Sure Doesn’t Feel Like 7.8%

I don’t care as much about what people say as I care about what they do.

The reality is the U6 still remains at 14.7% and that is how it feels.

The $3000 Thingamajig

The President needs to stick to something he knows about — like stopping the oceans from rising.

I’m afraid there’s a better than average chance that the economy-thing is not going to work out well at all.

The latest evidence: The $3000 Thingamajig …..

Types of Investment Fraud

Various types of investment and forex fraud have seen a growth in occurrence recently. In part, this growth in financial crime may be due to harder economic times. It may also be facilitated by the growing opportunities for scammers presented by the widespread use of the Internet by the general public and the recent popularity of online forex trading.

Nevertheless, some of these investment frauds are more commonly committed by corporate officers, accountants or by high-pressure sales staff offering easy-to-manipulate stocks over the telephone. Some of the more common investment fraud types are described further below.

  • Corporate Fraud – Fraud committed by high ranking corporate officers, like those at Refco and Enron, can cost investors dearly by overvaluing the price of a stock.

  • Accounting Fraud – A number of major accounting firms have been charged with or admitted being negligent in preventing and identifying falsified financial reports published by corporate clients. These reports can mislead investors as to their client’s financial status and the value of their stock as an investment.

  • Insider Trading – When a corporation’s stock is traded by one of its officers or key employees, or even by large shareholders or relatives, who does so based on secret information that they came across while performing their job for the corporation, this can constitute illegal insider trading.

  • Microcap Fraud – Microcap stocks are those of smaller companies that have a market capitalization of less than $250 million. Since they often trade at low prices, they usually fall into the penny stock category and have values less than $5 per share. Also, because they do not trade publically on major exchanges, their stock price can be readily manipulated. This type of fraud occurs when microcap stocks are sold to the public fraudulently, often as part of a pump and dump scheme that might involve an Internet scam or boiler room.

  • Boiler Rooms – When stock brokerages place excessive pressure on clients to trade over the telephone, they are sometimes known as boiler rooms or houses. Often they are used in conjunction with the perpetration of microcap frauds that may involve the sale of non-existent, distressed or unfairly marked-up stock.

  • Pump and Dump – This type of investment fraud typically involves thinly-traded microcap stocks and entails making false and misleadingly positive statements in order to unnaturally inflate the price of a stock owned by the maker of such statements. Once the stock price rises as fraudulently-swayed investors buy the stock, the fraudster then dumps their over-valued shares. This subsequently causes the stock’s price to fall and investors to lose out.

  • Abusive Naked Short Selling – The fraudulent practice of abusive naked short selling involves selling stock without it actually being borrowed and without having any intent to borrow the stock.

  • Short and Distort – Sometimes individuals spread false or misleading information about corporations in order to cause a decline in their stock prices so they can be purchased or repurchased cheaply. This investment fraud is often called “short and distort.”

  • Ponzi Schemes – Ponzi schemes generally involve fraudulent investment or forex funds, some of which consist of High Yield Investment Plans or HYIPs. In general, these frauds finance withdrawals and payouts with funds from subsequent investors instead of with profits gained from their claimed investments.

Types of Investment Fraud

Stimulus results? $340,000 per job

The Obama administration is crowing about the success of their largest-ever stimulus package, claiming some 1 million jobs either created or saved.
chart_job_stimulus.03

Taking out my trusty calculator, I see that 1,000,000 jobs are being claimed at a cost of some $340,000,000,000….

Put another way, each of those jobs came at a cost of $340,000.

How’s that hope and change working for ya’?

Who didn’t see this coming?

The AP is reporting that Obama administration officials have been cooking the books in reporting job growth as a result of stimulus spending.

Cooking the books? I’m shocked! (not)

The AP review found some counts were more than 10 times as high as the actual number of jobs; some jobs credited to the stimulus program were counted two and sometimes more than four times; and other jobs were credited to stimulus spending when none was produced. link

How’s that hopenchange working for ya?

