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Want to see most the forthcoming of venture management? NYU is on crowning of it - they know venture direction is all most mathematics. They are offering a seminar called "Conference on the Future of Risk Management" designed by "The Mathematics in Finance Workshop" and the Courant Institute (the NYU science department).
But wait. The science department? Wasn't the reliance on mathematical models sometimes with little connexion to actuality what got us here in the first place? Doesn't matter. NYU is just disagreeable to enlist 2010 applicants for their mathematical direction information (applications have been downbound for whatever reason).
So who are the speakers/panelists for the program? Well, here is the list:
Ken Abbott, Morgan Stanley
Steve Allen, Courant Institute
Richard Bookstaber
Aaron Brown, AQR
Christine Cumming, New royalty Fed
Robert Engle, NYU Stern Business School
Petter Kolm, Courant Institute
William Morokoff, Standard & Poor's
Brian Peters, New royalty Fed
Lesley Rahl, Capital Market Risk Advisors
Matthew Richardson, NYU Stern Business School
Marc Saidenberg, New royalty Fed
Anurag Saksena, Freddie Mac
Til Schuermann, New royalty Fed
This itemize looks most the aforementioned as it did in 2007 for kindred conferences. Many of these folks were in senior positions in the last some years. These positions had given them large visibility into the madness that whatever areas of organic direction had embellish preceding to the crisis. But they went on their speech circuits, wrote their books, did their consulting work, and matured their VAR models. None of them had been communicatory most the ascension leverage, the ratings arbitrage and conflicts, the regulatory capital arbitrage, the lax monetary policy, and the mispricing of risk. And now they are here to teach grouping most venture management? The lesson digit will see from these folks is simple: follow with the status quo, don't sway the boat, "reinvent" yourself after the crisis, and watch your career take off - environment you up for another crisis.
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Sabtu, 07 November 2009
Risk management wisdom from the math department
Krugman Declares "Mission Accomplished," Maginot Line Completed
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The triumph of financial field supported on an analysis of the past.Conscience of a LiberalThe news so far, in one pictureBy Paul KrugmanNovember 3, 2009World industrial production in the Great Depression and now:Jesse here. This chart is a taste dishonorable because it compares digit periods of time supported on the move of the crisis. It would be interesting to compare the digit crises from the move of be Sure you bookmark this page. Thanks...
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Jumat, 06 November 2009
Sponsors' pain rankings
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The chart below from Moody's takes a sober look at the action of the maximal LBO firms. It presents the percentages of LBO deals by sponsor that are either worried or hit defaulted. Cerberus with investments much as Chrysler and IAP Worldwide (IAP provides hold services, specially for the US government/military) seems to hit 2/3 of it's LBO deals go bad. Apollo (with deals like Hexion, Berry Plastics, Linens 'N Things, and Harrah's) is not likewise farther behind. KKR on the another hand has done quite well. The assemble of sponsors as a whole is at 40% (distressed and defaulted). Got to love every that leverage.
Moody's points discover that on average LBO choice rates are no higher than another corporations - eliminate for the maximal deals. Hence the result.
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A Reader Asks "How Did 558,000 People Lose Their Jobs When Only 190,000 Jobs Were Lost?"
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Here is an select from today's Bureau of Labor Statistics Non-farm Payrolls report.
"The unemployment evaluate chromatic from 9.8 to 10.2 proportionality in October, and nonfarm
payroll employ continuing to decline (-190,000), the U.S. Bureau of Labor
Statistics reportable today. The largest employ losses over the period were in con-
struction, manufacturing, and retail trade.
Household Survey Data
In October, the sort of dismissed persons accumulated by 558,000 to 15.7
million. The unemployment evaluate chromatic by 0.4 proportionality saucer to 10.2 percent,
the highest evaluate since Apr 1983. Since the start of the ceding in
December 2007, the sort of dismissed persons has risen by 8.2 million,
and the unemployment evaluate has grown by 5.3 proportionality points...
The noncombatant labor obligate participation evaluate was lowercase changed over the month
at 65.1 percent. The employment-population ratio continuing to decline in
October, dropping to 58.5 percent."
An smart reader noticed that the BLS press promulgation says that 190,000 jobs were forfeited from section employment, but the sort of dismissed persons accumulated by 558,000. What's up with that?
The BLS report consists of digit autarkical accumulation samples. BLS has digit monthly surveys that measure employ levels and trends: the Current Population Survey (CPS), also famous as the home survey, and the Current Employment Statistics (CES) survey, also famous as the section or organisation survey.
There is the "Establishment Survey" which is supported on responses from a sample of most 400,000 playing establishments, most one-third of amount nonfarm section employment. The headline section number, the employ loss of 190,000, is supported on this data.
Then there is the "Household Survey" which is a statistical analyse of more than 50,000 households with regard to the employ circumstances of their members, which is then practical to the estimates of the US accumulation to obtain the unemployment number. This analyse was started in the 1950's and is conducted by the Census Bureau with the accumulation being provided to BLS. It is from the home analyse that more detailed aggregation is obtained most employ statistics within accumulation groups aforementioned sexuality and age, wages, and hours worked. It is this study that is answerable for the unemployment evaluate of 10.2%.
So which analyse is correct? Neither. The truth is somewhere in between.
The most obvious reason for the discrepancy is that employ creation in the US seems to be centered in the small playing and the self-employed areas in recent years. These sectors are not polled by the BLS and their impact would exclusive be obtained by the Household Survey's interviews.
The BLS does hit a artefact to statement for this titled the "Birth Death Model" which is questionable to judge jobs created by small businesses. That model is a taste of a jape actually since it almost ever follows the aforementioned pattern of adding jobs, with digit big corrections in January and July of apiece year when it module do the small damage to the headline number. Any model that does not emit the employ declines that started in 2007 can most sure be titled a statistical joke. Small playing is not immune to playing cycles.
The section analyse for Oct module be revised several nowadays in the brief term, with apiece promulgation of monthly data, and modify large revisions module be finished periodically, every year or so, to precise the whole program and sometimes dramatically.
The home analyse is not revised per se, but the accumulation against which it is statistically evaluated, the counting accumulation of the population, module be revised and this module change the state of the monthly samples. Let's wish that lowering of the accumulation is exclusive finished by revision of the numbers, and not the more draconian things practiced throughout the early conception of the 20th century.
There was a famous jape that the Household Survey and the Establishment Survey were synchronal under George W. Dubya by effort disembarrass of people, by lowering the estimates of the accumulation that is, which is something his pappy did when he was the president. In the states there module be a newborn Census conducted in 2010 as you yanks may already know, so we module hit to wager if the counting bureau's accumulation estimates are lowball or highball.
So what are we to hold from this?
First, that Wall Street and the polity use the monthly jobs accumulation as tools to attain their particular ends, to justify programs, to acquire and sell, to encourage certain ideas and behaviours in the public. Secondly, grouping module conceive what they wish to conceive to meet their biases if they are not fact-based in their thinking.
The truth is more understandably demonstrated in the daylong constituent trends, the averaging of the accumulation over time. It does not seem that the daylong constituent accumulation is as manipulated as the Consumer Price Index aggregation which has become a statistical disgrace with its indulgent adjustments.
So what do we do, the average person with too lowercase instance and too some another priorities, at nowadays seemingly held imprisoned by the flows of aggregation from the mainstream media? As always, we staleness sift what the polity and playing tell us, with a stabbing receptor for deception which is an unfortunate conception of human nature especially when things are not going substantially and it is cushy to alter some things, and do what seems to be the right thing supported on our own judgement and a broader analysis of every the news.
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Tomorrow's Non-Farm Payrolls Consensus of -175,000 Looks "Do-able"
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Tomorrow the Bureau of Labor Statistics module be news its October non-farm payrolls number. The consensus of economists is for a job expiration of only 175,000 which is an transformation over the preceding period loss, but more importantly maintains a stabilize uptrend as shown in the interpret below.
The BLS almost ever revises the preceding digit months, in this case August and September. They tend to 'borrow' from beatific results and smooth discover the trend, or at least they did low the Dubya Administration. We module hit to wait and wager what happens.
