U.S. REGULATORS ANNOUNCE CRACKDOWN ON SUBPRIME LENDING PRACTICES
March 5th, 2007Maybe I need to get a blinking siren thing for Cryptogon…
We’ve got a perfect storm situation in the markets now.
Via: Finfacts Ireland:
The Wall Street Journal reports that US Federal bank regulators have announced a crackdown on loose lending standards on subprime home mortgages as two major lenders struggled to cope with losses and regulatory problems.
Subprime customers are those who do not qualify for prime market rates because of blemished or limited credit. Consequently, subprime customers are charged a higher interest rate to compensate for the increased risk.
In February, global bank HSBC stunned the market when it disclosed that it was adding $1.76 billion to loan provisions of $8.8 billion because of a big rise in defaults in the US subprime home loan market.
New Century Financial Corp., one of America’s largest subprime lenders, announced on Friday that it has been informed of a federal criminal inquiry into its accounting and trading in its securities. New Century also said that a failure to obtain waivers from lenders or find new funding sources could prompt its auditors to warn of “substantial doubt” over its ability to remain in business.
Another big lender, Fremont General Corp., said it plans to stop making subprime residential loans and is in talks with various parties aimed at selling that business.
The Journal says that a proposed policy statement released Friday by regulators comes after rising defaults already have rattled investors and forced subprime lenders to be more cautious in extending credit.
With a rise in subprime lending in the past decade, many lenders have pushed home loans that carry a fixed rate for the first two years, then “reset” to a much higher rate that floats with the general level of interest rates. These loans — known as 2/28 mortgages — can lead to jumps of 50% or more in monthly payments after the initial period ends. Many of the borrowers refinance to avoid these “payment shocks,” generating more fees for lenders and mortgage brokers.
The Journal says that regulators, including the Federal Reserve and four other agencies, said lenders should assess whether potential borrowers can cope with payments once the higher rate takes effect. They also cautioned lenders against skimping on verification of borrowers’ income, and told them to clearly spell out risks to consumers. Lenders and other interested parties have 60 days to comment before the regulators produce a final version of the guidance.
Related: Inside a Wall Street Chop Shop
STOCKS, GOLD CONTINUE SELL OFF ON YEN ADVANCE
March 5th, 2007I’m trying to understand the clobbering of gold right now, which went limit down in Tokyo today. Maybe institutions need liquidity to cover their yen (carry trade “easy money”) bets as that thing squeezes relentlessly higher. How? Panic yen covering on the one hand, selling off gold on the other?
If the capital from the gold liquidation isn’t going to cover yen positions, where is it going? Ok, I’m going to parse this Reuters piece to mean that the gold dumping is a desperation yen covering move: “currency investors cashed out on precious metals to pay for losses in other markets.”
In any event, the Plunge Protection Team is probably fixing bayonets and locking and loading for the U.S. market open in a few hours. Brace for impact.
Via: Washington Post:
Markets in Asia and Europe fell again Monday, extending their slide into a second week as investors worried about a possible global slowdown dumped stocks that had surged in recent weeks.
Also sparking jitters was the yen’s jump to a three-month high against the dollar as traders sold off higher-yielding investments funded by borrowing money at Japan’s ultra-low interest rates. A decline in this so-called yen-carry trade could hurt global liquidity.
FDA: Cattle Antibiotic Moves Forward Despite Fears of Human Risk
March 5th, 2007Madness. Or… “Consumers” are being softened up for the kill off event. Take your pick.
Via: Washington Post:
The government is on track to approve a new antibiotic to treat a pneumonia-like disease in cattle, despite warnings from health groups and a majority of the agency’s own expert advisers that the decision will be dangerous for people.
The drug, called cefquinome, belongs to a class of highly potent antibiotics that are among medicine’s last defenses against several serious human infections. No drug from that class has been approved in the United States for use in animals.
The American Medical Association and about a dozen other health groups warned the Food and Drug Administration that giving cefquinome to animals would probably speed the emergence of microbes resistant to that important class of antibiotics, as has happened with other drugs. Those super-microbes could then spread to people.
February Contribution Summary
March 4th, 2007In February, Cryptogon and Farmlet readers generated a total of $699.04 via all methods of support (Paypal, Amazon, Bluehost and Adbrite). Becky and I both thank all of you for your generosity.
