Daily Digest

Daily Digest - April 27

Tuesday, April 27, 2010, 9:45 AM
  • More American Expatriates Give Up Citizenship
  • Venezuela Considers Nationalization Of Gold Mines
  • Somali Pirates Say They Are Subsidiary of Goldman Sachs (Humor)
  • Investors Were Not Duped, Goldman to Tell Senators
  • Robots Work To Stop Leak Of Oil in Gulf

Economy

More American Expatriates Give Up Citizenship (Nickbert)

Amid mounting frustration over taxation and banking problems, small but growing numbers of overseas Americans are taking the weighty step of renouncing their citizenship.

Venezuela Considers Nationalization Of Gold Mines (Nickbert)

Venezuelan President Hugo Chavez is reportedly considering the nationalization of gold-mine concessions, a move that could expand government control of another business sector.

Somali Pirates Say They Are Subsidiary of Goldman Sachs (Humor) (Nickbert)

In the aftermath of the shocking revelations, government prosecutors were scrambling to see if they still had a case against the Somali pirates, who would now be treated as bankers in the eyes of the law. “There are lots of laws that could bring these guys down if they were, in fact, pirates,” one government source said. “But if they’re bankers, our hands are tied."

Investors Were Not Duped, Goldman to Tell Senators (jdargis)

Senate investigators are building on a case initiated last week by the Securities and Exchange Commission, which has accused Goldman of defrauding investors in a transaction known as Abacus 2007-AC1. The subcommittee takes the S.E.C. case a step further by claiming that the bank had not devised just one of the deals, but a series meant to profit from the collapse of the home mortgage markets. The subcommittee’s claims suggested for the first time that the investigation into the bank extended beyond the single transaction.

Energy

Robots Work To Stop Leak Of Oil in Gulf (jdargis)

Remote-controlled robots operating 5,000 feet under the ocean’s surface were more than a full day into efforts to seal off the oil well, which has been belching crude through leaks in a pipeline at the rate of 42,000 gallons a day. The leaks were found on Saturday, days after an oil rig to which the pipeline was attached exploded, caught on fire and sank in the gulf about 50 miles from the Louisiana coast.

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11 Comments

saxplayer00o1's picture
saxplayer00o1
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Re: Daily Digest - April 27

"April 27 (Bloomberg) -- The yen and the dollar strengthened as stocks fell on concern euro-region governments won’t approve aid for Greece quickly enough to help it avoid default.

The Japanese currency rose against its 16 most-traded peers, with the dollar climbing versus all but the yen. Greek transport workers strike today, while German Chancellor Angela Merkel said yesterday she won’t release funds for Greece until the nation has a “sustainable” plan to reduce its deficit."

(Note: The text of the above article was changed from earlier today, so use the link to see the changes. Google still shows the wording from the earlier version)

.................1A) Greece's Banks May Run Out of ECB Collateral, Citigroup Says

"April 27 (Bloomberg) -- Greece's banks may run out of the collateral used to get funding from the European Central Bank as Greek sovereign debt falls in value, according to Citigroup Inc. Chief Economist Willem Buiter.

Greek banks probably get most of their short-term funding from the ECB, using mainly Greek sovereign debt as collateral, Buiter said in a note yesterday. When the value of the state debt falls in the secondary market, the decline in the mark-to- market value of the collateral may trigger margin calls -- or demands for more collateral, Buiter said.

"Eventually the Greek banks could run out of additional collateral acceptable to the ECB/Eurosystem," Citigroup said. "Their funding needs are likely to be exacerbated by a withdrawal of deposits that could become a run.""

.....................1B) Europe May Need 150 Billion Euros For Greece, Goldman Sachs Says

"April 27 (Bloomberg) -- The European Union and the International Monetary Fund may have to lend Greece 150 billion euros ($201 billion) over three years to keep the nation from the bond markets, Goldman Sachs Group Inc. said.

The EU and the IMF will need to inject more than three times the existing $60 billion aid package to give Greece the time to enact economic reform including reducing nominal wages by as much as 20 percent, Erik Nielsen, chief European economist with Goldman Sachs wrote in a note to clients today. Even a 75 billion-euro, 18-month lending program implies “important risks and could lead to debt restructuring,” he wrote."

..................1C) Credit Swaps at Record High as Greek Debt Crisis Infects Europe (2 year bonds at 15%)

"Contracts tied to Greek government bonds climbed 14 basis points to 724, Portugal rose 11 basis points to 322 and Spain increased 7 basis points to 195, according to CMA DataVision. Yields on Greek two-year notes surged above 15 percent, the highest since at least 1998, on concern bondholders will be forced to take losses as the country grapples with the highest debt ratios in the European Union."