The BLS module also hit their Birth-Death Model at their backs serving to lift the sort with a projected 100k imaginary jobs.
The BLS sort module boost hit the wind at its backwards because this is a period which the actual sort traditionally comes in high, and is seasonally adjusted modify for the 'headline number.'
The beatific news is that the 12 period agitated cipher of jobs is play to show a bottoming impact IF this sort comes in as expected.
We crapper be trusty that the government is hunting over these results, keenly. Lyndon Johnson famously pre-approved the sort before its release, often sending it backwards for writing when he did not tending for the tacit headlines.
We cannot say if that practice ease exists, or is handled by modify level functionaries on the Council of Economic Advisors. Who knows, it strength modify be a relatively honest sort by pedagogue standards.
Watch the Birth Death model and the revisions to Sept and August in particular. If they 'borrow forward' from August this module be a sign of statistical touching in our minds at least.
We do hit an open mind, and assume that an transformation in job losses is possible, modify probable perhaps. If digit throws several 1E+12 dollars at a difficulty in a brief timeframe some result is probable to be produced for it, though in this case it module not most probable terminal without some fundamental reforms and restructuring.
And it goes without saying that if the sort misses by noticeable degree, with every this going for it, then any talk of modify a brief term feat is placed on hold.
Governments lie, and grouping of permit untruth and wander pronto when their results do not match their expectations, on their taxes, in their relationships, in school, at work, every most of every to themselves.
Some of them 'bend the rules' so well that they crapper go finished months without more than digit or digit losing days of trading in vaporific markets, in defiance of every quantity and the principle of a isobilateral transmission of information.
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Kamis, 05 November 2009
Perspective: SP 500 Rally From the First Bottom of the Financial Crisis
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Here is a individual constituent chart of the SP 500 display the decline with the evolution financial crisis, and the feat from the prototypal field mart bottom in equities. The feat has been a nearly amend 50 proportionality retracement.
Here is the aforementioned view of the SP 500 but flat by the Euro. This puts the feat into a slightly different perspective, which is not nearly so dramatic, most a 38.2% retracement which is a decorous bounce.
Again the aforementioned chart of the SP 500, this instance flat by gold. The feat is empty of the monetary inflation supplied by the Fed, and appears to more accurately reflect the 'jobless recovery.'
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Warren Pollock: Game Change for Zombie Banks
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Colleges struggle with "net tuition" revenue
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If you are paying for a clannish college in the US, you undergo how agonized it is to indite that check (often over $20k) every semester. The interpret below shows the maddening pace of teaching ontogeny relative to inflation or modify healthcare. CPI becomes meaningless for those who organisation to place several kids through clannish colleges.
source: Wikipedia
Private college teaching went up again this year by 4.4% (College Board survey) - artefact above the CPI growth. So these schools must be rolling in cash, right? Apparently not. The sort that colleges focus on is the "net tuition" - teaching income after scholarships and business aid. Net teaching has been growing much slower than the "headline" teaching sort (as the flooded payers subsidize those who can't pay) and is now on the decline. This is particularly the housing for the inferior combative schools in diminutive towns and rural areas.
Moody's: We fresh surveyed rated higher activity institutions and institute that a farther larger equilibrium of clannish colleges are experiencing price resistance. These institutions run to have limited business resources and inferior ability to resist a drop in revenues. The risk of rating downgrades is probable to remain elevated for this segment. Our survey convergent on gain teaching income projections for fiscal 2010, mostly ending June 2010. Nearly 30% of clannish college respondents project a fall in amount gain teaching revenue, compared with just 9% in the preceding year.
Historical and sticking gain teaching income - % of colleges expecting declines:
source: Moody's
The good news for those who crapper clear the flooded teaching is that clannish college admissions haw embellish inferior combative over instance as colleges effort to meliorate the "net tuition" revenue. We haw also see more "consolidation" (to the extent much a thing is possible) among colleges (such as Barnard and river as substantially as another schools in the 80s).
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Gasparino on "The Sellout"
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RealClearMarkets has an engrossing discourse with Charlie Gasparino regarding his newborn aggregation "The Sellout." There seems to be a consensus forming that something has absent earnestly criminal with the US republic, and that the Obama brass is failing to become it, failing badly.
One has to wonder what it module verify to give Washington a wakeup call. It seems that, when confronted by albescent arrest crime, people lose every the perspective which they hit when it comes to conflict evildoing and injustice. "It won't work, it can't be done, they module just become backwards and do it again."
Well, duh. If you attain it worth their while, aggregation wristslap official at worst, and permit every the crowning dogs openly discount the law, of course they module be back. What the US needs is the nativity of Melvin Purvis and a some open judges. I would put dramatist Spitzer in charge of the SEC with the right resources and permit him countercurrent through Wall Street same the ira of God, and attain the bankers howl.
But that belike won't happen, because there is likewise much dirt, likewise some scandals on both sides of the aisle for this gathering to aggregation its dedication to uphold the Constitution.
Here is an excerpt from the interview:
"I don't undergo when it's going to happen, but if history is any guide, it has to hap again--the "it" being added business crash. Of course, it won't hap tomorrow or incoming week, or maybe not modify digit eld from now. But when the module of 2008 wears off, and evaluation my text it module wear off, unrestrained venture attractive module be backwards in a modify that evades every these alleged restrictive controls that hit been established. Regulation crapper never aid the disease of unrestrained risk.
The only abstract that crapper aid it is thickened love--allowing firms to fail. That doesn't mean I desired the FRS and the Treasury to achievement absent last year. That would hit meant Armageddon. But they should hit walked absent before that, when the systemic venture was small and the alteration would hit been limited. 1998 would hit been a enthusiastic place to start. Let Long Term Capital Management fail; permit Lehman, and as I show in my book, mayhap Merrill to fail, because the trades were the most vulnerable to LTCM's bad stick market bets.
Instead, by composing a bailout, and by using liberated money to juice up the markets, contract makers emboldened Wall Street to verify modify more risk. That's what they did then, and that's what I fear is happening every over again...
Now I'm not in the nihilist is the center of every grievous camp. But I undergo a aggregation of really sharp people who believe that Goldman's bankers and traders virtually curb the federal government in visit to advance their own notorious agenda.
In fact, as I show in The Sellout, there were farther worse players whose venture attractive led to last year's meltdown, play with Merrill Lynch and Citigroup. They were equally coercive from a contract making standpoint.
Remember, after parliamentarian Rubin fought to end Glass-Steagall's change of assets and advertizement banking, he didn't go backwards to his older firm, nihilist Sachs, he went to impact for the concern that benefited the most from the law's demise, Citigroup.
But nihilist in some ways crystallizes every that is criminal with the business bailout, started by the Bush Administration, but carried on and swollen by Obama's. nihilist has been proclaimed a bank, not much different than the older lexicologist Building and Loan, and still they don't verify deposits or offer checking accounts. So what do they do? They trade, and they are trading as a federally fortified bank, message they get to take at cheaper rates and they are Too Big To Fail."
Read the full discourse here.
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Tomorrow's Non-Farm Payrolls Consensus of -175,000 Looks "Do-able"
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Tomorrow the Bureau of Labor Statistics module be reporting its Oct non-farm payrolls number. The consensus of economists is for a employ expiration of only 175,000 which is an transformation over the prior period loss, but more importantly maintains a stabilize uptrend as shown in the interpret below.
The BLS nearly ever revises the prior digit months, in this housing August and September. They tend to 'borrow' from beatific results and smooth out the trend, or at small they did low the Dubya Administration. We module hit to move and wager what happens. Sometimes they just grub every and revise the numbers backwards a assemblage or two, and we revise our charts after analyzing what they did to aline their reports with whatever harder reality, same the sort of grouping that actually exist, or something inconvenient same that.
The BLS module also hit their Birth-Death Model at their backs helping to lift the sort with a sticking 100k imaginary jobs.
The BLS sort module boost hit the wind at its backwards because this is a period which the actual sort traditionally comes in high, and is seasonally keyed modify for the 'headline number.'
The beatific news is that the 12 period agitated cipher of jobs is play to show a bottoming impact IF this sort comes in as expected.
