Thursday, July 8, 2010

More Than 12 Percent of Mortgages Nationwide Delinquent or in Foreclosure

I’ll keep this particular piece of bad news relatively short: Lender Processing Services reports that mortgage delinquencies were up fairly substantially last week. Mortgage delinquencies in May increased to 9.2 percent, up 2.3 percent from the April. This is also a 7.9 percent increase from the previous year.

Going a little further, the nationwide foreclosure rate is 3.2 percent, meaning that more than 12 percent of mortgages are delinquent or in foreclosure. Florida and Nevada lead the nation in non-current mortgage loans, with 22.4 percent and 21.8 percent respectively.

Additionally, the number of delinquent loans that are “cured” (become current) is declining, meaning that fewer and fewer people who become delinquent on their mortgages are able to catch up on payments.

None of this bodes particularly well for the future of the economy or the housing market. Further home price declines could certainly contribute to additional foreclosures.

Bernanke, Fed Made Used Taxpayer Money To Buy Junk Bonds Without Congress Knowing

July 1 (Bloomberg) -- Federal Reserve Chairman Ben S. Bernanke and then-New York Fed President Timothy Geithner told senators on April 3, 2008, that the tens of billions of dollars in "assets" the government agreed to purchase in the rescue of Bear Stearns Cos. were "investment-grade." They didn't share everything the Fed knew about the money.

The so-called assets included collateralized debt obligations and mortgage-backed bonds with names like HG-Coll Ltd. 2007-1A that were so distressed, more than $40 million already had been reduced to less than investment-grade by the time the central bankers testified. The government also became the owner of $16 billion of credit-default swaps, and taxpayers wound up guaranteeing high-yield, high-risk junk bonds.

Read the whole story:

Millions of motorists face £300 bill to install digital radios as ministers press ahead with FM switch-off

Millions of motorists will be forced to spend hundreds of pounds replacing or converting their car radios with new digital sets.

The coalition Government is to press on with controversial plans to switch off FM and medium wave radio in favour of digital – leaving much of the nation with no option but to pay out for new equipment both at home and in the car.

Despite serious concerns that the public neither wants nor is ready for the change, Culture Secretary Jeremy Hunt is expected to announce he will stick with Labour’s plans for a mass switchover in the next five years.

Switchover: Cars will need to be fitted with digital radios before analogue sets become obsolete by 2015

Switchover: Cars will need to be fitted with digital radios before analogue sets become obsolete by 2015

The move will cost consumers hundreds of pounds as they are forced to update and change their analogue radios at home and in their cars, before they become obsolete.

As many as 100 million analogue radios will become largely redundant after 2015 and around 20 million car radios will be useless - leaving many without their favourite stations.

Around 20 per cent of all radio listening happens in cars but only 1 per cent of all cars currently have the capability to receive digital stations.

Motorists will either have to replace their car radios at a cost of some £300 or buy special ‘conversion’ kits that must be attached to the windscreen, often alongside Satnavs, which could also cost more than £100.


Sold out: Analogue TV sets are now extinct

Analogue television is now extinct in the high street with digital sets now the only type on sale.

Research by Digital UK, which is tasked with overseeing television’s switchover, revealed this week that for the first time 100 per cent of sets sold were digital.

The World Cup is credited with sounding the death knell for analogue television by boosting sales of digital sets by nine per cent prompting retailers to reject the older televisions.

Consumers have increasingly been demanding televisions with digital and HD capability rendering traditional screens are now all but obsolete in the high street.

David Scott, chief executive of Digital UK, said 13,000 stores across the country were surveyed.

He added: ‘With a quarter of the country already fully switched to digital TV and a further 11 million homes due to switch next year, it’s good news that retailers have finally stopped selling analogue sets.

‘Having said that, people shouldn’t assume they need to replace their TV for switchover, virtually any old television can be easily converted to digital simply by connecting a digital box.’

This year Britons have bought nearly a million televisions a month with the average purchase price £400.

It is estimated that there are 60 million televisions in the UK – almost as many as there are people.

Last month the Office for National Statistics said the population had reached 61.8 million.

DAB sets for the home cost from £20 for a basic radio to £200 for waterproof, rechargeable versions that can be used outside.

The plans will hit motorists and pensioners hardest but most ordinary homes have two or three radios – and the expense of replacing them all will mount up for everyone.

The outgoing Labour Government was not able to put the 2015 date into its Digital Economy Act, which was rushed through during its last days of power this April.

But a Government source said it would try to stick with Labour’s planned timetable, meaning every household will have to own either a digital radio or have a TV in the next five years.

Senior Tory Lord Fowler, chair of the communications committee, warned the public ‘were not prepared’ for it.

He said: ‘These are people who do a lot of radio listening and if you’ve got four or five radios dotted around the house, then replacing them means the cost adds up.

‘The public have got to be taken with the process on this otherwise there is going to be something of an explosion of indignation.’

Digital platforms, including DAB radio, television and online accounted for 24 per cent of all radio listening in the first three months of this year, according to Rajar figures published in May.

This is an increase of almost four per cent on the same period in 2009 but still a small proportion of the nation.

Currently, DAB coverage reaches about 90 per cent of the population but is extremely patchy in hilly areas such as Snowdonia in Wales and the Peak District in England. FM coverage, meanwhile, runs at more than 99 per cent.

Critics also say that the quality of the reception can vary wildly and is often poorer than FM.

After 2015 there is likely to be a phase out period where FM, MW and digital offerings run alongside each other in order to ensure everyone has adjusted.
This phase out process could happen region by region, following the television model.

The Society of Motor Manufacturers and Traders has said incorporating digital radios into new models by 2015 would ‘be a challenge, but achievable’ but that still leaves tens of millions of older cars requiring conversion.

Earlier this year the communications committee published a report urging caution on radio switchover.

It said: ‘We recommend that the Government, in collaboration with the manufacturers, should provide guidance to the public on in-car digital listening, including advice on conversion kits available and likely to be available within the timeframe of digital switchover.’

Mr Hunt is expected to reveal his definitive time line and plans for digital radio tomorrow.

Federal jury awards $269.2 million in damages in "Who Wants to Be a Millionaire" suit

In a legal setback for the the Walt Disney Co., a federal jury in Riverside awarded the creator of "Who Wants to Be a Millionaire" nearly $269.2 million in damages from the once-popular prime-time game show.

The decision strikes at the heart of the "vertical integration" argument that has buttressed the wave of consolidation that has swept Hollywood over the last 20 years, in which media giants contend that it is economically advantageous to control both the production and distribution of TV programming.

Creator Celador International sued The Walt Disney Co. in 2004, claiming that it had been denied its fair share of profits from the show, which aired on the entertainment giant's ABC network for three years beginning in the summer of 1999 and continues to appear on local TV stations. Celador argued that a series of "sweetheart deals" struck between a clutch of Disney-owned companies kept the show in the red, even as it became ABC's first No. 1 show in more than a decade.

Celador asked the jury to award damages of up to $395 million in broadcast licensing fees, based on what one expert said would be the fair market value of the show. The U.K.-based company also claimed that it was owed $10 million in revenue from the sale of "Millionaire"-inspired games and other merchandise.

The jury arrived at a figure that was slightly less -- $260 million in licensing fees and $9.2 million in money owed from the sale of merchandise. Disney issued a statement, saying it plans to challenge the award.

"We believe this verdict is fundamentally wrong and will aggressively seek to have it reversed," Disney said in the statement.

The case has been described as an illustration of "Hollywood accounting," in which TV shows that become major hits never turn a profit. Over the course of the four-week trial, Celador's attorneys introduced evidence that the show generated $515 million in revenue from license fees over the course of its three-year prime-time run through 2002, not including $70 million in merchandising revenue.

"Millionaire" also attracted nearly $1.8 billion in advertising for ABC, according to research firm Kantar Media.

But according to Disney's accounting, Millionaire has run a $73-million deficit.

[Update, 11:22 p.m.: For more, see the story on the ruling against Disney in the "Who Wants to Be a Millionnaire?" lawsuit in tomorrow's Times.]

-- Dawn C. Chmielewski

Photo of "Who Wants to be Millionaire?" by Virginia Sherwood / ABC

The World of Most People and the Power of the Unseen.

Dog Poet Transmitting…….