FDIC Friday

Just one bank failure this week, the 33rd of 2009.

Kitsap Bank, Port Orchard, Washington,

Assumes All of the Deposits of Westsound Bank, Bremerton, Washington

May 8, 2009

Kitsap Bank, Port Orchard, Washington, Assumes All of the Deposits of Westsound Bank, Bremerton, Washington

Waiting on the big squeeze

Articles like this one seem to be the rule rather than the exception these days.

Brace yourself: The recession is projected to worsen this year.


I’m getting the same sort of feeling that I get when watching a big hurricane spinning around in the Gulf. Except, instead of trying to prepare for several days of turmoil, I get the feeling that this may be impossible to prepare for: the damage too great, the recovery period too long.

I hate this.

Obama moves toward trade war with China

President Obama’s Treasury Secretary nominee, Tim Geithner made statement today which will most certainly catch the attention of China. In a written response to questions submitted at his confirmation hearing, Geithner accused the Chinese government of currency manipulation.

“President Obama — backed by the conclusions of a broad range of economists — believes that China is manipulating its currency,” … {snip}
As an Illinois senator, Obama had co-sponsored legislation aimed at changing how the US government formally determines currency manipulation and authorizes new trade reprisal measures.

During the presidential campaign, he had accused China of suppressing its currency’s true strength to make its exports more competitive, echoing some US lawmakers who blamed the snowballing US trade deficit with China on the weak yuan and have sought sanctions against Beijing. AFP

This is a serious and fundamental policy shift, signaling a move against the Chinese. It is one that will have consequences, both seen and unforeseen. We can expect higher prices for imported goods, and a reduction in trade as China retaliates. We can expect fewer bond purchases by China which will drive bond prices down and boost yields – which, eventually, would cause borrowing costs for residential and some corporate customers to increase. The unforeseen consequences may actually make deflation more of a problem instead of less, as deleveraging and the unwinding of debt continues to impair corporate balance sheets.

I’ve got a bad feeling about this. I think we may have just passed a mile marker of some kind. The serious recession that we have endured for the last year may have just shifted into a 30’s style depression, fueled by bumbling politicians and an unnecessary trade war.

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Holiday Greetings From Fred Thompson

Asking Washington to exist with less of our money, is like asking a dog to not sniff butts.
It’s not in their nature.

h/t NBRA

WTF Open Thread

2008. The year of WTF.

People behaving out of character. A realignment on the political Right. The attempt to marginalize Christians. Weird, strange, unpredictable stuff. I can’t think of a better way to describe it than “WTF.”

First up, articles from NRO, Times Online, and JihadWatch.

Writing at NRO, Mark Steyn takes issue with those who would try to use the “nazi” label against the anti-jihad alliance. Roger Boyles continues the theme at the Times, And, writing at JihadWatch, Spencer takes on WSJ.

Mark Steyn says, “Silence = Acceptance”

We are told that the “vast majority” of the 1.6-1.8 billion Muslims (in Deepak Chopra’s estimate) are “moderate.” Maybe so, but they’re also quiet. And, as the AIDs activists used to say, “Silence=Acceptance.” It equals acceptance of the things done in the name of their faith. Rabbi Holtzberg was not murdered because of a territorial dispute over Kashmir or because of Bush’s foreign policy. He was murdered in the name of Islam — “Allahu Akbar.”

Roger Boyles reports from Berlin, “Mosques are a land grab, not a place of worship.”

So says Ralph Giordano, 85, Holocaust survivor. His protests against the grand mosque in Cologne brought a flood of supportive mail.

“…Mr. Giordano, we are afraid as you are of this creeping Islamification but we can’t say anything in public because we will end up being branded as neo-Nazis.”

The novelist and essayist pauses for effect. “Well, that’s something that cannot be pinned on me!”

