Daily Digest

Daily Digest - May 11

Tuesday, May 11, 2010, 10:46 AM
  • BMO's Mortgage Fraud Claims Won't Be Probed
  • Jim Rogers On Currency Crisis
  • More Kids Eat Dinner From Uncle Sam
  • Asian Stocks Fall As EU Bailout Rally Peters Out
  • Why The Eurozone Is Doomed
  • India Feeds Its Hunger For Coal
  • What Cost Is Too High For Nuclear Energy?
  • Canada Begins Drilling Deepest Oil Well
  • U.N. Report: Eco-Systems At 'Tipping Point'

Economy

BMO's Mortgage Fraud Claims Won't Be Probed (Ben Johnson)

The lack of police response does not surprise former RCMP officer Chris Mathers, who said police forces simply can't tackle alleged frauds of this magnitude. "There just aren't enough police officers to investigate these crimes," said Mathers, a Toronto-based corporate crime consultant. Mathers said fraud is rampant in Canada and police forces are already swamped.

Jim Rogers On Currency Crisis (Christian W.)

The currency crisis has been going on for a while. It did not start this week. It has been happening for a while. It started with, maybe depending on how you want to look at it, with Iceland or Latvia or many other countries who have been having problems, and the currency crisis is continuing and is going to get worse. This is not the end. Over the next year or more, we are going to see more. So prepare yourself.

More Kids Eat Dinner From Uncle Sam (Christian W.)

Nearly one in four children in the U.S. are food insecure and about one in five live in poverty, according to a report from Feeding America, a network of 200 food banks around the country. "As the economy gets worse, we're seeing more and more kids," said Beth Baldwin-Page, executive director of the Boys & Girls Club of Brattleboro.

Asian Stocks Fall As EU Bailout Rally Peters Out (Nickbert)

The bailout doesn't necessarily change the economic outlook for the euro-zone," said Lorraine Tan, director of equities research at Standard & Poor's in Singapore. "For Asian markets, the overriding factor over the midterm has been the prospect of higher interest rates, and the bailout doesn't change that concern either.

Why The Eurozone Is Doomed (Christian W.)

Beneath the endless announcements of Greece's "rescue" lie fundamental asymmetries that doom the euro, the joint currency that has been the centerpiece of European unity since its introduction in 1999.

Energy

India Feeds Its Hunger For Coal (Christian W.)

Coal accounts for over half of India’s total energy consumption . About 70 percent of India's own coal production is already utilized for power generation while three quarters of India's electricity is generated from over 80 coal-fired thermal plants. India, the third biggest coal producer in the world, had reserves of 56,498 million Mt, or nearly 7 percent of the world total.

Yet, India’s federal coal minister Sriprakash Jaiswal recently said coal imports are likely to rise 21 percent over the next year.

What Cost Is Too High For Nuclear Energy? (Christian W.)

Lyash, since promoted, said those words when the plant's original price tag stood at about $6 billion, and when the Levy plant was to begin operating in 2016. Since then, the price tag on the Levy facility has steadily ballooned. Last week in regulatory filings, Progress Energy said the nuke plant may cost as much as $22.5 billion and be delayed until 2021.

Canada Begins Drilling Deepest Oil Well (Christian W.)

Chevron Canada Ltd. has begun drilling the deepest oil well ever attempted in Canadian waters, at more than 1.5 miles deep, authorities say.

Environment

U.N. Report: Eco-Systems At 'Tipping Point' (Jeff B.)

The third Global Biodiversity Outlook (GBO-3) published by the Convention on Biological Diversity (CBD) warns that unless "swift, radical and creative action" is taken "massive further loss is increasingly likely."

Ahmed Djoghlaf, executive secretary of the CBD said in a statement: "The news is not good. We continue to lose biodiversity at a rate never before seen in history."

Please send article submissions to: [email protected]

17 Comments

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Re: Daily Digest - May 11

"May 11 (Bloomberg) -- Indonesia trimmed the size of its planned sales of Islamic and yen-denominated debt because of concern that Greece’s debt crisis will spread, a finance ministry official said."