It’s hard to find something to write about anymore. Of course, there are many situations and subjects that keep moving toward some unknown destination. All over the world there are conditions and pressures that interconnect with other conditions and pressures around the world. Perhaps the most mystifying feature is the world press. Major cataclysmic events are in operation or soon to be and the press is having tea with advertisers and reality TV stars. You wouldn’t (and don’t) know that much of anything that is happening is actually happening.

The situation in the Gulf of Mexico is off the charts and a number of police and enforcement agents are in operation to hinder the access of people seeking to study and report on what is happening. It appears that it has been made a felony to approach locations within a certain distance for the purpose of taking photos. This is in violation of laws that allow citizens to have access to public beaches and other locations. Workers involved in the cleanup are forbidden to speak to anyone about what they are doing.

BP is a company that is largely owned by front corporations that are owned by Rothschild. The press is 96% owned by Zionist concerns. The situation in the Middle East has been made the way it is by the same interests, starting with the 9/11 attack which was carried out by Israeli and American intelligence forces, which also engineered the attack on Afghanistan, which dummied up the false intel on Iraq and is now engaged in an all out effort to accomplish an attack on Iran. When you consider that ICTS was the security firm in charge of all 9/11 airports, the London Tube and the Madrid train station; it is pretty obvious who the bad guys are.

Then, when you factor in who is in control of the central banks and what they have done to financial interests that impact on the livelihood of the common soul and then look at what Goldman Sachs has been up to, it can be pretty scary. It explains the critical necessity of controlling the flow of information to the public.

Of course there are other interests involved. Of course there are bad elves and other helpers who have sold their soul for money and token power, as well as those blackmailed and threatened in various ways but… it can’t be denied that the state of Israel and the Zionist hegemonic machine is possibly the single most destructive engine of darkness at work in the world today.

People with the courage to do so are talking about this at blogs and the alternative press. They’re talking about it behind closed doors in the governments of the world. Alliances are shifting and the stage is being set for some world changing acts. Most of the world is watching TV or looking for something to occupy their attention while they hear little or nothing of any importance. The lies are immense and unceasing. It would look pretty bad overall if it weren’t for the fact that what you see is not all there is and… one of the things you don’t see is the most important thing of all. That’s what I’m banking on; meanwhile the operations of clever psychopaths against ignorant mouth breathers is a kind of death dance that goes on life after life with the players changing places.

The biggest difficulty that those who would seek to change the world encounter is that most people don’t want you to change the world. What most people want it to occupy the positions held by their oppressors. Most people want to be rich and famous. Most people want to be shallow and vain and accomplish it marvelously.

It’s like the case with the divine and religions. Most people see God as a bigger version of themselves. Most religious people frown on certain behavior while supporting far worse. Most people don’t want to hear this because most people think they know what’s going on and it is a certainty that most people do not and you can’t tell them any different.

The present situation that exists, as it affects nearly everyone, was brought about by the rise in the power of corporations and banks. As business gained more and more economic clout, it could hire more lawyers. They could also influence legislation. So more and more laws favored the interests of business and fewer laws protected the public from their predations. Business has no real loyalty to any country so business took its manufacturing where it could build its goods cheaper and out of cheaper elements. Corporations became obsessed with higher and higher profit margins and this naturally led to worsening situations for the poor and middle class. When you want to squeeze a greater amount of money from everything you do, you have to squeeze those with the least ability to complain and the least amount of capital to hire lawyers in their defense.

This is an age of paramount materialism. Therefore, those interests who operate the machinery also determine the reality. This is why television is set up to indoctrinate the consumer from a very early age and why most people see reality in terms of objects and amusements directed at base appetites because these reflect the products being sold. Business doesn’t have a conscience and a soul, so it doesn’t matter if the products poison the consumer or the environment, because the nature of business is to get bigger and bigger as if there were no end to it. After awhile, most people see their condition as the way it is because, as far as most people are concerned that is the way it is.

Into the mix comes the idea of patriotism in defense of a country whose main intent is to subjugate the rest of the world, based on the presentation of ongoing threats from countries they seek to plunder, on the behalf of corporations that desire the resources and make their money from warfare. Anyone who doesn’t play the game is marginalized or slandered as a threat to the internal security of the nation. Since the media that feeds the public its information is completely controlled by those who also profit from the various evils of imperialism and materialism, it’s a tight little circle from which few escape.

The illusion of the public good, civil rights and citizens rights is maintained by various organizations and charities that are headed by individuals that support the status quo and what should happen doesn’t happen …but it looks like it does, even when the people most affected can clearly see that it doesn’t.

Eventually there is a problem with the population which requires a major reduction in numbers and that’s just something that gets done because it serves the interests of business. I’m not opposed to business because it is a necessary thing. I’m talking about the corporate mind set but most people will think I don’t like business anyway (grin).

So, like it says on those maps in bus kiosks and at tourist centers, you are ‘here’, right where the little arrow is pointing. The combination of all the situations described in this post eventually lead to a terrible tragedy and the breakdown of the whole false envelope of manufactured reality. Out of the ashes, there rises a new world and after a couple of thousand years, you are right back where that arrow is pointing.

People don’t understand why this cycle repeats over and over, if they happen to be aware of it at all …but that is the nature of the world. The whole dance of civilization is just a movie in which people are given the opportunity to play a part. It stands to reason that there must be more than this at some other locations. We know there are times when it is not so bad overall and times when it is pretty bad nearly everywhere.

It’s not easy to make sense out of the whole affair and an objective observer would very soon be able to determine that most people are crazy and that the predictable routine of their movements is what gives them the appearance of sanity where there is none.

As I said, there’s something else that has a major effect on everything and also determines the outcome. It’s that thing I mentioned that you can’t see. Some people are in touch with this but most people are not. Since this is going to be demonstrated while most of us are still here, it isn’t necessary for me to say any more except to say that every life is affected, protected or destroyed by the power of this unseen thing and it probably makes sense to find out what that is and get into some kind of positive relationship with it but… most people won’t because most people think power comes from the visible agencies that seem to most clearly demonstrate the possession of it. Actually, all power is obtained from the unseen and only has that power for so long as the unseen allows it. This is not something most people can grasp and that is unfortunate for most people.

End Transmission…….

It gets even stranger as the denouement approaches but we’re used to it.

Formerly Beloved Technical Analyst For Wall Street Warns Massive Market Crash Coming

Pick any Roland Emmerich disaster movie and randomly select a scene--that's more or less what Robert Prechter, a market forecaster who was widely lauded as a technical analyst in the 1980s, says is coming to the Dow, writes the New York Times.

Buy-and-hold stock investors will be devastated in a crash much worse than the declines of 2008 and early 2009 or the worst years of the Great Depression or the Panic of 1873, he predicted.

For a rough parallel, he said, go all the way back to England and the collapse of the South Sea Bubble in 1720, a crash that deterred people “from buying stocks for 100 years,” he said. This time, he said, “If I’m right, it will be such a shock that people will be telling their grandkids many years from now, ‘Don’t touch stocks.’ ”

Prechter bases his doom and gloom on something called the Elliott Wave theory, which is based on the work of an accountant who discovered patterns in the stock market in the 1930s and '40s. He's used it to provide investing advice for decades now, and the paper says that since 1980, a portfolio based on his advice "has slightly underperformed the overall stock market but has been much less risky, losing money in only one calendar year."

Now he's saying that within the next 5 to 6 years, the Dow--currently over 9,000--will fall to less than 1,000.

The Times also talks to another analyst who recently moved his money out of stocks into cash, but who says he thinks that after a coming 10 to 15% drop, there should be another "meaningful rally."

The “mathematics don’t work,” Mr. Acampora said, because such a big decline would imply that individual stocks would need to trade at unrealistically low levels. Furthermore, he said, “I don’t want to agree with him, because if he’s right, we’ve basically got to go to the mountains with a gun and some soup cans, because it’s all over.”

Still, on a “near-term” basis, he said, “We’re probably saying the same thing.”

"A Market Forecast That Says ‘Take Cover’" [New York Times]

Food Thieves Prove Tough Times are Already Here

Mac Slavo

Normally we hear about thieves breaking into a house to steal a flat screen TV, or jacking someone’s car.

But, with the economy falling apart and millions out of work, stories like these will become much more common, as TV’s, computers, cell
phones and home furnishings start taking a back seat to essential goods like food:

The sign on the side of the road reads, “Home grown veggies for sale,” but thieves apparently ignored the words, “for sale”.

