Daily Digest

Daily Digest - April 25

Sunday, April 25, 2010, 9:46 AM
  • William K. Black On Lehman Bros.
  • Goldman 'Bet Against Securities It Sold To Clients'
  • Eager to Settle Into China’s Embrace
  • China’s Home Prices to Fall 20% This Year, BNP Says
  • U.S. Coast Guard: Oil Leaking From Sunken Rig
  • Pakistan's Energy Crisis
  • U.S. Food Inflation Spiraling Out of Control

Economy

William K. Black On Lehman Bros. (pinecarr)

William K. Black's eye-popping opening statement at House FinServ hearing on Lehman Bros. failure.

!

Goldman 'Bet Against Securities It Sold To Clients' (pinecarr)

Senator Carl Levin, the chairman of the Senate permanent Subcommittee on Investigations, said: "Investment banks such as Goldman Sachs were not simply market-makers, they were self-interested promoters of risky and complicated financial schemes that helped trigger the crisis. They bundled toxic mortgages into complex financial instruments, got the credit rating agencies to label them as AAA securities, and sold them to investors, magnifying and spreading risk throughout the financial system, and all too often betting against the instruments they sold and profiting at the expense of their clients."

Eager to Settle Into China’s Embrace (Nickbert)

China has multimillion-dollar deals all over West Africa, in countries with every shade of authoritarian leaning, according to a 2009 atlas of Africa by Stephen Smith, an Africa specialist. But its interests here are among the most significant, putting Niger easily in the top 10 African countries in terms of Chinese investment, said Deborah Brautigam of American University in Washington, a specialist in China-Africa relations.

China’s Home Prices to Fall 20% This Year, BNP Says (Nickbert)

China’s home prices may fall by as much as 20 percent in the second half, as government measures to curb credit, increase land supply and a potential property holding tax cool speculation, according to BNP Paribas.

Energy

U.S. Coast Guard: Oil Leaking From Sunken Rig (Nickbert)

The Coast Guard estimated that up to 1,000 of barrels of oil, or 42,000 gallons (158,987 liters) were spewing each day from a riser and a drill pipe, prompting further concerns of damage to Louisiana's fragile ecosystem, already stressed by hurricanes and coastal erosion.

Pakistan's Energy Crisis (Nickbert)

Pakistan's electricity supply problems are putting great pressure on federal and provincial authorities following a series of public protests. Yesterday, government offices and banks were shut across the country in order to conserve electricity. The government has decided that it is better to observe a two-day weekend, thereby reducing the burden on the power supply. Additionally, the government has ordered shops to shut earlier, despite the threat of protests from shopkeepers who in the past have angrily resisted such measures.

Environment

U.S. Food Inflation Spiraling Out of Control (pinecarr)

Some of the startling food price increases on a year-over-year basis include, fresh and dry vegetables up 56.1%, fresh fruits and melons up 28.8%, eggs for fresh use up 33.6%, pork up 19.1%, beef and veal up 10.7% and dairy products up 9.7%. On October 30th, 2009, NIA predicted that inflation would appear next in food and agriculture, but we never anticipated that it would spiral so far out of control this quickly.

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9 Comments

printfaster's picture
printfaster
Status: Bronze Member (Offline)
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Posts: 52
Re: Daily Digest - April 25

Why does "profiting at the expense of their clients."  sound like any form of commission based sales?  Even in selling houses, if the price of the house was such a great deal, you would expect the real estate agent to buy it instead of the buyer.

When I think of profiting at the expense of their clients, I think of brokers charging for margin, brokers offering stock they hold in customer accounts for shorting, and IPO and secondary stock offerings where they hold a lot of stock that they need to get rid of.

Sorry but I cannot feel sorry for any of Goldman's stupid customers who bought this junk, unless it is the true widows and orphans.

 

Doug's picture
Doug
Status: Diamond Member (Offline)
Joined: Oct 1 2008
Posts: 3125
Re: Daily Digest - April 25

William Black spells our his position on Bill Moyers' Journal.  He's articulate and seemingly right on the money, so to speak:

http://www.pbs.org/moyers/journal/04232010/watch.html

Doug

DavidC's picture
DavidC
Status: Silver Member (Offline)
Joined: Sep 29 2008
Posts: 243
Re: Daily Digest - April 25

Doug,

Thanks for that link to the Bill Moyer/William Black interview. Black has been one of the most eloquent and clear voices on what's been going on with the ongoing crisis.

DavidC

Farmer Brown's picture
Farmer Brown
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Posts: 1503
Portugal CDS rates getting ancy

Cannot get the chart to copy.  Basically looks a lot like Greece when its CDS rates started frothing.

http://www.zerohedge.com/article/portugal-cds-record-bond-markets-refuse-undergo-ge-sponsored-lobotomy

Farmer Brown's picture
Farmer Brown
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Posts: 1503
Housing Inventory to Represent 103 Months Supply

http://www.zerohedge.com/article/foreclosure-inventory-103-months

As of March, banks had an inventory of about 1.1 million foreclosed homes, up 20% from a year earlier, according to estimates from LPS Applied Analytics. Another 4.8 million mortgage holders were at least 60 days behind on their payments or in the foreclosure process, meaning their homes were well on their way to the inventory pile. That “shadow inventory” was up 30% from a year earlier.

 

Based on the rate at which banks have been selling those foreclosed homes over the past few months, all that inventory, real and shadow, would take 103 months to unload. That’s nearly nine years.

wooohoooo- time to become a Realtor, Mom!

