secret banking system

We have a secret banking system built on derivatives and untouched by regulation, says Pimco's Bill Gross.... http://money.cnn.com/2007/11/27/news/newsmakers/gross_banking.fortune/index.htm?postversion=2007112810

Morning Strategist Summary: Wieseman, Caron, Peters & Chakrabortti

Subject: Morning Strategist Summary: Wieseman, Caron, Peters & Chakrabortti

Ted Wieseman

• LIBOR spreads over Fed Funds are high and have been rising
  

·         The blowout in the spread of LIBOR over Fed Funds has partially short-circuited the transmission of the Fed's lowering of the fed funds rate into a positive impact on the economy

·         The pressure in the interbank lending market is a key symptom of the biggest challenge facing the economy at this point: the forced reintermediation of the banking system that is pressuring bank balance sheets and reducing the availability/raising the cost of credit

·         With significant, rising, and unpredictable demands on their capital, banks have preferred to stay liquid and demanded a significant premium to lend term in the interbankmarket

·         Problems have recently been exacerbated by balance sheet pressures tied to the year-end for a number of key firms

·         The Fed announced steps to attempt to tackle this problem directly by offering regular term repos bridging the year-end

·         If targeted and unconventional measures fail and the Fed is determined to get LIBOR down, the only alternative would be the blunt measure of overcoming the widening in LIBOR/fed funds spreads through more aggressive fed funds rate cuts

o       Even if spreads of LIBOR over fed funds stay wide or widen further, enough fed funds rate cuts could at least get the absolute level of LIBOR down substantially

·         Expects Kohn to signal a change in Fed stance in his speech tomorrow: the market  is fully expecting a rate cut and has been for some time now

 
 

Jim Caron

·          "Renormalization thesis" - liquidity was cheap and it was easy to attain leverage, which fueled asset inflation

·         Now we're finding the exact opposite, as liquidity has become more costly

·         This will have the greatest impact on the assets with the highest dependency on liquidity and leverage - especially Financials

·         Key with the Fed is to figure out how to address increased liquidity costs without cutting rates so much that it spills over into the broader economy

·         Market of Many trade: re-pricing of risky assets with high dependence on liquidity and leverage = breakdown of correlation across different asset classes

·         Fed is doing 45 day RP's to get us over the year-end hump, after which liquidity typically becomes more available

·         Fed is trying to keep liquidity up over the next 4-6 weeks until we get past this rough patch

·         The problem is that this seems to be a recurring theme and it doesn't seem to be just a rough patch

·         The Fed is trying to allow the re-pricing to happen, but wants to slow the pace of it

·         Jim thinks the yield curve will steepen quite a bit, out to 150-200 bps by the end of 2008

·         If LIBOR/Fed spread continues to widen further, he'd expect a 50bps cut in December - thinks the fed would have no choice but to cut funds much more aggressively

·         If your view is that the Fed will need to cut aggressively, he recommends putting on his "curve steepener" trade

 
 

Greg Peters

• Expects a short-covering rally but is still negative
  
• Policy makers and central banks do seem to have moved into an "action phase"- which is a good start but we have a long way to go
  
• What's important about the Citigroup news is that it separates big fish from little fish - for the contrast, look at ABK continuing to weaken
  
• Knock-on effects on economy should continue to play out
  
• Started with homebuilders, then into financials, then consumer discretionary, and the next leg will likely be cyclicals
  
• Recommending long position in AAA ABX - dealers and banks still have onerous positions which they've hedged out with ABX, which has depressed values beyond where they should be
  

 
 

Abhijit Chakrabortti

• Behavior of the yield curve is important to Financials; we've seen LIBOR rates go up and treasury rates falling
  
• In mid-89, fed started cutting rates and the YC was inverted-fed cut from 9.5% to 7% in a slow, sedate manner and the yield curve didn't move much (from 100 bps inverted to flat), while S&P financials fell 45%
  
• Only after the Fed finally started to cut aggressively did the rally take place
  
• Since the fed has cut this year, by 75 bps, Libor rates have come down by less than the Fed (65 bps) and the yield curve is virtually unchanged
  
• So he thinks this provisioning cycle will be far worse than 1990
  
• The unchanged YC will be devastating for NIM and overall earnings for Financials
  
• For a sustained rally to be mounted in financials, the curve has to steepen with treasury yield going UP and MM/Libor rates falling, telling us that liquidity concerns have eased
  
• Magic words the market is seeking is not that the balance is "roughly equal," but that the balance of risks has shifted decisively toward growth and that they will aggressively cut as much as is necessary to address the problem
  
• In the July sell-off, MO and CL went flat, but this time they have rallied - this is a sign that the focus should be on - the market internals
  
• Fed needs to shift from the denial phase at least to the recognition phase (not even the action phase)
  
• Everyone keeps telling him the bearish view of Financials is such a consensus position - but everyone at Palmetto was bullish on Financials
  
• Who thinks Financials could fall another 20%?  That is the real contrarian view
  
  • Finding out what is non-consensus is just as important as being contrarian
    

.5 Quadrillion in Derivatives

Global Derivatives Market Expands to $516 Trillion (Update1)

By Kabir Chibber

Nov. 22 (Bloomberg) -- The market for derivatives grew at the fastest pace in at least nine years to $516 trillion in the first half of 2007, the Bank for International Settlements said.