The theft happened over the weekend at a home along Bennetts Bridge Road in the Greer area of Spartanburg County.

The homeowner didn’t want to be identified, but told deputies that someone stole 40 pounds of ripe tomatoes, 20 pounds of lima and butter
beans and took all of her cucumbers and squash.

She blames the economy for the crimes.

source: MSNBC

The victim is likely right. The fair market value of those vegetables is roughly $150.

Chances are that whoever stole that food is not headed down to the nearest pawn shop to off-load it. They are likely bringing the veggies
back to the house for personal consumption.

While we may experience a strong deflationary impact to debt based goods like house prices, chances are that the essentials like energy and
food are going to rise significantly in relation to wages. If you’ve
been to the grocery store lately and picked up a week’s worth of veggies
and fruits, then you can attest to the costs.

It’s not cheap to eat healthy.

Hat tip Roger Mack for sending this one over

Unemployment Is No Longer A Lagging Indicator: El-Erian

Unemployment has shifted from a lagging indicator to a leading one and is warning government policymakers to confront problems in an economy mired in slow growth, Pimco co-CEO Mohamed El-Erian told CNBC.

The consideration of unemployment as a lagging indicator is a favorite mantra among economists who believe the rate primarily looks at the past rather than what is to come.

But the internal details of current trends paint a different picture: More than half the labor force out of work for more than 26 weeks, the average length of unemployment at greater than 35 weeks, and the unemployment rate of 25.7 percent for 16- to 19-year olds.

"These are structural aspects which cannot be solved overnight, cannot be solved with a cyclical mindset," El-Erian said. "And they are worrisome because they make the unemployment rate not only a lagging indicator but also a leading indicator."

The US has been "an outlier" among nations who have been confronting the challenges posed by what Pimco, the world's largest bond fund with more than $1 trillion in assets under management, calls the "new normal" of prolonged slow growth.

"Somehow in the US we are caught in this active inertia that results in just a cyclical response," said El-Erian, the firm's co-CEO. "We need more than that. we need cyclical and structural."

He cited China, Brazil and Russia specifically as countries that have taken more proactive approaches to their problems. While other nations have looked at austerity and structural reform, the US is saying, 'Hey, what we need is growth.' What you need is harmonization that is about growth, is about austerity and critically is about structural reform."

As for investors, El-Erian said stock prices are "getting toward fair value. We're not quite there yet because I don't think analysts quite understand what the new normal looks like in terms of lower growth and lower top-line revenue growth, but we're getting there."

He said the bond market, with the yield on the benchmark 10-year Treasury note yield below 3 percent, is close to fair value.

A double-dip recession, which has gathered more talk about economists, is a "risk scenario" but not what Pimco considers the most likely event, he said.

"We find it striking that consensus, which used to romance a 'V' (recovery) is now moving toward what we've been calling the new normal, and some people are going right through the new normal and romancing a double-dip and a depression," El-Erian said. "What you're seeing is a move in consensus that has repriced the bond market and is repricing the equity and credit markets."

The G-20 Agreed to Strangle Us With Debt

According to most media reports, the recent Toronto G20 summit was a "failure."

However, if one understands that the real goal is not to repair the economy but indeed to cripple it in order to impose a dreadful, new formula of "global governance" on mankind, then the G20 summit was a resounding success, albeit a sinister one.

What was the outcome of that weekend in late June 2010? The participating nations -- or should one say: the Politburo of the World? -- brought forth a quite substantial closing declaration, almost a treaty, defining their brutal goals as well as their time-line.

"Ever angelic" and in distant pre-1989 times, committed Marxist-Leninist, German Chancellor Angela Merkel, who has assumed the leading role in advancing this new formula of de-facto-communist world government, said "We are going to [stop] our economic stimulus policies, through which we used to run into even more debt, and will as industrial nations halve our new debts until 2013."

And in a second step, from 2013 to 2016, the G20 agreed to gradually reach zero new debt - which means, of course, even more "economic contraction."

But after 2016 comes the real thing: paying back all national debt, as ever with interest and compound interest!!!

The monetary magicians from whom we (as states, as companies, or as private persons) have been borrowing valueless, out-of-thin-air paper over decades and centuries, now demand "their money" this time, however, real value and real property.

As Chancellor Merkel explains that deadline of 2016: "That means that countries should then have reached balanced budgets so to take into view the reduction of the sum total of debt itself."

Mankind will get utterly strangled. And, no question, the result of this "programme" will be horrendous poverty, starvation, and death on an unimaginable scale, like all sick Hollywood doomsday movies combined, with this one single bizarre objective: the "creation" of a radically New World, with a sharply reduced population (less than 10% of present levels) and thoroughly "cleansed" of all the "superstition" and "traditional sentiment" of the old days. In other words: French Revolution plus Bolshevist Revolution revisited! -

But, don't worry, "Mutti", as the Germans call Angela Merkel, has a word of comfort: This exit strategy out of debt-financed economy stimulus policy will be "very demanding and for many certainly a big task."


As of July 6, 2010, the United States' outstanding public debt amounts to 13.2 trillion dollars. Divided by an estimated population of 308,690,000, this makes a per capita public debt only, from newborn to geriatric, of roughly $42,760.

Then add the suicidal load of private debt most Americans are struggling under, though more often self-inflicted than not, and you get the perfect foundation for ultimate enslavement. For other industrial countries the same story basically applies.

Dominique-Strauss-Kahn301.jpgA few months ago, at the peak of the Greek fiscal crisis, the Director of the International Monetary Fund, Dominique Strauss-Kahn, left, was asked by one journalist how he can be so sure that the IMF will ever get back the money from insolvent Greece.

His answer, with a relaxed smile on his lips, was that so far they'd never had any problems. Why they can be confident? Because they are in the position to make sure they get what they want.


Finally, we're not only dealing with this murderously abrupt shift of paradigms from an insane culture of debt to an ultra-disciplined culture of alleged "economic truth" (that applies only for us, not for our money-lenders).

There is also the pressure from the "anthropogenic climate change" front (it's all one and the same hidden hand at work anyway) that makes things even a thousand times more absurd.

Therefore, on top of all debt reduction comes the monstrous threat of huge, whatever fictitious, carbon taxation - for which purpose the Deepwater Horizon catastrophe could well have been most cynically designed, not only to debunk the United States once and for all but also to bring everybody over to the anti-"fossil-fuel" and heavy CO2-taxation side.

It's clear they're determined to break our backbone by whatever means, and there are many. And unless they can be stopped or a miracle happens (there still rules God in Heaven), we won't recognize our world, say, in ten years' time.

In fact, our world, the world as we know it, the world we grew up into, the world that we loved and admired and traveled through, will be gone.

Postscript: Has anybody had a revelation from the Toronto-G-20 logo? A mere depiction of Toronto's huge CN Tower? Look at it again! Could this depict a bird's claw held, controlled, and thereby imprisoned by a metal ring?

For those interested, the full document of the G-20 Concluding Declaration can be read here:

Part 1:
Part 2:
Part 3:
Part 4:

Books and web-links:

Anatoliy Golitsyn: New Lies for Old: The Communist Strategy of Deception and Disinformation; Dodd, Mead & Company, New York 1984

Anatoliy Golitsyn: The Perestroika Deception: The World's Slide towards the Second October Revolution; Edward Harle Ltd., London, New York 1995

Jan Sejna: We Will Bury You; Sidgwick & Jackson, London 1982

Yuri Bezmenov: Soviet Subversion of the Free World Press: A Conversation with Yuri Bezmenov, Former Propagandist for the KGB; 82-minute-video recorded in 1984; host: G. Edward Griffin (John Birch Society):

Yuri Bezmenov (Tomas Schuman): Soviet Defector from Novosti Press, KGB Propaganda Expert; 70-minute-lecture held in 1983 at L.A.:

Sergey Petrovich Melgounov: The Red Terror in Russia [orig. 1924]; Edward Harle Ltd., London, New York 2008

Aleksandr Solzhenitsyn: The GULAG Archipelago 1918-1956 [orig. 1974]; Harvill Secker 2003

Robert Buchar: And Reality be Damned... - Undoing America: What media didn't tell you about the end of the Cold War and the Fall of Communism in Europe; self-published via Bertram Print on Demand, 2010; available via

Igor Panarin, Dean of the Diplomatic Academy of the Foreign Ministry of the Russian Federation, predicts in 2009 the collapse and disintegration of the United States in 2010 (must see!):

Richard Wurmbrand: Tortured for Christ; Hodder Books, London 1974

Anthony Sutton: Wall Street and the Bolshevik Revolution [orig. 1974]; Buccaneer Books, Cutchogue NY 1993 G-20 Summit 2010 at Toronto Will Be Remembered!