"CARACAS (Dow Jones)--Venezuela's bolivar hit another record low against the dollar in unregulated trading Monday morning, in the wake of weekend threats by President Hugo Chavez to punish those who engage in currency market speculation.

The bolivar weakened to as much as VEF8.10 for $1 late morning in Caracas in the black market, traders said, which is its lowest since Chavez imposed strict currency controls in 2003 that gave rise to the unregulated market.

The bolivar is now 27% weaker from the end of 2009, when it traded at VEF5.95 for $1."

"May 10 (Bloomberg) -- Governments will only bring about an end to the credit crisis through the “blood, sweat and tears” of cutting the amount of public debt, “Black Swan” author Nassim Taleb said."

"“My fear is if we don’t stop them now they’re going to create hyperinflation,” Taleb said. “Nobody has confidence in a guy like Bernanke."

"THE markets might be happy with the €750bn rescue package, but analysts and commentators were far from enthusiastic about the latest plan to solve Europe's debt problems by more borrowing.

"The last thing you give a drunk is another drink," said Jeremy Batstone-Carr from London-based Charles Stanley stockbrokers."

"Several analysts raised worries about the long-term effects, and pointed to the lack of tough rules to force countries to cut spending.

"It buys time. We don't know if it will be enough," said Song Seng Wun, an economist with CIMB-GK Research in Singapore. "This perhaps just postpones the inevitable; the euro may have to give way, that's the worst case scenario."

Andrew Richman of US-based Suntrust Private Wealth Management was also scepticial. "The big question is will weaker countries follow through on austere cutbacks."

Most predicted the euro would continue to decline against the dollar as the European Central Bank (ECB) began a form of quantitative easing that is sometimes dismissed as little more than printing money.

"The euro will continue to fall because there will be more liquidity provided by the ECB, and ECB assets will deteriorate as the bank purchases lower quality debt issued by European governments," said Dariusz Kowalczyk of SJS Markets.

"The currency is starting to turn into an average of its members rather than the deutsche mark, which people thought it would be," said Kevin Gaynor, chief markets economist at Royal Bank of Scotland. "What we're seeing is everything being glued together by bailouts rather than integration." "

"The outstanding balance of Japan’s central government debt hit a record high of 882.92 trillion yen at the end of fiscal 2009 through March 31 as the government issued more bonds amid the economic downturn, the Finance Ministry said Monday. Per capita debt came to about 6.93 million yen based on Japan’s estimated population of about 127.39 million as of April 1.

The year-on-year increase of 36.43 trillion yen was due mainly to the issuance of more government bonds to cover a decline in tax revenues amid the economic deterioration. The central government’s debt is likely to reach about 973 trillion yen at the end of fiscal 2010 due to an increase in national budget expenditure coupled with a further fall in tax revenues. "

"The Greek government on Tuesday sought the first payment from an international bailout as renewed doubts that Europe's trillion dollar war chest will stave off a major debt crisis punctured market euphoria.

Stock markets in Asia and Europe fell and the euro came down from Monday highs amid worries that despite the huge rescue sums lined up, Greece and other debt-burdened countries will not follow through with tough austerity measures."

....................6A) Debt fears surge as Greece asks for crisis aid

"May 11 (Bloomberg) -- European financial companies hold more than 61 billion euros ($78 billion) in Greek and Portuguese sovereign debt, the worst-performing European government bonds so far this year.

Greek government bonds lost investors 28 percent this year, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. Portuguese bonds fell 10 percent, while Spanish debt gained 0.8 percent."

"May 11 (Bloomberg) -- Germany and France are among top- rated euro-area states that may compromise their AAA grades by standing behind the debts of weaker members with their 750 billion-euro ($955 billion) stabilization fund.

The package is “making debt profiles deteriorate, potentially damaging the ratings of core sovereigns,” said Stefan Kolek, a strategist at UniCredit SpA in Munich. “It’s a kind of Ponzi game at the highest level.”"

"(Reuters) - Moody's Investors Service, in an unusual move regarding its sovereign ratings process, said on Monday it may downgrade its ratings on Portugal, and Greece's rating could fall to as low as junk.