..................1D) Greek transport on strike as austerity anger grows

"LONDON (Dow Jones)--The euro has taken a fresh knock lower after a barely covered auction of short-term Italian debt reminded investors about financial stresses in euro-zone states other than Greece.

The long-running Greek debt fiasco already has the euro under long-term pressure, with bouts of uncertainty over the workings of an international financial rescue package for the embattled country frequently batting the European currency lower.

A brief pause in that stress left the euro reasonably well supported at the start of the day. Now, though, news that there was just enough demand to cover Italy's auction of six-month Treasury bills has scratched nerves once again, helping to push the euro 0.3% lower against the dollar in a sudden move, to leave it approaching $1.33. "

"Portugal is among countries that are “conspicuously vulnerable” and may need a bailout, said Kenneth Rogoff, a professor at Harvard University in Cambridge, Massachusetts, in a telephone interview.

Credit default swaps on Portuguese debt, which insure against default, reached 315.5 basis points today. 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. An increase in swaps signals deterioration in perceptions of credit quality."

..................3A) Portuguese traffic crippled by strike

"Staff from 16 public transport companies in Portugal walked out today in protest at the government's moves to cut a public deficit, bringing traffic across Portugal's biggest cities to a standstill.

Urban bus companies' employees went on strike Tuesday, joining staff of the Portuguese rail company who had begun a three-day walk out on Monday in opposition to the Socialist government's plans to freeze civil servants' pay.

In Lisbon, even river transport was cut off at at rush hour, adding further strain on the roads as commuters turned to their cars to get to work, local media reported."

"Thousands of French farmers are protesting in Paris today to call for more financial aid to help them through the economic downturn.

Falling prices and rising costs mean many are struggling to make ends meet. They want President Nicolas Sarkozy to intervene as they say they could go out of business.

One protesting farmer, Bruno Haas, said: “Our costs are exploding even though prices are falling. Our revenue is being absolutely crippled and we t the government to do something to help us in this difficult time.”

Yet direct aid looks unlikely. The French public deficit currently stands at a record 7.5 percent, twice the amount allowed under EU rules."

"Bankruptcy is not a bad word – insolvency is! Bankruptcy is a legal proceeding where the court restructures the financial condition of a debtor – balancing its income and expenditures so that it can become successful. Insolvency is the financial condition of a debtor who cannot pay its debts.

The city of Los Angeles is insolvent. It cannot pay its debts on time or, for that matter, at any time without drawing down on its reserves. The next days, weeks, months and years will see a dramatic increase in the size of its insolvency. Fire and police pension payments will increase approximately $1 billion within three years. Even this assumes an average of 8 percent return on investments after 10 years of an average 4 percent return."

"April 27 (Bloomberg) -- Harrisburg, Pennsylvania, which has missed $6 million in debt payments since Jan. 1, should consider seeking Chapter 9 bankruptcy protection, City Controller Dan Miller told a three-hour special committee hearing.

Miller, the first of four people to testify last night in an “informational session” on insolvency convened by Gloria Martin-Roberts, council president, said bankruptcy may offer Harrisburg relief from $68 million in debt-service payments this year tied to a waste-to-energy incinerator project. Martin- Roberts opposes a bankruptcy filing.

Harrisburg, the capital of Pennsylvania, the sixth-most populous U.S. state, has guaranteed payments on $282 million in bonds on the incinerator, run by the Harrisburg Authority. The payments on the bonds and on a working-capital loan this year add up to four times the amount the city collects in property taxes each year, budget documents show."

  • Other news stories and headlines:

Inflation Is ‘Big Worry’ for India, Subbarao Says

Strategists warn of sovereign debt bubble

Philippine Budget Gap Widens to Biggest in 16 Years

Brazil Rates Set to Surge 2.25 Points in Trading on Inflation

........................Ukraine Parliament Mayhem (27 April 2010) (Video....egg fight)

britinbe's picture
britinbe
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Re: Daily Digest - April 27

all the news about PIIGS............keeping on the animal theme, I wonder when the BAs (read the Brits and the Americians) will follow....

britinbe's picture
britinbe
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Re: Daily Digest - April 27

Interesting!  From the asian version of CNBC

JAG's picture
JAG
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Hugh Hendry: Japan To Go Nuclear?, Hedge Fund Managers Are Heros

In an interview with Investment Week, Hugh Hendry states that the country most likely to hyperinflate could be Japan:

So, you would put RPI in five years time at 15%?
If all of the things I say come to pass  I anticipate having a lot of inflationary traits. But some of the smartest minds in the marketplace have gone for logic rather than irony… what I am saying is you have to respect policy makers. They are wise, educated, hard working, and diligent. None of them wants to be the person who goes down in history as being the architect of hyper inflation. They do not want that. To get them to do it, to go nuclear, you have to press them to the edge and I think the place closest to the edge is Japan.