Credit-default swaps, contracts designed to protect investors against default and used to speculate on credit quality, led the increase, expanding 49 percent to cover a notional $43 trillion of debt in the six months ended June 30, the BIS said in a report published late yesterday.

Derivatives of debt, currencies, commodities, stocks and interest rates rose 25 percent from the previous six months, the biggest jump since the Basel, Switzerland-based bank began compiling the data. Investors have been turning to credit derivatives as a way to speculate on a growing risk of defaults amid record U.S. mortgage foreclosures.

``The pace of increase in the credit segment outstripped the rises in other risk categories,'' Christian Upper, a BIS analyst in Basel, wrote in the report. Credit-default swaps are ``the dominant instrument,'' accounting for 88 percent of credit derivatives, the BIS said.

The money at risk through credit-default swaps increased 145 percent from last year to $721 billion, the report said. The amount at stake in the entire derivatives market is $11.1 trillion, according to the BIS, which was formed in 1930 to monitor financial markets and regulate banks.

Interest Rates

Derivatives are financial instruments derived from stocks, bonds, loans, currencies and commodities, or linked to specific events like changes in interest rates or the weather. The report is based on contracts traded outside of exchanges in over-the- counter market.

Increased trading pushed ICAP Plc to a record this week as the world's largest broker of transactions between banks reported a 34 percent increase in net income to 80.1 million pounds ($164.4 million). The London-based company, which profits when prices fluctuate, handled a record amount of transactions as financial institutions bet on or hedged against losses linked to home loans.

The Markit CDX North American Index of credit-default swaps on 125 investment-grade rated companies has almost tripled since February to 90 basis points from 33.

Buyers of credit-default swaps receive the face value of underlying debt in the event of nonpayment, in return for the defaulted securities or cash equivalent. A basis point increase in the cost of a contract covering $10 million of debt is equivalent to $1,000 a year.

Interest Rates

Interest-rate derivatives remained the largest part of the market, gaining 19 percent to $347 trillion outstanding by June, the report said. Single currency interest-rate swaps made up 79 percent of the market.

Foreign exchange derivatives grew by 21 percent to $49 trillion as the dollar declined 2.5 percent against the euro in the first half. Contracts on the Swiss franc increased 32 percent, trailed by 27 percent increases in both the U.K. pound and the Canadian dollar contracts, the BIS said.

Equity market derivatives grew by 23 percent in the first half to $9 trillion. Growth was highest in Latin America equity derivatives at 43 percent and lowest in Japan at 6 percent. Japan's Nikkei 225 index rose 4.8 percent during the period while the MSCI Latin America index increased 25 percent.

Last Updated: November 22, 2007 07:53 EST

http://www.bloomberg.com/apps/news?pid=20601087&sid=a58EF32GpHeg&refer=home

Stocks Tumble and Subprime Spreads to Europe

European banks agreed to suspend trading in the $2.8 trillion market for mortgage debt known as covered bonds to halt a slump that has closed the region's main source of financing for home lenders..... http://www.bloomberg.com/apps/news?pid=20601087&sid=aS4wGPNgwfHs&refer=home

Fed cool on long-term growth forecast

The Federal Reserve on Tuesday revealed it no longer believed the US economy can grow much more than 2.5 per cent a year without causing rising inflation, a lower rate than many investors thought was sustainable.

Freddie Mac seeks emergency funding after posting $2bn loss

Freddie Mac, the government-sponsored company tasked with propping up the US mortgage market, said it would be forced to seek emergency funding to shore up its balance sheet after plunging $2bn (£968m) into the red.

The company yesterday said that it had hired Goldman Sachs and Lehman Brothers to tout for new funds that seemed likely to dilute existing shareholders, adding that it was also considering halving the dividend. Its shares lost more than a quarter of their value.

Dow at 7-month low

U.S. Stocks Tumble to Three-Month Lows; Freddie, Limited Fall

U.S. stocks fell to three-month lows after growing concern that losses from mortgage defaults will spread through the economy pushed down shares of banks, brokerages and retailers.

