US securitised mortgages backed by nothing; European markets freezing again; Citigroup's meltdown warning; Dilbert
Here are my Top 10 links from around the Internet at 10 past 5 pm, brought to you in association with New Zealand Mint for your reading pleasure.
I welcome your additions and comments below, or please send suggestions for Thursday's Top 10 at 10 via email to bernard.hickey@interest.co.nz.
I'll pop any surplus suggestions I get into the comment stream.
1. Deloitte bombshell - A former Deloitte partner and his wife who live in San Francisco have been accused by the SEC of insider trading with information received on 7 seperate deals. They handed on info to the brother-in-law, who then went on a trading spree.
This widening insider trading probe in America is spreading.
Trust in the investment bankers and hedge funds on Wall St was already non existent.
How long before the Manhattan bankers are truly punished by the voting public?
It seems a long way away while Obama is in charge.
After receiving the illegal tips, the brother-in-law took financial positions in U.S. companies that were targets of acquisitions by Arnold McClellan's clients. His subsequent trades were closely timed with telephone calls between Annabel McClellan and her sister, and with in-person visits with the McClellans.
Their insider trading reaped illegal profits of approximately $3 million in U.S. dollars, half of which was to be funneled back to Annabel McClellan.
2. Here's America's problem - Shoppers desperate for deals on 'Black Friday' are trampled in this video.
The cancer of this sort of rampant American (and NZ) consumerism will hurt us all in the end...
3. Gold ETF demand - Dow Jones and Zerohedge reports China has approved the creation of a fund that allows mainland investors to buy gold through an exchange traded fund.
Cue demand from a populace worried about inflation.
China has approved a fund that will invest in gold exchange-traded funds outside the country, opening the door to mainland China investors who face negative real interest rates on their bank deposits and want to hedge against inflation.
4. European financial markets freezing up again - FTAlphaville reports Deutsche Bank's global markets research team has found virtually no-one wants to buy government bonds from the periphery of Europe.
There are an increasing number of investors who will not touch these assets at any price for now given all the uncertainty.
That’s the worrying sign for those that think that a lot of these problems are overstated. You can have a well articulated view on why xx or yy is solvent but if the buyers have completely dried up because of all the fear and uncertainty then micro analysis becomes secondary.
For this to all end happily we need new buyers of the mountain of debt that is step by step becoming friendless in the deleveraging trade. Finding these new buyers is becoming a difficult job and maybe we’re fast forwarding towards more sizeable money printing programs.
5. 'Nothing backed securities' - Yves Smith at Naked Capitalism points out that Bank of America's Countrywide has admitted in court that it didn't transfer the proof of ownership notes on when they sliced and diced mortgages and sold them off. Now, it seems, the securitised mortgages may be backed by nothing.
We have been told separately that a senior industry executive also said that no one in the industry transferred the notes. If true, this has very serious implications.
As we’ve indicated, it means that residential mortgage backed securties are not secured by real estate, or as Adam Levitin put it, they are “non mortgage backed decurities.
Bloomberg provides further comments along those lines: “It may mean investors who think they bought mortgage- backed securities bought securities that aren’t backed by anything,” said Kurt Eggert, a professor at Chapman University School of Law in Orange, California.
6. 'Just the opening act' - Citigroup's Chief Economist Willem Buiter warns the Irish crisis is 'just the opening act' for wider concern about sovereign defaults, including America and Japan. Today's must-read for anyone sceptical about the potential for a European meltdown.
Although we have not had a sovereign default in the Advanced Economies since the West German sovereign default in 1948, the risk of sovereign default is manifest today in Western Europe, especially in the European Area periphery.
We expect these concerns to extend soon beyond the EA to encompass Japan and the US.
The analysis of the weakness of Portugal's banks, contained in the Banco de Portugal's Financial Stability Report, is disturbingly similar to the structural flaws in Ireland's banks, which took Ireland to the brink of bankruptcy.
There is however one important difference, which some will argue makes Portugal's financial predicament more perilous: Portugal's banks have not only been borrowing colossal sums from the ECB, they have also been lending billions of euros to the Portuguese government, so that it can finance the significant gap between what it spends and its dwindling tax revenues.
This is how the central bank put it: "the expansion of Portuguese banks' balance sheets in the first half of the year essentially reflected the financing of general government".Over the same period, Portuguese banks found it almost impossible to borrow from commercial sources, from other banks and financial institutions. So they avoided insolvency by using two techniques, neither of which is sustainable over the long term.
