Links 7/28/09

Wild camels ‘genetically unique’ BBC

U.S. releases unclassified spy images of Arctic ice Reuters

World will warm faster than predicted in next five years, study warns Guardian (hat tip reader John D)

Drugmakers Ramp Advertising Campaign For Health Care Reform Michael Shedlock. It isn’t news that Harry and Louise will be returning to a station near you. What is new are the patently ridiculous claims the industry is making in defense of the campaign.

Wells Fargo Buys Mortgage Bonds as Defaults Rise Bloomberg (hat tip DoctoRx). Why am I reminded of BofA’s enthusiasm for Countrywide, and the way Wall Street firms were buying subprime originators in the fall and winter of 2007?

Lobbyists Gain Upper Hand On Obama In Recent Weeks The Hill. In recent weeks? Where have they been? Were they asleep when the banks were taking ground?

Mark Hulbert: Insiders have quickened the pace of their selling MarketWatch

SEC Whistleblowers? Independent Accountant

California Foreclosures > National New Home Sales EconomPic Data

U.S. Effort to Modify Mortgages Falters Wall Street Journal. Your truly was skeptical when the program was announced, and had plenty of company.

GE Interest Plus Corporate Notes General Electric. Um, isn’t this an offering? And DoctoRx notes: “Net-based advertising to the public to become UNSECURED general creditors of GE or a subsidiary. (I’ll stick w FDIC stuff for trivial yields.”

BofA planning to cut 10 percent of branches: report Reuters, They just opened a ton in Manhattan and I wondered what they were smoking. There are way more bank branches than coffee shops.

Politicians Accused of Meddling in Bank Rules Floyd Norris. While I agree that piecemeal meddling is bad, has no one considered that the accounting authorities might be captive? This report seems to perpetuate the myth that they are merely benevolent umpires.

Martin Meyer on Credit Default Swaps Jesse. Today’s must read.

Antidote du jour (hat tip reader Barbara):

Two little orphaned wallabies become best of friends at Emerald Monbulk Wildlife Shelter, Melbourne, Australia…

…mirroring each other’s behaviour…

..and play-fighting.

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  1. Anonymous

    re: "Lobbyists gaining the upper hand on Obama"

    come on, did anyone really expect Obama to have a spine and do what needs to be done? His bread is buttered on the same side as the rest of us. It's a good thing that this country is starting to wake up to that fact.

  2. Anonymous

    Why dont's you link that "Martin Meyer on Credit default Swaps" piece to the original source?…(Institutional Risk Analytics)

    I don't see any significant value added by Jesse. Why should he get the readers???

  3. Peripheral Visionary

    One correction on the Independent Accountant piece regarding whistleblowers. The argument that Madoff was a "somebody" and that Markopolos was a "nobody" being the reason the tip-off was dropped is false. I review SARs (Suspicious Actions Reports; generally related to money-laundering) as a part of my current position, and one of the fastest ways for a SAR to get serious scrutiny is for the individual named as the suspect to be a "somebody". They go right to the top of the list, and get a close review (a clear example being Eliot Spitzer, who was identified through a SAR.)

    The problem with Madoff was that Markopolos had suspicions, but not legal proof; and that the case was an unusually complex one. Tips at the SEC were being reviewed, not by accountants or examiners, but by attorneys who lacked the specialized knowledge to assess the weight of the claim (and who also were looking for legal proof, i.e. testimony or documents, as opposed to statistical arguments.) Unfortunately, the piece is correct in that many of the tips received are really just "crackpot complaints"; somebody loses money in the market or feels like they got that bad end of a business deal, and immediately they're convinced that it's fraud or manipulation.

    My experience, after having seen both the tips and the SARs, is that the SARs work much, much better. That's because they're submitted, not by members of the general public who may or may not have an agenda, but by full-time professionals who have no special agenda, but who understand the subject matter and submit the information as a duty. If we could remodel the tip system along the lines of the SAR system, we'd be in much better shape.

    P.S. A big THANK YOU to the professionals who fill out SARs–I don't know if any of you are reading this, but we really appreciate your efforts, it makes a world of difference.

  4. Anonymous

    Martin Mayer through IRA, through Jesse, linked from Naked Capitalism says that what traders need is a place to short bonds. When assuming the risk of a credit default swap the writer will layoff that risk by borrowing the company's bond from one party and selling it to another party. I assume this is what is meant by shorting.

    I put an asterisk in front of the borrowed bond to indicate that that entity suffered the indignity of an CDS auction at the hands of Creditex.

    for October 2006 copyright DataExplorers

    Top ten corporate bonds by percentage of issue on loan

    Pfandbriefstelle der Oest Landes-Hypobank (2.506% 15-06-15)
    *Countrywide Home Loan Mortgage Pass Trust (4.728263% 19-01-34)
    *Freddie Mac (5.5% 15-Sep-2031)
    *Freddie Mac (5% 15-Jan-2033)
    *Freddie Mac (5.5% 15-Jan-2032)
    *Freddie Mac Gold Pool (5% 01-Jul-2035)
    Depfa Bank PLC (4.52% 23-Feb-2009)
    Dexia Credit Local (4.52% 23-Feb-2009)
    Landesbank Baden-Wurttemmburg (4.1% 26-Sep-2008)
    Rabobank Nederland (4.06% 26-Sep-2008)

    Top ten corporate bonds by cost to borrow

    Suncom Wireless Inc (9.375% 01-Feb-2007)
    *Calpine Corp (8.5% 15-Feb-2011)
    *Dura Operating Corp (8.625% 15-Apr-2012)
    TekniPlex Inc (12.75% 15-June-2010)
    HLI Operating Company, Inc (10.5% 15-June-2010)
    Century Communications (9.5% 01-03-05)
    *Calpine Corp (7.75% 15-Apr-2009}
    Adelphia Communications (10.25% 15-06-11)
    *Movie Gallery Inc. (11% 01-May-2012)
    RJ Tower Corp (12% 01-Jun-2013)

    The same source puts the dollar value of corporate bonds out on loan at almost 307 billion–in October of '06.