Mr Giordano finds himself in the company of far-right activists. “Of course, you have to distance yourself clearly from these people – obviously their racist, neo-Nazis arguments are quite different from mine – but I am not going to be muzzled just because people are fighting on the same issue with false arguments and a false ideology.”

Also counterpunching against the PC “right” at JihadWatch,

Over the weekend, Robert Spencer called out Wall St. Journal drone James Taranto on his cynicism about the intentions of the man who is most adamant about preserving Western civilization, Dutch parliamentarian Geert Wilders.

Specifically, as Spencer points out, Taranto finds Wilders’ views on Islam “problematic” and isn’t sure whether or not Geert Wilders is simply an “anti-Islamic provocateur.” To which Spencer replies, “It is a pity that Taranto would characterize speaking accurately about how Muslims use Islamic texts and teachings to justify violence and Islamic supremacism as being an ‘anti-Islamic provocateur.’”

More WTF on the domestic front, as the Mother of all Bailouts continues….

The Ohio Agriculture Department conducts a SWAT Team raid on a food co-op known as the Mana Storehouse. The charge? Running a retail establishment without a license. No kidding. Selling unlicensed food is now an offense worthy of a SWAT Team raid. Read more here.

At Euromoney, Helen Avery reports that the settlement system for the US Government bond market has broken down.

And,at the Market Oracle, Martin Weiss says, “America’s Second Great Depression has started.”

Right now, our country’s finances have deteriorated too far to balance the federal budget anytime soon. But it’s not too late to avoid some major financial blunders that could seriously weaken our country for the rest of the century. Even in the worst-case scenario, it is certainly not too late for you to protect your savings, boost your income and grow your wealth.

How long could the depression last? How much further can home prices fall? How far down will the stock market go? Will it be as bad as the 1930s? At this juncture, you can count on your fingers the number of serious analysts who believe that’s even a remote possibility. And yet, stranger things have already happened, including the largest bank and insurance company collapses of all time.

And, on a lighter note, Sparty claims that Chris Petersen will be named head coach at Mississippi State, right after today’s SEC Championship game, even though Petersen and everyone else denies it. I hope Sparty’s right.

Also, South Panola’s 89 game win streak is snapped by Meridian in the 5A Championship game. Yes Virgina, Meridian’s All-State QB Tyler Russell is headed to Mississippi State! C’mon Chris Petersen.

Finally, GN Magazine has “Surprising Truths” you may not know about the Nativity story.

The end of the boom

wall-st-bull

President Bush has described the current economic meltdown with the phrase, “Wall Street got drunk.”

After reading Michael Lewis’ account, “The End of Wall Street’s Boom,” I think the president’s description is quite the understatement.

Usually, reading about financial topics, subprime mortgages, CDO’s, CDS’s, is enough to glaze my eyes over. The reason, primarily, is because they are hard for me to get my head around. Know what I mean? That’s not the case with Mr. Lewis’s explanation. His writing is sharp, witty, and refreshing. I encourage you to take a few minutes and read this. Here is an excerpt:

To this day, the willingness of a Wall Street investment bank to pay me hundreds of thousands of dollars to dispense investment advice to grownups remains a mystery to me. I was 24 years old, with no experience of, or particular interest in, guessing which stocks and bonds would rise and which would fall. The essential function of Wall Street is to allocate capital—to decide who should get it and who should not. Believe me when I tell you that I hadn’t the first clue.

I’d never taken an accounting course, never run a business, never even had savings of my own to manage. I stumbled into a job at Salomon Brothers in 1985 and stumbled out much richer three years later, and even though I wrote a book about the experience, the whole thing still strikes me as preposterous—which is one of the reasons the money was so easy to walk away from. I figured the situation was unsustainable. Sooner rather than later, someone was going to identify me, along with a lot of people more or less like me, as a fraud. Sooner rather than later, there would come a Great Reckoning when Wall Street would wake up and hundreds if not thousands of young people like me, who had no business making huge bets with other people’s money, would be expelled from finance.

read it all

AIG has 8 weeks of cash left

At the rate troubled insurance giant AIG is bleeding cash, there are only about 8 weeks left before the well runs dry, according to Mark Tucker, CEO of Prudential PLC.