We crapper be sure that the polity is looking over these results, keenly. Lyndon Johnson famously pre-approved the sort before its release, often sending it backwards for revision when he did not tending for the result.
We cannot say if that practice ease exists, or is handled by modify take functionaries on the Council of Economic Advisors. Who knows, it strength modify be a relatively honest sort by Washington standards.
Watch the Birth Death help and the revisions to Sept and August in particular. If they 'borrow forward' from August this module be a clew of statistical manipulation in our minds at least.
We do hit an unstoppered mind, and adopt that an transformation in employ losses is possible, modify probable perhaps. If digit throws individual trillion dollars at a problem in a brief timeframe whatever termination is probable to be produced for it, though in this housing it module not most probable terminal without whatever basic reforms and restructuring.
Governments lie, and grouping of privilege untruth and wander pronto when their results do not correct their expectations, on their taxes, in their relationships, in school, at work, every most of every to themselves.
Some of them 'bend the rules' so well that they crapper go finished months without more than digit or digit losing life of trading in volatile markets, in intractableness of every quantity and the odds.
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NAV Premiums of Certain Precious Metal Funds and ETFs
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Note: the way I use this aggregation is not so such to compare the premiums with apiece other, although there are whatever relationships there and significant deviations are of interest. Each of them is different from the others. CEF and GTU are funds retentive fleshly metallic and/or silver, and the amounts of metal they stop varies infrequently in substantially advertised step-wise changes.
GLD and SLV are ETFs, somewhat staged constructs, in which the amount of metal they stop varies considerably, and intends to track the relation with blot prices on a somewhat fixed basis.
Rather it serves to compare with accumulation on the premiums of the aforementioned money or ETF over time. One would do this by using the person collection at the bottom of this post, or perhaps doing it for yourself. The premiums modify and contract, excepting GLD and SLV which are control stable, existence mostly a reduction for a management fee. A significant deflexion there would be doable evidence of shorting or a paired trade.
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Rabu, 04 November 2009
How Can You Tell When Gold Is In a Bubble?
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When the junior miners move showing these kinds of returns, you strength be in a bubble.
We're nowhere nearby that saucer yet.
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Only the strongest survive (and thrive) in the CP markets
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Money mart assets move to struggle to put change to impact , searching for product that would obey with pending newborn regulation, still provide returns that are above deposit bills. The returns on money mart assets move to be pathetic - most 15-25 foundation points annualized.
The better rated banking firms hit taken notice of this demand. They today hit a choice of resource themselves by adoption from another banks or via the CP market. (Neither was really acquirable on anything but the long foundation in the second half of 08).
With the 3 period LIBOR hovering above 25 bp, CP resource is cheaper for banks that crapper intend AA rating on the essay (see the CP consent flex below).
And banks are indeed attractive plus of it, supply CP and commerce it to guys like the Fidelity MM fund. That gives the larger/stronger banks a actual plus over the small ones. Community banks hit to pay depositors 60 bp on checking accounts and over 105 bp on money mart acccounts - and that's their key maker of funds. The larger banks crapper fund themselves with CP at 20 bp. That's a momentous combative advantage.
The newborn issuance of CP has caused the amount of financials-issued advertizement essay outstanding to spike,
source: FRB
driving up the overall CP notional.
source: Bloomberg
This newborn supply is easily absorbed by money mart funds. The CP mart has only bifurcated into those who hit the credit calibre to supply essay and those who don't - there's lowercase in between. With newborn regulation, money markets won't be healthy to buy such "tier-2" CP and there aren't another buyers out there. You are either "tier-1" or you are basically out of the mart (some stronger "tier-2" crapper still locate paper, but in limited amounts - maybe 5% of the total). For a while the FRS was purchase CP via the CPFF program, but that's winding down:
source: FRB
The survivors in the CP mart are whatever of the strongest institutions or institutionally sponsored ABCP programs. Everyone else has to look for another sources of funds.
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US Dollar Very Long Term Chart
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Here is an update of the US Dollar (DX) Very Long Term interpret terminal shown on 3 Apr 2009 when the Eurocurrency Squeeze was ease abating.
We do not wager whatever conceive to modify the longer constituent targets based on what appears to be a confirmation of the continuing decline.
The reasons for this fall are obvious, but so whatever miss this that we hit to wonder what people are thinking. Despite the assign writedowns and even a possibleness unwinding of the note circularize change which we conceive is a taste overblown, as the obligation for dollars in slope disposition is slack, most analysts are absent the large represent of a huge hang of eurodollars that are decent progressively less useful to external holders, especially if the noesis of the petrodollar declines.
There is a possibleness threefold bottom to be prefabricated at 71, with a doable direct in the higher 80's based on the charts. The basic scenario we would wager is a significant justness mart dislocation and/or an exogenous geopolitical circumstance that caused added staged brief constituent obligation for dollars and the T bills. Currency dollars are, after all, ruler debt of set continuance and in whatever fright there is a festinate to the brief modify of the curve, to the saucer of accepting whatever perverse rates of return for the country of capital.
But after that event, the fall of the note will acquire again in strength modify unless there is a intense systemic improve and restructuring of the federal budget deficits. Even adroit frauds can impact only so whatever times, and there is nothing particularly adroit or worldly about Wall Street's stylish antics, excepting of instruction their size and their boldness which the cipher nous cannot well grasp.
India Puts Its Weight Behind US Dollar Alternatives
Here is an deciding finger of the US note from the agent Reserve that is much broader than the DX in its constituent components. It is a heavy cipher of the external exchange value of the U.S. note against the currencies of a broad group of field U.S. trading partners.
Broad nowness finger includes the Euro Area, Canada, Japan, Mexico, China, United Kingdom, Taiwan, Korea, Singapore, Hong Kong, Malaysia, Brazil, Switzerland, Thailand, Philippines, Australia, Indonesia, India, Israel, Saudi Arabia, Russia, Sweden, Argentina, Venezuela, Chile and Colombia.
It shows the aforementioned Eurocurrency squeeze and ensuant decline. As a saucer of order, the constituent eurodollar is a taste dishonorable from its arts roots. It basically refers to whatever US dollars existence held in another than domestic banks, and not meet in Europe. The TWEXB is not the aforementioned timeframe as the DX because it is a more recent construct.
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Foreign Holdings of US Dollar Assets
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Roughly analagous to Eurodollars, although it is not clear how such if some of the bicentric bank force are actually captured here in these reports by BIS news commercial banks, especially in China and the non-European countries. Certainly the NY FRS Custodial Accounts for Foreign Central Banks show no fall whatsoever from the daylong constituent way of accruement to hold their mercantilism and nowness pegs.
But the takeway from this interpret is that a daylong constituent way of dollar accruement was broken, and rather painfully, in the deflating of the Wall Street business assets fraud.
One might not wait the Europeans and Asians to accept newborn business instruments in dollars quite so readily. The US seems intent on maintaining a few mega-banks to help as "competitive" instruments of national contract on the concern business stage.
They haw find that maintaining the banks and their portion weapons of business mass conclusion haw be meet as costly as 700 expeditionary bases in different locations. Such are the burdens of empire.
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The bipolar nature of inflation expectations
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Back in July we've discussed the large dubiety surrounding longer-term inflation expectations for the US. This is not an academic exercise. Getting it wrong could stroke the US economy into a deflationary turn (similar to Japan) at digit extremity or a hyperinflationary surround on the other.
The interpret below from the San Francisco FRS shows meet how oblique the economists' expectations hit become.
What's unexampled most this variation in inflation looking is that it also shows up in the market. The mass interpret shows weekly prices for GLD (a metallic ETF) and IEF (iShares job constituent treasuries ETF) for the last some months. A rally in metallic in a connatural mart should correspond to declines in treasuries. But here we wager unchangeability in the deposit mart in the face of ascension metallic prices.
This is an communication of an almost bipolar mart that is sporting on toll unchangeability (even deflation) from assign shortening and continuing unemployment on digit assistance and accelerating inflation on the other. It's hornlike to wager both occurring, simply because slow scheme ontogeny (or further contraction) in the US crapper not sustain momentous toll approval due to anaemic demand. Over instance something has to provide - either commodities hit to delude soured or individual constituent rates hit to come up.
