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Week of June 16, 2008

Sunday, June 22, 2008, 5:20 AM

06/16/2008

Spacer Weekend

June 21 & 22

Brokers threatened by run on shadow bank system (June 19 – MarketWatch SAN FRANCISCO)

A network of lenders, brokers and opaque financing
vehicles outside traditional banking that ballooned during the bull
market now is under siege as regulators threaten a crackdown on the
so-called shadow banking system.

The shadow banking system
grew rapidly during the past decade, accumulating more than $10
trillion in assets by early 2007. That made it roughly the same size as
the traditional banking system, according to the Federal Reserve.

While
this system became a huge and vital source of money to fuel the U.S.
economy, the subprime mortgage crisis and ensuing credit crunch exposed
a major flaw. Unlike regulated banks, which can borrow directly from
the government and have federally insured customer deposits, the shadow
system didn't have reliable access to short-term borrowing during times
of stress.

By early 2007, conduits, structured investment
vehicles and similar entities that borrowed in the commercial paper
market and bought longer-term asset-backed securities, held roughly
$2.2 trillion in assets, according to the Fed's Geithner.

Another
$2.5 trillion in assets were financed overnight in the so-called repo
market, Geithner said. Geithner also highlighted big brokerage firms,
saying that their combined balance sheets held $4 trillion in assets in
early 2007. Hedge funds held another $1.8 trillion, bringing the total
value of asset in the "non-bank" financial system to $10.5 trillion, he
added. That dwarfed the total assets of the five largest banks in the
U.S., which held just over $6 trillion at the time, Geithner noted. The
traditional banking system as a whole held about $10 trillion, he said.

This is important. What’s being said here is
that there is an official banking system, over which the Fed presides
and has some influence by setting interest rates and regulating
liquidity.

But there’s also a “shadow banking system,” just as
large, over which the Fed has little influence and even less insight
because of a severe lack of transparency.

This is the system that
fed off of the too-easy money policies of Greenspan and Bernanke, and
which is now imperiling the entire banking system. This shadow system
can create the appearance, if not the temporary reality, of massive
paper wealth, because of its ability to borrow $1 billion to be used as
collateral for a $10 billion loan.

As long as the system was/is
expanding, then everything seems fine, if not great. Once the expansion
stops we get to find out which players are insolvent.

As Warren Buffet likes to say, “When the tide goes out, that’s when you find out who was swimming naked.”


Bank takeovers often done on Fridays

In banking circles, Fridays are becoming the day of
the week to really pay attention. That's the day regulators
increasingly are choosing to announce bank failures - and failures are
on the rise this year.

When the Federal Deposit Insurance
Corp. announces a bank failure on Friday, often late in the day, it
does so with an eye on preventing a run on deposits. The timing
provides a weekend for people to calm down.

The extra time
also allows for a more orderly changing of the guard since regulators
work hard to line up a suitor bank to take over accounts at the failed
institution before making an announcement.

"They want to have
the least amount of disruption," said Harry Papp, a money manager at L.
Roy Papp & Associates in Phoenix. "It gives the receiving bank more
time to get prepared for all the phone calls they'll get on Monday
morning."

Of the past 14 bank failures announced by the FDIC,
12 came on Fridays and one on a Saturday. Regulators did most of the
hard work - examining bank records, finding a suitor, revoking the
bank's charter and so on - in the preceding days and weeks, as secretly
as possible to avoid sparking a run.

The above article explains why I strongly
suggest you get your money out of any bank that is exhibiting weakness as soon
as you detect a problem might be brewing.


Bank failures are notoriously rapid, and they happen over the weekend when there’s nothing you can do about them.


Home Repossession Rates Double (June 17 – The Trumpet)

American banks repossessed twice the number of
homes in May as they did a year ago as falling house prices trapped
borrowers in mortgages they could not afford. A June 13 RealtyTrac Inc.
report said lenders took possession of over 73,000 houses during May
alone.

The Washington-based Mortgage Bankers Association
reports that 2.47 percent of all U.S. homes were in some stage of
foreclosure during the first quarter of this year. That percentage rate
is 252 percent higher than the 0.98 percent average for the past 30
years. It is estimated that foreclosures may account for nearly a third
of national home sales this year.

Foreclosures are just an early step in the
process, repossessions are the last. Repos are rising strongly. The
other interesting statistics I see in here are the fact that 2.47% of
all US homes were in some stage of foreclosure.


I find this
startling, and wonder if there hasn’t been a slight misstatement.
Perhaps it’s 2.47% of all homes that have a mortgage? If not, it means
that 1 out of every 40 homes is in immediate financial distress.


The
next part is the estimate that nearly one out of every three home sales
will involve a foreclosed property. Ouch. That’s going to really drive
prices down very strongly.


TRIBUTE PAID IN OIL (June 20 – FSU Editorials)

The whole world is presently feeling the first
effects of the general exhaustion of world oil fields: "Peak Oil".
Unless "Peak Oil" is an imaginary problem, the price of oil is
therefore going to continue rising with brutal effects upon the world
economy. Not only Mexican oil production is declining; we are dealing
with a decline in world production of oil.

We must note
something that is of fundamental importance: neither the US nor the
Eurozone are actually paying for their oil with exports of goods and
services to the oil producing countries. They "pay" with bank digits,
created by computers; these payments are registered in the form of
credits in the computer memories of banks in the US and in the
Eurozone. We should have to include Japan among the countries which are
able to purchase oil with their own currency.

These bank
digits are not credit instruments in favor of those who receive them,
as for instance dollars were, when they were formerly redeemable in
gold; they are simply numbers, because they do not incorporate a
promise to deliver something to the beneficiary, the oil exporter. A
credit instrument is the promise to deliver something, and a bank digit
is not "something". It is just a number and nothing more.

So
we can quite correctly say that the US and the Eurozone – and other
countries whose currencies are considered "reserve currencies" – are "paying" for their oil imports with nothing at all. The Romans called
such an operation  "collection of Tribute from the Conquered". This is
what Mexico is doing; it is exporting precious oil from its oil fields
in relentless decline in exchange for – nothing.

This is very interesting. A Mexican writer
has noted the obvious; they send us the most valuable commodity ever
known to man, and the US sends back dollars.


Actually we send back
electrons over cables that cause computers in Mexican banks to create
alternating patterns of magnetic blips to appear on hard disks, indicating that Mexico now has more blips in new patterns than before.