Joseph D. Douglass: Red Cocaine: The Drugging of America and the West [orig. 1990]; Edward Harle Ltd., London, New York 1999

Christopher Story: The European Union Collective: Enemy of Its Member States: A Study in Russian and German Strategy to Complete Lenin's World Revolution; Edward Harle Ltd; London, New York 2002

Tom Fife: Global Elite Picked Obama (i.e. Russian communists knew of Obama as early as 1992!):

Tom Fife: Interviewed at Jeff Rense Radio Show, March 2009, 41-minutes:

Tom Fife: Interviewed by J. R. Nyquist (43 minutes):

Costa Rican Govt Approves US Occupation

In another example of the growing militarization of the war on drugs, the Costa Rican government has given the US permission to launch an invasion of up to 7,000 Marines, ostensibly to “fight drugs.”

The vote was extremely controversial in Costa Rica’s legislature, with several MPs arguing that it gave he US a “blank check” to occupy the nation and was a threat to its sovereignty. Costa Rica has had no military of its own since its abolition in 1948.

Preceded by decades of on-again, off-again violence, the lack of a military has actually served the nation quite well over the past 62 years, and Costa Rica is one of the few nations in Central America not to face any violent uprisings or brutal dictatorships. The nation even celerates a holiday, on December 1, called Military Abolition Day.

Indeed, it appears that the only reason the nation is in America’s sights at all is because it is geographically so narrow, and an occupation of it could provide a convenient choke-point for blocking drugs from South America reaching Mexico and eventually, the United States, by land.

Under the terms of the agreement, US troops “will enjoy freedom of movement and the right to carry out any activities needed to fulfill their mission.” In addition to the ground troops, the US will be deploying 46 warships and hundreds of helicopters.

Report: Secret Document Affirms U.S.-Israel Nuclear Partnership

According to Army Radio, the U.S. has reportedly pledged to sell Israel materials used to produce electricity, as well as nuclear technology and other supplies.

By Haaretz Service, Barak Ravid and Reuters

Israel’s Army Radio reported on Wednesday that the United States has sent Israel a secret document committing to nuclear cooperation between the two countries.

According to Army Radio, the U.S. has reportedly pledged to sell Israel materials used to produce electricity, as well as nuclear technology and other supplies, despite the fact that Israel is not a signatory of the Nuclear Non-Proliferation Treaty.

Other countries have refused to cooperate with Israel on nuclear matters because it has not signed the NPT, and there has been increasing international pressure for Israel to be more transparent about its nuclear arsenal.

Army Radio’s diplomatic correspondent said the reported offer could put Israel on a par with India, another NPT holdout which is openly nuclear-armed but in 2008 secured a U.S.-led deal granting it civilian nuclear imports.

During Tuesday’s meeting between Prime Minister Benjamin Netanyahu and U.S. President Barack Obama, the two leaders discussed the global challenge of nuclear proliferation and the need to strengthen the nonproliferation system.

They also discussed calls for a conference on a nuclear-free Middle East, which was peoposed during the 2010 Non-Proliferation Treaty (NTP) review conference in New York and which Netanyahu said he would not take part in because it intends to single out Israel.

Obama informed Netanyahu that, as a co-sponsor charged with enabling the proposed conference, the United States will insist that such a conference have a broad agenda to include regional security issues, verification and compliance and discussion of all types of weapons of mass destruction.

Obama emphasized the conference will only take place if all countries “feel confident that they can attend,” and said that efforts to single out Israel would make the prospects of such a conference unlikely.

The two leaders agreed to work together to oppose efforts to single out Israel at the IAEA General Conference in September.

Obama emphasized that the U.S. will continue to work closely with Israel to ensure that arms control initiatives and policies do not detract from Israel’s security, and “support our common efforts to strengthen international peace and stability.”

Dan Meridor, Netanyahu’s deputy prime minister in charge of nuclear affairs, said Obama’s endorsement was not new but that its public expression – two months after Washington supported Egypt’s proposal at a review conference of the Nuclear Non-Proliferation Treaty (NPT) – was significant.

Obama’s statement “was without a doubt a special and significant text. It was important for us, and it was important for the region,” Meridor said.

Israel neither confirms nor denies having nuclear weapons under an “ambiguity” strategy billed as warding off foes while avoiding public provocations that can spark regional arms races.

The official reticence, and its toleration in Washington, has long aggrieved many Arabs and Iranians – especially given U.S.-led pressure on Tehran to rein in its nuclear program.

Good news: Michigan school district effectively bans white teachers from being hired

UPDATE: On second thought, it is interesting that liberals want to beat conservatives over the head with a legal shovel when it suits their purposes. But when the law is against their ideological goals, they flip it the finger. The handgun ban recently passed in Chicago comes to mind right after the Supreme Court upheld the 2nd amendment. This case of discrimination in violation of the Michigan Constitution and the equal protection clause of the US Constitution are 2 really good examples of that mentality. ****
The way to stop discrimination on the basis of race is to stop discriminating on the basis of race. - SCOTUS Chief Justice John Roberts
Somewhere out in cyberspace, I can hear Glenn Reynolds saying "they told me if I voted for McCain, racism would be the order of the day. And they were right!" Isn't it interesting that the same people that have been gnashing their teeth and wringing their wrists over the Arizona law because of racial profiling concerns are the same ones that of racial preferences in college admissions and government hiring say 'you can have my racial discrimination when you pry it from my cold, dead hands!'? I have often said in this blog that liberal positions are not based on reason, but rather feelings. Without reason, one tends to have diametrically opposing viewpoints on issues at the same time that can not be reconciled. Abortionof the innocent yes but capital punishment for the guilty no. Racial profiling is in the same league. Take for example the Plymouth-Canton school district here in Southeatern Michigan. From The Detroit News (HT: Jennifer Gratz on FB):
...A recent directive in the Plymouth-Canton Community Schools urges administrators to scan resumes for "cues" that applicants are from a minority racial group. Tip-offs can include job-seekers' residence, college attendance, fraternity or church membership and employment history.

Nearly a quarter of Plymouth-Canton's nearly 19,000 students are minorities, compared with less than 3 percent of its educational staff. District officials say they want to close that gap while hiring the most-qualified candidates.
Why do these diversiphiles insist that if 25% of the student population is minority (black? hispanic? asian?) that the teacher population needs to mirror that percentage? And why limit it to the district and not apply it to individual schools? Or down to the classroom? If the teacher population were 50% minority, do you think they would be trying to fire half the minority teachers? And why don't these diversifiles apply this 'proportional representation' theory to sports? Why not tell the NBA that since the US population is only 12% black that only 1 black guy can be on the floor at any one time between the 2 teams playing? As stupid as that sounds, and it should, that is exactly the 'logic' that they are using. Yet diversiphiles like Ann Marie Hudak - chairwomanof the Plymouth-Canton Citizens for Diversity and Inclusion - are pushing skin pigmentation diversity rather than quality education:
"Our teaching population should reflect the student population, because, based on statistics, kids who see themselves reflected in teachers tend to score higher on tests, and it's important for our children."
Why doesn't the school district discriminate on the basis of ideology? Based on the voting record of the district, why aren't teachers hired for being of a certain ideology based on how the districts votes? Or on eye color? Or on height and weight? Why the obsession with justskin pigmentation? The Michigan Education Association (MEA) supports the racial discrimination. Natch. I should point out that Michigan voters overwhelmingly passed the Michigan Civil Rights Initiative (MCRI) back in 2006 (called proposal 2 on the ballot) that was supposed to have removed any discrimination in the public square based on race, ethnicity, national origin, gender, etc. That included the so-called affirmative discrimination action programs in public schools and universities and in hiring. Apparently, it didn't quite turn out that way in Plymout-Canton. But at least not all school districts are on theskin pigmentation diversiphile bandwagon:
Bob Freehan, a district spokesman, says the Warren schools have no plans to use race as a factor in hiring.