Moody's in a "special comment," called the sovereign debt crisis "unprecedented." European Union finance ministers agreed to an emergency loan package on Monday that with IMF support could reach 750 billion euros ($1 trillion) to prevent a sovereign debt crisis spreading through the euro zone."

"LONDON—Spot gold on Tuesday hit a new record high for 2010, with investors increasingly seeking a safe haven amid fears that sovereign-debt problems aren't going away despite a European Union aid package announced at the start of the week.

Spot gold rose to a high of $1,217.45 a troy ounce, breaking the previous record $1,213.80 a troy ounce, reached Friday."

"May 11 (Bloomberg) -- China's stocks dropped, sending the benchmark index into a bear market, on concern the government will raise borrowing costs to combat inflation and unveil more measures to curb soaring housing prices."

"May 11 (Bloomberg) -- Europe’s sovereign-debt crisis risks spurring inflation and countries including the U.K. still need to come to terms with their deficits, even as a $1 trillion emergency fund provides relief for the euro region, according to Roderick Munsters, chief executive officer of Robeco Groep NV."

"At one point during a call with Group of Seven officials at the weekend, Tim Geithner, the US Treasury secretary, made it clear that the US was not pleased with the eurozone rescue package as it stood.

"He was very direct," said a person with knowledge of the discussions, adding that Mr Geithner told his counterparts the intervention was not in the "right order of magnitude" and should be increased. He had said more commitments were needed from struggling countries in terms of "fiscal credibility"."

"May 11 (Bloomberg) -- Dubai’s benchmark index declined to the lowest level since March on concern Dubai Holding LLC, a company owned by the emirate’s ruler, may have to restructure some of its $12 billion in debt and as European stocks fell."

"The $1 trillion global emergency package to stabilise the euro has allowed the single currency bloc to emerge strongly from a "life or death" battle and averted global crisis, Italy's economy minister said on Monday. Speaking after markets reacted positively to the international package of standby funds, loan guarantees and central bank measures, Giulio Tremonti said policymakers had feared the euro zone was going to "dissolve."

"The battle we fought was almost for life or death," Tremonti said in a television interview with Sky Italia.

"If we had failed we would have seen the fall of the euro, then of the dollar and the other currencies. It would have been an almost global catastrophe.""

"HONG KONG (MarketWatch) -- China's inflation rate accelerated in April, as consumer and producer prices beat estimates, while bank lending rose nearly 30% faster than expected.

Analysts said the data, including figures released the same day showing accelerating property prices, would renew policy makers' concerns about emerging bubbles."

................16A) Inflationary Pressures Rise in China

"SHANGHAI — China released data on Tuesday showing explosive growth in some parts of its economy, renewing concerns that Beijing may have to do more to prevent it from overheating.

The National Bureau of Statistics said that retail sales and bank lending soared in April, inflationary pressure ticked up and home prices jumped a record 12.8 percent in the month from a year earlier, despite a rash of measures aimed at cooling the already sizzling property market. "

................16B) China April Home Prices Defy Curbs With Record Jump

"SHANGHAI — China released data on Tuesday showing explosive growth in some parts of its economy, renewing concerns that Beijing may have to do more to prevent it from overheating.

The National Bureau of Statistics said that retail sales and bank lending soared in April, inflationary pressure ticked up and home prices jumped a record 12.8 percent in the month from a year earlier, despite a rash of measures aimed at cooling the already sizzling property market. "

..................16C) Brazil's Bovespa Index, Real Sink on China Inflation Concern

"State budget writers face an uphill battle as they deal with a $4.3 billion structural shortfall over the next 26 months. Civitas Institute Policy Analyst Brian Balfour cites several reasons for the financial crisis: $391 million below budgeted General Fund revenue for fiscal year 2009-10; $788 million less revenue available for the coming fiscal year than previously anticipated; and a $2.9 billion drop-off in revenue for fiscal year 2011-12 due to an end to federal stimulus funds and temporary state taxes.