My
prediction is that, well before a collapse in production makes exporting
physically impossible for Mexico, a political/social decision will be
made to preserve Mexico’s natural wealth for its own citizens.


Spacer Friday

June 20

Citi CFO sees subprime pain easing, but still high (June 19 – Reuters NEW YORK)

Citigroup Inc (NYSE:C - News) could take
substantial write-downs in the second quarter, the company's chief
financial officer said on Thursday, raising concern the bank's
second-quarter earnings would be weaker than expected.

CFO
Gary Crittenden told investors on a conference call that many asset
write-downs in the second quarter would be smaller than those in the
first quarter, when it took a total of $16 billion in credit losses and
charges.

But they could still be large, Crittenden said,
showing investors that the credit crunch is hardly over. Citi's shares
fell as much as 4.9 percent, pulling down banking stocks and briefly
the broader U.S. stock market. The cost of protecting Citi's debt
against default rose.

Citigroup is #2
on the derivative chart, with over $33 trillion of derivatives on the
books. The only thing surprising about the write-downs here is that
they are not higher.

I suspect that
when the financial report comes out and I dig into it, I’ll find that
their Level III and Level II ‘assets’ have mushroomed, again, to a new
high.

Those assets
represent pools of toxic debt that cannot be easily priced, because
there is no real market for it right now. If those assets were to be
sold into the market, the ‘price discovery’ would be shocking;
possibly as much as 20% to 80% in losses depending on the asset type.

The most recent
data I have puts Citigroup’s Level III assets at 125% of total
shareholder capital. In other words, if Citigroup’s Level III assets
were valued at an 80% loss, Citigroup would be wiped out. And how much
of a hit on their derivatives holdings would wipe them out? 0.4%.

That’s “zero
point four percent.” Not much, in other words. A lot of these
derivatives are linked through to the housing market. Let’s check in
with the largest housing market in America (see next).


[California House] Prices plummet 30% from May 2007 peak (June 19 – Sign On San Diego)

California housing sales were at their lowest level
in 13 years last month, as prices slid 30 percent from year-ago levels,
San Diego-based DataQuick Information Systems reported yesterday.

The
33,024 transactions statewide were down 6 percent from April and off
10.7 percent from May 2007. It was the worst May since 1995. The
statewide median price stood at $339,000, 4.2 percent below April's
level and 30 percent down from the all-time peak of $484,000 in May
2007. It was the biggest year-over-year downturn for any month in 20
years of record keeping, said DataQuick analyst Andrew LePage.

California Housing Prices

Folks, a 30%
yr/yr hit to house prices is not a ‘downturn,’ it is a financial shock
of the highest order. Using the 30% decline in median house prices, a
rough estimate tells us that in CA alone more than $2 trillion in
housing ‘wealth’ has evaporated since last May.

A good portion
of that is going to represent real losses at real financial
institutions. And every indication is that the trend in house price
declines is still accelerating to the downside, so there’s more pain in
store.


U.S. Says Exercise by Israel Seemed Directed at Iran (June 20 – NYT WASHINGTON)

Israel carried out a major military exercise
earlier this month that American officials say appeared to be a
rehearsal for a potential bombing attack on Iran’s nuclear facilities.

More
than 100 Israeli F-16 and F-15 fighters participated in the maneuvers,
which were carried out over the eastern Mediterranean and over Greece
during the first week of June, American officials said.

The
exercise also included Israeli helicopters that could be used to rescue
downed pilots. The helicopters and refueling tankers flew more than 900
miles, which is about the same distance between Israel and Iran’s
uranium enrichment plant at Natanz, American officials said.

"They
wanted us to know, they wanted the Europeans to know, and they wanted
the Iranians to know," the Pentagon official said. "There’s a lot of
signaling going on at different levels."

Ugh. Even as we
struggle with high fuel costs, a shaky food situation, and the worst
financial crisis ever, somehow Israel and the US have jointly decided
that now is a good time to pick a fight with the #4 oil-exporting
nation, which also just happens to have a controlling geographic
position over the Strait of Hormuz, where fully 25% of the world’s
daily oil exports pass on any given day.

Why now?

I am seriously without a grasp on the logic for this particular skirmish at this particular time. Every
report either says that Iran does not have a credible military nuclear
program, or, even if they do, that they are many years away from being
any sort of a threat.

And even then,
you’d have to believe that Iranians would be insane enough to use a
nuclear warhead against Israel or the US - two countries that have
thousands of nukes between them and certainly possess the will to use
them in retaliation.

I simply cannot
grasp this logic, so I have to assume that there is a different game
with a different set of explanations in the background.


How Iran would retaliate if it comes to war (June 20 – Christian Science Monitor)

"If you attack Iran you are unleashing a firestorm
of reaction internally that will only strengthen revolutionary forces,
and externally in the region," says Ranstorp. "It's a nightmare
scenario for any contingency planner, and I think you really enter the
twilight zone if you strike Iran."

Any US-Iran conflict would
push up oil prices, and though Iran could disrupt shipping lanes in the
Persian Gulf, its weak economy depends on oil revenues.

But
nearby US forces in Iraq, Afghanistan, and the Gulf provide a host of
targets. Iran claimed last October that it could rain down 11,000
rockets upon "the enemy" within one minute of an attack and that rate
"would continue." Further afield, Israel is within range of Iran's
Shahab-3 ballistic missiles, and Hezbollah claims its rockets –
enhanced and resupplied by Iran since the 2006 war to an estimated
30,000 – can now hit anywhere in the Jewish state, including its
nuclear plant at Dimona. Closer to home, Iran has honed a swarming
tactic, in which small and lightly armed speedboats come at far larger
warships from different directions. A classified Pentagon war game in
2002 simulated just such an attack and in it the Navy lost 16 major
warships, according to a report in The New York Times last January.

“No plan ever survives first contact with the enemy” – War college saying.

If either the US
or Israel attack Iran, you can fully expect things in Iraq to go pretty
much haywire. Our boys and girls are directly in harm’s way, especially
those concentrated in the Green Zone, which we could easily expect to
be targeted by Iran in the opening moments of a shooting war. The point
here is that Iran stands no chance against the US/Israel in a
conventional war, but as Iraq (and the Revolutionary war) taught us, a
‘weaker’ opponent has other options.


Farms hit as floods kill 24 in US midwest (June 20 – Guardian)

Devastation caused by week-long flooding in
America's farm belt is threatening to push up food prices which are
already at record highs.