"The system we use for hiring doesn't look at the cultural background," Freehan said. "We look for teachers who are student-focused and curriculum-focused."
As it should be. I did my schooling as a kid through Warren Consolidated, so thumbs up to my alma mater school district! Exit question: shouldn't a prosecutor be looking at charges against the leaders of this school district since they are plainly violating state law?

U.S. Shopping Center Vacancies Approach Record High, Reis Says

July 7 (Bloomberg) -- Vacancies at U.S. neighborhood and community shopping centers moved closer to the highest on record in the second quarter amid signs the economic recovery is losing steam and consumer confidence remains subdued, Reis Inc. said.

The vacancy rate at shopping centers rose to 10.9 percent from 10 percent a year earlier and 10.8 percent in the first quarter, the New York-based real estate research firm said in a report today. It was the highest since 1991’s 11 percent. The record for shopping center vacancies since Reis began tracking the data 30 years ago was 11.1 percent in 1990.

“There are really very few reasons to believe that performance deterioration won’t continue for another 18 to 24 months for retail properties, although there are some signs that the pace of decline is moderating,” Victor Calanog, director of research, said in the report.

Out of 80 cities, 11 posted increases in rents paid by tenants. “Compared to the last two quarters, when most if not all of our markets posted declines in effective rents, this is good news,” Calanog said.

The Standard & Poor’s Supercomposite Retailing Index has fallen 23 percent since April 26, when it touched the highest level since July 2007.

Little New Space

“Less than 400,000 square feet of new strip mall space was added in the second quarter, so increases in the national vacancy rate are coming from existing properties bleeding out, not from new properties,” Calanog said.

Effective rents at the shopping centers, or what tenants actually pay rather than landlords’ asking rents, fell 2.8 percent from a year earlier and 0.5 percent from the previous quarter, Reis said.

At regional and super-regional malls, vacancies remained at a 10-year high, rising to 9 percent from 8.4 percent a year earlier and 8.9 percent in the first quarter. Asking rents fell for the seventh straight quarter, the longest streak in the 10 years Reis has compiled the numbers.

Regional malls typically include department stores and fashion and general merchandise retailers and range in size from 400,000 to 800,000 square feet (37,161 to 74,322 square meters), according to the International Council of Shopping Centers. Super-regional malls, including the Mall of America in Minnesota, South Coast Plaza in Southern California and Tysons Corner Center in Virginia, are defined as those larger than 800,000 square feet.

Neighborhood shopping centers tend to be 30,000 to 150,000 square feet and mainly house convenience retailers. Community shopping centers are 100,000 to 350,000 square feet and may include a discount department, home-improvement or grocery store.

--Editors: Anne Pollak, Kara Wetzel

Americans may be slammed by shocking tax hike

After nearly a decade of federal tax cuts, Americans could awaken New Year's Day with a whopper of a hangover.

Breaks covering everything from child tax credits to the death tax are set to expire that day, less than six months from now, bringing higher payments for nearly every American who pays taxes.

"We've never in history seen anything quite like this, where such a major portion of the tax code is set to expire on a single date and affect so many Americans all at once," said Scott Hodge, president of The Tax Foundation, a Washington nonprofit that tracks tax policies.

Enacted in 2001 and 2003, the cuts run out unless Congress votes to extend them. President Obama proposed extending some tax breaks, for couples earning less than $250,000 a year, but lawmakers could let them all expire.

If that happens, according to The Tax Foundation's analysis, everyone would pay more from bottom to top: Taxes for a couple with two children and a $50,000 income would more than triple to $2,825 a year, while a couple with no children earning $1 million would pay $44,000 a year more in taxes, for a total bill of $298,510.

"In that first paycheck in 2011, everyone will see a chunk missing. There will be a significant impact," said Curtis Dubay, senior tax policy analyst for The Heritage Foundation, a conservative Washington policy group.

Congress might choose to extend some benefits and let those for top earners expire, said Ryan Ellis, tax policy director of Americans for Tax Reform, a Washington tax policy nonprofit group.

But if lawmakers choose to do nothing, the changes would include:

• Across-the-board income tax increases of 3 percent to 5 percent for every bracket;

• The so-called death tax on estates would return after a one-year hiatus, at 55 percent on estates over $1 million;

• Capital gains tax would rise to 20 percent from 15 percent, and dividends tax would rise to 39.6 percent from 15 percent;

• The child tax credit would be cut in half to $500 per child.

Rob Malone, 32, of Beechview didn't expect this.

"I'm surprised," Malone said. "Obama's plan was not to raise taxes. He's said many things and done the opposite."

Lee Heckman, 51, who owns Custom Framing & Gallery on Beverly Road in Mt. Lebanon, said he's worried about tax increases for small businesses. Two-thirds of small businesses are taxed at the top rate, which would increase to 39.6 percent from 35 percent, Americans for Tax Reform said.

"We're already overwhelmingly overtaxed," Heckman said.

Many of those concerned about higher taxes worry about the government's deficit spending. The government plans to spend $1 trillion more than it brings in this year.

Tax breaks are not the problem and should be frozen in place, said Glen Meakem, managing director of Meakem Becker Venture Capital in Sewickley.

"The rate of spending today is out of control," he said. "It's unsustainable and ... it's going to bankrupt the country."

One problem is that Americans don't know how much they will have to pay -- even if the news is bad, said Allan Meltzer, a political economist at Carnegie Mellon University.

Without knowing whether they'll pay higher taxes in 2011, businesses and investors are uncertain about how to spend their money, he said.

"Someone needs to announce where we're going and how we're going to get there," Meltzer said. "People won't like to hear it, but they're better off hearing it rather than speculating."

Porn movie: one hospital's road to rude financial health

Why shouldn't a hospital hire itself out to people who want to make porn films? It's got the beds…
Barbara Windsor in Carry on Doctor
Hospitals have always had a certain je ne sais quoi. Photograph: Rex Features

As public sector managers look to find ever more creative ways of saving money, they would do well to study the enterprising thinking of NHS Kensington & Chelsea.

During a House of Commons speech yesterday Conservative MP Penny Mordaunt let slip that, prior to 2002, a hospital ward in the borough was hired out for the filming of a "big budget" pornographic movie.

The title of the film has yet to emerge, but it took place in a closed yet "fully-equipped" ward. It is also unclear whether the hospital was aware of the genre of film, or if it provided any technical support.

Mordaunt was speaking during a debate on improving transparency in government accounting:

"Although I cannot claim to have seen the final picture – as I understand it, these things are no longer claimable on parliamentary expenses – it was a big-budget affair and generated substantial income for the hospital. But apart from cheering up a few of the in-patients, it cannot be said to be contributing to the objectives of the primary care trust."

Rather than take credit for this innovative way of generating new income streams, NHS Kensington & Chelsea distanced itself from the matter: "We can confirm this incident occurred some time prior to 2002 under a predecessor organisation's management and prior to the formation of PCTs."

Do these unnamed money-making managers need to congratulated for taking the blue in blue-sky thinking quite literally?

SULTANS OF SWAP: BP Collapse Potentially More Devastating than Lehman!

As horrific as the gulf environmental catastrophe is, an even more intractable and cataclysmic disaster may be looming. The yet unknowable costs associated with clean-up, litigation and compensation damages due to arguably the world’s worst environmental tragedy, may be in the process of triggering a credit event by British Petroleum (BP) that will be equally devastating to global over-the-counter (OTC) derivatives. The potential contagion may eventually show that Lehman Bros. and Bear Stearns were simply early warning signals of the devastation lurking and continuing to grow unchecked in the $615T OTC Derivatives market.

What is yet unknowable is what the reality is of BP’s off-balance sheet obligations and leverage positions. How many Special Purpose Entities (SPEs) is it operating? Remember, during the Enron debacle Andrew Fastow, the Enron CFO, asserted in testimony nearly 10 years ago that GE had 2500 such entities already in existence. BP has even more physical assets than Enron and GE. Furthermore, no one knows the true size of BP’s OTC derivative contracts such as Interest Rate Swaps and Currency Swaps. Only the major international banks have visibility to what the collateral obligations associated with these instruments are, their credit trigger events and who the counter parties are. They are obviously not talking, but as I will explain, they are aggressively repositioning trillions of dollars in global currency, swap, derivative, options, debt and equity portfolios.

