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From: B
Sent: Sat, November 6, 2010 3:14:10 PM
Subject: Re: Observations - Week of November 8
Volcker on QE2:
finance.yahoo.com
On Sat, Nov 6, 2010 at 12:47 AM, B wrote:
Brodskys equilibrium price: USD 8k/tr oz.
Worth a read:
ritholtz.com
So it is with great humility and rationality that I admit to you today: my name is Paul Brodsky and I am a gold bug.
On Fri, Nov 5, 2010 at 10:22 PM, B wrote:
From the most recent issue of Shadow Stats:
At issue with the payroll employment data is the use of "concurrent" seasonal-factor adjustments, where the current and recent seasonal adjustment factors are created and changed on a monthly basis. The use of this process enables the Bureau of Labor Statistics (BLS) to report almost anything desired in terms of monthly payroll change.
...
Current Seasonal Factors Created Roughly 200,000 Phantom Jobs.
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So how can a problem be reasonably fixed if the fixers are using deliberately inaccurate data?
On Fri, Nov 5, 2010 at 10:09 PM, B wrote:
Europe has its own fed with big secrets it seems (for your own good, of course):
bloomberg.com
ECB Rejects Request for Greek Swap Files, Citing `Acute' Risks
By Elisa Martinuzzi, Alan Katz and Gabi Thesing - Nov 5, 2010 1:29 AM MT
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ECB President Jean-Claude Trichet wrote, “The information contained in the two documents would undermine the public confidence as regards the effective conduct of economic policy.” Photographer: Hannelore Foerster/Bloomberg
The European Central Bank refused to disclose internal documents showing how Greece used derivatives to hide its government debt because of the “acute” risk of roiling markets, President Jean-Claude Trichet said.
The ECB turned down a request and an appeal by Bloomberg News to release two briefing documents officials drafted for the central bank’s six-member Executive Board in Frankfurt this year. The notes outline how Greece used the swaps to hide its borrowings, according to a March 3 note attached to the papers and obtained by Bloomberg News.
“The information contained in the two documents would undermine the public confidence as regards the effective conduct of economic policy,” Trichet wrote in an Oct. 21 letter in which he rejected the appeal. Disclosure “bears, in the current very vulnerable market environment, the substantial and acute risk of adding to volatility and instability.”
The ECB is withholding the information six months after the European Union and International Monetary Fund led a 110 billion-euro bailout ($154 billion) for Greece. The government didn’t originally disclose the swaps, which were designed to help it comply with the deficit and debt rules it agreed to meet when it joined the euro in 2001. Eurostat, the EU’s statistics agency, is still trying to work out how Greece hid the deficit.
The Greek swaps fueled a financial crisis that threatened the breakup of the region’s currency. The government now says the swaps, some of which were arranged by Goldman Sachs Group Inc., may have caused “long-term damage” for taxpayers.
‘Full Disclosure’
“There’s only one solution to resolving the current uncertainty: full disclosure,” said Gustavo Piga, author of “Derivatives and Public Debt Management,” and a professor at Tor Vergata University in Rome. “The ECB, the European Commission and Eurostat need to show that they are aware of all the transactions and that they have no issue in disclosing them. The market has been left to think the worst.”
Investor confidence in Greece’s ability to repay its debt is weakening. The extra yield investors demand to hold the nation’s 10-year government bonds instead of German 10-year bunds climbed to 893 basis points on Nov. 4, up from a four- month low of 649 on Oct. 18. The spread set a record of 965 on May 7.
The IMF, which published a sensitivity analysis of Greece’s debt in September, said it identified 5 billion euros of swaps that could increase public borrowings. Officials at the Washington-based fund declined to comment beyond the report.
‘Big Mistake’
Eurostat will by Nov. 15 publish revised budget deficit figures for Greece that will take into account the effect of the swaps. Tim Allen, a spokesman for Eurostat, said the agency has everything it requested from Greece. The agency is currently examining data sent to Greece’s statistics office.
The government has given Eurostat all relevant details on the transactions, said a finance ministry official in Athens who declined to be identified. The impact of the swaps on the deficit is “small,” the official wrote in an e-mail, declining to elaborate.