The cost of corn and soya beans has
peaked on the US market amid concern of a shortfall in production. The
midwest, one of the world's biggest corn-growing regions, has been hit
by the worst flooding for 15 years. An estimated 16% of Iowa's grain
crop has been destroyed.

Food inflation
is about to get a whole lot worse. This is a perfect storm (sorry for
the pun) of weather, cheap money, too much money, and actual shortages
collectively driving food prices higher.

One way for you
to protect yourself is to simply buy more food than you need each week
and put it in the pantry. Get yourself up to ~ 1 years worth, and then
sit back and enjoy the fact that you get to eat food at last year’s
prices.

Trust me, you will not get a better return on your money from the stock market this year.


GM says more than 18,000 take severance deals (June 19 - AP DETROIT)

General Motors said today that 18,657 of its hourly
workers will leave the company by July 1 through buyout and early
retirement offers.

GM expects to replace some of the workers
at a new entry level wage of about $14 per hour. That's about half the
rate of current production workers.

Does GM realize
that their new entry level wage is too low to allow the workers to
afford its own products? If every company pays its workers less than
what it would cost to afford its own products, all the companies will
go out of business. This is where we see a process accountants refer to
as “the spiral of death.”

As workers are paid less, they can
afford to spend less, so companies cut back by paying their workers
less, which means the workers can afford to spend less, which means….


Gold May Reach $5,000 an Ounce on Inflation, Schroder Says (June 19 – Bloomberg)

Gold prices may reach $5,000 an ounce as investors
seek to protect themselves against accelerating inflation, said
Schroder Investment Management Ltd., which oversees $277 billion of
assets globally.

"You could easily see for the next several
years that prices rise not to $1,000 an ounce, but prices rise to
$5,000 an ounce or beyond as inflation psychology becomes more and more
embedded and people become desperate to have a source of value," said
Christopher Wyke, London-based emerging market debt and commodities
product manager at Schroder, which manages about $10 billion of
commodity assets.

Investors are turning to gold for protection
as two-thirds of the world's population cope with inflation rates above
10 percent, Wyke said. Cash and inflation-linked bonds are poor
substitutes as low interest rates, coupled with surging inflation,
erode the real value of investments, he said.

A price target for gold that I can get behind. :)


Spacer Thursday

June 19

May oil demand down 0.1 pct from year ago (June 18 – Reuters WASHINGTON)

Demand for crude oil and petroleum products in May
fell a slight 0.1 percent from a year earlier, and U.S. gasoline use
for the January-May period dropped for the first time since 1991, as
record-high pump prices dented demand, the American Petroleum Institute
said on Wednesday.

Total petroleum product deliveries,
excluding exports, averaged 20.614 million barrels per day, down 17,000
bpd from May 2007, the API said in its monthly oil report. Sagging
gasoline and residual fuel use was nearly offset by strong demand for
distillates and jet fuel, the API said.

"Gasoline demand has
weakened with higher prices, but diesel demand has proved to be more
resilient," said Ron Planting, an analyst at the API.

Deliveries,
which are a good indicator of demand, are calculated by the API to
reflect petroleum products moved from refineries and bulk storage to
wholesale and retail suppliers. U.S. refineries churned out record
amounts of distillate and ultra-low sulfur diesel in May, and jet fuel
output rose 6.6 percent from the prior year, the API said.

Meanwhile
gasoline demand in May fell by 133,000 bpd, or 1.4 percent, to 9.296
million bpd as crude oil prices rose to around $135 a barrel and pump
prices climbed to near $4 a gallon nation-wide.

After all of the
gnashing of teeth and wailing about changing of consumer behaviors in
response to high oil prices, we are told that oil demand dropped by a
nearly imperceptible amount. You have to give them style points,
though.

Where they said
daily petroleum use was 20.614 million barrels, they then shifted the
decimal point over a few places to report that this represented a drop
of 17,000 bpd(!!!). I guess that was more dramatic than saying that
demand had slipped from 20.631 mbd to 20.614.

What can we take
away from this article? Certainly, we can conclude that oil demand is
very sticky and does not fall much even in the face of steeply rising
prices.


Non-OPEC oil supplies at risk of stalling this year (June 19 – Globe & Mail LONDON)

Oil supply from countries outside OPEC, source of
three in every five barrels, is stalling this year and may even
decline, keeping the heat under record-high oil prices.

The
International Energy Agency and the U.S. government have cut forecasts
for supply growth in 2008, in part due to delays at new fields and
declining output at existing ones.

“There is a risk of zero
non-OPEC growth,” said Mike Wittner, oil analyst at Societe Generale,
who forecasts non-OPEC supply will expand by 400,000 barrels per day
(bpd) this year.

“As far as our forecast is concerned, there is definitely downside to our numbers.”

While OPEC gets
all the news, and one could be forgiven for thinking that OPEC produces
the majority of the world’s oil, the fact is that non-OPEC countries
produce 60% of the world’s oil.
This article is telling us that
despite the economic stimulus of record oil prices, the majority of the
world’s oil-producing countries are going to squeak out flat production
this year.
If we’re lucky.

So even as demand marginally nudges lower in the US (see above), supply is threatening to decline even faster.


Mexico May Raise Daily Oil Output 4.3 Percent by 2009 (June 17 - Bloomberg)

Mexico may increase crude production to 3 million
barrels a day next year as state-owned Petroleos Mexicanos pumps more
oil to make up for the biggest drop in output in a dozen years at its
largest field, the country's energy minister said.

"Petroleos
Mexicanos is taking measures internally to raise production to 3
million barrels a day by the end of this year or the start of next
year," Energy Minister Georgina Kessel said in an interview in Mexico
City today.

The government needs to raise Pemex's budget 66
percent to $30 billion annually to help it maintain production goals of
3 million to 3.1 million barrels a day of crude through 2012, Kessel
said. The Finance Ministry, which manages Pemex's budget, set aside
about $18 billion this year for the company. The 2009 increase would
mean a 4.3 percent jump in output from this year's average of 2.875
million barrels a day.

Pemex's production has been falling for
four years as its largest field, Cantarell, led a decline in output.
Cantarell, the world's third-largest oil field, represented 63 percent
of Pemex's output at its peak in December 2003.

Pemex's output is "at risk" of falling more this year, leading to further cuts in exports, Kessel said.