The difficult situation is exacerbated by the general turmoil in the financial markets as willing bidders for AIG assets are waiting on the sideline.

And what about the original $85 billion bailout fund?

“AIG is using the funds primarily for collateral obligations for the credit default swap portfolio and general corporate funding.” The additional $37.8 billion facility is being used by the securities lending program that AIG operates as part of fulfilling the normal cash needs of the life insurance companies.

As the credit markets are trying to free up liquidity, the fear of a general worldwide recession is growing and adding to the downward pressure on the world’s stock markets. This is hurting AIG by reducing values of collateral that AIG is shoring up with Fed cash. At the same time, the value of investment-grade bonds is dropping, reducing the ability of AIG to raise cash, even from the Fed. This is putting severe pressure on AIG’s ability to operate freely. …

AIG’s Joe Norton would not disclose the date that AIG will release the 3rd Quarter earnings report. If AIG announces that the results will be published on Nov. 4 or 5, perhaps taking a leaf from the political handbook, it could be seen as a sign of extremely bad news that could be covered overlooked by the excitement of the presidential election.

Global de-leveraging continues unabated.

Get those winter gardens in.

Freaky Friday Financials

Halloween arrived a week early in the financial markets this morning, as a sharp sell-off in the Asian markets is leading to a similar move on Wall Street. TEOTWAWKI? {cue spooky music}

Selling pressure is very strong in pre-market activity this morning. Futures trading is halted until 9:30 am Eastern.

Hang in there folks. It’s going to be a crazy day.

Update: (peaking out from the fortified bunker) … Thirty minutes into the trading day … No, the sky hasn’t fallen … yet.

Here are the headlines from cnbc.com

Continue reading

10 things going right in America

Recent news from the markets have caused many Americans to be more concerned about their financial futures than any time in recent memory. Kiplingers reminds us that when life hands us lemons, then make lemonade. Here is their list of 10 things going right in America:

1.Oil Loses Its Swagger: With the U.S. and global economy hurting, oil prices have dropped 50% in just three months, from $147 a barrel in July to the $75 range. Remember $80-$100 fill-ups at the pump? The national average for a gallon of gasoline is down to $3.10, from $4.11 in March, and should stay in the $3.00-$3.50 range through next year. Prices for home heating oil and natural gas are also headed lower this winter than last.

2. A Tipping Point for the Auto Industry: After years of talk and false starts, finally, all the major carmakers are furiously developing hybrid and alternative-fuel vehicles that could lessen our dependence on foreign oil. Meanwhile, desperate dealers are offering unheard-of deals on new, gas-fired models. For example, Toyota is offering $1,000 cash back and 0% financing on the 2009 Camry, the most popular car in America. Don’t drive much? If you’ve always wanted an SUV or truck, the discounting on some models is extraordinary.

3. Interest Rates Are Low and Headed Lower: The prime rate is at 4.5%, which is driving down interest rates on home-equity lines of credit and some consumer loans. The interest rate on a traditional 30-year fixed-rate mortgage is averaging 6.5%, the highest it’s been since the summer of ’07, but still not too far from the historic low of 5.8% reached in 2003-05 and 1963-65. And although credit-card companies are cutting personal spending limits, rates are dropping, too. The average rate on credit-card purchases fell to 11.89% in the first week of October, down from 12.13% in September, according to LowCards.com, which tracks 1,260 credit cards.
Continue reading

Bailout Bill to Nowhere: Why we’re still not out of the woods

The $700+ billion bailout bill has passed through Congress and been signed by the President. The debate, the stock market volatility, and the lack of cogent reporting of events has left many of us wondering what in the world we have just witnessed.

MM calls it “Crap Sandwich 2.0.” In fact, she live-blogged the House debate.