    My point is simply that somehow bonds are sold short and I just assumed that it was traders who did it. I also sent an email to Institutional Risk Analytics.

  5. "DoctoRx"

    Love the pics!

    And love the comment on the BofA cutting branches link about there being more banks than coffee shops: and coffee is better for you than borrowing money, esp. considering that it's your money that BofA was given that they're lending.

  6. LeeAnne

    BofA planning to cut 10 percent of branches: report "With more people using online and mobile banking, changing customer preferences were the driving force for the closings, the paper's sources cited McGee as saying."

    Finally, good news from a bank – closing street level branches and the signage that goes with them -not likely for the reason given.

    The branches of BoA and other bank branches have been proliferating on the streets of New York along with iBanking for years, paying premium rents that squeeze out small neighborhood businesses and restaurants for signage on prime street corner locations.

    Given their business practices, exorbitant fees, and the phony 'improving economy' for banks but not for you, banks have reason to begin removing their branches; the most obvious targets of civil unrest.

  7. someofparts

    "banks have reason to begin removing the most obvious targets of civil unrest"

    oh please
    now I have coffee all over the monitor

  8. autodidact

    "World will warm faster than predicted in the next five years"

    My response: May I point out one small observation, which should be non-controversial, as it should be obvious when you think about it?

    If the IPCC or any other group advancing the theory of man-caused global warming had a formula that could accurately predict global climate, they would have predicted the cooling which is now occurring. For example, we know solar activity runs on a cycle. This was not plugged into the formula and it was not predicted that warming would moderate or that cooling would predominate? El Nino is less predictable, granted, but still, it is not the whole story, so predictions should not have been as far off as they have been.

    It is a simple observable fact, comparing IPCC predictions with actual temperatures, that climate models cannot predict global temperature. And if we cannot predict temperature, it is not sensible to tax populations into energy poverty on the basis of dodgy formulae. (A comparison of CO2 levels with global temperature over the past 500 million years ought to disabuse any rational person of the notion that CO2 is a major influence on temperature. There is virtually no correlation. Yet, we must still endure mad ravings from the likes of Al Gore about CO2.)

    When there is a track record of prediction successes, please get back to me. Until then, I will be looking into finding a coal-burning furnace. It gets cold as hell in the midwest USA in winter, I am disabled, low income, and I need cheap fuel. Failed predictions of uncertain theories mean little to me.

  9. Yves Smith


    If you had been reading climate news, instead of merely following headlines and looking for reasons to object, you would know they HAD been predicting cooling for the next few years, then an acceleration of warming. I have older posts that mention this.

    Anon of 9:51,

    For Jesse to be allowed by IRA to post the full article, he has to be an official affiliate. So IRA is perfectly fine with having its work featured this way. It is only sites that are seeking to maximize ads that are concerned re this sort of use (I've had other bloggers thank me upon occasion for featuring full text of their articles. I am loath to do that, but once in a while, there is no way to cut down the original without losing key content). IRA sells its research contracts for large amounts of money, the website is for political/reputation enhancement purposed, not to generate ad revenue.

    Felix Salmon in particular argues that bloggers should want their copy featured as many places as possible. And Jesse has been a guest blogger here.

  10. dragoneyes

    (ooops originally posted this on another post by mistake)

    As someone who majored in geology in colege before getting a degree in math, I am appalled at the politicization of climate issues from both major parties. Since so much of the climate change hype is based on the results of models, and we all know how well important judgements based on models have worked for the financial system.

    Here is an excellent article on the current global cooling sub-cycle we're in, by someone with excellent credentials.

    Global Warming or Global Cooling? A New Trend in Climate Alarmism

  11. Yves Smith

    Anon of 10:54,

    With all due respect, your assumptions are incorrect.

    CDS are hedged by entering into offsetting CDS, not by shorting bonds. Mayer is proposing to make it easier to short bonds as an alternative to CDS.

  12. Andrew Bissell

    I'm amazed that anyone still trusts any of the FDIC's promises, whether it's backing bank deposits or debt issued by shaky, potentially insolvent institutions like GE Capital. They don't even have one THOUSANDTH of the cash they need to cover all these promises. Sure, maybe the U.S. government will print up all the money they need, but do you really want to take the bet that recovering your funds will be a smooth, orderly process,

  13. ComparedToWhat?

    I just recently came across John Authers's "Short View" video series at I'm extremely skeptical of video in general (no TV in my home) but I like this format — talking head with simple animated graphs, run time under three minutes.

    Check out this clip. Toward the end we see US consumption spending since 1950, which bumps along around 62% until 1980 or so and then rises pretty much linearly to a bit over 70%. So far so conventional.

    The real fun starts when the next data series is plotted, which is consumption spending minus spending on medical care. Best "WTF" moment I've had recently, and Authers's comments are spot on.

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