Mexico,
the third-largest supplier of crude to the U.S., exported 1.439 million
barrels of crude in April, 14 percent fewer barrels than a year earlier
as production declined. Overall output fell 13 percent to 2.767 million
barrels a day in April, the largest drop in 12 years. Cantarell's
output fell 33 percent to 1.07 million barrels a day.

Hmmmm…there’s
something fishy about this story. The facts are that Mexico’s oil
production has been falling and Mexico’s internal demand for oil has
been rising.

The assertion is that more investment would boost production by a planned 4%.

The problem is that these numbers don’t line up.

Here’s why.

The call is for
an additional $12 billion to be invested to yield an additional 4%,
which equals 115,000 barrels per day, or 40 million barrels in a year.
$12 billion divided by 40 million yields a cost of $300 per barrel for
this new oil. Who would spend that kind of money?

I’m going to reserve judgment on this claim of new Mexican production until I read a few more articles that make some sense.

In the meantime,
it is enough to know that Mexico’s internal demand is eating into
exports at a good clip, and that without a lot of new production,
Mexico may become a net importer as soon as 2012.


Mexico caps price of basic foods (June 19 – BBC)

Mexico has frozen the price of 150 basic foods to
curb inflation, in the government's biggest set of price controls in
more than a decade.

The government on Wednesday capped prices
on foods including cooking oil, beans and fruit juices, with immediate
effect until the end of 2008.

Mexico's government is concerned
about the impact of soaring food bills. Overall consumer price
inflation was 4.95% over the past year, but food price inflation was
far higher at 8%.

Price controls never work, for the simple reason that they can’t.

What price
controls do is financially ruin producers and shops so they end up
reducing the amount of available products, which (try to act surprised
here) ends up driving up price pressures. This simple logic is
perfectly resistible by politicians who love to appear as though they
are ‘doing something’ about inflation.

The worst part
about this is that capping prices puts on a display of economic
ignorance that makes bloodletting look like a stroke a genius. Rising
prices are the symptom – too much money is the cause.

If treating
symptoms worked, small pox could have been eradicated with a few loofas
and a decent exfoliant. I predict this effort will fail within a few
months.


Free Trade in Food Is `On the Ropes'  Amid Shortages, Price Rise (June 19 – Bloomberg)

Free-trade policies long advanced by World Bank
President Robert Zoellick and U.S. President George W. Bush are losing
favor as countries in Africa, Asia and Latin America find they can't
buy enough food to feed their people.

Global food prices have
spiked 60 percent since the beginning of 2007, sparking riots in more
than 30 countries that depend on imported food, including Cameroon and
Egypt. The surge in prices threatens to push the number of malnourished
people in the world from 860 million to almost 1 billion, according to
the World Food Programme in Rome.

Leaders of developing
nations including the Philippines, Gambia and El Salvador now say the
only way to nourish their people is to grow more food themselves rather
than rely on cheap imports. The backlash may sink global trade talks,
reduce the almost $1 trillion in annual food trade and lead to the
return of high agricultural tariffs and subsidies around the world.

"Trade
as the route to food security, that idea is on the ropes," said Arvind
Subramanian, a senior fellow at the Peterson Institute for
International Economics in Washington. "If the guy who is selling it
doesn't want to sell it overseas, then the guy at the other end is
terribly exposed."

During a down
cycle, economic protectionism can be like a whole bale of straw heaped
on the camel’s back. This situation is particularly dicey because while
the Western and Japanese central banks have been trying to cure the
toxic effects of too much money with an even larger dose of too much
money, the rest of the world has gone hungry.

The subtext to
this article is that a lot of so-called ‘developing countries’ have
figured out that the west just prints up gobs of extra money whenever
it gets into a bind, and so they’ve started to wonder what the point is
of playing by all the rules.

If money is just
an abstract thing that developed countries can create when it suits
them, why does money have to be such a tangible thing for the ‘poorer’
countries? And what’s the point of playing by the rules if it turns out
that the West considers rules to be more like guidelines whenever
things get a bit tricky?


Banks Find New Ways To Ease Pain of Bad Loans (June 19 – WSJ)

In January, Astoria Financial Corp. told investors
that its pile of nonperforming loans had grown to about $106 million as
of the end of last year. Three months later, the thrift holding company
said the number was just $68 million.

How did Astoria do it?
By changing its internal policy on when mortgages are classified on its
books as troubled. The Lake Success, N.Y., company now counts home
loans as nonperforming when the borrower misses at least three
payments, instead of two.

Well, that’s certainly creative. Don’t like how your loans are performing? Just change the way you classify them!

“Hey Bob! Look
what happens to our non-performing loan pool when I increase the missed
payment variable by 50%.” Sheesh. It goes without saying that the
amount reserved for bad loans should have remained the same regardless
of the classification.

If the loan loss reserves went down too, then this is simply fraud.


Are We Too Gloomy? (June 19 – The Big Picture)

Anyone who makes the comparison between the stats
today versus 30 years ago is revealing their economic naivete. Even if
you take the headline data at face value (which you never should), you
have to acknowledge the many changes in how the BLS models are
constructed over the years. It becomes an apples to oranges comparison.
Perhaps the fault lies not within ourselves, but within our data.

Maybe
we should be asking different questions instead: "Is our press
economically incompetent? What level of economic naivete is tolerable
in the mass media? When did our financial media become mere
stenographers? What happened to critical thought, analytical rigor or
investigative journalism? Wasn't the charge of the press at one time to
"afflict the comfortable?"

To be blunt, any scribe that trots out the headline data on Unemployment or Inflation as gospel are either fools or liars.

This is pulled from Barry Ritzholtz’s blog, which is an excellent source of information and news.
I
happen to fully agree with his view that economic statistics are so
obviously either false or flagrantly bad that any reporter who writes
an article around them without questioning their veracity is either an
ignorant fool or a liar.


Spacer Wednesday

June 18

RBS issues global stock and credit crash alert (June 18 – UK Telegraph)

The Royal Bank of Scotland has advised clients to
brace for a full-fledged crash in global stock and credit markets over
the next three months as inflation paralyses the major central banks.
"A very nasty period is soon to be upon us - be prepared," said Bob
Janjuah, the bank's credit strategist.

A report by the bank's
research team warns that the S&P 500 index of Wall Street equities
is likely to fall by more than 300 points to around 1050 by September
as "all the chickens come home to roost" from the excesses of the
global boom, with contagion spreading across Europe and emerging
markets.