Amazon purchases via Cryptogon have remained at the high level that started with the legendary Pookie Challenge a couple of months ago. Thanks for remembering to make those purchases via Cryptogon. That’s a great way to help out. You get your goods and Cryptogon and Farmlet get updated with interesting information.
Note: In addition to the commissions, I really enjoy looking at what you guys are buying from Amazon. In case that weirds you out a bit, don’t worry; there’s absolutely no way for me to know who bought what on Amazon. I just see a list of items. Now, I was looking for a simple way of showcasing some of the things that Cryptogon and Farmlet readers are buying because I thought that the rest of you might be curious. I’m not listing everything, but just a few things that seemed interesting, weird or useful. I’m not sure how I want to use this yet, but here goes: The Cryptogon aStore.
If you are considering buying webhosting for the first time, or changing hosts, take a look at what Bluehost has to offer. Cryptogon and Farmlet are hosted on Bluehost, and I’m extremely impressed with their service and pricing. Not only will you get an excellent deal on hosting, but Bluehost will pay Becky and me $65. I’ve written more about it here.
What Happened to Gold as Global Stock Markets Sold Off?
March 3rd, 2007WARNING: This is not a recommendation to buy sell or hold any financial asset or investment.
Again, the assumptions for gold proved to be wrong. As stock markets sold off around the world last week, gold declined sharply. How can this be?
Gold has been turned into a funny money bet, just like stocks, bonds and index futures. The people trying to sell us precious metals say the stuff is, “real money.” If that’s true, how can you use fiat script to acquire it? Furthermore, how can leveraged fiat script be used to control large amounts of “real money”???
I’d believe in precious metals if they couldn’t be bought with fiat currencies or, even more insane, traded with leveraged fiat currencies (margin). How would anyone be able to acquire precious metals then? Real, tangible goods and services, only, would be exchangeable for gold or silver. Sure, in such a non existent, theoretical environment, precious metals make sense. Increasingly, though, with big fiat money psychopaths throwing their leveraged numbers around in the computer systems, the “real money” is looking more like fools gold. Don’t take my word for it, look at the numbers, blinking and updating in real time…
Obviously, these metals have some underlying, intrinsic value, but what is it? What is the actual value when the prices quoted are based on the leveraged scams of the global fiat money casino?
Precious metals strategy? This sounds more like a roll of the dice to me.
Lots of people, including me (I was a goldbug for years), have been sold a fallacy as a strategic hedge against financial uncertainty. But when the best thing you can say about your strategy—based on the actual observation of events—is, “It might work, or it might not,” you’ve got a serious problem.
Take a serious, objective look at your plans. Are you eliminating your reliance on luck and minimizing the impact of factors that are completely beyond your control, or are your rolling the dice?
If you found the analysis above useful, you might also like:
Gold Gapping Down Along with Global Stock Markets? Sure, Why Not?
Waiting for Clarity On the Brink of Oblivion
Via: Marketwatch:
Gold futures dropped more than 3% Friday, suffering from a fourth-straight losing session and a weekly loss of more $42 an ounce with investors still rattled by this week’s volatility in global stock markets as they eye demand for the precious metal in Asia.
“We have now witnessed a rout in bullion of a magnitude not seen since last fall,” said Jon Nadler, an analyst at Kitco Bullion Dealers, in e-mailed commentary.
Gold for April delivery lost $21 to close at $644.10 an ounce on the New York Mercantile Exchange. Prices have been falling from Monday’s $689.80 level in the wake of Tuesday’s global sell-off in stocks that triggered volatility across financial markets.
The contract ended the session down $42.60, or 6.2%, below last Friday’s closing level.
Silver futures led the decline in the precious metals, with the May contract dropping 5.1%, or 69 cents, to end at $12.96 an ounce. The contract touched a six-week low of $12.80 and ended the week with a 12% loss.
Yen Carry Trade Players Decapitated
March 3rd, 2007What is the real value of the yen carry trades? Nooooooooooooooobody knows… But if that thing continues to get squeezed, look out.
Via: Times Online:
Hedge funds gambling on highly leveraged bets in the markets driven by the gap between Japan’s low interest rates and higher ones elsewhere may have seen a year’s worth of potential profits wiped out in ten days as the yen has surged.
Investors in the yen “carry trade†have been badly wrong-footed by the leap in the value of the Japanese currency, which rose yesterday to an 11-week high of 117 to the dollar.