While our government pats itself on the back for avoiding financial Armageddon, I wonder if they realize that the drama of the past few weeks is only the first layer to be peeled from this onion.

The next layer will begin to be pulled away next Monday, as settlement of credit derivative trades involving Fannie Mae and Freddie Mac are unwound.

On Friday, the Lehman auction is scheduled.  WaMu follows one week later.  That is, if anyone is left standing.

How many billions will have to come off the balance sheets at settlement? As interesting and unsettling as the past few weeks have been, we haven’t seen anything yet.

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Bawny Fwank’s Boyfriend Was Fannie Mae Exec.

But will the Lame Stream Media notice?

WASHINGTON —  Unqualified home buyers were not the only ones who benefitted from Massachusetts Rep. Barney Frank’s efforts to deregulate Fannie Mae throughout the 1990s.

So did Frank’s partner, a Fannie Mae executive at the forefront of the agency’s push to relax lending restrictions.

Now that Fannie Mae is at the epicenter of a financial meltdown that threatens the U.S. economy, some are raising new questions about Frank’s relationship with Herb Moses, who was Fannie’s assistant director for product initiatives. Moses worked at the government-sponsored enterprise from 1991 to 1998, while Frank was on the House Banking Committee, which had jurisdiction over Fannie.

Both Frank and Moses assured the Wall Street Journal in 1992 that they took pains to avoid any conflicts of interest. Critics, however, remain skeptical.

“It’s absolutely a conflict,” said Dan Gainor, vice president of the Business & Media Institute. “He was voting on Fannie Mae at a time when he was involved with a Fannie Mae executive. How is that not germane?

“If this had been his ex-wife and he was Republican, I would bet every penny I have – or at least what’s not in the stock market – that this would be considered germane,” added Gainor, a T. Boone Pickens Fellow. “But everybody wants to avoid it because he’s gay. It’s the quintessential double standard.”

A top GOP House aide agreed.

“C’mon, he writes housing and banking laws and his boyfriend is a top exec at a firm that stands to gain from those laws?” the aide told FOX News. “No media ever takes note? Imagine what would happen if Frank’s political affiliation was R instead of D? Imagine what the media would say if [GOP former] Chairman [Mike] Oxley’s wife or [GOP presidential nominee John] McCain’s wife was a top exec at Fannie for a decade while they wrote the nation’s housing and banking laws.”

Frank’s office did not immediately respond to requests for comment.

Frank met Moses in 1987, the same year he became the first openly gay member of Congress.

“I am the only member of the congressional gay spouse caucus,” Moses wrote in the Washington Post in 1991. “On Capitol Hill, Barney always introduces me as his lover.”

The two lived together in a Washington home until they broke up in 1998, a few months after Moses ended his seven-year tenure at Fannie Mae, where he was the assistant director of product initiatives. According to National Mortgage News, Moses “helped develop many of Fannie Mae’s affordable housing and home improvement lending programs.”

No conflict of interest? What a “Crap Sandwich” that is.

The rest here

Barney’s New Squeeze?

FASB 157 gets a “clarification”

The much maligned accounting principle of “mark to market” accounting has received an important clarification today from regulators at the SEC.

“When an active market for a security does not exist, the use of management estimates that incorporate current market participant expectations of future cash flows, and include appropriate risk premiums, is acceptable.” source

FASB 157 came about as a result of the Enron scandal and subsequent regulations contained in the onerous Sarbanes Oxley Act.

Hopefully this is a first step toward its full repeal.

It is important to note that the SEC is NOT saying that cooking the books is now an acceptable accounting practice. That would be the last thing that corporate America needs in order to restore public confidence. Transparency is necessary, and the SEC’s clarification will help investors to see a much truer picture of the financial health of the corporate balance sheet. Perhaps, after the debacles of Bear Stearns, Lehman, Merrill, Wachovia, Wamu, and AIG, the SEC sees this as a way of acknowledging that many of the weaker players and their related toxic assets have been identified and dealt with, and it’s time to protect the healthier players that remain.