Farmer Brown's picture
Farmer Brown
Status: Martenson Brigade Member (Offline)
Joined: Nov 23 2008
Posts: 1503
Re: Daily Digest - April 25

The latest play-by-play action on the Greek (and as it turns out, now Portugal) situation from our watchdogs at Zerohedge:

http://www.zerohedge.com/article/greek-hdat-withdraws-official-bond-price-disclosure-greek-spreads-650-greek-stock-market-dow

The Greek bond holiday is here. Greece's bond pricing administration HDAT has withdrawn bond prices as spreads have hit 650 bps. Greece acknowledges it is game over as 10 Years are at 10%, and 3 Years at 13%. Stock liquidation are rampant as Greeks are on the verge of panic: the ASE is down 3% and investors are now widely expecting a 10% correction to below 1,700 on the ASE. And Portugal is now officially part of the party Portuguese - CDS just hit 310 bps.In the meantime Germany is starting to feel the burn - German FinMin Schaeuble has stated he is determined to defend the stability of the euro by asking that Greek talks with IMF conclude by weekend. He also said that he anticipates that Euro zone and IMF want to free up Greek aid simultaneously and does not favour idea of granting Greece moratorium on debt. Alas, the time for speeches is over. Making matters worse, Germany’s SPD says will not back accelerated parliamentary process to approve Greek aid, rendering all rhetoric useless. Lastly, Angela Merkel will make a statement on Greece at 13:00 GMT. We can't wait to hear the powerlessness in her voice.

Farmer Brown's picture
Farmer Brown
Status: Martenson Brigade Member (Offline)
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Posts: 1503
More on Greece's slippery bond yields

From Calculated Risk.  I think this is the week.  Multiple headlines, inverted yield curve, plus signs of contagion spreading (to Portugal):  stick a fork in it.

http://www.calculatedriskblog.com/2010/04/greece-10-year-debt-yield-spread-widens.html

Monday, April 26, 2010

Greece: 10-Year debt yield spread widens to new record

by CalculatedRisk on 4/26/2010 08:36:00 AM

From The Times: Pressure mounts on Greek Government as cost of borrowing rises above 9 per cent

The bond markets hammered Greek government debt this morning, raising the cost of borrowing for the eurozone nation above 9 per cent.

From the WSJ: Cost of Insuring Greek Debt Soars

[T]he gap in yields between 10-year debt from Greece and Germany—the euro-zone's most solid borrower—swinging out to a new record of 6.11 percentage points. That yield spread stood at 5.63 percentage points after Greece asked to activate the aid package Friday.

On May 19th, €8.5bn of Greece's bonds mature - so there is very little time left to work out the details of a loan package.

robie robinson's picture
robie robinson
Status: Diamond Member (Offline)
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Posts: 1148
Re: More on Greece's slippery bond yields

When will this help me with the price of my favorite greek olive oil.

Just a bit-o-humour in these times

robie

strabes's picture
strabes
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Posts: 1032
Re: Daily Digest - April 25
printfaster wrote:

Why does "profiting at the expense of their clients."  sound like any form of commission based sales?

Because you're not digging into the facts.

Quote:

Even in selling houses, if the price of the house was such a great deal, you would expect the real estate agent to buy it instead of the buyer.

The analogy isn't accurate.  What Goldman did here is the equivalent of a realtor selling a house that they knew was eaten away by termites and only had 6 months before it collapsed.  AND on top of that taking out massive insurance policies against the house that would pay the realtor for the collapse once it happened rather than paying the new owner of the dirt pile.

Of course that would be illegal for a realtor...they are fair market players because any number of legal jurisdictions can hold them accountable.  Not so for GS.  They're above the law since only the feds have jurisdiction and GS' own people run those agencies. 

And when you say that a realtor would buy the house if it was such a great deal, you're forgetting that the realtor would need capital.  Realtors are limited to buying deals that they can finance, so again they are to fair market players.  Realtors are not Goldman Sachs, which can buy up everything it wants because it knows the Fed will infinitely monetize whatever it does because it's "too big to fail"...not a free market player engaging in free market transactions at all.

Quote:

When I think of profiting at the expense of their clients, I think of brokers charging for margin, brokers offering stock they hold in customer accounts for shorting, and IPO and secondary stock offerings where they hold a lot of stock that they need to get rid of.

You're thinking of legal market-making activities of powerless people called brokers that have a crapload of regulations and oversight (not remotely analogous to the power and insider knowledge of a tier 1 gambling institution like GS).  What GS did was like if your broker sold you on margin all the stock in his wife's business that he knew was about to go bankrupt. 

Quote:

Sorry but I cannot feel sorry for any of Goldman's stupid customers who bought this junk, unless it is the true widows and orphans.

I don't think you realize the scope of what's happening.  You're including yourself and everyone in the world who has a bank account as a "stupid customer" because those worthless securities were packaged up and forced on the rest of the banking industry's balance sheet as assets, i.e. it's what backs your money (we need to remember that GS, Chase, etc are a small cartel of institutions that control all money in the US).  So only if you have no bank accounts and only have gold are you excluded from the soon-to-be victims of this.  

Also we need to keep in mind that what's really going on has nothing to do with screwing a few individuals but GS is playing an important part in an overall strategy to restructure the US and the rest of the world under global currency/banking control.  So I wonder once that system is setup and the US government has lost even more sovereignty if you'll feel sorry that the American republic was killed. 

 

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