"Banks or families?" Warren, a Harvard Law professor and chair of the TARP Congressional Oversight Panel, asks rhetorically in an op-ed in Politico. "For almost a year, the big banks and the American Bankers Association (ABA) have presented that choice to Congress. Lobbyists argue that meaningful consumer protection will jeopardize the safety and soundness of banks, telling lawmakers that they must decide between the two."

King World News: Andrew McGuire and Adrian Douglass (DickB)

Andrew is an independent metals trader turned whistleblower at the center of a storm for exposing what could be the largest fraud in history involving countries, banks and government leaders. Adrian Douglas Board of Director from GATA, the man who Andrew reached out to joins in this interview where they discuss a fraud so extraordinary and so unimaginable that it is the kind of thing that only happens in hollywood thrillers. They also discuss the CFTC sponsored meeting on metals which was an unmitigated disaster because it additionally exposed the fraud on a grander scale.

King World News: GATA (DickB)

In this interview with GATA we continue the saga after just having interviewed Andrew Maguire, the whistleblower out of London. This gives a short and long-term view down the rabbit hole through the eyes of 3 of the GATA board members. GATA was so heavily involved not only in breaking the news at the CFTC meeting about the the metals manipulation but also at the same time quite possibly uncovering the largest fraud in history.

Hard-Luck Stories Hit Home (Mark S.)

A state report notes that the profession with the worst prospects by far this recession is ... carpenter.

Much Ado About Debt (SolidSwede)

The United States suffers from not only a temporary imbalance, but also a deeper rot. Congressional Budget Office Director Doug Elmendorf summed it up this way: "The country faces a fundamental disconnect between the services the people expect the government to provide, particularly in the form of benefits for older Americans, and the tax revenues that people are willing to send to the government to finance those services." Whereas the natural trajectory of rich countries is to support greater services for the elderly and poor with higher tax levels, the United States increasingly "supports" greater services for the elderly and poor with lower effective tax rates and higher borrowing. That is what a looming deficit crisis sounds like.

UK Treasury Relases FOIA On Gordon Brown's 1998 Gold Sale, Catches Tony Blair Lying, Questions US Treasury's Good Delivery Standards (Davos)

As part of the FOIA, it becomes clear that Brown attempted at least 4 tried to persuade the BOE to proffer a joint proposal from the Treasury and the Bank Of England as pertains to English gold sales in the late 1998 period. And even as the FOIA submission is now making the round, there is still a critical redaction.


Obama Administration Cops to Likelihood of Looming Global Oil Shortage: PCI Requests Transparency of Energy Policy (Suzie G.)

While Sweetnam and the Obama Administration prefer to use the term “undulating plateau” to “peak,” the terms are nearly identical. Lauren Mayne, responsible for liquid fuel prospects at the Department of Energy notes: “Once maximum world oil production is reached, that level will be approximately maintained for several years thereafter, creating an undulating plateau. After this plateau period, production will experience a decline.”

Please send article submissions to: [email protected]


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Re: Daily Digest - April 1

"SHANGHAI: China should be cautious in buying or selling huge amounts of US Treasury bonds due to the inherent risks they pose, Cheng Siwei, an influential economist, said on Wednesday, suggesting that the suitable ceiling for the nation's foreign exchange reserves is $800 billion.

"The country should diversify its currency portfolio for foreign exchange reserves and reduce the share of US dollar-dominated assets for risk control purposes," said Cheng, the former vice-chairman of the Standing Committee of the National People's Congress, in a speech at Fudan University."

"(Reuters) - PIMCO sees Europe's action on Greece as ineffective in fixing the country's problems, while Britain's sovereign debt rating could be downgraded within a year, a top executive of the world's largest bond fund said.

Scott Mather, head of global portfolio management at Pacific Investment Management Co (PIMCO), told a briefing in Taipei on Thursday that the company was underweighting UK, U.S. and pan-European 10-year sovereign bonds.

"Miracles are needed in the next six months in order to keep economic growth in the developed world," Mather said."

"The deficit is expected to rise to about $1.56 trillion dollars, or about 10.5 percent of gross domestic product, this year and some analysts expressed concern that it could lead to a downgrade of the US debt's AAA rating.

"Right now we need to make sure that we are doing everything we can to get this economy growing again, and creating jobs," Geithner said.

"If all you focus on right now is trying to cut the deficit too quickly right now, that will imperil growth, we'll have a weaker economy, and people will be living with higher unemployment for a longer period of time. We're not going to let that happen," he added.

The economy will start creating jobs as it is growing, but it will take a long time to bring down unemployment, Geithner said.

"The unemployment rate is still terribly high, and it's going to stay unacceptably high for a long period of time," he said."

"The U.S. will also offer $21 billion in 10-year debt, $13 billion in 30-year bonds and $8.2 billion in 10-year Treasury Inflation Protected Securities, the dealers forecast. The auctions will take place on four consecutive days beginning April 5. The Treasury will announce the sizes at 11 a.m. tomorrow in Washington.