It becomes crucial as the Treasury anticipates buying some $700 billion in mortgage-backed securities, and in effect, establishing a market price for illiquid assets. A direct consequence would be that the remaining banks would have to take a write down on their assets to reflect the new market price.

This is an important clarification from the SEC. It will have an important and immediate impact.

more: At cnbc.com, Lee Brodie asks, “New rules, same game?”

Market bottom?

Last week’s move by the Fed led to a strong, albeit unsustained, rally in the major indices. But investor confidence waned toward the end of the week, and outright panic at Bear Stearns, which lost 47% of its share value on Friday

Carlyle (CCC), Citi, and Bear Stearns lead a list of troubled financials that have fallen on hard times, facing liquidity problems as the uncertain valuation of collaterized debt obligations have weighed heavily on their ability to operate. Today, WSJ is reporting a move by JP Morgan to acquire Bear Stearns.

Effective immediately, J.P. Morgan Chase is guaranteeing the trading obligations of Bear Stearns and its subsidiaries and is providing management oversight for its operations. The deal isn’t subject to any conditions, except shareholder approval. It is expected to close before the end of the second quarter.

Government regulators, including the Federal Reserve and the Office of the Comptroller of the Currency, have given their blessing to the transaction.

We may be at the bottom.

Or not.

The Fed is keeping their powder dry, with rumors of an additional rate cut of 75bp. Obviously the central bank views the liquidity crisis as a bigger concern than an increasing rate of inflation.

Overnight, the Nikkei is down more than 3% in early trading.

A good sign that the aggressive moves by the regulators might work: The Europeans hate it. One thing for sure: market opening will be very tense tomorrow morning.

WFFOT: In the news

Here are a few stories that have caught my attention today…

The Airborne Laser Cannon — Ready to Deploy

lasercannon.jpgCreating a laser that can melt a soda can in a lab is a finicky enough task. Later this year, scientists will put a 40,000-pound chemical laser in the belly of a gunship flying at 300 mph and take aim at targets as far away as five miles. And we’re not talking aluminum cans. Boeing’s new Advanced Tactical Laser will cook trucks, tanks, radio stations—the kinds of things hit with missiles and rockets today. Whereas conventional projectiles can lose sight of their target and be shot down or deflected, the ATL moves at the speed of light and can strike several targets in rapid succession.

“Lower the drawbridge” … Yuma AZ ponders digging a moat (I kid you not)

There have been virtual fences, real fences, increased patrols and night-vision cameras. Now the latest initiative by the US to seal its increasingly porous border with Mexico harks back to one of the oldest approaches: dig a moat. City officials in Yuma, in south-western Arizona, have come up with a scheme to create a “security channel” along the nearby border by reviving a derelict two-mile stretch of the Colorado river.

“The moats that I’ve seen circled the castle and allowed you to protect yourself, and that’s kind of what we’re looking at here,” Yuma county sheriff Ralph Ogden told the Associated Press. The scheme would see engineers dig out a two-mile stretch of a 180-hectare (440-acre) wetland known as Hunters Hole.

Harvard student database hacked, posted on BitTorrent

Harvard University says about 10,000 of last year’s applicants may have had their personal information compromised.

At least 6,600 Social Security numbers were exposed. Worse, a compressed 125 M-byte file containing the stolen student data is currently available via BitTorrent, a peer-to-peer network.

In a statement published Monday night Harvard officials said the database containing summaries of GSAS applicant data for entry to the Fall 2007 academic year, summaries of GSAS housing applicant data for the 2007-08 and 2006-07 academic years, and administrator information had been compromised. The server had been taken offline for several days last month to investigate the extent of the problem.

AP: This winter has been WARMER than average

Winter storms and snow notwithstanding, this winter was still warmer than average worldwide, the government reported Thursday.