Once again, as we saw with Lehman Bros and Bear Stearns we have no visibility to the murky world of off balance sheet, off shore and unregulated OTC contracts, where BP’s financial risk is presently being determined. At a time when understanding a corporation’s risk position is critically important, investors are in the dark. When markets are uncertain, bad things are certain to follow. The new financial regulations under the Dodd-Frank legislation does absolutely nothing to address this. This was the central issue in truly understanding and corralling TBTF risk. It has not been addressed and the markets will likely make the tax payer pay for this regulatory failure once again.

Massive BP Risk lay in the $615T OTC Market that only the major international banks have any visibility to…. and they are not talking!


I could not have stated it any clearer than Jim Sinclair at “People are seriously underestimating how much liquidity in the global financial world is dependent on a solvent BP. BP extends credit – through trading and finance. They extend the amounts, quality and duration of credit a bank could only dream of. You should think about the financial muscle behind a company with 100+ years of proven oil and gas reserves. Think about that in comparison to a bank with few tangible assets. Then think about what happens if BP goes under. This is no bank. With proven reserves and wells in the ground, equity in fields all over the planet, in terms of credit quality and credit provision – nothing can match an oil major. God only knows how many assets around the planet are dependent on credit and finance extended from BP. It is likely to dwarf any banking entity in multiples…. The price tag and resultant knock-on effects of a BP failure could easily be equal to that of a Lehman, if not more. It is surely, at the very least, Enron x10.”

From a historical context, some may not be aware that the infamous House of Rothschild at the height of their banking power moved into Energy & Oil. Also, John D. Rockefeller quickly realized his globally expanding Standard Oil was more a bank, consolidating his financial empire under a banking structure which resulted in the Chase Manhattan Bank (the basis of Citigroup). As long as an energy giant can manage its cash flows throughout the volatility of price fluctuations, it becomes a money and credit generating machine. It can borrow with AAA yields anywhere on the curve and lend to less credit worthy entities at attractive spreads. These lending differentials help fuel the $430T Interest Rate Swap OTC market. BP has been able to spin off $20B of earnings for the last 5 years and $15B in cash last year. All of this suddenly comes to an end if its credit rating is significantly impaired. But what could possibly cause this to happen? It would take a black swan event. An outlier. A fat tail.

Sound familiar? Heard this discussion before?

The Gulf Oil Disaster may be the fat tail to end all fat tails and shows the exposure behind the entire risk models of the vast majority of derivatives algorithm models. To suggest that BP would need to take impairments north of $20B would have seemed out of the realm of possibilities less than 90 days ago. Now, if it is contained to only $20B, it would be considered a blessing. Fitch dropped BP’s credit rating an unprecedented 6 notches on June 15th from AA to BBB which followed June 3rd's AA+ to AA cut. This is what happens when a fat tail occurs and it has only just begun.

Though few are talking openly, it doesn’t mean large amounts of money aren’t aggressively repositioning. This repositioning is effectively de-leveraging and is consequentially a liquidity drain. This comes as US M3 has gone negative and M2, M1 are rapidly declining. BP is going to face a massive liquidity crunch which has all the earmarks of triggering an already tenuous and worsening international liquidity situation.

I found the charts (right) published by Credit Derivatives Research to be very telling of the abrupt shift that has occurred. Their charts show that the April 21st Macondo well explosion has triggered a significant inflection in the risk, counterparty and high yield areas. A comparison with Government and High Grade Debt has a different profile (see end of this report for the charts) which reflects the European banking concerns associated with the southern European economies (PIIGS). It is important to differentiate these as separate drivers. Both come as the percentage of corporate bonds considered in distress is at the highest in six months - a sign investors expect the economy to slow and defaults to rise. This spells deleveraging.


1 - CSO (Credit Synthetic Obligations)

A study by Moody’s outlines that a BP bankruptcy would impair 117 Collateralized Synthetic Obligations (CSOs), which would lead to pervasive losses by a broad range of holders. The 117 effected is a startling 18% of the total CSOs outstanding, which is an indication of the scope and impact of BP financing globally. For those that remember the 2008 financial debacle, you will recall its epicenter was the collapse of Collateralized Debt Obligations (CDO) associated with mortgages and Credit Default Swaps (CDS) of financial companies impacted. CSOs are even more leveraged and toxic.

The exhibit above lists CSOs (excluding CSOs backed by CSOs) with over 3% exposure
to the five companies involved in the Gulf of Mexico incident.

To quote Moody’s:

In the event of BP’s restructuring or bankruptcy, CSO transactions referencing BP or its affected subsidiaries may experience what is called a “credit event.” If the credit event occurs, the CSO transactions will have to meet their payment obligations to the protection buyers, which will result in the loss of subordination to the rated CSO tranches. In cases where the subordination is no longer available, CSO investors will incur the loss.
We reviewed our entire universe of outstanding CSOs and determined that exposure to BP and its rated subsidiaries appears in 117 (excluding CSOs backed by CSOs) transactions, which represents approximately 18% of global Moody’s-rated CSOs. Exposure ranged from 0.26% to 2% of the respective reference portfolios. The transaction with the largest exposure to BP and its subsidiaries is Arosa Funding Limited – Series 2005-5.

Restructuring or Bankruptcy of Other Oil Companies Involved in the Spill Also Affects CSOs. In addition, we assessed Moody’s-rated CSO exposure to the other four companies and their subsidiaries that were involved in the Gulf of Mexico incident, which are Halliburton, Anadarko Petroleum, Transocean Inc., and Cameron International. Halliburton appears in 43 CSOs, Anadarko Petroleum appears in 28 CSOs, Transocean Inc. appears in 79 CSOs, and Cameron International appears in 6 CSOs. We recently changed the credit outlooks for Transocean and Anadarko Petroleum, as well as their rated subsidiaries, to negative from stable because of uncertainties related to the companies’ involvement in the Gulf of Mexico incident and potential financial liabilities associated with it. The CSOs referencing one or more of these issuers would face credit event consequences in a scenario where any of them restructures or enters bankruptcy.

We need to recall that Transocean was the owner /operator of Deepwater Horizon with 131 of the actual 137 employed by Transocean (RIG) and that Anadarko (APC) was BP’s 25% partnership holder in the well. Cameron International (CAM) was the builder of the faulty blowout preventer and Halliburton (HAL) the contractor for the well cementing operation in sealing the 13,350 foot Macondo drill site. These players will no doubt be heavily involved in the litigation and compensation settlements, but additionally will have collateral damage on other oil industry participants as they are forced to raise cash for litigation and claims.

2 - CDS (Credit Default Swaps)
On June 25th BP’s Credit Default Swaps shot up 44 to 580 on the 5 years CDS. This meant it costs $580,000 per year to ensure $10 million in BP bonds over a 5 year contract period. Anything approaching 300 is considered serious risk. For counterparties willing to pay this amount means their dynamic hedging models are working over time and a near panic scramble is taking place.

On June 16th Zero Hedge Reported:

The BP Curve has really flipped (out). The 1 year point on the curve is now over 1,000 bps, a 400 bps move in one day. The point is also offerless (bidless in traditional cash jargon). Granted the DV01 so close to 0 is rather low, but this kind of ridiculous curve inversion is simply wreaking havoc on correlation desks. The 6 month point is now 0.5 pts upfront. Pretty soon BP will need to apply for the same ECB bailout that rescued all those banks who were risking a wipe out when Greek spreads were trading at comparable levels. The question now becomes: who sold the bulk of the BP protection? BofA's announcement yesterday (06-15-10) that it is limiting counterparty risk exposure with BP to all contracts over 1 year could be a rather material clue as to the identity of at least one such entity.


With Credit Default Swap concerns we would expect this to be reflected in BP’s Yield Curve Spread. What is interesting here is that the curve is inverted as is BP’s CDS curve (shown above). Usually short term yields are less than longer term yields because of inherent risk over a longer period of time. For instance, one heavily traded bond, which matures in March 2012, traded with 9.48% yield recently. Meanwhile, further down the curve a bond that matures in March 2019 is trading at a yield of 7.74%, less than the shorter-term bond. This suggests that the market is pricing in a credit event. A credit event would have a profound impact on OTC contracts, which we have no visibility to.