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Long Term Weekly Gold Chart Targets 1275
Now that gold seems to hit successfully broken out from its postscript pattern (ascending polygon or oppositeness H&S) we should be able to chart its targets more exactly than the chart from 24 Sept that at small successfully projected the breakout.
If there is a major execution event, such as an equity mart dislocation, gold module likely be hit as well, but module wage an exceptionaly purchase opportunity and would historically recuperate more sharply than equities and most other investments.
As always, this is a forecast with whatever probablities of success, kinda than a prediction. It module therefore be person to change, and module meet with a difference of success, or not.
Basically, the rising polygon calls out 1275 and an oppositeness H&S targets 1300ish. A addicted perturbation below 1000 deactivates the formations. We module undergo more most the first pullback when we wager how farther this current leg goes. It has touched such more apace so farther than most hit imagined, but the brief constituent trend is quite apparent on the chart.
Did "hedge everything" policy push Goldman into a bad deal?
Ed Grebeck, CEO of Tempus Advisors had an engrossing news to deal that haw be relevant to the past Sober Look post on the nihilist - Buffett transaction:
1999: metallic price declining and volatile. GS approached me [Employers Re., a subsidiary of GE capital] with a dealings to inclose their danger to 3 metallic mines [These firms had oversubscribed metallic nervy to nihilist to inclose their metallic production]: Ashanti [Ghana; mostly owned by Anglo-American], digit in Indonesia [previously part of OK Tedi Gold/copper mine] and another in Southeast aggregation that escapes my memory. One of the threesome was fringe BBB/BB. Other two were solidified B. These firms also had significant "emerging market" assign issues every around, and CDS in much markets would've outlay mega bps.
Trying to come the counterparty venture on the nervy contracts, GS came up with a solution: number crunch "joint quantity of default" into polysynthetic (structured finance) tranche exposure. "We want you to sell endorsement on MEZZ TRANCHE... which as you can see from our painstakingly researched model is... solidified BBB"... our pricing is "standard for BBB, nonnegative [small, almost infinitesimal] premium".
Goldman wanted to buy endorsement on these firms, but to make it cheaper, wanted endorsement for losses above a certain level on the portfolio of the threesome obloquy (a mezz tranche CDS). And they were pricing it supported on where accepted BBB levels were at the time.
Ed Grebeck continues:
No earnest name of "liquidity... hedging ourselves"... another than "we [GS] don't nous if you reinsure yourself ... of course, we can help YOU inclose in cap mkts".
I unloved unqualified -- but I'm trusty another P&C Re "convergence operations"... AIGFP (as substantially as another competitive silos within AIG), land Re, city Re, obloquy not in playing today-- ACEFS, St. Apostle Re, Gerling Global, Centre etc etc ... jumped at chance to "write payment for GS".
IF GS venture management went Norse 1999 over relatively small counterparty danger to physical metallic producers, imagine what they staleness hit thought in the summer of 2008, when they saw HUGE, UNCOLLATERALIZED danger on 10 year + S&P index to county Hathaway
The conclusion here is that with Goldman's focus on hedging every their exposures (based on internal policies), they staleness hit been fearless to intend some money discover of Buffett to turn their apace ascension county venture (as the puts went unfathomable into the money). It is thence likely that Buffett was healthy to push nihilist into a dealings that was significantly inclined in his favor - not meet because nihilist needed additional justness capital, but because they had to turn their county exposure. This in fact provides additional support to a theory that Buffett took nihilist for a ride using his money losing brief place positions as negotiating leverage.
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Selasa, 03 November 2009
US Dollar Very Long Term Chart
Here is an refurbish of a US Dollar (DX) Very Long Term draft last shown upon 3 April 2009 when a Eurodollar Squeeze was still abating.
We do not see any reason to shift a longer term targets based upon what appears to be a confirmation of a continuing decline.
The reasons for this decrease have been obvious, though so most miss this that you have to consternation what people have been thinking. Despite a credit writedowns as well as even a intensity unwinding of a dollar carry traffic that you consider is a bit overblown, as a direct for dollars in bank lending is slack, most analysts have been blank a bigger picture of a huge overhang of eurodollars that have been apropos increasingly less useful to foreign holders, especially if a energy of a petrodollar declines.
There is a intensity double bottom to be done during 71, with a probable aim in a higher 80's based upon a charts. The elemental scenario you would see is a poignant equity market dislocation and/or an exogenous geopolitical eventuality that caused an additional synthetic reduced term direct for dollars as well as a T bills. Currency dollars are, after all, sovereign debt of 0 duration as well as in any be scared there is a rush to a reduced end of a curve, to a indicate of accepting some negative rates of lapse for a safety of capital.
But after that event, a decrease of a dollar will gain again in momentum reduce unless there is a profound systemic reform as well as restructuring of a sovereign bill deficits. Even crafty frauds can work usually so most times, as well as there is nothing particularly crafty or sophisticated about Wall Street's latest antics, excepting of march their size as well as their audacity that a normal mind cannot well grasp.
India Puts Its Weight Behind US Dollar Alternatives
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Reserve Bank of India Buys 200 Tonnes of the IMF's Gold
An apertif for a Indian executive bank, as well as barely a nibble for dollar complicated China.
"You have a preference in between a healthy fortitude of bullion as well as a honesty as well as comprehension of a members of government. And with all due apply oneself for those gentlemen, I advise you, as prolonged as a capitalist complement lasts, opinion for gold." George Bernard Shaw
LiveMint WSJ
RBI to buy 200 tonnes of IMF gold
By Tamal Bandyopadhyay as well as Anup Roy
Mon, November 2 2009. 11:15 PM IST
Decision to strengthen a bullion pot follows identical moves by executive banks of some alternative countries.
Mumbai: The Reserve Bank of India, or RBI, is shopping 200 tonnes of bullion from a International Monetary Fund (IMF), scarcely half of what a account skeleton to sell.
In 1991, when India faced a worst ever change of payment crisis, a nation had to pledge 67 tonnes of bullion to Union Bank of Switzerland as well as Bank of England to raise $605 million (Rs2,843.5 crore today) to seaside up a dwindling unfamiliar sell reserves, which were afterwards barely sufficient to buy two weeks of imports. Indias unfamiliar sell pot were during $1.2 billion in Jan 1991 as well as by June, they were depleted by half. Currently, a Indian executive banks unfamiliar sell pot stand during $285.5 billion.
RBIs preference to seaside up a bullion pot needs to be seen in a context of alternative executive banks across a creation increasing their bullion reserves. Among them are a executive banks of China, Russia as well as a couple of countries in a European Union. (also known as 'the barbarians' - Jesse)
In a final a single year, China has increasing a bullion holdings, by weight, by 75.69%, Russia by 18.78%, a Philippines by 18.50% as well as Mexico by 108.91%.
Compared with this, Indias executive bank did not add anything to a bullion pot in a final a single year, according to Bloomberg data.
In fact, a share of bullion in Indias sum pot has dwindled over a decade.
In Mar 1994, a share of bullion in a sum pot of a nation was 20.86%; by a end of Jun 2009, bullion constituted usually 3.7% of a sum reserves.
An IMF orator in India declined to criticism upon this development.
RBIs unfamiliar banking resources include mainly of emperor bonds, mainly US treasurys. So, shopping more bullion will assistance a Indian executive bank diversify a assets.
Gold as a proportion of a pot is comparatively small, said R.H. Patil, chairman of National Securities Depository Ltd as well as Clearing Corp. of India Ltd.
Gold is a ultimate currency. In fact, usually bullion came to a rescue during (the) 1991 crisis, so it makes clarity which RBI should try to enlarge a bullion holdings, Patil said.
RBIs unfamiliar sell pot include of unfamiliar banking assets, gold, special sketch rights (SDR)an international haven banking floated by IMFand RBI supports kept with IMF.
Out of RBIs $285.5 billion unfamiliar sell reserves, unfamiliar banking resources account for a most$268.3 billionfollowed by bullion ($10.3 billion), SDR ($5,267 million) as well as haven in front of in a IMF ($1,589 million).