“Undoubtedly, there will have been significant pain suffered by a number of players,†Adam Chester, the chief economist in the treasury department of HBOS, said.
Billions of dollars may have been lost by hedge funds and traders who have failed to cap their exposure in any way – although precise estimates are impossible because of wide variations in estimates of the size of the trade.
Hiroshi Watanabe, the leading Japanese financial diplomat, estimated conservatively this week that the carry trade was worth between $80 billion (£41 billion) and $160 billion. On that basis the yen’s steep rally since February 23 would have left carry-trading speculators exposed to potential paper losses of $3.1 billion to $6.2 billion.
Some estimates of the trade go as high as $1 trillion, however, which would magnify these potential losses. Hedge funds and proprietary traders in the big investment banks routinely conduct carry trades, borrowing cheaply in Japan, converting to other currencies and investing the proceeds in higher-yielding securities. Until recently, the rush to conduct yen carry trades has helped to weaken further an already depressed yen, boosting profits in a virtuous circle for hedge funds.
However, analysts say that this virtuous circle is in danger of turning into a vicious one, with hedge funds rushing to unwind their positions, boosting a resurgent yen and triggering further unwinding.
…
Amid a nervous climate among speculators who have staked billions on the carry trade, the impact of any negative news for the dollar is being amplified. As any such news pushes the dollar down, and adds to upward pressure on the yen, carry-trade speculators have greater grounds to worry that the rising yen will undermine the profitability of their bets in the markets and are encouraged to unwind these positions. Since that requires them to buy the yen, the currency comes under yet more upward pressure.
USDA Backs Production of Rice With Human Genes
March 3rd, 2007Total madness.
Via: Washington Post:
The Agriculture Department has given a preliminary green light for the first commercial production of a food crop engineered to contain human genes, reigniting fears that biomedically potent substances in high-tech plants could escape and turn up in other foods.
The plan, confirmed yesterday by the California biotechnology company leading the effort, calls for large-scale cultivation in Kansas of rice that produces human immune system proteins in its seeds.
The proteins are to be extracted for use as an anti-diarrhea medicine and might be added to health foods such as yogurt and granola bars.
“We can really help children with diarrhea get better faster. That is the idea,” said Scott E. Deeter, president and chief executive of Sacramento-based Ventria Bioscience, emphasizing that a host of protections should keep the engineered plants and their seeds from escaping into surrounding fields.
But critics are assailing the effort, saying gene-altered plants inevitably migrate out of their home plots. In this case, they said, that could result in pharmacologically active proteins showing up in the food of unsuspecting consumers.
Although the proteins are not inherently dangerous, there would be little control over the doses people might get exposed to, and some might be allergic to the proteins, said Jane Rissler of the Union of Concerned Scientists, a science policy advocacy group.
“This is not a product that everyone would want to consume,” Rissler said, adding that other companies grow such plants indoors or in vats. “It is unwise to produce drugs in plants outdoors.”
Mars Melt Hints at Solar, Not Human, Cause for Warming
March 3rd, 2007That humans are causing global warming is one of the most pervasive memes in the world at the moment. I pretty much believed it, as much as I believe anything establishment science says, which is to say that I consider it along with all other perspectives.
Then I met Andrew, a friend of Becky’s. Andrew is a PhD climatologist. He’s working in the field right now. Oh yeah, things are heating up. When I asked him what he thought about the cause, he kindof grimaced and said, “That’s a tough one.”
That’s a tough one?!
I thought it was a mathematical certainty that humans were causing it. Wrong.
Ever since that conversation, I’ve been watching the global warming news, and the increasing linkages to crackpot laws and proposed legislation that have nothing to do with global warming, and everything to do with fascism. Replace “the war on terror” with “global warming” and you’ve got the same damn philosophy with different nouns.
You guys know how I feel about religions (including atheism), fascism and dogmas of all types. The thinking person knows that it’s never that simple. Is it?
I know that many of you might find it personally offensive that I would link to a story that goes against the mainstream scientific view that humans are behind global warming, but Cryptogon isn’t about pleasantly stroking your dogmas, or mine.
After reading this National Geographic piece, and remembering my conversation with Andrew, to not post this would be grossly irresponsible.