What we do know however is that BP has between $2 and $2.5 Billion in one year commercial paper to rollover that is required for trading operations and working capital. This is going to make it both more expensive and harder to secure and will be a liquidity drain for BP.


To the above Commercial paper roll-over ($2-$2.5B in one year), ongoing new and rollover debt issuance, we need to add the $20B it has agreed with the White House to put in place, though we know of no detailed agreement actually being signed.


The Financial Times Alphaville via Data Explorers reported the short interest through June 4th. As you can see from the graph below by stripping out the spike related to the last dividend payment, the underlying level of stock outstanding on loan (SOOL) has barely budged since the spill. So, short sellers can’t be blamed for the plunge; the selling must be coming from somewhere else, such as long-only funds. Rumors circulated 06/10/10 that Norges Bank was looking to offload 330m shares. Brokers said the total Transatlantic volume of stock traded in BP 06-09-10 had a value of $8bn. To put that figure into some perspective, the total volume traded on the entire EuroStoxx index on the same day amounted to $15bn. Moreover, since the Deepwater Horizon rig exploded on April 21st, 70 per cent of BP’s market cap has turned over, most of it in the US. Trading volumes in BP American Depository Receipts (ADRs) are usually 10 per cent lower than the ordinary shares in London. Since the spill, that position has been reversed and the ADRs have traded 3.5 times the ordinaries, all of which suggests BP’s largest US investor base have been dumping stock.

How long before equity shorting begins? It must be noted here that this is BP equity. Shorting activity of BP debt is all together another matter especially concerning dynamic hedging, with again much less visibility.


Wall Street Pit on 06/10/10 wrote that “Options volume on beleaguered oil company, BP PLC, is fast approaching 750,000 contracts, fueling a more than 79.7% upward shift in the stock’s overall reading of options implied volatility to a 5-year high of 120.96%. Options activity on the stock can easily be described as frenzied as volume continues to grow in both call and put options across multiple expiries.”



Are the final gulf oil spill costs going to be $20B or $60B? Does anyone know? I personally believe it is closer to the latter than the former. If we just use the reported oil spillage numbers for comparison we might get a better understanding of the complete failure to grasp the scope of the disaster. According to the Financial Times, the oil spillage was reported as follows:

(bls./day) TO DATE
April 20 1000
May 4 5000
May 7 5000 350M
May 14 5000 625M
May 28 15,500 950M
June 3 19,000 990M
June 8 15,500 1,250M
June 10 15,500 1,430M
June 17 15,500 1,600M
June 23 25,800 2,600M Spillage increased by 25 X in 60 days

As time passes the numbers are rising exponentially. Engineers are warning that the capture will be complicated and scientists monitoring the situation are predicting the spill will prove larger than the current estimates are reflecting. An expert in the field, Matt Simmons of Simmons International has stated that the flows are over 100,000 barrels per day. Most independent experts agree.

Assuming $4,000/barrel damages costs, 100,000 barrels per day flow rates, a 90 day flow duration (minimal), we arrive at clean-up, litigation and damage compensation of approximately $32B. This is nearly twice the US escrow account agreement and within our expectations of between $20 and 60B. There are a range of issues regarding further leaks, shifting seafloor, methane levels, hurricanes, disbursement effects and many more that are surfacing daily that will have significant negative impact on current analysis and assumptions.

An element of future litigation that is very concerning is the amount of punitive damages that may be awarded. After the White House sent Attorney General Eric Holder to New Orleans to threaten BP with criminal prosecution, BP responded that it believes a case of negligence can’t be proven. However, the Deepwater Horizon travesty comes at a particularly bad time for BP. According to Caroline Baum at Bloomberg: “BP is already the most reviled company in America. Two of its refineries accounted for 97 percent of the violations (a total of 862, of which 760 were “egregious willful”) in the refining industry over the last three years, according to the Center for Public Integrity. It holds the record for the largest fine ($87 million) ever levied by the Occupational Safety and Health Administration.” Additionally, the US Chemical Safety & Hazard Investigation Board has immediately jumped into the oil spill investigation as they did previously at the 2005 fire and explosion of BP’s Texas City refinery that killed 15 and injured many others.

After Moody’s cut Anadarko’s rating to junk late on June 18th, the US oil company (a 25 per cent non-operating investor in the Macondo well) broke its eight-week silence with this broadside from CEO Jim Hackett:

“The mounting evidence clearly demonstrates that this tragedy was preventable and the direct result of BP’s reckless decisions and actions. Frankly, we are shocked by the publicly available information that has been disclosed in recent investigations and during this week’s testimony that, among other things, indicates BP operated unsafely and failed to monitor and react to several critical warning signs during the drilling of the Macondo well. BP’s behavior and actions likely represent gross negligence or willful misconduct and thus affect the obligations of the parties under the operating agreement.”

We can safely surmise that the stab in the dark by the White House of $20B is about as accurate as its forecasts of GDP growth, unemployment improvement and the Recovery and Reinvestment Act of 2009. Slim to none. A more realistic number is likely substantially larger and will likely surface soon. However, anything larger than $20B is likely to be the immediate nail in the coffin for BP as evidenced by how quickly the newly elected British Prime Minister was dispatched to the White House to stop the mounting implosion of both BP and the seriously impacted British Pension system.


BP has stated it has immediate cash available of $15B and will raise additional cash via:

  1. Asset Sales
  2. Capital Expenditure Cuts
  3. Dividend Cut for the Next 3 Quarters


To again quote Jim Sinclair at “BP is the primary player on the long-end of the energy curve. How exposed are Goldman sub J. Aron, Morgan Stanley and JPM? Probably hugely. Now credit has been cut to BP. Counter-parties will not accept their name beyond one year in duration. This is unheard of. A giant is on the ropes. If he falls, the very earth may shake as he hits the ground. As we are beginning to see, the Western pension structure, financial trading and global credit are all inter-twined. BP is central to this, as a massive supplier of what many believe(d) to be AAA credit. So while we see banks roll over and die, and sovereign entities begin to falter… we now have a major oil company on the verge of going under. Another leg of the global economic "chair" is being viciously kicked out from under us.”

The whole BP travesty is quickly compounded via the OTC Derivatives market and the risk inherent within it.

  1. As it was in Lehman, opacity is once again experienced when transparency is most critically required.
  2. Finance has always been about risk determination but never before with so much leverage associated with risk assessments and held in such complex, dependent structured instruments.
  3. Investors are still unprotected. The Frank-Dodd Bill is now nothing more than watered down window dressing before it finally reaches legislative approval and even before it begins the regulatory supervision machinations.
  4. Investors hate uncertainty and we have nothing but uncertainty here:
    1. Political
    2. Legal
    3. Financial
    4. Business

    The most likely scenario is that the US operations of BP will voluntarily attempt Chapter 11 bankruptcy proceedings. This is the worst possible scenario for claimants. The problem here is that this triggers a credit event which has daunting repercussions to the highly leveraged global financial markets. Like AIG before, the government does not want to tamper with the ramifications and fall out of a CDS event. Lehman was one too many.

    If a US voluntary bankruptcy is stopped by the US and there is a BP corporate bankruptcy, then there is a strong possibility that the British Government will be forced to step in and bailout BP. In the end, the tax payer will pay as the ongoing game of Regulatory Arbitrage is played masterfully once again.

    Deleveraging associated with BP may be the event that triggers the $5T Quantitative Easing spike we have been warning about for some time now. It will be needed to complete the final process of manufacturing of a Minsky Melt-up to avoid the looming pension, entitlement and US state financial crisis.

    The ability of the government to achieve this is anything but certain. However, we need to expect the unexpected and watch out for fat tails to trip over.

    The Dodd-Frank Legislation leaves investors & taxpayers once again exposed to another Lehman

    The Regulatory Arbitrage Game Continues.



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    Gordon T Long Web: Tipping Points
    Mr. Long is a former executive with IBM & Motorola, a principle in a high tech start-up and founder of a private Venture Capital fund. He is presently involved in Private Equity Placements Internationally in addition to proprietary trading that involves the development & application of Chaos Theory and Mandelbrot Generator algorithms.

    Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.

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Five Signs Telling Me the Bear Market Is Back

The stock market’s rise since the March 2009 lows was nothing more than a bear market rally. Yes, it was a huge rally, but not out of the realm of similar historical examples.