“While lawmakers will blame the economy, make no mistake: the financial disaster that is North Carolina state government is completely of its own making. Long-term fiscal irresponsibility highlighted by out-of-control spending growth, stunning increases in debt spending and unsustainable financial commitments is to blame,” said Balfour.

The recent passage of federal health care reform will also directly affect North Carolina’s budget. Taxpayers will be saddled with an additional annual Medicaid burden starting at $245 million in 2017, growing to at least $490 million by 2020 due to legislation expanding Medicaid enrollment."

..................17A) $1 billion shortfall looms for lawmakers

"May 11 (Bloomberg) -- The pound fell against the dollar as negotiations to form the next U.K. government entered a fifth day, stoking concern the nation’s political leaders will delay taking steps to cut the record budget deficit."

"European levels of government debt have hit danger levels and vigorous action will be needed to get them down again, the International Monetary Fund warned on Tuesday.

The IMF, fresh from a trillion=dollar European debt bailout package with Brussels, said debt levels had to be reduced and national budgets brought back into balance over the medium-term."

"Zero Hedge has received confirmation that several of the largest French banks are now actively shorting the euro to take advantage of globalized moral hazard, which with every ensuing bailout does nothing but make the bonuses of French FX traders surge. In other words, the very banks that Europe is bailing out are betting more and more aggressively with each passing day against Europe's own survival! Even George Soros has shed a tear of pride in how beautifully his initial plan to take on the BOE has mutated for the Bailout Generation."

"Albany, NY — New York’s powerful public worker unions took the state to court today in what could become a costly and lengthy battle to stop one-day-a-week furloughs for state employees.

The Public Employees Federation and the Civil Service Employees Association unions, representing hundreds of thousands of white- and blue-collar workers, are seeking a temporary restraining order to block the cost-saving measure approved by the Legislature Monday night.

That’s the first step in the court challenge to furloughs for about 100,000 state workers, which the union argues would violate their labor contracts. Many lawmakers who reluctantly authorized the furloughs said in floor speeches that the unions will likely win in court."

"Twelve of Sacramento County's 13 school districts don't have enough money in their coffers to pay the health benefits promised future retirees and are not setting aside money to pay for them, according to a grand jury report released Monday.

Collectively, the county's school districts have a staggering $1 billion in unfunded retiree health benefits, according to the report.

School officials are effectively ignoring the mounting debt, the report concludes, and barring a drastic change of course, could end up bankrupting their districts or stiffing retirees on health benefits. "

  • Other news stories, headlines and opinions:

Ash Cloud May Cost Travel Industry $1.5 Billion, TUI Chief Says

Baltics Warn Greek Turmoil Creates Euro Enlargement 'Worries'

Australian Government To Return To Surplus Faster Than Expected

Saudi Arabia- Bracing for Greek contagion

The Looming Mother of all Economic and Social Crisis

Commercial Mortgage Prices Fall in March

Struggling Commercial Real Estate Helplessly Waits Around For The Slaughter Of 2010

Next governor faces 'colossal' crisis with $3B budget hole (Pennsylvania)

Even $1 Trillion Won't Save The European Disaster, Says Roubini (Video)

Germany might have to foot entire euro aid bill-SPD

No end in sight as Thai protesters refuse to leave

Pension Crisis Could Bury LA, Other Calif Cities

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Re: Daily Digest - May 11

A Closer Look at the 1,000 Point Dow Plunge

I was at 30,000 feet when the crash hit on Thursday. When I landed in NY and saw what happened, the first thought was trader error. But the evidence for that remains lacking. I spent a good part of the weekend trying to track down evidence that it was HFT, or a fat thumb, or a NYSE erroneous trade halt.To date, the best analysis I’ve seen came from a young analyst on an institutional desk. His forensic approach to piecing together what occurred is the best explanation I have come upon:

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Re: Daily Digest - May 11

British PM Is Resigning; Tories, Liberal Dems to Form Coalitionhttp://www.cnbc.com/id/37078827

British Prime Minister Gordon Brown announced he is resigning, bringing to a close the Labour Party's 13-year hold on power, while his two chief rivals sealed a coalition deal after the country's inconclusive election.