Treasury Sec Paulson Expects Tidal Wave of Mortgage Problems; and One Republican Senator is blocking Major Interventions

While all the signs of a perfect economic storm are registering more and more clearly, Bush admin is waffling and barely waking up, while a single lone Republican senator is blocking even minimal intervention.

Auto Trading Term: Mean – Reversion

Mean Reversion is a mathematical methodology commonly used for stock investing, but it can be applied to other processes. In general terms the idea is that both a stock's high and low prices are temporary, and that a stock's price will tend to have an average price over time.

Mean reversion involves first identifying the trading range for a stock, and then computing the average price. (Persons using extensive financial analytical techniques establish the average price as it relates to assets, earnings, etc.)

When the current market price is less than the average price, the stock is considered attractive for purchase, with the expectation that the price will rise. When the current market price is above the average price, the market price is expected to fall. In other words, deviations from the average price are expected to revert to the average.

One Standard Deviation (the square root of the trading range) can be used as a buy or sell indicator measurement. For instance, if the normal trading range is betweent 51 and 100, the range is 50, giving a standard deviation of $7.07 (the sq. rt. of 50). If the average price is $75, an investor using Mean Reversion would buy the stock at $75-SD (buy at $68) and sell the stock at $82 ($75+$7). One standard deviation is thought to cover 78% of future price movements, based on past movements. One, two or more standard deviations can be used for more accuracy.

Stock reporting services (such as Yahoo, MS Investor, Morningstar, etc.), commonly offer moving averages for periods such as 50 and 100 days. While reporting services provide the averages, identifying the high and low prices for the study period is still necessary.

Mean reversion is a more scientific method of choosing stock buy and sell points than charting, because precise numerical values are derived from historical data to identify the buy/sell values, rather than trying to interpret price movements using charts (charting, also known as technical analysis).

Persons desiring to apply this methodology should become familiar with the math concept of standard deviation.

http://en.wikipedia.org/wiki/Mean_reversion

Usd/chf short here? More talk about dollar down

Jim Rogers Urges People to Sell U.S. Dollar Holdings

Saudi minister warns of dollar collapse

The dollar could collapse if Opec officially admits considering changing the pricing of oil into alternative currencies such as the euro, the Saudi Arabian foreign minister has warned.

In an embarrassing blunder at the meeting in Riyadh, ministers' microphones were not cut off during a key closed meeting, and Prince Al-Faisal was heard saying: "My feeling is that the mere mention that the Opec countries are studying the issue of the dollar is itself going to have an impact that endangers the interests of the countries. "There will be journalists who will seize on this point and we don't want the dollar to collapse instead of doing something good for Opec."

The dollar's decline: from symbol of hegemony to shunned currency

The decline of the dollar, symbol of US global hegemony for the best part of a century, may have become so entrenched that some experts now fear it is irreversible.

After months of huge and sustained turmoil on the money markets, lack of confidence in the world's totemic currency has become so widespread that an increasing number of international traders are transferring their wealth to stronger currencies such as the euro, which recently hit its highest level against the dollar.

Dollar stays weak as Iran joins fray on greenback weakness

The dollar's woes continued for yet another day with Iran's call for oil cartel OPEC to recognise the currency's relentless falls highlighting just how far sentiment on the greenback has deteriorated

Dollars no good for the Taj Mahal

Foreign tourists to many of India's most famous landmarks will no longer be able to pay the entrance fee in dollars, the government says.

American Gangster's Wad of Euros Signals U.S. Decline

American Gangster's Wad of Euros Signals U.S. Decline (Update1)

By James G. Neuger and Simon Kennedy

Nov. 14 (Bloomberg) -- ``It may be our currency, but it's your problem'' was Treasury Secretary John Connally's taunt when the U.S. unhooked the dollar from the gold standard in 1971, unilaterally rewriting the rules of world business in America's favor.

Now the world is taunting back. Almost four decades after the U.S. tore up the monetary arrangements that governed the post-World War II international economy, the dollar's fall from grace amounts to a tectonic shift in the global hierarchy. This time, the U.S. currency is on the losing side.

After declining in five of the last six years, the weakest dollar in the era of floating currencies reflects a period of diminished U.S. political and economic hegemony. Whoever wins the White House next year will confront two unpopular choices: Accept the fall in U.S. clout and the rise of new rivals, or rein in record public and consumer debt that the rest of the world no longer wants to bankroll.

``What we're seeing is a very broad rebalancing of economic and political power in the world,'' says Jeffrey Garten, a Yale School of Business professor who was the Commerce Department's undersecretary for international trade in the Clinton administration. ``The scales are moving, and they're moving quite fast.''