They borrowed from what the central bank calls "institutions belonging to the perimeter of the respective banking groups" by selling bonds to them - which is in effect shuffling money from one bit of an organisation to another. And they also borrowed from central banks on a colossal scale.
In the first half of 2010, domestic Portuguese banks' borrowings from central banks - largely what they borrow from the ECB and the Banco de Portugal - increased from €15.7bn to €39.7bn.
Aye Carumba.
Several factors — most notably, unaffordability, high interest rates and falling migration are acting to very rapidly reduce the clearance rate. In Sydney last month, Australian Property Monitors reported that the clearance rate had slumped to 53% of auctioned houses sold — down from 67% last year (the clearance rate last weekend was also 53% in Sydney).
In Melbourne, the situation has deteriorated even more rapidly, with the clearance slumping from about 80% throughout most of 2009 to 57% last weekend.
Even the Fairfax papers, a traditional mouth-piece of real estate bodies, has turned decidedly bearish.
My co-panelist on Sky Business’ Business View, the excellent Greg Hoffman, produced this stunningly logical piece (which was the second most read business article on the Fairfax websites), pointing out that the intrinsic value of property is, heaven forbid, dependant on its cash returns- - like every other asset.
Hoffman noted, “the Australian property price debate is divisive and emotionally charged but, whatever your view, it’s foolhardy not to acknowledge the possibility that capital gains may not always be counted on to bridge the gap between the rental income (or rent saved) and a fair return on your capital”.
9. The US Mint sold a record 4.2 million silver eagle coins in November - Reuters reports
"The underlying, basic reasons for the silver market's rise are really gold-oriented, but the speculative element of silver continues to be a big driver," said Bill O'Neill, partner of New Jersey-based commodities firm LOGIC Advisors. O'Neill said that a well established retail coin-dealer network helped increase sales of the silver Eagles. He called silver a "speculative playground" and does not recommend trading it due to high volatility.
Silver, gold and platinum group metals have benefited from the fiscal crises in Greece, Ireland that could also spread to other European nations, lingering worries about economic growth and inflation concerns.
10. Totally philosophical video about 21st century enlightenment.
36 Comments
We had a thriving aquaculture industry until the Labour government ( 1999-2008 ) chose to wreck it , as they also did to the NZ forestry industry .............. It would be nice to see those export earners ressurrected .
The appetite for fish , here in Asia , is mind-boggingly gi-normous . Far better prospects for earning some dosh than by dairying .
"chose to wreck it" ????????????
Please stick to the truth.
They put a moritorium on further expansion - quite a different thing.
Aquaculture, like anything else, is an extraction of energy from some stage in the food-chain.
Research thus far into the knock-on effects further up the chain?
Nil.
If I had Quota further up the chain in these areas, I would be wanting reassurances of a scientific kind. The idological kind would not cut the sushi.
It's exactly like grazing a new paddock, without applying fertiliser.
It's exactly like grazing a new paddock, without applying fertiliser.
It's often worse than that - many forms of aquaculture, basically anything raising carnivorous fish, consumes more fish in the form of meal for feed than it actually produces. So it's more like slaughtering 50 calves to feed to one bullock.
@#2
It's not a cancer as much as the video demonstrates how consumers are not rational perfect actors in the economy and that the efficient market hypothesis is a myth. Why would anyone wait 24-48 hours in the cold to save a couple hundred buck on a TV? These people fail to ask themselves what their time worth? Is spending 48 hours in the cold worth $300? That is only minimum wage?
Edit: BTW here are 10 more videos for your viewing pleasure!
FYI from Chalmers Johnson at Harpers. HT Vanderlei
http://harpers.org/archive/2007/01/0081346
The United States remains, for the moment, the most powerful nation in history, but it faces a violent contradiction between its long republican tradition and its more recent imperial ambitions.
The fate of previous democratic empires suggests that such a conflict is unsustainable and will be resolved in one of two ways. Rome attempted to keep its empire and lost its democracy. Britain chose to remain democratic and in the process let go its empire. Intentionally or not, the people of the United States already are well embarked upon the course of non-democratic empire.
Several factors, however, indicate that this course will be a brief one, which most likely will end in economic and political collapse.