Japan? Are the risks of hyper-inflation really that great in an economy rocked by deflation?
Japan features prominently in a lot of the positions we are adopting today. Japan will of course reject the notion of overseas finance and therefore likewise could pursue fiscal austerity.

In that environment you would find Japan could print -5%, -6% nominal GDP very, very quickly. In that environment there is a paradox – the yen would appreciate, which runs very counter to most people’s logic. So I think you could have a coincidence of -5%, -6% Japanese GDP, you could have dollar/yen in the low 70s if not in the 60s. That would be an environment in which they would go nuclear.

 

Also, Hendry just posted this article in the Telegraph,

We Hedge Fund Managers Are On Your Side

It's not that hedge fund managers are bitter and seek to wreak havoc. It's just that we believe that recurring and periodic recessions reveal the economy's winners and losers. And through our endeavours, hedge funds attempt to discover the identity and inadequacies of the poor businesses. During hard times, such businesses typically go bust, allowing us to make an investment profit by betting on that eventuality, and ensuring that successful and prudently managed businesses prosper.

Or rather that was how it was supposed to work. But our political leaders have gone to considerable cost to avert this normal business cycle.

Fearing that the huge scale of reckless bets within the banking system threatened another depression, our politicians have used public funds to bail out the economy's losers. And in doing so they run the danger of creating a plutocracy: a society ruled by the wealthy. Consider that fact that in Latvia school teachers have had to take a 35 per cent pay cut so that the Swedish banks who funded the real-estate bubble are repaid their imprudent mortgages.

We need to stop this socialisation of risk taking: heads I win, tails you lose. Consider the American government's enormous bail out of the failed insurer, AIG. According to the world's largest bond fund manager, Bill Gross, it is perfectly acceptable for the taxpayer to subsidise his returns. As he explained it to the investment magazine Barons: "All I'm saying is the government would lose almost $50 billion if it decides AIG no longer is worth supporting. It is a game of chicken. You either call the government's bluff or you don't."

I would recommend a different course of action. It is the same one recommended in 1930 by then US Treasury Secretary Andrew Mellon. I would call the bankers' bluff and seek to purge the rottenness out of the system. All of us will work harder, prices will adjust, and enterprising people will flourish. Of course, this is a minority view. Instead, those in power would rather use the subterfuge of inflation to hide the enormous public subsidy.

The politicians' problem is that free and independent capital markets tend to be anti-inflationary. As we have seen, attempts at quantitative easing immediately depress the value of existing government bonds in addition to the value of sterling. And then you have the problem presented by my little industry. But we are intelligent, well-funded and willing to vociferously challenge public decisions. Most importantly, we are on your side.

Love him or hate him, Hendry is consistently the smart money.

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Dorrian
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Re: Daily Digest - April 27

Stock markets tumble as Greek debt is cut to junk, Portugal downgraded

Standard & Poor's cut the credit rating on Portugal two notches to A-. Minutes later it slashed Greece's credit rating to junk, the first time it has happened to a member nation of the euro.

This will cut Greece from any new credits from the money market, so you can consider it "bankrupt" if the Eurozone doesn't act quickly.
This week will be an interesting week, especially here in Germany.

pinecarr's picture
pinecarr
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Re: Daily Digest - April 27

Here's some more tinder for the Goldman fire...

"Ilene Richman sues Goldman for failing to disclose SEC notice"

http://www.theaustralian.com.au/business/news/ilene-richman-sues-goldman-for-failing-to-disclose-sec-notice/story-e6frg90x-1225858854503

"A GOLDMAN Sachs shareholder filed a lawsuit against the bank today, accusing it of failing to disclose a Securities and Exchange Commission probe.

The lawsuit, filed in federal court in Manhattan, asks for class-action status on behalf of other Goldman shareholders.

It is the third known case to be filed against Goldman Sachs since the SEC filed civil charges against the bank on April 16. Two other shareholder lawsuits were filed last Friday in New York Supreme Court in Manhattan.

printfaster's picture
printfaster
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Re: Daily Digest - April 27

On Venezuela seizing the gold mines.

What Chavez ought to do is go into the prisons and authorize robbers and burglars to steal whatever they can find for the government in return for their releaseFrown.  He should post police at every street corner and anyone passing by heading for a store or market should simply be held up for whatever cash that they have in their pockets.  And for anyone leaving a store, the police should confiscate all the goods that were bought.  All cars should be confiscated and resold overseas.

Venezuela is headed to the pits, and we are chasing them as fast as we can.