The dollar blues have migrated from the halls of central banks to images of rap musicians.

In a video for the movie ``American Gangster,'' hip-hop maestro Jay-Z thumbs through a wad of 500-euro notes on a night of cruising through the concrete canyons of New York, a city where the euro isn't legal tender. The euro gained against the dollar today as European economic growth in the third quarter accelerated more than forecast.

Nixon Genesis

The latest tailspin was triggered by the ascendance of China and India, growing confidence in Europe's common currency, record American debt and trade gaps, London's challenge to New York as a financial center and a two-year housing recession in the U.S. For the first time, economists are raising the once-improbable specter that the dollar's monopoly as the world's dominant reserve currency is under threat.

Like the British pound, its predecessor as the world currency, the dollar has fallen victim to widening burdens overseas and economic stresses at home. The slippage began in 1971 when President Richard Nixon, in a stopgap move to cope with the inflationary financing of the Vietnam War, halted the exchange of dollars for gold.

Since then, currency markets have ebbed and flowed. High Federal Reserve interest rates and a flood of Japanese capital to finance Ronald Reagan's deficits bred the ``superdollar'' of the mid-1980s. The Internet-led productivity boom lured investment to the U.S. in the late 1990s. The most recent period reflects a world awash in other options.

Permanent Depreciation

``Part of the depreciation is permanent,'' says Harvard University professor Kenneth Froot, who has been a consultant to the Fed. ``There is no doubt that the dollar must sink against periphery currencies to reflect their increase in competitiveness and productivity.''

The Fed's trade-weighted major currency index bottomed at 71.11 on Nov. 7, the lowest since the era of free-floating currencies started in 1971. Against the yen and European currencies, the dollar is now worth about a third of what it was in the days of fixed rates.

One of the main U.S. exports since then has been the dollar itself, in exchange for foreign capital to finance trade deficits and a national debt of more than $9 trillion. While the current- account deficit is narrowing from last year's record $811.5 billion, the U.S. still requires $2.1 billion a day of other people's money.

`Unstable Situation'

``We're getting into a very unstable situation,'' says Richard Duncan, a partner at Blackhorse Asset Management in Singapore and author of the 2005 book ``The Dollar Crisis: Causes, Consequences, Cures.''

Such a prospect unsettles U.S. allies, and concerns are mounting that the flight from the dollar is feeding on itself and threatening a crisis of confidence that the next president will have to address.

Kuwait, freed by the U.S. from Saddam Hussein's army in 1991, unhinged its currency from the dollar in May, and pressure is building for Gulf Arab neighbors to follow suit. Qatar's prime minister, Sheikh Hamad bin Jasim bin Jaber al-Thani, complained Nov. 11 that the dollar's drop is cutting oil and gas income, leaving less to invest abroad. The United Arab Emirates may drop the dirham's peg to the dollar, analysts said.

The central bank in Iraq, a country the U.S. military has occupied since 2003, last month said it, too, wants to diversify reserves away from mostly dollars.

Korean Shipbuilders

Korea's central bank this week urged shipbuilders to issue invoices in won, the Korean currency, and take out more hedging policies to guard against a weakened dollar.

The dollar's share of global central banks' currency portfolios slid to 64.8 percent in the second quarter from 71 percent in 1999, the year the euro debuted, the International Monetary Fund says. The euro, used in 13 countries, now accounts for 25.6 percent.

``The global reserve system is fraying; it's falling apart,'' said Joseph Stiglitz, a Nobel-laureate economist at Columbia University, at a Bloomberg seminar last month in Tokyo. ``The change in mindset about the use of the dollar in reserves and the movement of the dollar out of reserves will continue to exert downward pressure.''

Economic Dry Spell

To be sure, the latest slump -- 6.6 percent against the euro since the end of August, 4.7 percent against the yen --partly reflects an economic dry spell. Credit-market turmoil led banks to cut consumer lending, bruising the U.S. economy's main engine.

``I don't think this is a lasting phenomenon, but it will come to a halt especially when America in a few months or at the start of next year gets over the financial crisis,'' says Theo Waigel, Germany's finance minister in the 1990s and an architect of the euro.

For now, the U.S. economy is a drag on the rest of the world. When the IMF last month trimmed its global growth prediction for 2008 to 4.8 percent from 5.2 percent, it blamed the U.S., whose forecast was cut to 1.9 percent from 2.8 percent.

Two Fed rate cuts, to 4.5 percent, have tilted the trading odds against the dollar in the near term. While the European Central Bank has put a planned increase in its benchmark 4 percent rate on hold, investors still see European rates going up and U.S. rates going down.