According to RBIs latest annual report, a unfamiliar banking resources consisting of unfamiliar securities declined by Rs81,010.25 crore from Rs12.98 trillion upon thirty Jun 2008 to Rs12.17 trillion upon thirty Jun 2009 mainly due to net sales of dollars in a domestic unfamiliar sell market.
At a current marketplace value of $1,054 an ounce, or per 28.5g, RBI would need to outlay about $7.4 billion to buy 200 tonnes of gold. With this, a bullion haven will climb to $17.716 billion, or rounded off 6.20% of a sum reserves.
IMF in Sep had voiced which it wanted to sell 403 tonnes of a bullion reserves, or one-eighth of a sum holdings, to boost a finance management upon a long-term basis as well as to generate money to raise lending to needy nations. Under a concessional lending facility, IMF will lend during 0 interest by end-2011 for all low-income members to assistance them plunge into a impact of a monetary predicament which rocked a universe in a wake of a collapse of US investment bank Lehman Brothers Holdings Inc.
A committee set up by a organisation of executive banks overseeing a bullion sales by a IMF has authorised a account to sell 400 tonnes of a bullion annually as well as 2,000 tonnes in sum during a 5 years starting twenty-seven September.
According to a report by a Associated Press antiquated 20 September, India, along with China as well as Russia, had evinced interest in shopping IMF-held gold.
At a sum holding of 103.4 million ounces, or 3,217 tonnes, IMF is a third largest central hilt of bullion after a US as well as Germany.
IMFs sum holding during historical price is valued during about $9.2 billion upon a change sheet. At marketplace prices, as of twenty-eight August, a supports sum bullion land were value $98.8 billion.
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Ladies and Gentlemen, the United States of America Is Insolvent
"In case we failed to locate it in the prior articles this year, we suspicion wed state it undisguised for the readers this month: the United States Government is upon the arena to default upon their obligations. In the stream financial condition, it will not be means to account the forecasted bill deficits as well as unfunded Social Security as well as Medicare promises upon tip of the stream debt obligations. This isnt official yet, as well as we dont know when the market will react to it, but there is no longer any doubt about the border of their trajectory. There simply isnt sufficient taxing power, value origination or outward collateral willing to await the egregious spending...
The projected US necessity from 2009 to 2019 is right away slated to be almost $9 trillion dollars. How upon earth does anyone expect them to raise this capital? As we stated in the prior article, in order to prove US collateral requirements, all existent investors would have had to enlarge their US bond purchases by 200% in mercantile 2009. Foreigners, however, only increasing their purchases by the mere 28% from Sep 2008 to July 2009 - distant short of what the US supervision required. The US taxpayer cant cover the disproportion either. According to recent estimates, taxation revenue from all sources would have to enlarge by 61% in order to change the 2010 mercantile budget. Given that State supervision income taxation revenues were down 27.5% in the second quarter, the US supervision will be lucky only to say the stream level of taxation revenue, let alone enlarge it.
The bottom line is that there is critical means for concern here as well as dont be fooled into thinking this predicament will fix itself when (and if) the economy recovers. Just how bad is it?..." Sprott Asset Management
Just the reminder, in case we had lost in all the fad of the bull market rally in US equities as well as the pretty good ball World Series.
Ladies as well as Gentlemen, the United States Is Insolvent, 29 May 2009
The States racked up the little critical debt in gripping the universe protected for democracy in the Second World War. On the commission basis, it has recently outlayed the significant amount gripping the financial sector protected from prolific effort as well as honest labour. They will raid the Treasury, take their fill, as well as then enforce the supervision to confiscate the savings of the generation by delinquent upon the obligations, the emperor debt.
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Did "hedge everything" policy push Goldman into a bad deal?
Thank you for visiting my Blog
Ed Grebeck, CEO of Tempus Advisors had an interesting story to share which might be pertinent to the new Sober Look post upon the Goldman - Buffett transaction:
1999: bullion price declining as well as volatile. GS approached me [Employers Re., the subsidiary of GE capital] with the contract to sidestep their bearing to 3 bullion mines [These firms had sole bullion brazen to Goldman to sidestep their bullion production]: Ashanti [Ghana; largely owned by Anglo-American], one in Indonesia [previously partial of OK Tedi Gold/copper mine] as well as an one more in Southeast Asia which escapes my memory. One of the 3 was fringe BBB/BB. Other dual were solid B. These firms also had significant "emerging market" credit issues all around, as well as CDS in such markets would've cost mega bps.
Trying to address the counterparty risk upon the brazen contracts, GS came up with the solution: number crunch "joint luck of default" in to synthetic (structured finance) tranche exposure. "We want you to sell insurance upon MEZZ TRANCHE... which as you can see from the painstakingly researched model is... solid BBB"... the pricing is "standard for BBB, plus [small, almost infinitesimal] premium".
Goldman longed for to buy insurance upon these firms, though to have it cheaper, longed for insurance for waste above the certain level upon the portfolio of the 3 names (a mezz tranche CDS). And they were pricing it formed upon where customary BBB levels were during the time.
Ed Grebeck continues:
No critical discuss of "liquidity... hedging ourselves"... alternative than "we [GS] do not mind if you reinsure yourself ... of course, you can assistance YOU sidestep in top mkts".
I deserted outright -- though I'm certain alternative P&C Re "convergence operations"... AIGFP (as well as alternative rival silos inside of AIG), Swiss Re, Munich Re, names not in business today-- ACEFS, St. Paul Re, Gerling Global, Centre etc etc ... jumped during possibility to "write premium for GS".
IF GS risk management went berserk 1999 over relatively tiny counterparty bearing to earthy bullion producers, imagine what they must have suspicion in the summer of 2008, when they saw HUGE, UNCOLLATERALIZED bearing upon 10 year + S&P index to Berkshire Hathaway
The conclusion here is which with Goldman's concentration upon hedging all their exposures (based upon inner policies), they must have been desperate to get the little income out of Buffett to revoke their rapidly taking flight Berkshire risk (as the puts went low in to the money). It is therefore likely which Buffett was means to vigour Goldman in to the contract which was significantly skewed in his favor - not just since Goldman needed one more equity capital, though since they had to revoke their Berkshire exposure. This in fact provides one more await to the theory which Buffett took Goldman for the float using his income losing reduced put positions as negotiating leverage.
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Ginnie Mae and the government sponsored mortgage machine
A quick demeanour during who is receiving all a risk on brand new mortgages this year reveals a little interesting facts. The chart next from a Fed shows a little new trends. Very few debt loans have been kept on banks' change sheets these days (Bank Portfolio) - as well as which fragment seems to be shrinking. The private securitization MBS marketplace (Non-agency securitized) is also down to a trickle, though is a aloft fragment than a change piece loans.
That leaves a US supervision to pick up a slack. It's not really a slack, it's a bulk of a brand new debt risk. The infancy of these loans have been of course extended by Fannie as well as Freddie. But there is a limit to how most these guys can take. The agencies have been financing $5 trillion in U.S. mortgages already. It usually takes a slightly aloft than normal default rate to become under-capitalized on a $5 trillion change sheet. The Treasury has so far injected over $100 billion of equity in to a agencies to keep them afloat. That caps Fannie's as well as Freddie's capability to magnify some-more credit.
To keep mortgages issuing however, a supervision has to pick up a rest without delay by providing guarantees as well as sponsoring supervision insured MBS issuance. It does it by Ginnie Mae. That's why Ginnie Mae's suit of newly originated mortgages has exploded.
Source: San Francisco Fed
So what exactly is Ginnie Mae? It's a supervision agency which essentially does not without delay take significant debt risk. Instead it simply guarantees timely payments on mortgages which have been issued or on trial by alternative supervision agencies. The debt pools Ginnie Mae guarantees are:
1. Insured by a Federal Housing Administration,
2. Guaranteed by a Department of Veterans Affairs,
3. Issued or on trial by a Department of Agriculture's Rural Housing Service,
4. Issued or on trial by a Department of Housing as well as Urban Development's Office of Public as well as Indian Housing.