“People will be concerned about the way we took down the last round of supply,” said Brian Edmonds, head of interest rates at Cantor Fitzgerald LP in New York, one of the primary dealers, which are required to bid at Treasury auctions. “People are thinking that we are now showing a crack in the way we take down supply.”

Treasury 10-year notes fell the most since December last week as lower-than-average demand at each of the government’s 2-, 5- and 7-year note auctions raised concern that investor interest is waning as the budget deficit climbs to a record."

"The state's delay in paying $2.1 billion in school aid was not the thing that was most worrisome to local school officials Wednesday.

What concerned them far more was the gnawing fear that the state's financial crisis is so severe that the money will never be paid, or that the already-budgeted amounts will be substantially reduced.

Those fears were fueled by not only the magnitude of the state's budget crisis but also Gov. David A. Paterson's statement that the money will be paid by June 1 "assuming sufficient cash is available." Schools had been scheduled to receive the aid Wednesday.

There is precedent for the loss of anticipated aid from Albany.

A state bailout of New York City's Metropolitan Transportation Authority last year was supposed to be followed by increased funding to repair upstate roads and bridges. But the upstate aid never materialized."

"BERLIN (Reuters) - Germany's total public sector budget deficit hit a record 105.5 billion euros (93.9 billion pounds) last year, the Federal Statistics Office said on Wednesday. The deficit, combining a funding shortfall at federal, state and local government levels -- as well as the balance of the social security systems -- broke a previous record of 74.1 billion euros from 2003, the preliminary Office figures showed.

In 2008, the deficit was 5.2 billion euros, it said.

Germany's economy contracted by some five percent in 2009 -- its worst postwar slump -- leading to a sharp drop in tax revenues. The state also spent billions of euros propping up the labour market and pumping money into struggling banks.

Economists have forecast the 2010 deficit could exceed last year's. The Kiel-based IfW economic think tank forecast the 2010 shortfall could reach some 130 billion euros."

"Planned layoffs rose sharply in March, largely due to reduction of government payrolls, staffing consultancy company Challenger, Gray & Christmas reported Thursday.

The number of job cuts planned rose by 67,611, up 61 percent from February.

But the number of planned layoffs remained well below the pace of the previous year, down 55 percent from March 2009.

Planned government cuts rose 75 percent last month to 50,604, with the US Postal Service planning to cut its payroll by 30,000 workers. The postal service is not permitted to lay off employees so will achieve the cuts by retirement and attrition, the report said."

"The nation’s two biggest public pension funds, CalPERS and CalSTRS, were big investors in debt-laden private equity during the boom years. Now some worry that a wave of debt coming due in two years could limit borrowing needed for refinancing.

A page-one New York Times story this month said massive corporate and federal government debts are coming due at the same time, causing worry that “some companies will have trouble getting new loans, spurring defaults and a wave of bankruptcies.”"

..............8A) S&P lowers CalSTRS' long-term credit rating

"CalSTRS’ long-term issuer credit rating was lowered by Standard & Poor’s to AA- from AA, the rating agency said in a statement.

The decline is directly related to S&P’s action on Feb. 3 to downgrade California general obligation bonds to A- from A, David Hitchcock, S&P credit analyst, said in the statement. S&P’s criteria for rating a public pension fund limits its rating to no more than three notches higher than the general obligation bond rating of its government sponsor."

"NEW YORK, March 31 (Reuters) - Two years after the near collapse of Bear Stearns, the New York Federal Reserve is finally revealing the $30 billion worth of ailing assets it took on as part of a hastily arranged rescue of the investment bank.

The New York Fed on Wednesday released a complete list of all the commercial and residential real assets it assumed from Bear as part of the deal that enabled JPMorgan Chase (JPM.N) to acquire Bear for $10 a share.

The eclectic portfolio includes everything from collateralized debt obligations to loans to dozens of Hilton Hotels and a half-empty mall in Oklahoma City. Also in the portfolio are hundreds of credit default swaps and other derivatives, which Bear apparently had taken out to hedge its exposure to some of the other assets going bad.

The New York Fed lists the notional, or face value, of the portfolio at $74.8 billion, which is some indication of just how distressed the assets were when the New York Fed set-up Maiden Lane in March 2008."

"The aggregate pension fund deficit shown in company accounts for the 200 largest UK privately sponsored pension schemes increased from £36bn in March 2009 to £93bn at the end of March 2010."

Scroll down to see the melt value of other coins.