The global temperature for meteorological winter — December, January and February — averaged 54.38 degrees Fahrenheit, 0.58 degrees warmer than normal for the last century, the National Oceanic and Atmospheric Administration reported.

Temperatures have been rising over recent years, raising concerns about the effects of global warming, generally attributed to human-induced impacts on the atmosphere.

No, wait a minute …. NOAA: Coolest Winter Since 2001 for U.S., Globe

The average temperature across both the contiguous U.S. and the globe during climatological winter (December 2007-February 2008) was the coolest since 2001, according to scientists at NOAA’s National Climatic Data Center in Asheville, N.C. In terms of winter precipitation, Pacific storms, bringing heavy precipitation to large parts of the West, produced high snowpack that will provide welcome runoff this spring.

A complete analysis is available online.

Financial News Roundup………………

President Bush addresses ECNY.  Calls for “Political Courage”

bush.jpgIn a speech to The Economic Club of New York, Bush said this was not the first time the economy has been rattled and that he is certain that it will ride out its troubles. “These are uncertain times,” he said.

Security Capital Assurance Halts Taking on New Business

Troubled bond insurer Security Capital Assurance Ltd. on Thursday posted a massive fourth-quarter loss and said it will stop writing new policies in an effort to preserve capital.

The Bermuda-based company reported it lost $1.2 billion, or $18.67 per share, in the last three months of the year as the value of securities backed by home loans the company insured deteriorated rapidly. During the same period in 2006, SCA posted a profit of $35.8 million, or 56 cents per share.

JPMorgan and Fed Move to Bail Out Bear Stearns

Bear Stearns, facing a grave liquidity crisis, reached out to JPMorgan on Friday for a short-term financial lifeline and now faces the prospect of the end of its 85-year run as an independent investment bank.

With the support of the Federal Reserve Bank of New York, JPMorgan said in a statement that it had “agreed to provide secured funding to Bear Stearns, as necessary, for an initial period of up to 28 days.”

For the next month, JPMorgan will work with Bear Stearns to reach a solution for its financing crisis. Options could include organizing permanent financing or, according to people briefed on the discussions, buying the bank for a discounted price.

Carlyle may help CCC investors: Rubenstein

Private equity group Carlyle (CYL.UL) will look at ways to help investors who have lost money in Dutch-listed Carlyle Capital Corporation (CCC) (Amsterdam:CARC.AS – News), Carlyle co-founder David Rubenstein told media in statements confirmed to Reuters by a spokeswoman.

In an interview with France’s Les Echos newspaper, Rubenstein said Carlyle had done all it could to help CCC, citing a $150 million credit line provided by its partners “no doubt at a loss” but wanted to try and make amends.

Congress Examines Municipal Bond Ratings, Bond Insurance Industry

The fast-spreading U.S. mortgage crisis prompted lawmakers Wednesday to explore problems with municipal bonds, painting a bleak outlook for bond insurers that one official said imposes a “secret Wall Street tax” on state and local taxpayers.

Connecticut Attorney General Richard Blumenthal is investigating how credit rating agencies grade the risk of municipal bonds and said the existing system is “quite possibly illegal.” He joined other state officials in calling for changes at a House committee hearing.

Carlyle Capital Corporation: commentary

No one can complain that they weren’t warned. The implosion of Carlyle Capital Corporation is a spectacular failure, probably the most damaging to sentiment in credit markets since Northern Rock. But this time all those closely involved were consenting adults.

Those who read the prospectus for the company had no doubt about its potentially precarious nature. You lose count of the number of references to “leverage without limit”. Never mind the eye-popping 32 times gearing CCC opted for. There was nothing in the company rules to prevent it leveraging up 320 times.

Read the Prospectus? What a novel idea!
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Carlyle Capital is insolvent

Tom Heath, writing in the Post,

The high-profile downfall, part of the broad turmoil in credit markets worldwide, followed a week of frantic negotiations between the Carlyle Group and a number of lenders. Carlyle Group’s three founders as recently as Monday were considering injecting cash into the fund as a way to usher it through the credit crisis.