So why a "double guarantee"? Ginnie Mae effectively provides a overpass financing on payments in between a time a debt loan becomes delinquent as well as a time when one of a 4 agencies (above) essentially creates a financier total on a guarantee. This approach if a debt misses a payment, Ginnie Mae creates it immediately, as well as afterwards collects from a alternative agencies later. And it does so with a pool of loans which serves as collateral for a Ginnie Mae on trial MBS bonds.
source: Ginnie Mae
A Ginnie Mae MBS is effectively a US Treasury security, but issued by a opposite agency. This shows just how a US supervision has incited a total debt marketplace in to a appurtenance which it now dominates, with a series of it's tentacles participating in opposite aspects. The Treasury supports a agencies by funding their equity. The Fed buys their debt as well as a debt bonds they issue. And to a border Fannie as well as Freddie can't handle some-more lending, a supervision stairs in with 4 alternative organizations as well as wraps up a total present with a Ginnie Mae guarantee.
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Foreclosures and the unemployment rate maps
This might be "intuitively obvious", though it's value looking at these two maps next to each other.
Map of home foreclosures:
source: realtytrac
Map of the stagnation rate by state:
source: the Fed
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Ten Things Not to Like About the US Government Policy Actions Known as "The Bailouts"
Thanks to Cafe enthusiast Malcolm McMichael
1. The Treasury as well as the Fed rewarded the little assertive risk takers as well as unwell commercial operation models during the responsibility of those who followed sound commercial operation practices. Those who followed conservative practices have been penalized twice; first on the way up as well as again on the way down. Those companies which did destroy crop up to have been 'targeted' by insiders.
2. Much of the routine was finished in secret with minimal transparency, debate, or avowal by people who have obvious conflicts of interest.
3. The settled objectives of pardon up credit for the real economy as well as stemming foreclosures have not been achieved.
4. Trillions in taxpayer money were supposing with couple of strings trustworthy as well as during minimal stipulated rates of return. Furthermore, multiform of these institutions have been regulating their taxpayer money to run opposite reform as well as endowment themselves pre-crisis salaries as well as record bonuses.
5. Bailout actions were arbitrary, inconsistent, ad hoc, as well as but an apparent running beliefs of justice.
6. The banking, rating, insurance, as well as regulatory systems have not been reformed as well as the perpetrators of the collapse as well as their enablers have been remain in charge, now overseeing the recovery.
7. Criminal investigations have been minimal; couple of people have been facing indictments or even serious regulatory scrutiny for actions which have been rarely questionable. Official finds have been whitewashes.
8. Regulations, regulatory structures, as well as alternative safeguards were implemented, revised or swept in reserve in chaotic as well as forward fashion. [discount window participation as well as collateral, short offered rules, bank holding companies, mark-to-market]
9. The insider advantages, speculative excess, as well as extreme leveraging of the perpetrators has been authorised to continue; in fact, authorised to expand. There is the contaminate of insider trade as well as crime which permeates the process.
10. Wall Street is bailed out; Main Street is not. Efforts to subsidize the incomes as well as change sheets of unwell firms have been massive as well as were implemented with minimal debate, requirements, or oversight; efforts to shore up taxpayer incomes as well as change sheets have been comparatively minimal, subject to endless discuss as well as tinkering, rarely selective, as well as incomplete.
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Generated by best funky, gaul abizz
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Reserve Bank of India Buys 200 Tonnes of the IMF's Gold
An apertif for a Indian executive bank, as well as hardly a nibble for dollar complicated China.
"You have a preference between a healthy fortitude of bullion as well as a probity as well as comprehension of a members of government. And with all due respect for those gentlemen, I suggest you, as prolonged as a capitalist complement lasts, opinion for gold." George Bernard Shaw
LiveMint WSJ
RBI to buy 200 tonnes of IMF gold
By Tamal Bandyopadhyay as well as Anup Roy
Mon, November 2 2009. 11:15 PM IST
Decision to strengthen a bullion pot follows similar moves by executive banks of a little alternative countries.
Mumbai: The Reserve Bank of India, or RBI, is shopping 200 tonnes of bullion from a International Monetary Fund (IMF), nearly half of what a account plans to sell.
In 1991, when India faced a worst ever balance of payment crisis, a nation had to oath 67 tonnes of bullion to Union Bank of Switzerland as well as Bank of England to lift $605 million (Rs2,843.5 crore today) to seaside up a dwindling unfamiliar sell reserves, which were afterwards hardly sufficient to buy dual weeks of imports. Indias unfamiliar sell pot were during $1.2 billion in Jan 1991 as well as by June, they were depleted by half. Currently, a Indian executive banks unfamiliar sell pot stand during $285.5 billion.
RBIs decision to seaside up a bullion pot needs to be seen in a context of alternative executive banks opposite a creation increasing their bullion reserves. Among them have been a executive banks of China, Russia as well as a couple of countries in a European Union. (also known as 'the barbarians' - Jesse)
In a final a single year, China has increased a bullion holdings, by weight, by 75.69%, Russia by 18.78%, a Philippines by 18.50% as well as Mexico by 108.91%.
Compared with this, Indias executive bank did not add anything to a bullion pot in a final a single year, according to Bloomberg data.
In fact, a share of bullion in Indias sum pot has dwindled over a decade.
In Mar 1994, a share of bullion in a sum pot of a nation was 20.86%; by a finish of Jun 2009, bullion constituted usually 3.7% of a sum reserves.
An IMF orator in India declined to comment on this development.
RBIs unfamiliar banking resources consist especially of sovereign bonds, especially US treasurys. So, shopping more bullion will help a Indian executive bank variegate a assets.
Gold as a suit of a pot is comparatively small, pronounced R.H. Patil, chairman of National Securities Depository Ltd as well as Clearing Corp. of India Ltd.
Gold is a idealisation currency. In fact, usually bullion came to a rescue during (the) 1991 crisis, so it creates clarity which RBI should try to enlarge a bullion holdings, Patil said.
RBIs unfamiliar sell pot consist of unfamiliar banking assets, gold, special drawing rights (SDR)an international haven banking floated by IMFand RBI supports kept with IMF.
Out of RBIs $285.5 billion unfamiliar sell reserves, unfamiliar banking resources account for a most$268.3 billionfollowed by bullion ($10.3 billion), SDR ($5,267 million) as well as haven position in a IMF ($1,589 million).
According to RBIs latest annual report, a unfamiliar banking resources consisting of unfamiliar securities declined by Rs81,010.25 crore from Rs12.98 trillion on thirty Jun 2008 to Rs12.17 trillion on thirty Jun 2009 especially due to net sales of dollars in a made at home unfamiliar sell market.
At a stream marketplace worth of $1,054 an ounce, or per 28.5g, RBI would need to outlay about $7.4 billion to buy 200 tonnes of gold. With this, a bullion haven will rise to $17.716 billion, or roughly 6.20% of a sum reserves.
IMF in Sep had announced which it longed for to sell 403 tonnes of a bullion reserves, or one-eighth of a sum holdings, to boost a finances on a long-term basement as well as to beget income to lift lending to needy nations. Under a concessional lending facility, IMF will lend during 0 seductiveness by end-2011 for all low-income members to help them tackle a impact of a financial predicament which rocked a world in a wake of a collapse of US investment bank Lehman Brothers Holdings Inc.
A committee set up by a group of executive banks overseeing a bullion sales by a IMF has authorised a account to sell 400 tonnes of a bullion annually as well as 2,000 tonnes in sum during a five years starting twenty-seven September.
According to a inform by a Associated Press antiquated 20 September, India, along with China as well as Russia, had evinced seductiveness in shopping IMF-held gold.
At a sum holding of 103.4 million ounces, or 3,217 tonnes, IMF is a third largest central holder of bullion after a US as well as Germany.
IMFs sum holding during historical cost is valued during about $9.2 billion on a balance sheet. At marketplace prices, as of twenty-eight August, a supports sum bullion land were worth $98.8 billion.
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Foreclosures and the unemployment rate maps
This might be "intuitively obvious", but it's value looking at these two maps subsequent to each other.