  • Other headlines and stories:

11.4 million people are claiming unemployment benefits (Scroll to the bottom)

One third of youth in Italy are jobless

Watch out for sovereign black holes in the credit universe

Global sovereign debt issuance at all-time high

Poland May Sell Record Amount of Bonds in 2nd Quarter

Ambac Assurance will cause 32 CDO defaults - Fitch ($2.9 billion)

Cash-Poor Cities Take On Unions

Illinois Markets $250 Million Tax-Exempts After Fitch Downgrade

SF to test extending parking meter hours

State workers receive 4% pay raises today, adding $400M to NY payroll

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Re: Daily Digest - April 1


GATA will sell 191 tonnes of gold on IMF's terms but $100/oz cheaper

Submitted by cpowell on Thu, 2010-04-01 04:08. Section: Daily Dispatches

12:13a ET Thursday, April 1, 2010

Dear Friend of GATA and Gold:

The Gold Anti-Trust Action Committee today offered to sell 191.3 tonnes of gold, tonnage equal to that remaining to be sold by the International Monetary Fund, on the same terms offered by the IMF except $100 per ounce below the London PM gold fix price on the day prior to purchase.

GATA Chairman Bill Murphy said his organization could provide a better price for the metal because it recently had received a gift of expensive hundred-year-old certificate paper originally intended for use as Chinese railroad bonds and because, in selling the gold, the organization, unlike the IMF, would not employ a large staff of publicists to tout the sale to news media throughout the world every day for months in advance.

Except for the discounted price, GATA's gold sale terms will match the IMF's:

-- After selling the gold, GATA will present the buyers with certificates of ownership while continuing to store the gold using vaults in the United States, Britain, France, or India whose locations are known only to GATA.

-- The gold will be audited by auditors chosen by GATA whose reports will be available only to GATA.

-- The gold may be resold through GATA as long as it does not leave GATA's vaults.

-- GATA will use some of the gold sale proceeds to assist developing or financially troubled nations but exactly how much is used for that purpose and what's done with the remainder will be nobody's business.

-- GATA's sales will be structured to minimize any effect on the world gold market and to this end they will be announced only this once.

-- For an additional $250 GATA will have a buyer's gold certificate tastefully framed.

-- Buyers of gold in the amount of $100 million or more will be invited to GATA's annual Christmas party.

Purchasers should send certified checks payable to GATA in care of your secretary/treasurer at the address below.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee
7 Villa Louisa Road
Manchester, Connecticut 06043-7541



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Re: Daily Digest - April 1

These people have put together an interesting table:

Total Wall Street Bailout Cost



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Re: Daily Digest - April 1


China's Global Shopping Spree

Is the World’s Future Resource Map Tilting East?

by Michael T. Klare

Think of it as a tale of two countries.  When it comes to procuring the resources that make industrial societies run, China is now the shopaholic of planet Earth, while the United States is staying at home.

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Re: Daily Digest - April 1

Diane Rehm interviews Simon Johnson about his book 13 Bankers


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Re: Daily Digest - April 1

I don't understand this GATA announcement. Have they bought the IMF gold, or brokering it, and why all the strange provisions?

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Re: Daily Digest - April 1

Or better, is this an April Fool's announcement?

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Ken C
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Re: Daily Digest - April 1
John99 wrote:

I don't understand this GATA announcement. Have they bought the IMF gold, or brokering it, and why all the strange provisions?


this is obviously a "Tougue in check" parody of the "anouncement" by the IMF of the gold sale.

I too would sell gold to anyone that would pay me in advance and only get a certificate for the gold. In addition, no way to ever verify if the gold ever really existed and no way to find out where your gold is if it did exist.


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Re: Daily Digest - April 1

Greens, Democrats slam Obama's switch on offshore oil drilling
April 2, 2010


WASHINGTON: Barack Obama's about-face on offshore oil exploration has
been criticised by environmentalists and congressional representatives
who argue that his policy will do little to secure America's energy

But the move was calculated to win political support for comprehensive
climate legislation that will aim to reduce greenhouse gas emissions
while mandating a switch to renewable energy.

''Drilling alone can't come close to meeting our long-term energy needs,
and for the sake of our planet and our energy independence, we need to
begin the transition to cleaner fuels now,'' the President said at the
official policy launch on Wednesday.

''I know that we can come together to pass comprehensive energy and
climate legislation that is going to foster new energy, new industries,
create millions of new jobs, protect our planet, and help us become more
energy independent.''

But green groups and some Democrats said plans to expand drilling for
oil along vast lengths of the North American coastline threatened marine
life and coastal environs, and sent the wrong signal in the face of
climate change.

Republicans said the concession was too cautious. They said the
additional exploration would do little to reduce US dependence on
foreign oil.

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No Overt Capital Controls…Yet

Here is a good info on the new capital controls questions:

USA: No Overt Capital Controls…Yet    2010 by Mark Nestmann :

...So, the HIRE Act isn't about capital controls, at least not directly.  It's about enforcing IRS rules.  You can still have money offshore if you report it and pay tax on it.  The challenge will be...


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Re: Daily Digest - April 1

Thank you for the Elizabeth Warren Op Ed. I found it clear and could understand. I support a consumer-dedicated agency. For over a year and a half I have followed her name and views given with gusto in support of families and in particular the middle-class that does draft-horse support of the economy.

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