“Given the history of transparency with respect to Greece, which we all know is pretty bad, it would be a big mistake by the ECB to refuse this” request, said Manfred Neumann, a professor of economic policy at the University of Bonn. “Voters will be more suspicious than they used to be. In my view, there is no defense for not publishing.” Neumann led a group of 155 economists who in 1998 called for a delay in creation of the euro in part because countries hadn’t cut deficits sufficiently.
The ECB must consider demands for access to public documents under a March 2004 EU directive. Individuals and companies can subsequently appeal to the European Ombudsman, which reports to Parliament, and the European Court of Justice.
‘Right to Know’
“As citizens of the EU have every right to know how their taxes are being used to bail out secret financial deals between a government and its bankers, we are considering legal options in the pursuit of transparency and the public interest that may take us to the European Court of Justice in Luxembourg,” Bloomberg News Editor-in-Chief Matthew Winkler said.
The first document is entitled “The impact on government deficit and debt from off-market swaps: the Greek case.” The second reviews Titlos Plc, a securitization that allowed National Bank of Greece SA, the country’s biggest lender, to exchange swaps on Greek government debt for funding from the ECB. It also discusses the existence of similar transactions, the Executive Board said in the cover note for the briefings.
The ECB in its note proposed to change how EU members account for swaps based on Greece’s experience. The executive board, which Trichet heads, manages the bank and oversees its implementation of monetary policy. Members include Vitor Constancio, the ECB’s vice president, and Juergen Stark, the chief economist.
‘Risk Control’
The briefings give officials’ views on the impact of the swaps and analyze how the Titlos transaction would affect “the Eurosystem collateral framework, and associated risk control measures,” Trichet said in his reply to Bloomberg.
Trichet said the documents were used for decision-making and so cannot be released. At the same time, he said the documents were outdated and could mislead investors. Complete information will be published by Eurostat, Trichet said.
“Releasing the two documents would undermine the possibility of ECB’s staff to freely submit uncensored advice to the ECB’s decision-making bodies and that they would be subject to external pressure thus limiting the ECB’s space to think,” Trichet said in his letter.
The European Commission is responsible for overseeing national deficits and Eurostat reviews the statistics. While the ECB is the EU’s most powerful economic institution, its main remit is setting interest rates and fighting inflation. The central bank doesn’t directly oversee national accounts.
‘Unusual Terms’
It was April 2009, seven months before the Greek crisis erupted, when ECB officials first spotted “a swap operation in unusual terms,” according to the March 3 document.
After uncovering Titlos, the ECB’s Governing Council, the bank’s main decision-making body, commissioned the two reports, the first from its Statistics unit and the second from its Market Operations and the Risk Management divisions. Bloomberg is seeking copies of both reports.
The ECB declined to comment on the March 3 note and on the outcome of previous public access requests.
Greece was also in April 2009 considering selling bonds in dollars and yen, the first time it would have sold non-euro debt since 1998. The government then forecast that the deficit would fall to 3.7 percent of gross domestic product in 2009 and that debt would rise to 96.3 percent of GDP in 2009. Greece now says the deficit for that year exceeded 15 percent. The country’s debt amounted to at least 115 percent of GDP, according to Eurostat. Greece hasn’t sold bonds with maturities longer than 12 months since March.
Goldman Sachs
Greece’s fiscal crisis turned attention to off-market swaps arranged by Goldman Sachs that allowed the country to hide the extent of its debt from 2000 onwards. The Goldman Sachs swaps, signed in 2000 and 2001, reduced the country’s foreign- denominated debt in euro terms by 2.37 billion euros and lowered debt as a proportion of GDP to 103.7 percent from 105.3 percent, according to a Feb. 21 statement by Goldman Sachs. Greece told Eurostat that the other swaps were significantly smaller than the Goldman Sachs agreements, according to the EU agency.
“Disclosure could, of course, help with working through what happened, who knew what at what time,” said Carsten Brzeski, a senior economist at ING Groep NV in Brussels who used to work at the European Commission. “Everyone knows they’ll have to watch out for swap arrangements.”