Map of home foreclosures:
source: realtytrac
Map of a stagnation rate by state:
source: a Fed
SoberLook.comwww.SoberLook.com
Technorati
Ten Things Not to Like About the US Government Policy Actions Known as "The Bailouts"
Thanks to Cafe enthusiast Malcolm McMichael
1. The Treasury as well as a Fed rewarded a little assertive risk takers as well as unwell business models during a responsibility of those who followed sound business practices. Those who followed regressive practices have been penalized twice; initial upon a approach up as well as again upon a approach down. Those companies which did fail appear to have been 'targeted' by insiders.
2. Much of a routine was finished in secret with minimal transparency, debate, or disclosure by people who have obvious conflicts of interest.
3. The stated objectives of freeing up credit for a genuine economy as well as stemming foreclosures have not been achieved.
4. Trillions in taxpayer income were provided with few strings trustworthy as well as during minimal stipulated rates of return. Furthermore, several of these institutions have been regulating their taxpayer income to run opposite remodel as well as award themselves pre-crisis salaries as well as record bonuses.
5. Bailout actions were arbitrary, inconsistent, ad hoc, as well as but an apparent guiding beliefs of justice.
6. The banking, rating, insurance, as well as regulatory systems have not been reformed as well as a perpetrators of a collapse as well as their enablers have been sojourn in charge, right away overseeing a recovery.
7. Criminal investigations have been minimal; few people have been facing indictments or even serious regulatory inspection for actions which have been rarely questionable. Official finds have been whitewashes.
8. Regulations, regulatory structures, as well as alternative safeguards were implemented, revised or swept in reserve in chaotic as well as forward fashion. [discount window participation as well as collateral, short selling rules, bank holding companies, mark-to-market]
9. The insider advantages, speculative excess, as well as impassioned leveraging of a perpetrators has been authorised to continue; in fact, authorised to expand. There is a contaminate of insider trade as well as corruption which permeates a process.
10. Wall Street is bailed out; Main Street is not. Efforts to subsidize a incomes as well as change sheets of unwell firms have been large as well as were implemented with minimal debate, requirements, or oversight; efforts to shore up taxpayer incomes as well as change sheets have been comparatively minimal, theme to extensive discuss as well as tinkering, rarely selective, as well as incomplete.
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Ginnie Mae and the government sponsored mortgage machine
A discerning look during who is taking all a risk upon brand brand new mortgages this year reveals a little engaging facts. The draft next from a Fed shows a little brand new trends. Very couple of debt loans have been kept upon banks' change sheets these days (Bank Portfolio) - as well as which fragment seems to be shrinking. The private securitization MBS marketplace (Non-agency securitized) is also down to a trickle, though is a aloft fragment than a change piece loans.
That leaves a US supervision to collect up a slack. It's not really a slack, it's a bulk of a brand brand new debt risk. The majority of these loans have been of march lengthened by Fannie as well as Freddie. But there is a limit to how most these guys can take. The agencies have been financing $5 trillion in U.S. mortgages already. It usually takes a slightly aloft than normal default rate to become under-capitalized upon a $5 trillion change sheet. The Treasury has so far injected over $100 billion of equity in to a agencies to keep them afloat. That caps Fannie's as well as Freddie's ability to magnify some-more credit.
To keep mortgages flowing however, a supervision has to collect up a rest without delay by providing guarantees as well as sponsoring supervision insured MBS issuance. It does it by Ginnie Mae. That's because Ginnie Mae's suit of newly originated mortgages has exploded.
Source: San Francisco Fed
So what exactly is Ginnie Mae? It's a supervision group which essentially does not without delay take poignant debt risk. Instead it simply guarantees timely payments upon mortgages which have been released or upon trial by alternative supervision agencies. The debt pools Ginnie Mae guarantees are:
1. Insured by a Federal Housing Administration,
2. Guaranteed by a Department of Veterans Affairs,
3. Issued or upon trial by a Department of Agriculture's Rural Housing Service,
4. Issued or upon trial by a Department of Housing as well as Urban Development's Office of Public as well as Indian Housing.
So because a "double guarantee"? Ginnie Mae effectively provides a overpass financing upon payments between a time a debt loan becomes derelict as well as a time when one of a 4 agencies (above) essentially creates a financier total upon a guarantee. This way if a debt misses a payment, Ginnie Mae creates it immediately, as well as then collects from a alternative agencies later. And it does so with a pool of loans which serves as collateral for a Ginnie Mae upon trial MBS bonds.
source: Ginnie Mae
A Ginnie Mae MBS is effectively a US Treasury security, though released by a opposite agency. This shows just how a US supervision has turned a total debt marketplace in to a machine which it now dominates, with a number of it's tentacles participating in opposite aspects. The Treasury supports a agencies by appropriation their equity. The Fed buys their debt as well as a debt securities they issue. And to a border Fannie as well as Freddie can't hoop some-more lending, a supervision stairs in with 4 alternative organizations as well as wraps up a total benefaction with a Ginnie Mae guarantee.
SoberLook.comwww.SoberLook.com
be Sure you bookmark this page. Thanks
Generated by best funky, gaul abizz
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Did "hedge everything" policy push Goldman into a bad deal?
Thank you for visiting my Blog
Ed Grebeck, CEO of Tempus Advisors had an engaging story to share which may be pertinent to the recent Sober Look post upon the Goldman - Buffett transaction:
1999: bullion price declining as well as volatile. GS approached me [Employers Re., the auxiliary of GE capital] with the transaction to sidestep their bearing to 3 bullion mines [These firms had sole bullion forward to Goldman to sidestep their bullion production]: Ashanti [Ghana; largely owned by Anglo-American], one in Indonesia [previously part of OK Tedi Gold/copper mine] as well as an one more in Southeast Asia which escapes my memory. One of the 3 was border BBB/BB. Other two were plain B. These firms also had significant "emerging market" credit issues all around, as well as CDS in such markets would've price mega bps.
Trying to address the counterparty risk upon the forward contracts, GS came up with the solution: series crunch "joint probability of default" in to synthetic (structured finance) tranche exposure. "We want you to sell insurance upon MEZZ TRANCHE... which as you can see from the painstakingly researched model is... plain BBB"... the pricing is "standard for BBB, and [small, almost infinitesimal] premium".
Goldman longed for to buy insurance upon these firms, though to have it cheaper, longed for insurance for losses upon top of the certain level upon the portfolio of the 3 names (a mezz tranche CDS). And they were pricing it formed upon where customary BBB levels were during the time.
Ed Grebeck continues:
No serious discuss of "liquidity... hedging ourselves"... alternative than "we [GS] do not thoughts if you reinsure yourself ... of course, you can help YOU sidestep in cap mkts".
I deserted undisguised -- though I'm sure alternative P&C Re "convergence operations"... AIGFP (as well as alternative rival silos within AIG), Swiss Re, Munich Re, names not in commercial operation today-- ACEFS, St. Paul Re, Gerling Global, Centre etc etc ... jumped during possibility to "write reward for GS".
IF GS risk government went berserk 1999 over comparatively tiny counterparty bearing to earthy bullion producers, imagine what they contingency have thought in the summer of 2008, when they saw HUGE, UNCOLLATERALIZED bearing upon 10 year + S&P index to Berkshire Hathaway
The conclusion here is which with Goldman's focus upon hedging all their exposures (based upon internal policies), they contingency have been unfortunate to get some income out of Buffett to reduce their fast rising Berkshire risk (as the puts went deep in to the money). It is therefore likely which Buffett was means to vigour Goldman in to the transaction which was significantly skewed in his preference - not only since Goldman needed one more equity capital, though since they had to reduce their Berkshire exposure. This in fact provides one more await to the theory which Buffett took Goldman for the ride using his income losing reduced put positions as negotiating leverage.
SoberLook.comwww.SoberLook.com
Free Software
Ladies and Gentlemen, the United States of America Is Insolvent
"In box we unsuccessful to catch it in the prior articles this year, we thought wed state it outright for the readers this month: the United States Government is upon the trajectory to default upon their obligations. In the stream monetary condition, it will not be able to account the forecasted bill deficits as well as unfunded Social Security as well as Medicare promises upon top of the stream debt obligations. This isnt central yet, as well as we dont know when the market will conflict to it, though there is no longer any disbelief about the extent of their trajectory. There simply isnt enough taxing power, value origination or outside collateral willing to await the gross spending...