 

Damnthematrix's picture
Damnthematrix
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Global Solar-Panel Demand May Double on Above-Market Rates

http://www.bloomberg.com/apps/news?pid=20602099&sid=aW1qaLgVgtrQ

Global Solar-Panel Demand May Double on Above-Market Rates

By Jeremy van Loon

April 26 (Bloomberg) -- Global demand for solar panels may double this year as Germany and other European countries offer guaranteed, above-market rates for the power produced.

Solar-panel installations will probably rise to between 11.5 gigawatts and 14.8 gigawatts this year from 7.3 gigawatts in 2009, Bloomberg New Energy Finance said in its photovoltaic industry outlook.

State support in most European countries drives investment in photovoltaic equipment, NEF said. In Italy, the prices paid for solar power are as high as 43 euro cents (57 U.S. cents) for each kilowatt-hour generated. That’s about six times the wholesale rate earned by fossil-fuel-burning plants.

Operators of solar power stations in France, the U.K. and the Czech Republic are paid similar rates. Spain and Germany, the biggest solar equipment market, are reducing rates.


DK: 14.8 GW for 5.5 hours /day for 365 days / year = 29.7 TW.h

which is 0.15% of world electricity generation in 2008 (BP 2009).

At AU$4.05 / Wp for 185 W Solar E on special at http://www.solaronline.com.au/solar-panels

14.8 GW would cost AU$60 billion plus inverters, meters, transport, fitting.

and $40 trillion to replace all existing electricity.

Damnthematrix's picture
Damnthematrix
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Re: Daily Digest - April 27

<http://www.nytimes.com/2010/04/27/world/asia/27lahore.html>

Pakistanis Living on Brink, and Too Often in the Dark

By SABRINA TAVERNISE
Published: April 26, 2010

LAHORE, Pakistan — The Taliban may be plotting bombings, and the economy is on the brink. But these days, the single biggest woe tormenting Pakistanis is as basic as an electric light bulb.

Pakistan is in the throes of an energy crisis, with Pakistanis now enduring about 12 hours of power cuts a day, a grueling schedule that is melting ice, stopping fans and enraging an already exhausted populace just as the blast furnace of summer gets started.

In an effort to stem that frustration, Pakistan’s government held an emergency meeting last week, bringing together top bureaucrats from across the country. But instead of easing the problem, it aggravated it, ordering power-saving measures that seemed calculated to smother some Pakistanis’ last remaining pleasures.

“They are playing a joke on us,” said Amina Ali, the mother of a bride at a wedding hall that was under orders to close early as part of the new energy-saving restrictions. Her brother chimed in: “The Pakistani people are a toy in the hands of the government.”

The power failures could prove destabilizing if they go unchecked, analysts said. Pakistan badly needs its economy to expand to make space for its bulging young population, and chronic power cuts work against that.

Eye's picture
Eye
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Re: Daily Digest - April 27

 "BA's"  -  you must mean the "Sheeple"  Wink

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mesaboogieman
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Posts: 42
Re: Global Solar-Panel Demand May Double on Above-Market ...

 

I'm very keen to get both types of solar fitted especially after I heard about the feed in tarriff. But for PV systems the outlay is around £12k for a 2.5-3kwp set up for components which would cost about £8-9k, quite a chunk of money.  If you go down the DIY route you can't get the feed in tariff because it's now a regulated industry in the UK, and the components and installers have to be certified under the MCS (microgeneration certification scheme), quite an involved and expensive process. I'll get a PV setup one of these days though, as nothing could be better than charging up an electric car and getting paid 41p a unit for it!

 

 

Damnthematrix wrote:

http://www.bloomberg.com/apps/news?pid=20602099&sid=aW1qaLgVgtrQ

Global Solar-Panel Demand May Double on Above-Market Rates

By Jeremy van Loon

April 26 (Bloomberg) -- Global demand for solar panels may double this year as Germany and other European countries offer guaranteed, above-market rates for the power produced.

Solar-panel installations will probably rise to between 11.5 gigawatts and 14.8 gigawatts this year from 7.3 gigawatts in 2009, Bloomberg New Energy Finance said in its photovoltaic industry outlook.

State support in most European countries drives investment in photovoltaic equipment, NEF said. In Italy, the prices paid for solar power are as high as 43 euro cents (57 U.S. cents) for each kilowatt-hour generated. That’s about six times the wholesale rate earned by fossil-fuel-burning plants.

Operators of solar power stations in France, the U.K. and the Czech Republic are paid similar rates. Spain and Germany, the biggest solar equipment market, are reducing rates.


DK: 14.8 GW for 5.5 hours /day for 365 days / year = 29.7 TW.h

which is 0.15% of world electricity generation in 2008 (BP 2009).

At AU$4.05 / Wp for 185 W Solar E on special at http://www.solaronline.com.au/solar-panels

14.8 GW would cost AU$60 billion plus inverters, meters, transport, fitting.

and $40 trillion to replace all existing electricity.

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