Asia Diversifies

``I wouldn't bet against the U.S. as the world's reserve currency,'' says former Treasury Secretary John Snow, now chairman of Cerberus Capital Management in New York. ``The dollar markets are so deep and so liquid and the American economy is so fundamentally advanced.''

Central banks in Asia are hedging that bet. Buoyed by the fastest growth of any major economy and putting tight limits on the appreciation of its exchange rate, China has piled up the world's biggest stash of foreign currencies, worth $1.4 trillion at the end of September.

Cash-rich governments are discovering the profit motive, adding to pressure on the dollar as they comb the world's markets for investments that pay more than the current 4.25 percent return on 10-year U.S. Treasury bonds.

Economists at Merrill Lynch & Co. estimate as much as $1.2 trillion in dollar holdings will shift to other currencies in the next five years.

A warning by Cheng Siwei, vice chairman of the National People's Congress, that China will invest in stronger currencies triggered a recent stampede out of the dollar. China doesn't have to dump dollars to depress the U.S. currency, economists at UBS AG say. Accumulating them at a slower pace will have the same effect.

G-7 Action

Ultimately, if the dollar's swoon depresses U.S. stocks or threatens global growth, Group of Seven major industrial nations may have to do more than issue communiqués.

The last concerted international maneuver to rearrange currency rates was in September 2000, when the G-7 sold dollars to prop up the then-stumbling euro in a U.S. presidential election year.

For the moment, policy makers are just talking. ECB President Jean-Claude Trichet last week called the euro's record- setting rise ``brutal.''

Treasury Secretary Henry Paulson trotted out the 1990s mantra that a ``strong dollar is in our nation's interest'' --as long as markets determine its rate. For the first time, Paulson had to rebut concerns about the dollar's supremacy as a reserve currency.

`Uphill Struggle'

``At this moment I don't think that the Americans are very disturbed,'' says former Dutch Finance Minister Gerrit Zalm, one of the euro's founding fathers. ``Until now, the developments are gradual with little effect on the stock exchange or long term capital-market rates.''

``There is a loss of confidence in both the dollar and the U.S.,'' said Riordan Roett, a professor at Johns Hopkins University in Baltimore. ``It may only reflect the widespread dismay with the Bush administration, but it is obvious that the next administration, of either party, will have a steep uphill struggle.''

To contact the reporters on this story: James G. Neuger in Brussels at jneuger@bloomberg.net ; Simon Kennedy in Paris at skennedy4@bloomberg.net

Last Updated: November 14, 2007 10:15 EST

http://www.bloomberg.com/apps/news?pid=20601109&sid=azto7U.TmGX0&refer=exclusive

Write downs bankruptcy and depression like 1930

Wall Street's money machine breaks down

The subprime mortgage crisis keeps getting worse-and claiming more victims. A Fortune special report. ... http://money.cnn.com/magazines/fortune/fortune_archive/2007/11/26/101232838/index.htm?postversion=2007111212

Run for the hills — the worst is far from over. An investor's stock portfolio now, he believes, should be only about half of what it might normally be.

Another of his worries is that central banks around the globe, America's included, are debasing their currencies, which is setting the stage for a new round of higher inflation. Our bear figures the next six to 12 months will be awful for investors as the market goes down "pretty substantially."

Mr. Melcher is also gung-ho on several currencies, particularly the Swiss franc and the Japanese yen.

http://www.nysun.com/pf.php?id=66268&v=6535094911

Goldman Held Bigger Level 3 Share Than Citi, Merrill (Update3) Goldman Sachs Group Inc. held a bigger proportion of hard-to-value assets at the end of the third quarter than Citigroup Inc. and Merrill Lynch & Co., two of the firms hardest hit by subprime mortgage losses.

E*Trade Shares Fall; Analyst Says Bankruptcy Possible (Update5) E*Trade Financial Corp. lost more than half its market value after the online brokerage forecast a decline in fourth-quarter earnings and a Citigroup Inc. analyst said the company may go bankrupt.

A $45 Billion Writedown Won't Stop Wall Street Profit (Update1) Even after the record $8.4 billion writedown for bad debts at Merrill Lynch & Co., the unprecedented ouster of three chief executives within five months and the elimination of $84 billion of market value at the five largest securities firms, Wall Street still is poised to report its second-most profitable year.

Bundchen Proves Buffett-Savvy Paring Currency Risk (Update2) Brazilian supermodel Gisele Bundchen is proving to be as savvy as professional investors hedging risks in the foreign-exchange market.

Subprime Losses May Reach $400 Billion, Analysts Say (Update5) Losses from the falling value of subprime mortgage assets may reach $300 billion to $400 billion worldwide, Deutsche Bank AG analysts said.