Thanks Bernard, there is a very good Chalmers Johnson video here http://vimeo.com/9984373
An excellent analysis on US hegemony from a former CIA insider, compelling.
Author of Blowback, The Sorrows Of Empire and Nemesis: The Last Days Of The American Empire, Chalmers Johnson has literally written the book on the concept of American Hegemony. A former naval officer and consultant of the C.I.A., he now serves as professor Emeritus at UC San Diego. As co-founder and President of the Japan Policy Research Institute, Mr. Johnson also continues to promote public education about Asia's role in the international community.
In this exclusive interview, you will find out why the practice of empire building is, by no means, a thing of the past. As the United States continues to expand its military forces around the globe, the consequences are being suffered by each and every one of us.
BH
Thank God we have individuals like yourself to tell it the way it is in a public manner.
Any thought that we can stand immune from the coming tsunami with $ 246 billion of debt due for roll while we debate new art galleries is a worry.
However with the Cut Rose Growers ETS transition credits program underway I guess all will be well !
I felt truly sickened watching that video.
I'm sure its a fairly extreme example though.
The people in the video looked really your "white trash" kind (notwithstanding a few blacks!) , the kind of people probably really hurting over there, and desperate for the big bargains
Truly horrific
Re #2 - So this is what the 4% of the worlds population that consume 24% of the worlds oil production look like...
No wonder they don't do public transport!.. would you want to sit next to one of those fat abusive bullies on the train or bus... no wonder they are Climate Change and Peak oil Phobic.
Evolution is running them fat Fu#kers down a one way dead end no U-turn street.
Speaking of extinction and retail - I have had 2 direct marketing porpositions in the last week... one from Harvey Norman offering Cost+10% plus GST, and one from LV Martin for Cost +5% plus GST...
Wasn't it always that Christmas Sales commenced on boxing day... So why is this happening in the last week of November... this segment [of retail] is truly in the shite.
Pretty much everyone I talk to expects sales in December before Xmas, there were some good deals last year as well, I dont recall boxing day being much better than before xmas last year? So I think the above is just a start.....I noticed the std price for a 40inch Samsung LED TV is now <$1500 down from $1800...so sales can chop that a bit more...
Retail is dying IMHO....lots of cheap[ish] made in china goods sold at huge margins making up too much of GDP I cant see how it can survive.
regards
Shops seem to have been having permanent sales all year, so why would December be any different? There's so much crap stacked up in everybody's houses from the big credit binge that almost nobody will really need to shop for quite some time. I think it'll turn out that we did 10 or 15 years' worth of shopping in advance.
Re. the 21st century enlightenment video:
"Despite major departures from the trend, most terribly in the 20th century, the history of the human race has been one of diminishing person to personal violence"
That's got to be the first prize for cherry picking data.
Also, he says that the lowest paid workers in the developed world are better off that then rich a century earlier. Yeah - except that in a globalised economy you really have to include the people who make your stuff as the lowest paid workers in your economy, not the lowest paid people who are resident in your country, which means we haven't made so much glorious progress in that direction either.
Hey Rhys
10 points for giving a damn. He also talks about extending empathy's reach: You just did. Lots of talk around here about 1 hr charts, not much about the social framework for commerce to operate in. Wonder why?... Anything intrinsically wrong with commerce? Nope.
FYI the latest from Ambrose. The ECB looks set to have to deliver its own brand of QE II
As Europe's debt crisis spreads ever wider, the EU authorities are coming under intense pressure to move beyond piecemeal rescues and resort to radical action on a nuclear scale.Most alarming is the surge in Italian yields to 4.7pc, raising fears that the world's third biggest debtor, with more than €2 trillion of outstanding bonds, could be drawn into the maelstrom.
Peter Westaway from Nomura said Rome's woes will force the ECB to act at its meeting on Thursday. "We think the increase in Italian spreads has had a major impact on markets and will prompt the ECB this week to begin purchasing mainly Spanish and Italian bonds in significant amounts, for as long as it takes."
As if we didn't see that coming , Bernard ........ Cannot have the banks and bondholders taking the consequences of their actions , gotta bail them out ...... At the tax-payers expense , of course .
But on the bright side of things , some kind soul put the idea of being stranded on a desert island with Paula Bennett , into the Gummy mind . Thankyou to that wonderful person ...................... The Gummy one will dream happily ( and stickily ) tonight ......