Gordon Brown
Simon Dawson / AP
British Prime Minister Gordon Brown.

Brown said he will travel to see Queen Elizabeth II to resign—allowing opposition Conservative Party chief David Cameron to take office after Cameron struck a deal with Nick Clegg, leader of the third-placed Liberal Democrats.

The Conservatives won most seats in a parliamentary election last week but fell short of a majority. Labour came second and the Lib Dems a distant third.

Both of the major parties have been trying to win over the Lib Dems, but senior Labour figure Ed Miliband said on Tuesday afternoon the talks between his party and the Lib Dems were "temporarily" over, fuelling speculation they had broken down.

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Re: Daily Digest - May 11

Please ask Taleb, how he would transfer "Debt into equity"?   Just one simple example would help me understand what is being said!

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Re: Daily Digest - May 11

Just love it when Rick Santelli gets going LOL.

Latarp....LOL

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Banks protesters storm Irish parliament

Looks like they almost made it too..

Protesters have stormed Ireland's parliament during a march against government plans to inject billions of euros into the country's banks.

http://www.belfasttelegraph.co.uk/breaking-news/uk-ireland/banks-protest...

 

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Re: Daily Digest - May 11

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Re: Daily Digest - May 11

http://www.zerohedge.com/

First the fun stuff: gold hit an all time record today. To those who have had the foresight to realize that in the currency devaluation race to the bottom, the only winners will be non-dilutable precious metals (and not industrial gimmickry and bets on China's excess capacity like copper), we salute you. In fact, so does the market: the S&P is now down 8% year to date when expressed in ounces of gold. Because while central banks can monetize, sterilize (whatever that means), and dilutize that last remnant of the dying Keynesian religion, the FRN and its equivalents around the world, gold is untouchable, and increases in value with each desperate attempt to save a failed economic system. Yet the bandwagon is once again getting heavy: the EUR is getting killed after hours, approaching $1.25 and is about to break the E-mini critical 117 yen support once again. Should central bank buyers not materialize, hello gravity. Which would also mean freefall for the ES. The bailout plan is now null and void, and in need of a bailout plan itself. The French banks won: we expect their FX traders to make a killing this year. We hope their contract demands bonus payment in gold.

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Re: Daily Digest - May 11

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Re: Daily Digest - May 11
this article has the best general explanation of
what went wrong last Thursday that I have seen so far :
 
<snip>
It boils down to this: this episode exposed structural flaws in how a trade is implemented (think orphaned algo orders) and it exposed the danger of leaving market making up to a network of entities with no mandate to ensure the smooth and orderly functioning of the market (think of the electronic market makers and high freqs who can pull bids instantaneously as opposed to a specialist on the floor who has a clearly defined mandate to provide liquidity).
</snip>
 
And are they going to fix it ?
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Re: Daily Digest - May 11
Damnthematrix wrote:
this article has the best general explanation of
what went wrong last Thursday that I have seen so far :
 
<snip>
It boils down to this: this episode exposed structural flaws in how a trade is implemented (think orphaned algo orders) and it exposed the danger of leaving market making up to a network of entities with no mandate to ensure the smooth and orderly functioning of the market (think of the electronic market makers and high freqs who can pull bids instantaneously as opposed to a specialist on the floor who has a clearly defined mandate to provide liquidity).
</snip>
 
And are they going to fix it ?

Yes, they are developing brain-machine interfaces to get the best of both worlds: The trading speed of a human coupled with the insights of a machine Laughing

Samuel

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Re: Daily Digest - May 11

Here is a youtube especially for Davos....Gold 10,000 should help many of us here LOL. Enjoy.

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Re: Daily Digest - May 11
Fannie Mae Needs $8.4 Billion More
By NICK TIMIRAOS
11 May 2010
 
Fannie Mae asked the U.S. government for an additional $8.4 billion in aid after posting an $11.5 billion net loss for the first quarter, the latest sign that the bailout of the mortgage investor and its main rival, Freddie Mac, is likely to be the most expensive legacy of the U.S. housing-market bust.
 