Blackstone's Profit Misses Estimates; Shares Decline (Update7) Blackstone Group LP, manager of the world's biggest leveraged buyout fund, reported third-quarter profit that missed analysts' estimates as real estate fees fell, sending its shares down the most since going public in June.

$100 Oil May Mean Recession as U.S. Economy Hits `Danger Zone' Rising fuel prices that businesses and consumers took in stride earlier this year may now be near the point of pushing the weakened U.S. economy into recession.

Currency Controls Combat sinking dollar

Currency Controls Return as Central Banks Fight Dollar Freefall Nov. 12 (Bloomberg) -- Central banks from Bogota to Mumbai are imposing foreign-exchange curbs to take control of their soaring currencies from traders dumping the dollar.

In Colombia, international investors buying stocks and bonds must leave a 40 percent deposit at Banco de la Republica for six months. The Reserve Bank of India created a bureaucratic thicket to curb speculation by foreign money managers. The Bank of Korea is investigating trading of currency forward contracts to limit gains in the won, now at a 10-year high.

Instead of using currency reserves or interest rates to influence foreign exchange markets, central banks and finance ministries are setting up obstacles to keep the falling dollar from threatening company profits and economic growth. The U.S. currency slumped 10 percent this year against its biggest trading partners, the steepest decline since 2003, while Treasury Secretary Henry Paulson has reiterated that the U.S. supports a ``strong'' dollar.

``Central banks are struggling to find new ways to intervene against their currencies and some of the proposals simply can't work,'' said Mirza Baig, an analyst in Singapore at Deutsche Bank AG, the world's biggest currency trader. Some plans are ``truly bizarre,'' he wrote in a report.

http://www.bloomberg.com/apps/news?pid=20601087&sid=ad3SyUGo78L0&refer=home

Paulson Says China Is `Out of Step' on Exchange-Rate Policy
Bloomberg - Nov 8, 2007
Paulson noted an increasing number of governments are joining the US in demanding China loosen its controls on the yuan. European Central Bank President ...

South Africa: JSE Has Currency Futures Ambitions
AllAfrica.com, Washington - Nov 8, 2007
The JSE said this week it was led to believe that, if this went well, which it appears to have done, a relaxation of foreign exchange controls would follow, ...

Central Bank Gold Agreement
Gold Seek - Nov 9, 2007
Inflow Capital Controls are another way of coping with this problem of a strong revaluation of the currency and a departure from the $ peg. ...

US, China Play Currency 'Chicken'
Seeking Alpha, NY - Nov 8, 2007
If you think there are bubbles in China today, a rapidly rising currency and reduced capital controls would make the situation much, much worse and then ...

News and Data Sources for the week

Top US banks agree on backup fund for markets

The fund is meant to avoid a severe credit market disruption, according to its organizers, by either providing time for asset prices to recover or, more likely, at least discourage structured investment vehicles from unloading their holdings en masse, the Times said.

Banks with high exposure to derivatives risk

Oil Price Rise Causes Global Shift in Wealth

Financial data collection tools:

MZM: alternative to M3

http://research.stlouisfed.org/fred2/series/MZM?cid=30

http://en.wikipedia.org/wiki/Money_with_zero_maturity

http://www.eiu.com/ The world leader in global business intelligence
The Economist Intelligence Unit is the world's foremost provider of country, industry and management analysis. Founded in 1946 when a director of intelligence was appointed to serve The Economist, the Economist Intelligence Unit is now a leading research and advisory firm with more than 40 offices worldwide. For nearly 60 years, the Economist Intelligence Unit has delivered vital business intelligence to influential decision-makers around the world. Our extensive international reach and unfettered independence make us the most trusted and valuable resource for international companies, financial institutions, universities and government agencies.

Our mission is to provide executives with authoritative analysis and forecasts to make informed global decisions. We offer three kinds of business intelligence:

	Country analysis on more than 200 markets
	Industry trends in eight key sectors
	Latest management strategies and best practices

The Economist Intelligence Unit has recently merged with Economist Conferences to deliver 360-degree decision support for your international business. We call it 360-degree decision support because we can help you at any stage of your decision-making process: whether you are gathering facts, developing plans, networking with executives or benchmarking strategies. And we can now provide you with business intelligence in your preferred format: through electronic services, custom research, executive meetings or personalised presentations.

http://www.transparency.org/ Transparency International, the global civil society organisation leading the fight against corruption, brings people together in a powerful worldwide coalition to end the devastating impact of corruption on men, women and children around the world.
TI's mission is to create change towards a world free of corruption.

Transparency International challenges the inevitability of corruption, and offers hope to its victims. Since its founding in 1993, TI has played a lead role in improving the lives of millions around the world by building momentum for the anti-corruption movement. TI raises awareness and diminishes apathy and tolerance of corruption, and devises and implements practical actions to address it.