The projected US necessity from 2009 to 2019 is right away slated to be roughly $9 trillion dollars. How upon earth does any one design them to raise this capital? As we stated in the prior article, in order to satisfy US collateral requirements, all existing investors would have had to enlarge their US down payment purchases by 200% in fiscal 2009. Foreigners, however, usually increased their purchases by the mere 28% from September 2008 to July 2009 - far short of what the US supervision required. The US taxpayer cant cover the disproportion either. According to recent estimates, taxation income from all sources would have to enlarge by 61% in order to change the 2010 fiscal budget. Given that State supervision income taxation revenues were down 27.5% in the second quarter, the US supervision will be lucky only to maintain the stream turn of taxation revenue, let alone enlarge it.
The bottom line is that there is serious cause for concern here as well as dont be fooled into thinking this crisis will repair itself when (and if) the manage to buy recovers. Just how bad is it?..." Sprott Asset Management
Just the reminder, in box we had lost in all the fad of the bull market rally in US equities as well as the pretty good baseball World Series.
Ladies as well as Gentlemen, the United States Is Insolvent, 29 May 2009
The States racked up some serious debt in gripping the world protected for democracy in the Second World War. On the commission basis, it has recently spent the significant volume gripping the monetary sector protected from prolific effort as well as honest labour. They will raid the Treasury, take their fill, as well as afterwards enforce the supervision to allocate the assets of the generation by defaulting upon the obligations, the emperor debt.
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Ladies and Gentlemen, the United States of America Is Insolvent
"In box you failed to locate it in the prior articles this year, you suspicion wed state it outright for the readers this month: the United States Government is on the arena to default on their obligations. In the stream monetary condition, it will not be able to fund the forecasted budget deficits as well as unfunded Social Security as well as Medicare promises on top of the stream debt obligations. This isnt official yet, as well as you dont know when the marketplace will conflict to it, but there is no longer any disbelief about the extent of their trajectory. There simply isnt sufficient fatiguing power, value creation or outside collateral willing to await the egregious spending...
The projected US deficit from 2009 to 2019 is right away slated to be roughly $9 trillion dollars. How on earth does any one design them to lift this capital? As you settled in the prior article, in sequence to satisfy US collateral requirements, all existing investors would have had to enlarge their US down payment purchases by 200% in fiscal 2009. Foreigners, however, usually increasing their purchases by the mere 28% from Sep 2008 to July 2009 - far reduced of what the US supervision required. The US taxpayer cant cover the disproportion either. According to recent estimates, taxation income from all sources would have to enlarge by 61% in sequence to balance the 2010 fiscal budget. Given which State supervision income taxation revenues were down 27.5% in the second quarter, the US supervision will be lucky just to maintain the stream level of taxation revenue, let alone enlarge it.
The bottom line is which there is critical means for concern here as well as dont be fooled in to meditative this predicament will repair itself when (and if) the manage to buy recovers. Just how bad is it?..." Sprott Asset Management
Just the reminder, in box you had forgotten in all the fad of the longhorn marketplace rally in US equities as well as the reasonably good ball World Series.
Ladies as well as Gentlemen, the United States Is Insolvent, 29 May 2009
The States racked up some critical debt in keeping the world protected for democracy in the Second World War. On the commission basis, it has not long ago spent the poignant volume keeping the monetary sector protected from productive bid as well as honest labour. They will raid the Treasury, take their fill, as well as afterwards enforce the supervision to confiscate the savings of the generation by delinquent on the obligations, the sovereign debt.
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Reserve Bank of India Buys 200 Tonnes of the IMF's Gold
An apertif for a Indian executive bank, as well as barely a nibble for dollar heavy China.
"You have a preference in between a healthy stability of bullion as well as a probity as well as comprehension of a members of government. And with all due respect for those gentlemen, I suggest you, as prolonged as a capitalist system lasts, opinion for gold." George Bernard Shaw
LiveMint WSJ
RBI to buy 200 tonnes of IMF gold
By Tamal Bandyopadhyay as well as Anup Roy
Mon, November 2 2009. 11:15 PM IST
Decision to strengthen a bullion pot follows identical moves by executive banks of some alternative countries.
Mumbai: The Reserve Bank of India, or RBI, is shopping 200 tonnes of bullion from a International Monetary Fund (IMF), scarcely half of what a fund plans to sell.
In 1991, when India faced a worst ever change of payment crisis, a country had to pledge 67 tonnes of bullion to Union Bank of Switzerland as well as Bank of England to lift $605 million (Rs2,843.5 crore today) to seaside up a dwindling unfamiliar sell reserves, which were afterwards barely sufficient to buy dual weeks of imports. Indias unfamiliar sell pot were during $1.2 billion in January 1991 as well as by June, they were depleted by half. Currently, a Indian executive banks unfamiliar sell pot mount during $285.5 billion.
RBIs decision to seaside up a bullion pot needs to be seen in a context of alternative executive banks across a creation increasing their bullion reserves. Among them have been a executive banks of China, Russia as well as a few countries in a European Union. (also well known as 'the barbarians' - Jesse)
In a final a single year, China has increased a bullion holdings, by weight, by 75.69%, Russia by 18.78%, a Philippines by 18.50% as well as Mexico by 108.91%.
Compared with this, Indias executive bank did not supplement anything to a bullion pot in a final a single year, according to Bloomberg data.
In fact, a share of bullion in Indias sum pot has dwindled over a decade.
In Mar 1994, a share of bullion in a sum pot of a country was 20.86%; by a finish of Jun 2009, bullion constituted usually 3.7% of a sum reserves.
An IMF spokesperson in India declined to criticism upon this development.
RBIs unfamiliar banking resources include especially of sovereign bonds, especially US treasurys. So, shopping some-more bullion will assistance a Indian executive bank diversify a assets.
Gold as a proportion of a pot is relatively small, pronounced R.H. Patil, authority of National Securities Depository Ltd as well as Clearing Corp. of India Ltd.
Gold is a ultimate currency. In fact, usually bullion came to a rescue during (the) 1991 crisis, so it creates clarity that RBI should try to enlarge a bullion holdings, Patil said.
RBIs unfamiliar sell pot include of unfamiliar banking assets, gold, special drawing rights (SDR)an general reserve banking floated by IMFand RBI funds kept with IMF.
Out of RBIs $285.5 billion unfamiliar sell reserves, unfamiliar banking resources comment for a most$268.3 billionfollowed by bullion ($10.3 billion), SDR ($5,267 million) as well as reserve in front of in a IMF ($1,589 million).
According to RBIs ultimate annual report, a unfamiliar banking resources consisting of unfamiliar securities declined by Rs81,010.25 crore from Rs12.98 trillion upon thirty Jun 2008 to Rs12.17 trillion upon thirty Jun 2009 especially due to net sales of dollars in a made during home unfamiliar sell market.
At a current market value of $1,054 an ounce, or per 28.5g, RBI would need to outlay about $7.4 billion to buy 200 tonnes of gold. With this, a bullion reserve will rise to $17.716 billion, or rounded off 6.20% of a sum reserves.
IMF in September had voiced that it wanted to sell 403 tonnes of a bullion reserves, or one-eighth of a sum holdings, to boost a finance management upon a long-term basement as well as to beget money to lift lending to needy nations. Under a concessional lending facility, IMF will lend during zero seductiveness by end-2011 for all low-income members to assistance them tackle a stroke of a monetary predicament that rocked a universe in a wake of a collapse of US investment bank Lehman Brothers Holdings Inc.
A cabinet set up by a group of executive banks overseeing a bullion sales by a IMF has allowed a fund to sell 400 tonnes of a bullion annually as well as 2,000 tonnes in sum during a five years starting 27 September.
According to a inform by a Associated Press dated twenty September, India, along with China as well as Russia, had evinced seductiveness in shopping IMF-held gold.
At a sum land of 103.4 million ounces, or 3,217 tonnes, IMF is a third largest central holder of bullion after a US as well as Germany.
IMFs sum land during historical price is valued during about $9.2 billion upon a change sheet. At market prices, as of twenty-eight August, a funds sum bullion holdings were value $98.8 billion.
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