Korea Faces Specter of Multi-Nation Financial Meltdown (June 18 - Chosun)

There are warning signs of a synchronous financial
crisis that could affect about a dozen countries, including the Baltic
states, Vietnam, India, the Philippines, Indonesia and Argentina. These
nations are seen as on the verge of slipping into a foreign currency
crisis, with their economic indices worse than Korea's when it was
socked by the financial crisis of 1997.

Most of these nations
have achieved economic growth with easy access to loans amid a global
economic boom, the result of excessive liquidity. Now they must borrow
to repay their debts, but money resources have dried up as the global
financial market suffers the repercussions of the U.S. subprime
mortgage crisis.

To make matters worse their current account
deficits are growing due to soaring raw materials prices, hurting their
economic fundamentals. Many are emerging economies and major importers
of Korean products. If a simultaneous financial meltdown becomes
reality, Korea's exports would be dealt a severe blow. Pundits say that
such a crisis would also disrupt the global financial market and
trigger an exodus of foreign capital from Korea.


U.S. [Corporate] Defaults Keep Soaring (June 17 - CFO)

So far this year, 33 companies have defaulted
world-wide, affecting debt worth $38.3 billion and surpassing the 22
defaults recorded in all of last year, according to Standard &
Poor's. Of the globe's defaulting companies, 32 are based in the U.S.,
with the other in Canada.

The U.S. also leads in the number of
"weakest links" — entities that are closest to the default threshold —
with 117 of the 140 entities, or 84 percent of the total, according to
the credit rating agency. Meanwhile, the 12-month-trailing global
corporate speculative-grade bond default rate increased to a 31-month
high of 1.45 percent in May from 1.29 percent the previous month.


Senate blocks debate of clean energy tax credits (WASHINGTON Reuters)

The U.S. Senate on Tuesday blocked debate of a bill
to offer about $17.7 billion in tax incentives for consumers to build
renewable energy sources like windmills and solar arrays, and buy
plug-in cars that run on electricity rather than gasoline.

The
Energy Independence and Tax Relief Act of 2008 would have extended a
tax credit to build windmills by one year through December 31, 2009,
and extend for three years similar credits for renewable energy sources
like biomass, geothermal, landfill gas and trash combustion.

The
bill failed to garner enough votes to limit debate and move to a vote,
leaving the fate of the clean-energy credits uncertain.


Paulson & Co. Says Writedowns May Reach $1.3 Trillion (June 18 – Bloomberg)

John Paulson, founder of hedge fund Paulson &
Co., said global writedowns and losses from the credit crisis may reach
$1.3 trillion, exceeding the International Monetary Fund's $945 billion
estimate.

``We're only about a third of the way through the
writedowns,'' Paulson, 52, told the GAIM International hedge fund
conference in Monaco today. ``There are a lot of problems out there and
it will continue to be felt through the year. We don't see any signs of
stabilizing.''

Paulson, whose New York-based company manages
about $33 billion, made bets that subprime-mortgage debt would fall
after he noticed ``bubble like'' prices. His Paulson Partners fund rose
18 percent a year since it started in 1994, and his main fund focused
on subprime debt rose 591 percent last year. Banks and securities firm
worldwide posted more than $395 billion in losses and writedowns since
the subprime crisis started last year.

The U.S. is heading
into a recession as falling home prices weigh on consumer spending,
Paulson said. The second half of this year will be worse than the first
as the economic slowdown continues into 2009. Signs of stress are
``accelerating'' in the housing market, he said. Paulson said he's
betting on falling securities prices.

``I don't consider myself a bull or a bear,'' he told the audience at Monaco's Grimaldi Forum. ``I'm a realist.''


Grantham: the bear growls (June 17 – Globe & Mail)

Renowned value investor Jeremy Grantham knows an
investment bubble when he sees one coming, and always steers well clear
of the risks - sometimes at great initial cost. At the height of the
Internet stock bubble in the 1990s, GMO, the Boston-based institutional
money manager he founded, lost about 45 per cent of its funds under
management when investors sought out firms with sexier strategies. Of
course, his sound analysis and risk assessments were vindicated and his
clients eventually were rewarded handsomely.

By 2006, Mr.
Grantham, whose firm manages about $145-billion (U.S.), including
$2.8-billion from Canadian pension funds and other institutions, was
warning of the coming implosion of the global credit market. And he has
seen nothing since that cataclysmic event last year to convince him the
worst might be over.

You draw comparisons between what's
happening today and the start of the Great Depression. We're in that
1929-30 window, where we've had a shock to the system. But the
secondary effects - less consumption, lower profit margins, lower GDP,
lower employment, lower global trade - are beginning to work through
the system. They're steadfastly ignored because they're still quite
slight. It takes a year, 18 months [or] even longer for some of these
effects to show up.

So no short, shallow downturn, then? It's
very hard to torture the economics, to think that you can squeeze
liquidity, take a hit to your biggest capital asset, housing, mark it
down 15 per cent and then maybe another 15 per cent, in an
overleveraged society, without having a sustained negative effect that
would last two or three years. Which I'm sure it will.


Anatomy of a Meltdown: The Bubble (June 17th – Washington Post)

Jan. 10, 2008. In his first public remarks of the
year, Fed Chairman Ben S. Bernanke acknowledges that the problems that
had begun in the subprime market now "affected the prospects for the
broader economy."

Unemployment was rapidly rising, hitting its
highest point -- 5 percent -- since November 2005. On Jan. 19, a
Saturday, a weekend of urgent conference calls among Fed officials
began.

Bernanke and his colleagues -- Vice Chairman Donald L.
Kohn, Fed Governor Kevin M. Warsh, New York Fed President Timothy F.
Geithner and others -- agreed that the central bank needed to sharply
cut interest rates to stimulate the economy. But they debated whether a
big cut before a routine meeting -- only a week and a half later --
would make the Fed seem as if it were simply responding to declining
stock markets. Bernanke implored the group: If it's time to act, the
Fed should act.

Two days later, on Martin Luther King Jr. Day,
stock markets throughout the world suffered some of their largest drops
since Sept. 11, 2001. Meeting by videoconference, the Fed voted to cut
its key rate three-quarters of a point, the biggest single-day cut in
nearly a quarter-century, and announced the move before U.S. markets
opened Tuesday. The Fed continued to lower rates but couldn't stop the
economy's plunge. More banks reported losses.

Meanwhile,
President Bush, working with Congress, signed into law a $168 billion
economic stimulus package, offering tax rebate checks.