Transparency International is a global network including more than 90 locally established national chapters and chapters-in-formation. These bodies fight corruption in the national arena in a number of ways. They bring together relevant players from government, civil society, business and the media to promote transparency in elections, in public administration, in procurement and in business. TI's global network of chapters and contacts also use advocacy campaigns to lobby governments to implement anti-corruption reforms.

Politically non-partisan, TI does not undertake investigations of alleged corruption or expose individual cases, but at times will work in coalition with organisations that do.

TI has the skills, tools, experience, expertise and broad participation to fight corruption on the ground, as well as through global and regional initiatives.

Now in its second decade, Transparency International is maturing, intensifying and diversifying its fight against corruption.

US Debt tops 9 trillion, stocks battered, banks overwhelmed with bad debt

Stocks battered by mortgage mess

Dow falls over 150 points on news Wachovia will take a $1 billion hit, forecasts for slower growth in Europe.

Bankruptcy Law Backfires On Banks

The Economic Consequences of Mr. Bush

Federal Liabilities Now Equal $175,000 for Every American

National Debt at Record $9 Trillion

California Gas Prices Reach $5 In Some Areas

Asian Stocks Slump as Dollar Tumbles, Subprime Losses Widen

Asian stocks fell the most in 12 weeks, extending a global rout after the dollar plunged yesterday, oil slumped and U.S. financial companies disclosed mounting credit-market losses.

US debt tops $9 trillion for first time-Treasury US debt tops $9 trillion for first time-Treasury

The U.S. Treasury Department said on Wednesday publicly held U.S. debt breached $9 trillion this week for the first time ever, just five weeks after Congress had raised the statutory borrowing limit.

At the end of September, U.S. President George W. Bush signed a measure to increase the debt limit ceiling to $9.815 trillion from $8.965 trillion, allowing the government to keep issuing debt.

The increase in the debt limit is the fifth since Bush took office in January 2001. The U.S. debt stood at about $5.6 trillion at the start of his presidency

UN warns of possible sharp rise in bird flu outbreaks ahead of Northern Hemisphere winter... http://hosted.ap.org/dynamic/stories/A/AS_GEN_ASIA_BIRD_FLU_ASOL-?SITE=AP&SECTION=HOME&TEMPLATE=DEFAULT&CTIME=2007-11-09-06-04-23

http://www.nytimes.com/2007/11/09/business/09shop.html?ex=1352264400&en=76e3c7ce5cabfdc4&ei=5090&partner=rssuserland&emc=rss Consumers have rendered a verdict on the coming holiday season: grim

 

Wall St. Bets against it’s own survival

Nov. 7 (Bloomberg) -- Credit-default swaps on bonds of Citigroup Inc., Wachovia Corp. and Morgan Stanley are trading at the highest in at least five years on speculation the nation's biggest banks may be forced to write down more subprime assets.

Analysts began revising predictions for writedowns at the banks after Citigroup this week said losses from the assets may rise to $11 billion. Credit-default swaps tied to Citigroup more than tripled in the past three weeks, indicating the risk of default is rising. Contracts on Morgan Stanley and Wachovia Corp. and Merrill Lynch & Co. are at or near six-year highs.

http://www.bloomberg.com/apps/news?pid=20601087&sid=auTmbruMWHfw&refer=home

A credit default swap (CDS) is a bilateral contract under which two counterparties agree to isolate and separately trade the credit risk of at least one third-party reference entity. Under a credit default swap agreement, a protection buyer pays a periodic fee to a protection seller in exchange for a contingent payment by the seller upon a credit event (such as a default or failure to pay) happening in the reference entity. When a credit event is triggered, the protection seller either takes delivery of the defaulted bond for the par value (physical settlement) or pays the protection buyer the difference between the par value and recovery value of the bond (cash settlement).

Credit default swaps resemble an insurance policy, as they can be used by debt owners to hedge against credit events. However, because there is no requirement to actually hold any asset or suffer a loss, credit default swaps can be used to speculate on changes in credit spread.

Credit default swaps are the most widely traded credit derivative product^[1]. The typical term of a credit default swap contract is five years, although being an over-the-counter derivative, credit default swaps of almost any maturity can be traded.

http://en.wikipedia.org/wiki/Credit_default_swap

Buying Swaps

Credit-default swaps tied to Citigroup's bonds have climbed 17 basis points to 70 basis points since Oct. 31, according to broker Phoenix Partners Group in New York. The contracts are trading at the widest levels since at least September 2002, data from Credit Suisse Group show.

A basis point on a contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.