..... ............... Ohhhhhhh hunny ........ , Paula me !
Hadn't seen this factoid before: stunning.
Nominal Irish GNP has contracted by 26pc since the peak
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100008812/irelands-debt-servitude/
cheers
Bernard
"I might add that if it is really true that a haircut on the senior debt of Anglo Irish, et al, would bring down the entire financial edifice of Europe, then how did any of these European banks pass their stress tests this summer, and how did the EU authorities ever let the matter reach this point? Brussels cannot have it both ways."
Agree....it was and is a farce.......
So right now its one huge debt transfer to the voter from the hedge funds/banks/investors, however how did this debt come into being? oh the voter spent it.....either on now worthless housing or toys, or public pay offs that couldnt really be afforded....based on earings tomorrow taht with Peak oil will never materialise....
The voter is now blaming the Govn....the voter should look at itself....it took which ever Pollie offered the biggest bribe......some ask for leadership, but vote with their hip pocket every time when it comes down to it....and here in NZ its not better. Cullen outbribed Brash in 2005, and JK out bribed Cullen in 2008......and so it continues.
regards
A response to the Ambrose E/P article on going Nuclear.
drjonathanwilson 10 hours ago Recommended by
88 people Ambrose
Let me be the last to point out to you that the nature of those leaders in Germany and by extension their Brussels front are German national socialists by any other name.
I do not need to rehearse for you the infamous leaders that German National Socialism has spawned – one Adolf Hitler comes to mind. And Vichy France is alive and well but like the German National Socialists they have, in today’s high-tech parlance, put on different“skins”.
For all the DT economists who feign no particular ideology, this perspective can be dismissed airily as inconsequential – let us stick to the high “morally neutral” ground of “technicalities”.
To take this position is very dangerous because it ignores the powerful motivations of German National Socialists and the Vichy French.
If we can but see the would through their eyes ((and by the way there is very little difference in practical outcomes – dictatorship - between Mein Kampf (Hitler) and Materialism and Empirio-criticism (Lenin)) then we would recognise that the crises that you outline in your excellent commentary here, is an ideal opportunity to collapse the system into a Germanic dictatorship.
How will they attempt to do this?
They will do this by folding one EMU area central bank after another into the ECB. Greece has gone and so now has Ireland.
Portugal’s central bank functions will be the next to be folded into the ECB. That would be enough precedent to then simultaneously collapse the rest of the EMU country’s central banking functions into the German controlled ECB.
What about the legal niceties?
The German National Socialist and Vichy French are working on the principle of “possession is nine tenths of the law”. The treaties can come later if such a cover for this dictatorship is even deemed necessary.
Like Nigel Farage, I hope that the markets do their self interested work before the German National Socialists can achieve the twisted aims of their Volk ideology.
Jonathan
Further in Ambrose's piece,
"Let me add that the ECB ran a monetary policy that was too loose even for the eurozone as a whole, holding rates at 2pc until well into the credit boom and allowing the M3 money supply to expand at 11pc (against a 4.5pc target)"
So the bankers thought they had it all under control.....way to loose OCR policy...and now they whine its too loose when now it needs to be....these guys want sacking right now.
"The truth is that the EMU venture is one of shared culpability. Yes, the Irish should have regulated their banks properly and restricted mortgages to a loan-to-value ratio of 80pc, 70pc, or 60pc, forcing it down as low as needed – as Hong Kong and Singapore do – to stop idiotic bubbles."
Nice plan, lets see it here....
This is such a cracking piece,
http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100008812/i…
Well worth reading at least twice....its packed so full of "good" stuff....I hope Irelend defaults and lets its banks go.....Ireland's ppl cant pay this off anyway.........let the stupid Irish bank(s) to bust......full speed ahead and damn the torpedoes!
regards
"Yes, the Irish should have regulated their banks properly and restricted mortgages to a loan-to-value ratio of 80pc, 70pc, or 60pc, forcing it down as low as needed – as Hong Kong and Singapore do – to stop idiotic bubbles."........that rings a bell.....oh yeah I remember...Cullen and Clark.....useless as tits on a bull the pair of them.
Exactly so.....and we had the likes of Moody's etc saying we were doing good things...LOL look at Iceland the darling of the rating agencies and IMFs of this world.....that played out well didnt it.
Then we had our own treasury.....who wanted even more right wing policies....crash and burn is all I can say.
regards
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