On
March 12, concern intensified about the soundness of one important
financial player with heavy exposure to subprime securities: Bear
Stearns. The chief executive of the 85-year-old New York investment
bank, Alan Schwartz, tried to calm investors by going on television to
say his firm had a $17 billion cash cushion.

Overnight,
though, Bear Stearns's lenders cut off the company. Customers demanded
their cash. Bankruptcy was imminent. On March 13, Schwartz called Jamie
Dimon, chief executive of J.P. Morgan Chase, who answered on a special
cellphone reserved for his three daughters and few others. Schwartz
wanted J.P. Morgan to buy Bear Stearns. Dimon wouldn't agree to do so
without more time but promised to work on the problem. He dispatched
hundreds of J.P. Morgan employees back to the office to review Bear
Stearns's books.

As he learned about the unfolding crisis,
Bernanke feared a global economic collapse if Bear Stearns went under.
Money-market funds where Americans deposit billions of dollars in
savings had lent money to Bear Stearns. And the company's important
role in the financial markets -- trading countless securities for big
investors -- would come to a halt. Other investment banks, Bernanke
worried, would be next.

Spacer Monday

June 17

Food supply fears mirror oil worries at Saudi summit (June 16 – Reuters DUBAI)

Saudi Arabia's emergency energy meeting next week
brings together Western consumer countries threatened by soaring oil
prices with Arab producers worried about scarce food supplies.

Record
oil prices and their impact on the industrialized world will no doubt
dominate the agenda, but food security could also feature as arid
Middle East states worry about affordably feeding their rapidly growing
populations.

Poor harvests, low stocks and rising demand have
sent food prices to record highs, stoking protests, strikes and
violence in Africa, Latin America, Asia and the Middle East. Dwindling
water makes the issue more dramatic for the Gulf Arab region.

"We are entering a new arena here," said chief economist John Sfakianakis at Saudi-based SABB bank.


Grim Numbers For Fifth Third (June 13 - .Forbes)

Fifth Third Bancorp's stock hit a 13-year low
Friday after one analyst predicted it would be the next regional bank
to halve its dividend and try to raise the capital needed to cover
higher-than-expected write-offs.

On Friday, BMO Capital
Markets Analyst Peter Winter downgraded Fifth Third Bancorp (nasdaq:
FITB - news - people ) to market perform from outperform on
expectations that net charge-offs will be much higher than anticipated.


Nearly Half of Wall St. Bank Profits Are Gone (June 16 – NYT)

Only a year ago, Wall Street reveled in an era of
superlatives: record deals, record profit, record pay. But a mere 12
months later, nearly half of the profits that major banks reaped during
that age of riches have vanished.


Beltwaywide Financial (June 16 – WSJ)

The Countrywide Financial sweetheart loan scandal
continues to grow, spreading to Senators and other Beltway potentates.
We are about to find out if Congress's passion for investigating
business ethics extends to conflicts of interest and cash that involve
fellow Members.

Take Senator Kent Conrad, the North Dakota
Democrat whose office issued a Friday statement saying that "I never
met Angelo Mozilo." What he did not say then but admitted under later
questioning by a Journal reporter is that, although he may not have had
a face-to-face meeting with the Countrywide CEO, Mr. Conrad had called
Mr. Mozilo and asked for a loan. The result was a discounted loan on
his million-dollar beach house and a separate commercial loan of a type
that residential lender Countrywide did not even offer to other
customers, regardless of the rate.


Morgan Stanley warns of 'catastrophic event' as ECB fights Federal Reserve (June 17 – UK Telegraph)

The clash between the European Central Bank and the
US Federal Reserve over monetary strategy is causing serious strains in
the global financial system and could lead to a replay of Europe's
exchange rate crisis in the 1990s, a team of bankers has warned.

"We
see striking similarities between the transatlantic tensions that built
up in the early 1990s and those that are accumulating again today. The
outcome of the 1992 deadlock was a major currency crisis and a
recession in Europe," said a report by Morgan Stanley's European
experts.


Stage Two of the Mortgage Collapse: $500 Billion in Pay Option ARMs Meet the Piper in 2008 with 60 Percent Being in California. (June 14 – Dr Housing Bubble)

The next stage of the mortgage debacle is only
starting to rear its ugly head and all early signs tell us that this is
going to be even worse than the subprime mortgage collapse. We need to
remember that the subprime mortgage debacle was only one facet of a
global debt boom that has taken a stranglehold over the industrialized
world. The United Kingdom is now starting to realize that even they are
going to face a housing meltdown. Yet there is still a perception out
there from pundits and those in the media that this housing meltdown
was caused purely by subprime loans, which could not be anything
further from the truth.


Economic stimulus payments push May budget deficit to an all-time high of $165.9 billion (June 14 – IHT WASHINGTON)

A flood of economic stimulus payments in the U.S.
pushed the federal budget deficit to an all-time high of $165.9 billion
in May.

The Treasury Department reported Wednesday that the
May deficit was more than double the imbalance in May 2007, reflecting
$48 billion in payments as part of the government's $168 billion
economic stimulus effort to give the economy a jump-start and keep the
country from falling into a deep recession.

For the first
eight months of the budget year, the deficit totals $319.4 billion,
slightly below the all-time record for this period of $346 billion, set
in the 2004 budget year.


Anatomy of a metltdown: the bubble (June 15 – Washtington Post)

Although the business of structured finance grew
during the 1990s, Internet companies drew the sexiest action on the
Street. When that bubble popped, average Americans who had invested in
the high-flying stocks saw their savings evaporate. Consumer and
business spending began to dry up.

Then came the 2001
terrorist attacks, which brought down the twin towers, shut down the
stock market for four days and plunged the economy into recession.

The
government's efforts to counter the pain of that bust soon pumped air
into the next bubble: housing. The Bush administration pushed two big
tax cuts, and the Federal Reserve, led by Alan Greenspan, slashed
interest rates to spur lending and spending. Low rates kicked the
housing market into high gear. Construction of new homes jumped 6
percent in 2002, and prices climbed. By that November, Greenspan noted
the trend, telling a private meeting of Fed officials that "our
extraordinary housing boom . . . financed by very large increases in
mortgage debt, cannot continue indefinitely into the future," according
to a transcript.


When Gas Stations Run Out of Gas (June 17 – Business Week)

Don't be surprised to see more filling stations
with empty pumps. But don't panic either. There isn't a gasoline
shortage like there was in the 1970s.