At that level, Citigroup is trading as if it were rated Baa3, the lowest investment-grade rating, according to the credit strategy group at Moody's Investors Service.

Moody's this week lowered Citigroup's ratings to Aa2, its third-highest rating, from Aa1.

Level 3 and mainstream Dollar Refusal

BOSTON (MarketWatch) -- Citigroup Inc. (C:Citigroup, Inc C 36.18, -1.55, -4.1%) in a quarterly regulatory filing Monday said its so-called level 3 assets as of Sept. 30 were $134.84 billion. Level 3 assets are holdings that are so illiquid, or trade so infrequently, that they have no reliable price, so their valuations are based on management's best guess. The investment bank said its total liabilities related to level 3 assets at quarter-end were $40.36 billion, according to the Form 10-Q.

http://www.marketwatch.com/news/story/citigroup-reports-1348-billion-level/story.aspx?guid=%7BC06333CB%2DC985%2D4B41%2DA7B2%2D1699184BBA4E%7D

http://news.yahoo.com/s/ap/20071103/ap_on_re_eu/climate_security Think tank: Climate affects security

http://www.bloomberg.com/apps/news?pid=20601087&sid=aCs.keWwNdiY&refer=home Supermodel Bundchen Joins Hedge Funds Dumping Dollars Supermodel Bundchen Joins Hedge Funds Dumping Dollars

``We've told all of our clients that if you only had one idea, one investment, it would be to buy an investment in a non- dollar currency,'' said Gross, the chief investment officer of Pacific Investment Management Co. in Newport Beach, California, and manager of the world's biggest bond fund. ``That should be on top of the list,'' said Gross, whose firm is a unit of Munich- based insurer Allianz SE.

The Amero

http://www.amerocurrency.com/
From the mindsets documented above, and more data available through this site, emerges the concept of the "Amero," an international currency whereby the American monetary system and our treasury system become homogeneous with those of Mexico and Canada.

http://www.amerocurrency.com/amerophotos.html photos of the Amero

http://en.wikipedia.org/wiki/Amero The North American currency union is a proposal in which the three principal countries of North America, namely Canada, the United States and Mexico, would share a common currency. This idea is based on the common European Union currency, the euro. There are also related proposals for a single currency for all of the Americas. The hypothetical currency for both of these ideas is sometimes referred to as the Amero.

Support in other regions

There are many lower levels of currency cooperation that have occurred in the Americas. A number of nations – such as Argentina, Brazil and Canada – have at times tied their currency to the United States Dollar, and in 2000, Ecuador adopted the U.S. Dollar as its sole currency. In much of Central America and the Caribbean the U.S. Dollar is already a de facto secondary currency.

It serves as parallel legal tender in both Panama (since independence in 1903) and El Salvador (since 2001), and unofficially in Cuba where the Convertible Peso is currently pegged at 1 Peso equal to US$1.08 (previously, it was until 24 March
2005, 1 Peso = US$1).

Amero Video http://www.youtube.com/watch?v=6hiPrsc9g98

Private CIA: Rent-a-Spy

Blackwater's Owner Has Spies for Hire

http://www.washingtonpost.com/wp-dyn/content/article/2007/11/02/AR2007110202165.html?hpid=topnews

First it became a brand name in security for its work in Iraq and Afghanistan. Now it's taking on intelligence.

The Prince Group, the holding company that owns Blackwater Worldwide, has been building an operation that will sniff out intelligence about natural disasters, business-friendly governments, overseas regulations and global political developments for clients in industry and government.

http://www.totalintel.com/
Total Intelligence Solutions, Inc. (Total Intel), brings together the experience and collective knowledge of three well-established security organizations - The Black Group, Terrorism Research Center and Technical Defense - to provide Fortune 1000 companies with the only comprehensive and complete solution for private intelligence.

Total Intel is co-managed by Rob Richer, former Assistant Deputy Director of Operations (ADDO) at the Central Intelligence Agency (CIA) and Matthew Devost, Co-founder and President of Terrorism Research Center.

Oil, Fed injection, and embezzlement articles

OPEC oil ministers say they are powerless in the face of many factors driving up the price of crude, with one member of the producers' cartel warning that the 'market is out of control'.

Fed Injects $41 Billion Into US Financial System to Help Ease Credit Problems  Charles Merrill Fears Market Crash  Whisperings Of Gold Conspiracy  No end in sight for housing slump  Oil hits new record over $90  Billionaires Up, America Down

Former Colorado Gov. Describes ''CRIME OF CENTURY'': The first rule of embezzlement is to find some naive patsy. We sensed forty years ago the younger generation was not paying enough attention to public policy, so we quietly found ways to maintain our lifestyle and charge it to the next generation – and their children.