Low trading volume, still high valuations and lingering economic problems — especially within the real estate sector and the banking system — have been strong arguments for my outlook. And the history of burst real estate bubbles could serve as a blueprint for our current dilemma.

I’ve never departed from that assessment of what was going on …

In fact, over the past months I’ve regularly predicted that the March lows would finally be broken and the stock market’s valuation would decline. What’s more, they would go all the way down to levels seen at historical secular lows and hit single digit price/earnings ratios.

Now it looks as if the bear market rally is over and the next cyclical bear market has begun. I say that because my cyclical stock market model has given me …

Five Bearish Signs

Sign #1— Valuations never fell Valuation metrics never fell to undervalued levels. But they quickly rose to overvalued again, as soon as the stock market recouped a good part of its losses.

Sign #2— Money dried up The liquidity indicators turned outright bearish. Not just in the U.S., but globally, too. These indicators are especially important during this cycle, because the rally since March 2009 was mainly liquidity driven.

It was simply a reaction to monetary and fiscal stimulus never heard of before, aside from during war times. And with liquidity drying up the uptrend was on rented time.

Sign #3— Excessive optimism Sentiment indicators reached levels indicating high complacency and even extreme optimism. Some put/call ratios fell as low as during the heights of the 2000 stock market bubble.

And the cash level of mutual funds fell to a record low. Lower than in March 2000, and lower than during the summer of 2007, the two former record lows. Both marked excellent times to get out of the stock market.

Sign #4— LEI fell

The Economic Cycle Research Institute’s Leading Economic Index fell below the zero line in early June. This leading economic indicator (LEI) for the U.S. economy came in at minus 7.7 percent. If history is our guide, this reading is a clear recession warning.

Until recently the only component for my model that wasn’t bearish was the technical situation of the stock market. Typically, important turning points are accompanied by negative divergences in market breadth indicators, such as the advance/decline line or the number of stocks making 52-week highs.

But that changed last week when …

Sign #5— The technical picture turned the corner

The technical component of my cyclical stock market model turned bearish on June 30. Have a look at the S&P 500 chart below to see what I’m talking about.

SP 500 Chart
Source: Bloomberg

The market’s behavior since October 2009 looks like a well formed topping formation. Its lower boundary or neckline is the 1,040-1,050 area. The shape of the formation is a head and shoulders top, with the right shoulder having formed in June, accompanied by low volume, as it should be.

Then last Wednesday, the S&P 500 broke below this neckline. In doing so the topping pattern was finished with a clear technical sell signal.

This sell signal gets additional strength from the much oversold condition the market was in before last week’s breakdown took place, which is a sign of remarkable weakness. Normally a market as oversold as this one at least experiences a short-term bounce.

But that’s not all …

There is another strong technical argument signaling the end of the bear market rally and the beginning of a new cyclical bear market.

The upward trend of 200-day moving average of the S&P 500 has started to level off, also shown in the above chart. This moving average is a slow moving trend-following indicator. It won’t help you pick market tops or bottoms. But you can use it as a good sign post to tell you whether the cyclical trend is up or down.

And the 200-day moving average is not only a good indicator of the S&P 500 and most other major U.S. indexes, but also for the EuroStoxx 50 and the Nikkei 225 as shown in the two charts below.

Euro Stoxx 50 Index Chart
Source: Bloomberg

Nikkei 225 Index Chart
Source: Bloomberg

Indeed, this adds fuel to the overall bearish message.

It’s Time to Get Out of the Stock Market

The evidence that a new bear market has begun is compelling. And I believe this downturn can easily last until 2012 with prices going much lower than in 2008.

In my opinion, the prudent thing to do now is to consider selling.

Best wishes,


The 7/7 London Bombings: How to Set Up a Patsy

7/16/2005 Daily Mirror front page - click for article

7/16/2005 Sun front page - click for article

The first surveillance footage of the leaders of the July 7 bomb plot has been shown to a jury, showing them meeting with a “committed terrorist” outside an East London kebab shop. The video ... shows Mohammed Sidique Khan, with a beard and short hair, and Shezhad Tanweer, wearing a woolly hat, as they walk down a street in Upton Park, East London with four other men. [Telegraph]
Note the date of the surveillance video.

Mohammad Sidique Khan, the teacher who killed himself and six others in the Edgware Road bombing, attended Parliament as the guest of a Labour MP. He was invited in July 2004 by Jon Trickett MP in his capacity as a learning mentor at Hillside Primary School in Beeston, Leeds where Mr Tickett's wife Sarah is headteacher. [Telegraph]

Is it standard protocol for terrorist suspects to be allowed into the Houses of Parliament?

A consultancy agency with government and police connections was running an exercise for an unnamed company that revolved around the London Underground being bombed at the exact same times and locations as happened in real life on the morning of July 7th.

ITV News interview with Peter Power, Managing Director of Visor Consultants, and a former Scotland Yard official who worked at one time with the Anti Terrorist Branch.

Video of interview - 2.3 MB WMV download

POWER: Today we were running an exercise for a company—bear in mind now that I'm in the private sector—and we sat everybody down in the city—1000 people involved in the whole organization—with the crisis team. And the most peculiar thing was it was we based on a scenario of simultaneous attacks on a underground and mainline station. So we had to suddenly switch an exercise from fictional to real. And one of the first things is, get that bureau number, when you have a list of people missing, tell them. And it took a long time—

INTERVIEWER: Just to get this right, you were actually working today on an exercise that envisioned virtually this scenario?

POWER: Almost precisely. I was up to 2 o'clock this morning, because it's our job, my own company. Visor Consultants, we specialize in helping people to get their crisis management response, how you jump from slow time thinking to quick time doing. And we chose a scenario with no assistance, which is based on a terrorist attack because they've been close to a property occupied by Jewish businessmen there in the city, and there are more American banks in this city than there are in the whole of New York—a logical thing to do.

INTERVIEWER: How extraordinary today must feel for you as it unfolds. You mentioned a few moments ago there our experience with Irish Republican terrorism. And of course it was very different wasn't it because however perverted their behavior, the IRA believed itself to have some sort of code of honour, and tended to issue some kind of warnings, of course they often came too late to do any good.

I got an email with an interesting rumor going around London that just before the attacks, someone was trying to hire Muslims to play terrorists for a terror drill, to try to sneak onto the trains and buses with fake bombs to test out the security.

We know the terror drill was real. We know they were running the drill at the exact same stations the bombings actually occurred.

We know that the accused bombers don't fit the profile of men ready to die for Allah. Indeed, it is reported that some of them were not particularly religious.

Yet we are faced with the strange claim that these men, one of whom had a new family, and another whose wife was pregnant, carried bombs set on timers and stood there waiting for them explode.

If these men thought they were committing suicide, why did they buy RETURN TICKETS ON THE TRAIN? Why did they pay for "pay and display" tickets for their cars at the parking area?

This makes sense ONLY if they thought they were carrying fake bombs as part of a terror drill. This also explains the nervousness of the man on the bus who had probably just heard of the real explosions and was starting to suspect that the fake bomb he was carrying might not be fake after all.

"Hey you, Muslim person. Wanna make a hundred pounds? You could use that kind of dough, with a new kid and all. We're running a terror drill, and all you gotta do is take this here harmless backpack with a fake bomb inside to work with you tomorrow, just to see if the subway guards catch you or not. Mum's the word, this is national security and all; you can't tell anyone!"


The London Police claim the bombers were photographed at the Luton station, then rode the 7:40 train to King's Cross, where they were photographed again.

But according to the actual train timetable, the 7:40 train was cancelled that day and even had it not been cancelled, would not have arrived in time for the men to be photographed at King's Cross at 8:26. [Full details]

American student Sean Baran was walking towards Edgware Road Station when the explosion occurred. "One gentleman told me that the floor of the train he was on was blown out, it was just gone," he said. [Sky News]

Bruce Lait, in a tube carriage in which an explosion occurred:

As they made their way out, a policeman pointed out where the bomb had been. "The policeman said 'mind that hole, that's where the bomb was'. The metal was pushed upwards as if the bomb was underneath the train. They seem to think the bomb was left in a bag, but I don't remember anybody being where the bomb was, or any bag," he said. [Cambridge News]

Are we to believe that suicide bombers were strapped beneath the carriages when they detonated their explosives?

Last, but not least, how did Mossad know the London bombings were going to happen?