What's happening is that
filling stations have had their margins squeezed. Credit-card companies
charge by the dollar, pushing up costs per gallon that filling stations
pay to work with banks. And forget about sneaking in a few pennies'
worth of profit.

Consumers are bargain-shopping like never
before. The upshot: Some filling stations either can't stay in business
or are just barely hanging on. Plenty of filling stations have already
gone under. Last year, 3,184 of the nation's 164,292 gasoline stations
closed their doors and went out of business, the biggest drop in five
years, according to National Petroleum News. In the mid-1990s, there
were more than 200,000 stations in the U.S. Experts think there are
more closures to come.


US Coal Production Unlikely to Sate World Demand (June 17 – Reuters HOUSTON)

US coal production has room to grow, but expansion
is unlikely to meet surging world demand because miners fear a
boom-bust cycle, key reserves are declining, and regulation has
tightened.

Despite soaring prices, the US Energy Information
Administration has cut projections of US output rather than raised
them, and now foresees a total of 1.166 billion short tons by 2010,
barely up from a record 1.163 billion in 2006.

That is not
enough to overcome what some coal officials see as a shortage of 25
million to 35 million tons this year in the 6-billion-ton world market
and a shortfall of perhaps 70 million tons next year.


The message from the markets is inflation, inflation, inflation (June 16 – The National)

No surprise what the message this week from markets is: inflation, inflation, inflation.

Inflationary
forces in the United States are being offset to some extent by the
housing recession and slowing consumer spending, but Midwestern storms
and rising utility bills could spell trouble.


Southern towns shrink, economic woes grow (June 17 – USA Today)

The USA's population history is most often a story
of growth — of people moving to ever-growing metropolises and the
challenges of accommodating them. The nation, which has one of the
highest growth rates among industrialized countries, passed the 300
million mark in population almost two years ago and is expected to
reach 400 million by 2040. But vast sections of the nation are seeing
heavy, sustained population losses, a reflection of the decline of
family farming and the lack of rural jobs and economic opportunities.

Spacer Monday

June 16

In Midwest Floods, a Broad Threat to Crops (June 16 – NYT NEWHALL, Iowa)

Here, in some of the best soil in the world, the
stunted stalks of Dave Timmerman’s newly planted corn are wilting in
what sometimes look more like rice paddies than the plains, the
sunshine glinting off of pools of collected water. Although time is
running out, he has yet to plant all of his soybean crop because the
waterlogged soil cannot support his footsteps, much less heavy
machinery.

At a moment when corn should be almost waist-high
here in Iowa, the country’s top-producing corn state, more than a
million acres have been washed out and destroyed.

Beyond that,
agriculture experts estimate that 2 million acres of soy beans have
been lost to water, putting the state’s total grain loss at 20 percent
so far, with the threat of more rain to come.

“The American
farmer, we feed the world,” Mr. Timmerman said. “We’re going to be
short on corn and we’re going to be short on soybeans.”


Eurozone inflation hits highest rate for 16 years (June 16 - FT)

Eurozone inflation has been revised up to the
highest level for 16 years and a European Central Bank official has
warned that rising wage costs could add increasingly to the pressures
created by soaring oil prices.

Annual inflation in the
15-country region last month was 3.7 per cent, according to Eurostat,
the European Union’s statistical office. That was up from 3.3 per cent
in April.


Price jolt: Electricity bills going up, up, up (June 16 – USA Today)

"Consumers now face a tough reality on
electricity," says Mark Cooper of Consumer Federation of America. The
increases come after rising fuel prices already have driven up utility
bills nearly 30% in the past five years, the sharpest jump since the
1970s energy crisis. Fuel costs are again the main culprit. In
Virginia, Potomac Edison, citing high coal and natural gas prices,
plans to raise rates 29% on July 1, pushing an average monthly
residential bill from about $70 to $90.

AmerenUE, Missouri's
largest utility, recently asked for its first rate increase in 20
years, a 12.1% boost, mostly to cover higher fuel costs. Customers of
Public Service Co. of Oklahoma were socked with a 25% rise on June 1.
The price of coal, which fires half of U.S. power plants, has doubled
since last year, largely because of surging energy use in countries
such as China and India. Natural gas prices are up nearly 50% on high
U.S. demand.

In California, drought has forced Pacific Gas
& Electric to replace cheap hydroelectric power with natural gas,
helping to prompt it to seek 13% rate increases.


Fuel £9 a gallon as supplies dry (June 16 - BBC)

A Devon petrol station is charging drivers more
than £9 a gallon for petrol and diesel as drivers clamour for fuel. The
Foxhayes station at Exwick near Exeter has put all grades of petrol and
diesel up to £1.99 a litre.

The manager said the move was to
conserve stocks and said he was not being mean. It follows a four-day
strike by Shell tanker drivers in an industrial dispute over pay.


Saudis May Be Strapped for Oil, Close to Full Capacity (June 16 – CNBC)

Saudi Arabia's pledge to boost oil production by
500,000 barrels per day may not be achievable, a source close to the
Saudi oil industry told CNBC.com.

The New York Times reported
on Saturday, citing unnamed analysts and oil traders briefed by Saudi
officials, that the production increase was to be announced at a
meeting of oil producing and consuming countries on June 22 in the port
city of Jiddah to discuss ways of dealing with soaring energy prices.

The
increase would bring Saudi's oil production to 10 million barrels a
day, the country's highest ever, according to reports by the New York
Times and the Middle East Economic. Saudi Arabia is the world's largest
oil-producing country. But the country's ability to produce more than
9.45 million barrels a day of easily refined sweet crude is reliant on
the newly-discovered Khursaniyah field, which is of yet not producing
to its full capacity, a source close to the industry said.


Brown Says Europe Will Tighten Iran Sanctions (June 17 – NYT LONDON)

Prime Minister Gordon Brown announced on Monday
that Britain and Europe would freeze the overseas assets of Iran’s
largest commercial bank, joining the United States in intensifying
financial pressure against Iran over its refusal to address
international concern over its nuclear activities.


Iran withdraws $75 billion from Europe (June 16 – Reuters EHRAN)

Western powers are warning the Islamic Republic of
more punitive measures if it rejects an incentives offer and presses on
with sensitive nuclear work, but the world's fourth-largest oil
exporter is showing no sign of backing down.

"Part of Iran's
assets in European banks have been converted to gold and shares and
another part has been transferred to Asian banks," Mohsen Talaie,
deputy foreign minister in charge of economic affairs, was quoted as
saying.