I find Hummers and the typical American energy footprint as obscene as any other tree hugging dirt worshiper. (I’ve lived in the choking pollution of Los Angeles.) Over the years on Cryptogon, I have focussed on multiple technologies that could drastically reduce the use of hydrocarbon fuels. But what we are starting to see is a sort of global warming fascism, while, for decades, simple solutions to the alleged problem have been available.
There’s something wrong with the global warming picture, and the more credence it gains in the Hollywood-limousine liberal crowd, the more skeptical about it I become.
Via: National Geographic:
Earth is currently experiencing rapid warming, which the vast majority of climate scientists says is due to humans pumping huge amounts of greenhouse gases into the atmosphere.
Mars, too, appears to be enjoying more mild and balmy temperatures.
In 2005 data from NASA’s Mars Global Surveyor and Odyssey missions revealed that the carbon dioxide “ice caps” near Mars’s south pole had been diminishing for three summers in a row.
Habibullo Abdussamatov, head of the St. Petersburg’s Pulkovo Astronomical Observatory in Russia, says the Mars data is evidence that the current global warming on Earth is being caused by changes in the sun.
“The long-term increase in solar irradiance is heating both Earth and Mars,” he said.
Abdussamatov believes that changes in the sun’s heat output can account for almost all the climate changes we see on both planets.
Mars and Earth, for instance, have experienced periodic ice ages throughout their histories.
“Man-made greenhouse warming has made a small contribution to the warming seen on Earth in recent years, but it cannot compete with the increase in solar irradiance,” Abdussamatov said.
By studying fluctuations in the warmth of the sun, Abdussamatov believes he can see a pattern that fits with the ups and downs in climate we see on Earth and Mars.
Abdussamatov’s work, however, has not been well received by other climate scientists.
Escape from America
March 2nd, 2007Brother, I’ll drink to that!
Most people reading Cryptogon inside the U.S./Britain are familiar with nonstop feelings of impending doom and frequently asking themselves questions like:
Am I next?
Is this it?
Can I escape?
Is it too late?
Has everyone gone nuts?
Have I gone nuts?
Is this job killing me?
What booze is on sale?
etc. etc.
That was what it was like inside my head for about two years before I bought my one way ticket to New Zealand.
What was the actual escape like for me?
After a couple of hectic days of selecting what to take with me, and what to leave behind, the time arrived for me to get to the airport.
As I was groped and fondled by defenders of the Homeland at airport security, I went into a kind of dreamlike trace. “Will I make it out to the other side of this thing?” I wondered. The cacophony of the checkpoint became a sort of languid hum. The fat TSA employee started to move its lips, but I don’t remember what it said. I complied, on some instinctual level. A few minutes later, I was standing just beyond the security checkpoint, holding my shoes and belt in one hand, and my falling down pants with the other.
I exchanged a couple of brief, humiliated, what-just-happened-to-us? kind of looks with other travelers, many of whom were not Americans, and not used to being treated like that.
I walked to the appropriate Air New Zealand gate and sat down. I took my mobile phone out and called a couple of people to say one last goodbye. Then I called the voice mail system for my phone and changed the greeting to something close to this:
“Hi, you have reached Kevin. I have left the United States and don’t have any plans to return. Goodbye.”
Minutes later, hundreds of people, including me, took our seats in the belly of the large white bird. Minutes after that, it hurtled down the runway and out over the Pacific Ocean, veering South and West. I’ve never been able to sleep on aircraft before. But I did on that flight.
Once I was in Auckland, I had to catch another flight to reach the Far North, my wife (she went over a few weeks before me) and my new family. I walked to the domestic departures area in the Auckland airport and asked an Air New Zealand employee where the security checkpoint was, because I somehow wound up at the gate without passing through one.
“There is no security checkpoint for domestic flights, sir.”
You can imagine my shock at this remarkable statement.
“There’s no security checkpoint?!” I asked.
“Nope. Not for domestic flights,” she smiled.
I felt like dropping to the ground and kissing the polyester airport carpet, but I didn’t.
I took a seat and mumbled to myself, “I’m not even out of the airport and things already seem better here.” That was my first big epiphany in New Zealand, and they just kept happening. (Maybe someday I’ll write more about this. In short, if you’re having doubts about the lies you’ve been taught all your life about the U.S., run with those feelings. Run for your life.)
When I read the story below, I wondered, “How long has it been since I escaped America?” As of today, I have been in New Zealand for exactly one year. On reflection, I think back on my life in America as a vague and distant nightmare. The United States has became a vast nut house inside a debtor prison. I’m still not over the euphoria of being out.