Fannie's losses reflected continuing weakness in the housing market and would have been worse without accounting changes that reduced its deficit. The quarterly loss was an improvement from the $23.5 billion loss for the year-ago quarter and marked the 11th consecutive quarterly loss for the Washington-based firm.
 
Fannie Mae is asking for an additional $8.4 billion in government aid after reporting an $11.5 billion net loss for the first quarter. WSJ's Nick Timiraos joins the News Hub with more.
 
The company has now racked up losses of nearly $145 billion, or nearly double its profits for the previous 35 years. While many of the nation's biggest banks have repaid their government loans and some are back to racking up big profits, Fannie and Freddie are still suffering from the housing-market crisis.
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Re: Daily Digest - May 11
US Fed to ship dollars to Europe
AP, May 11, 2010
 
WASHINGTON: The Federal Reserve late on Sunday opened a programme to ship US dollars to Europe in a move to head off a broader financial crisis on the continent. Other central banks, including the Bank of Canada, the Bank of England, the European Central Bank, the Swiss National Bank and the Bank of Japan also are involved in the dollar swap effort.
 
The move comes after the EU and IMF pledged a nearly $1 trillion defense package for the embattled euro, hoping to calm jittery markets and halt attacks on the eurozone's weakest members. The ECB also jumped into the bond market on Sunday night, saying it is ready to buy eurozone bonds to shore up liquidity in "dysfunctional" markets.
 
The Fed's action reopens a programme put in place during the 2008 crisis under which dollars are shipped overseas through the foreign central banks. These central banks can lend the dollars out to banks in their home countries that are in need of dollar funding to prevent the European crisis from spreading further. Fed said action is being taken "in response to the reemergence of strains in US dollar short-term funding markets in Europe."

http://www.informationclearinghouse.info/article25420.htm

Greece and the American Taxpayer

Video

Ron Paul points out that the Fed opening its swap lines to Europe violated its promise to Congress not to do so. Paul also says the bailout will help lead to the destruction of all fiat paper currencies, ensuring that "gold will rule the roost".

May 11, 2010

 

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Re: Daily Digest - May 11
idoctor wrote:

Here is a youtube especially for Davos....Gold 10,000 should help many of us here LOL. Enjoy.

The comments from the panel made me laugh....."he's sticking to his guns"....................."he has been right, you gotta give him that"

Is this another one of those conditioning interviews? Whereas before they would have laughed at him at the end of the interview are they now saying "listen up people, you may no like the message but this guy knows what he is talking about"?

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Re: Daily Digest - May 11

Still Time to Cash in on Gold: Analystshttp://www.cnbc.com/id/37058583

 Fears that the past weekend’s $1 trillion European rescue package will ultimately drive inflation resulted in investors piling back into gold.

Much of that demand is reportedly coming from Germany, where the memory of hyperinflation between the two world wars continues to significantly influence thinking.

Gold bars
Tom Grill | Iconica | Getty Images

The price of gold is at an all-time high, with demand at its highest level since the collapse of Lehman Brothers.

UBS said demand for gold coins is so high that supply is struggling to match demand and gold producers are ramping up production of coins to cash in on fears over rising inflation.

Gold is currently benefiting from the belief that central banks cannot raise rates, said Monica Fan, senior currency product engineer at State Street Global Advisors.

“Politically it would be very unpalatable to raise rates raising fears over inflation," Fan said. "With so much uncertainty out there gold has become a de-facto currency.”

Fundamentals for gold remain strong given the rise of the middle class in Asia, and the "long term trend is bullish,” she said.

Stephen Perry, the chairman of The 48 Group Club and a China watcher, agreed that gold is likely to head higher.

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Re: Daily Digest - May 11
britinbe wrote:

The comments from the panel made me laugh....."he's sticking to his guns"....................."he has been right, you gotta give him that"

Is this another one of those conditioning interviews? Whereas before they would have laughed at him at the end of the interview are they now saying "listen up people, you may no like the message but this guy knows what he is talking about"?

What do you know, people aren't always as stupid as they seem... they might just be slow :)

Samuel

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