Stung by Soaring Transport Costs, Factories Bring Jobs Home Again (June 13 – WSJ)

The rising cost of shipping everything from
industrial-pump parts to lawn-mower batteries to living-room sofas is
forcing some manufacturers to bring production back to North America
and freeze plans to send even more work overseas.

Emerson, the
St. Louis-based maker of electrical equipment, recently shifted some
production of items such as appliance motors from Asia to Mexico and
the U.S., in part to offset rising transportation costs by being closer
to customers in North America.

Edward Monser, the company's
chief operating officer, says logistics costs, which include all the
expenses associated with moving goods, became a worry about a year ago.

"That's when it became a dominant part of the discussion," he
says, adding that oil then was less than $100 a barrel. "So with oil
now at $130, it's even more serious." Mr. Monser says Emerson's larger
strategy is to regionalize manufacturing, producing as much as possible
within the part of the world where it’s sold.


Tempers fray as Shell strike begins to bite (June 15 The Independent)

Tempers frayed and frustration rose with the
lengths of the queues on garage forecourts yesterday, with people
hurling insults and vehicles literally scraping past each other as
motorists jostled to get to the pumps.

With striking workers
continuing to blockade Shell petrol depots around the country, there
were growing reports of panic buying and people travelling dozens of
miles just to fill up. Supermarkets have said they struggled to meet
demand, and some garages are predicting they will run out of fuel.


More lay-offs as energy crisis spreads June 15 – (Herald Sun (AU) WESTERN)

Australia's gas crisis will hit hard this week as
more businesses face the decision to shut down and lay off workers
because of escalating energy costs, the state government says

The
WA Chamber of Commerce and Industry (CCI) has estimated 14 per cent of
83 companies it surveyed recently may halt operations because of the
energy squeeze.

Apache Energy says it will be two months
before gas supplies are partly resumed at its Varanus Island gas plant,
where a June 3 explosion cut off one-third of the state's domestic gas
supply.


Saudi Arabia May Announce Oil Output Increase June 22 (June 15 – Bloomberg)

Saudi Arabia may announce an oil output increase at
a meeting it will host in Jeddah on June 22 for oil producers and
consumers because customers are asking for more crude, an OPEC official
said today.

State-owned Saudi Aramco said June 13 that it
would start pumping oil from its 500,000 barrel-a-day Khursaniyah field
within a month, a project it previously had said would start operating
last December. After confirming the delay in opening the field in
January, Aramco said it was ready to use its spare capacity, which
included 1 million barrels of Arab Light crude, to meet market demand.


Malaysia Faces Bankruptcy If Oil Subsidy Continued (June 14 – RedOrbit HULU TERENGGANU, Bernama)

The country can go bankrupt if the government
continues giving oil subsidy to the people, in order to cope with the
global oil price hike, without sound measures to tackle the problem,
said former Finance Minister Tengku Razaleigh Hamzah.

He said
based on information from Petronas and the oil production rate of
600,000 barrels per day currently, he opined that the country's oil and
gas reserves would not be able to meet the demand in the next five
years.

"After this, Malaysia will have to bear a high cost and
depend wholly on oil imports to meet the local demand. "If the oil
subsidy continues like in the last 45 years, the country can go
bankrupt. Now we are producing 600,000 barrels daily...eventually our
oil wells will be dried up and we will be forced to import from Saudi
Arabia.


High oil prices are based on fundamentals not speculative bubbles (June 15 – The Telegraph UK)

Oil prices have now risen seven-fold since 2001.
Having surged 40 per cent since January, crude has already notched up
28 record highs this year. Even after falling slightly last week, oil
still stands above $134. And a drop isn't expected soon, with crude for
delivery later this year close to $135.

Anyone wanting to
understand what's happening should peruse BP's excellent Annual
Statistical Review of World Energy, published last week. It shows the
"fundamental" problem - oil demand running ahead of supply. And that
gap is far more likely to widen than to close.


Ukraine threatens to retaliate if Russia hikes gas prices in 2009 (June 13 – Thomson Financial KIEV)

Ukraine warned Friday it will raise its fees on
Russian gas shipments through its territory and on underground storage
services if Russia abruptly hikes gas prices in 2009.

'Be
confident that Ukraine will have a strong asymmetric response if there
is a question of imposing European price levels and if there is a
willingness to introduce them immediately, starting from January 1,
2009,' Olexander Chaly, a deputy assistant in the Ukrainian president's
office, told a press conference.

Russia on June 6 said it
would double the present tariff that Ukraine pays for gas from next
year as a result of the higher costs of acquiring the gas from Central
Asia.


When Gas Prices Lead to Roads Less Traveled (June 15 – NYT)

What price would gasoline have to reach before it
caused you to make a big change? Some people have already crossed that
barrier. According to a survey by the NPD Group, a research firm,
rising fuel prices have caused a small percentage of drivers to buy a
more efficient vehicle or to move closer to their work. People are also
making more-reversible changes, like working from home, canceling
vacations, carpooling and taking public transportation.


After the credit boom comes the long and painful squeeze (June 15 – Timesonline UK).

After the credit boom comes the hangover, which
will last. That is why Britain and other countries are reeling under
the impact of the credit crunch. It is why – although the international
financial system may have been brought back from the brink – the
economic repercussions have yet to play out fully.

Worse, some
of the changes will be permanent. The age of cheap food and energy is
over. The days of easy credit will not return for years. A new era has
started with an uncomfortable jolt – and it does not look nearly as
nice as the old one.


US airline catastrophe looms under record oil prices (June 14 – AFP WASHINGTON)

The US airline industry is set to crash as record
oil prices threaten to push several carriers into bankruptcy,
threatening "our American way of life," an industry study said Friday.

"As
a consequence of the skyrocketing price of oil, the US commercial
aviation industry is in full-blown crisis and heading toward a
catastrophe," said a study issued by AirlineForecasts and the Business
Travel Coalition.


Farther, deeper, colder (June 14 – Globe and Mail)

Swiss investment bank UBS has estimated it could
cost a staggering $600-billion (U.S.) to develop the two major subsalt
fields, Tupi and Carioca.Companies: Petrobras is the principal
operator/investor.

Others in Brazil's offshore include
Norway's StatoilHydro ASA, Britain's BG PLC, Spain's Repsol YPF SA, and
U.S.-based Exxon Mobil Corp.

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