To contact the reporters on this story: Elisa Martinuzzi in Milan at emartinuzzi@bloomberg.net; Alan Katz in Paris at akatz5@bloomberg.net; Gabi Thesing in London at gthesing@bloomberg.net
On Fri, Nov 5, 2010 at 10:00 PM, B wrote:
Next up, JP Morgan and HSBC:
If the Supremes don't outlaw class actions, or the Feds don't stop this via a national security claim, this should be interesting:
(Class action complaint attached as pdf)
marketwire.com
SOURCE: Kaplan Fox & Kilsheimer LLP
Nov 04, 2010 12:47 ETKaplan Fox Sues JP Morgan and HSBC on Behalf of Investors for Silver Futures and Options Contract Losses Caused by Market Manipulation
NEW YORK, NY--(Marketwire - November 4, 2010) - On November 2, 2010, Kaplan Fox & Kilsheimer LLP (www.kaplanfox.com), a leading plaintiffs' firm, filed a class action complaint in the United States District Court for the Southern District of New York, on behalf of an individual investor, against JP Morgan Chase and HSBC in connection with their alleged conspiracy and manipulation of the market for silver futures and options contracts traded on COMEX. To view a copy of the complaint, please click here.
The complaint alleges that around June 2008, when JP Morgan acquired Bear Stearns, including Bear Stearns' short positions in silver futures, JP Morgan and HSBC commenced a conspiracy to manipulate, and did manipulate, the market for silver futures and options contracts on COMEX. Specifically, the complaint alleges that around this time, JP Morgan and HSBC, pursuant to their conspiracy, acquired massive short positions on silver futures contracts in an effort to artificially depress the price of the silver futures market. The defendants realized substantial illegal profits in connection with their scheme, while investors who had no knowledge of the scheme, lost substantial amounts of money because of the defendants' conduct.
The complaint further alleges that the defendants' illegal scheme continued until around March 2010, when a metals trader based in London, publicly exposed the scheme. This trader has reported the scheme to the Commodity Futures Trading Commission ("CFTC"), and both the CFTC and the Antitrust Division of the United States Department of Justice are investigating the alleged conspiratorial and manipulative activities of the defendants.
If you have any information concerning any of the defendants' conduct, or wish to learn more about the litigation, please contact Kaplan Fox attorneys Robert N. Kaplan or Jason A. Zweig at (800) 290-1952.
On Fri, Nov 5, 2010 at 9:27 PM, B wrote:
At the shooting gallery, Bank of America. Next up, Citigroup:
businessweek.com
Investors sue Citigroup over toxic mortgage bonds
WASHINGTON
Citigroup Inc. is being sued by big investors that bought the bank's toxic mortgage bonds during the run-up to the financial crisis.
New York-based Citigroup said in a regulatory filing Friday that Charles Schwab Corp., the Federal Home Loan Banks of Chicago and Indianapolis, Cambridge Place Investment Management and others filed the lawsuits beginning in July. The suits allege that Citigroup made misstatements or omissions related to mortgage investments that it sold.
The New York-based company funded subprime loans, repurchased and pooled them, then sliced the pools into securities that could be resold to investors.
The trillions of dollars in the securities produced by Wall Street turned out to be toxic. When home prices stopped rising and borrowers couldn't repay, no one knew how much the bonds were worth. The uncertainty was so widespread that it helped trigger a global credit crisis in 2008.
The investors suing Citigroup say the bank misled them about the quality of the mortgages in its bonds. They want courts to make Citigroup buy back the investments at full price, and to assess other damages.
Citigroup said the loans met certain underwriting standards. In many cases, the loans were much worse than Citigroup acknowledged, the plaintiffs say.
Former Citigroup employees have said that more than half of the mortgages bought and sold by the bank failed to meet Citigroup's own standards.
Bank of America Corp. faces a similar lawsuit from investors including Pacific Investment Management Co., Blackrock Inc., the Federal Reserve Bank of New York and Freddie Mac.
The lawsuits concern bonds issued by Countrywide Home Loan Services, which Bank of America bought during the financial crisis of 2008. The investors say the loans didn't meet Countrywide's stated underwriting standards.
On Fri, Nov 5, 2010 at 8:47 PM, M wrote:
Martin Armstrong is projecting that the Yen can go to 65 to the USD by June 2011, at which point we'll get a cycle turn.
Looks like we could well get there as it continues within its current channel.
Note that the Yen made an all-time high (strength-wise) on a monthly closing basis vs. the USD in October.
Good article by Gillian Tett, in case you missed it....
ft.com |