Via: joebageant.com:
It is near midnight and the dogs sleeping in the sand under my cabana, Rex and Pluto, emit happy, gurgling growls, as if chasing imaginary rabbits in their dreams. I lie in bed just breathing in and breathing out and feeling so free that I’ve laughed out loud a couple of times tonight, something I have never done in my life. At least not while simply looking at the ceiling. Tomorrow I will not worry about losing my ass in the declining real estate market. I will not commute three nerve grinding hours a day, or nervously engorge myself in front of my laptop for hours on end. Nor will I or wake up with the crimes of the empire running like adding machine tape in my head, annotated with all the ways I contributed to those crimes by participating in the American lifestyle. After more than two years of effort, I’m outta the gilded gulag, by damned, and tell myself that I have at last quit being part of the problem — or at least as much as much as anyone can without living stark naked in a Himalayan cave and toasting insects over a dung fire.
When I arrived in Belize a few weeks ago I vowed never to write about this country, mainly because the Americans I write to are more interested in American politics, religion, class issues and the Iraq war. How the hell could anybody with more than an inch of forehead not be anxious over those things? But the contrast here is so stark it seems unavoidable to write about the view of America from Belize and Hopkins Village this one time. I must say that from down here the Empire does not look much different. No worse, no better. But the stress and stench of the empire is less in this Caribbean breeze and the mark of the beast is sharper from a distance.
The effect of moving was immediate. As one expat told me years ago what would happen, whole days go by when I do not think of America at all, much less rage against it, something I would previously considered impossible.
Husband and Wife Lawyers and 11 Top Wall Street Workers Charged in Federal Securities Fraud Scheme
March 1st, 2007Just another day at the office.
Via: Yahoo / AP:
Husband and wife lawyers and 11 top Wall Street workers were charged Thursday with making more than $15 million in illegal trading profit through an alleged federal securities fraud scheme, authorities said.
Linda Chatman Thomsen, director of the Division of Enforcement for the
Securities and Exchange Commission, said in a statement that the case was “one of the most pervasive Wall Street insider trading rings since the days of Ivan Boesky and Dennis Levine” in the mid-1980s.
“What is so alarming about the conduct alleged in the SEC’s case isn’t just the scope of the scheme … but, sadly, who is at the center of it,” she said.
Besides the lawyers, defendants including registered representatives, compliance personnel and hedge fund portfolio managers, improperly relied on hundreds of tips during five years of illegal trading, she said.
“And this conduct didn’t occur in obscure boiler rooms — but rather at what are commonly considered `top tier’ Wall Street firms,” Thomsen said.
U.S. Attorney Michael Garcia said Wall Street professionals repeatedly traded on secrets revealed to them by insiders at UBS Securities LLC and Morgan Stanley and Co.
Among financial professionals charged criminally in U.S. District Court in Manhattan was Mitchel Guttenberg, an executive director and institutional client manager at UBS.
Garcia said Guttenberg, who worked in UBS’s equity research department, accepted hundreds of thousands of dollars as he sold nonpublic information to two men regarding upcoming upgrades and downgrades in UBS analysts’ securities recommendations.
The men, David Tavdy and Erik Franklin, used the UBS inside information to each earn more than $4 million by executing profitable trades in various brokerage accounts they controlled, Garcia said.
The attorneys, Randi Collotta, 30, who worked for Morgan Stanley & Co. Inc. in Manhattan, and her husband, Christopher Collotta, 34, who worked in private practice, were also among those criminally charged. Civil charges against 11 individuals and three entities were brought in a complaint filed by the SEC.
In an indictment, prosecutors said Randi Collotta was an associate in Morgan Stanley’s global compliance division when she passed inside stock tips to her husband, who gave it to others, resulting in illegal profits of hundreds of thousands of dollars between September 2004 and August 2005.
After others made money from the tips, they paid Christopher Collotta cash that represented a portion of their profits, the indictment said.
Guttenberg, Tavdy, Franklin and the Collottas all were charged with conspiracy to commit securities fraud and securities fraud, which carry potential penalties of up to 25 years in prison. It was not immediately clear who would represent them at an initial court appearance along with five others arrested Thursday.
The four other criminal defendants have pleaded guilty to conspiracy, securities fraud and commercial bribery charges, prosecutors said.