By yesterday the fund had defaulted on $16.6 billion of debt and said it expected to default soon on its remaining debt. The fund’s $21.7 billion in assets were exclusively in AAA mortgage-backed securities issued by Fannie Mae and Freddie Mac, traditionally considered secure and conservative investments, which it was using as collateral against its loans.

Excrement sandwich, anyone?

Hank Paulson says there are so many “mistakes” in the market that there is not going to be an “easy solution.”

Well, duh.

We didn’t arrive at this point overnight, and there will be no overnight solution. I think we all understand that. Most of us are wondering where the bottom is, where the sideline is, and what to do next. Standing pat might be the right strategy, but dang, just dang.

h/t n2l

Peeling the onion

Over the past few weeks, I’ve offered up several short blurbs about the unraveling of the financial markets. To my surprise, it is a subject which continues to get only cursory media attention.

Were it not for the coverage in the foreign press, a person might be persuaded that all is well, that this is just a temporary slowdown which will be over and forgotten soon enough. I wish it were true.

The fourth quarter [’07] may be the worst earnings period for the financial industry since the Great Depression.” So said JPost in mid January. As the 10Ks roll in, the good news may be that it’s not quite that bad. The bad news, however, may be that the worst is yet to come. The fact is, nobody really knows how much of a hit the industry is going to take — primarily because of the uncertainty of putting an accurate valuation [heck, at this point, a ball-park valuation would be nice] on a particular type of security, a derivative known as a collateralized debt obligation, or CDO.

The unraveling is not limited to US banks and insurance companies. The Telegraph is reporting that EU banks are staring down the barrel of an additional $68 bilion in write-offs, as yet another layer of the onion is peeled away.

Our major financial institutions are in trouble. Our political institutions are both unprepared and unwilling to lead.

Most of us will feel the bite in our 401(k)’s. We’re still a month away from the mailing of the 2008 1st quarter account statements, which will cause many folks to pay attention to this for the first time. Most of the major indices are down double digits YTD, the Benchmark S&P 500 down about 12%. The additive effect of the poor results for 4th Q ’07 will be a combined decrease of over 20% from the market high, and maybe more by the end of this quarter.

Six years ago, after taking it on the chin following the Tech Bust, I rebalanced my portfolio to a “moderate” profile, about 60-40 stocks to bonds. I’ve maintained that profile, even though the temptation was to chase after the returns during the Bush bull market. Now, the temptation is to move to sidelines and wait it out. I think, though, I’m going to keep doing what I’ve been doing. I’m trying to practice what I preach: fend for myself, prepare, study, decide, adjust, adapt, and overcome.

There is more to come. The unraveling continues.

Update: See also, “Banks face systematic margin call”

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The unraveling continues

The downturn in CDO’s picked up steam today with the default by The Carlyle Group on margin calls to seven creditors.

This is getting very serious, folks….

from The Telegraph

Property investment trusts shares have crashed on panic selling in New York after an affiliate of the private equity giant Carlyle Group fell into default on mortgage losses.

The news sent shockwaves through the financial markets. Carlyle Capital has leveraged itself to the hilt, taking out debt at a ratio of 32:1 to invest in the US mortgage assets. It held securities worth a $21.7bn (£10.8bn) last month, raising the spectre of distress sales on a scale large enough to trigger a cascade of liquidations by other funds.

Fears of forced sales ravaged real estate investment trusts, which also own big holdings of Fannie Mae and Freddie Mac debt. Anworth Mortgage shares plunged 24pc and Capstead Mortgage was off 25pc.

Thornburg Mortgage crashed 60pc after revealing an SEC-filing in New York that it had missed a $28m margin call to JP Morgan Chase. It has suffered from the collapse in investor demand for so-called jumbo mortgages.

TIME NEVER DIES

Sercan Ondem

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