Thursday, 31 December 2009
How to tell a Man from a Woman ... (Index Finger!) ... Happy New Year! ... Now go Party well informed
Wednesday, 30 December 2009
Space head: Russia may send spacecraft to asteroid -to knock it off its path and prevent a possible collision with Earth.
Reading -Space head: Russia may send spacecraft to asteroid -to knock it off its path and prevent a possible collision with Earth.
MOSCOW – Russia's space chief said Wednesday his agency will consider sending a spacecraft to a large asteroid to knock it off its path and prevent a possible collision with Earth.
Anatoly Perminov said the space agency will hold a meeting soon to assess a mission to , telling Golos Rossii radio that it would invite , the European Space Agency, the Chinese space agency and others to join the project once it is finalized.
When the 270-meter (885-foot) asteroid was first discovered in 2004, astronomers estimated the chances of it smashing into Earth in its first flyby in 2029 were as high as 1-in-37.
Further studies ruled out the possibility of an impact in 2029, when the asteroid is expected to come no closer than 18,300 miles (29,450 kilometers) above Earth's surface, but they indicated a small possibility of a hit on subsequent encounters.
In October, NASA lowered the odds that Apophis could hit Earth in 2036 from a 1-in-45,000 as earlier thought to a 1-in-250,000 chance after researchers recalculated the asteroid's path. It said another close encounter in 2068 will involve a 1-in-330,000 chance of impact.
Scientists have long theorized about asteroid deflection strategies. Some have proposed sending a probe to circle around a dangerous asteroid to gradually change its trajectory. Others suggested sending a spacecraft to collide with the asteroid and alter its momentum, or using nuclear weapons to hit it.
Without mentioning NASA findings, Perminov said that he heard from a scientist that Apophis is getting closer and may hit the planet. "I don't remember exactly, but it seems to me it could hit the Earth by 2032," Perminov said.
He wouldn't disclose any details of the project, saying they still need to be worked out. But he said the mission wouldn't require any nuclear explosions.
Hollywood action films "" and "Armageddon," have featured space missions scrambling to avoid catastrophic collisions. In both movies space crews use nuclear bombs in an attempt to prevent collisions.
"Calculations show that it's possible to create a special purpose spacecraft within the time we have, which would help avoid the collision without destroying it (the asteroid) and without detonating any nuclear charges," Perminov said. "The threat of collision can be averted."
"People's lives are at stake. We should pay several hundred million dollars and build a system that would allow to prevent a collision, rather than sit and wait for it to happen and kill hundreds of thousands of people," he added.
Boris Shustov, the director of the Institute of Astronomy under the Russian Academy of Sciences, hailed Perminov's statement as a signal that officials had come to recognize the danger posed by asteroids.
"Apophis is just a symbolic example, there are many other dangerous objects we know little about," he said, according to RIA Novosti news agency.
GMAC Set for Another Cash Infusion - U.S. Expected to Lend Firm $3.5 Billion to Help Cover Mortgage Losses; Aid Bill Already at $12.5 Billion
GMAC Set for Another Cash Infusion - U.S. Expected to Lend Firm $3.5 Billion to Help Cover Mortgage Losses; Aid Bill Already at $12.5 Billion
GMAC Financial Services is close to getting approximately $3.5 billion in additional aid from the U.S. government, on top of $12.5 billion already received since December 2008, according to people familiar with the situation.
The announcement, expected within days, will coincide with GMAC taking additional steps to absorb losses related to its mortgage operations, these people said. The cleanup is designed to return the Detroit-based finance company to profitability in the first quarter of 2010, according to one of these people.
A GMAC spokeswoman declined to comment on any potential government action but said, "GMAC has been conducting a strategic review of its business and evaluating options to address the challenges in its mortgage operation." The spokeswoman said GMAC wants to prepare itself to repay the U.S. government.
The willingness by the U.S. Treasury to deepen taxpayer exposure to GMAC reflects the troubled company's importance to the revival of the auto industry. The company was told to raise additional capital as part of government-led stress tests of large banks conducted earlier this year. The tests were to determine whether firms would need more capital to continue lending if the economy deteriorated in 2009 and 2010.
GMAC has only filled a portion of its capital hole and, unlike other banks that participated in the stress tests, has been unable to attract much capital from private investors. The Treasury said earlier this year that it would make as much money available to GMAC as needed to fill its capital hole and projected the firm would need another government infusion of as much as $5.6 billion.
GMAC's capital needs have turned out to be somewhat less than originally envisioned, in part because impact from the bankruptcies of General Motors Corp. and Chrysler Corp. was not as severe as federal regulators originally projected.
A Treasury spokesman said Tuesday: "As we stated on Nov. 9, Treasury is in discussions with GMAC to ensure its capital needs as determined last May by the stress tests are met."
GMAC has argued it didn't need additional support.
The Treasury has authority to provide funds to GMAC through the Troubled Asset Relief Program, the $700 billion program authorized by Congress at the height of the financial crisis. This will be the first big infusion to a single company in several months. The Treasury has been working to wind down many of the TARP programs as the financial crisis eases, and it has already seen $175 billion returned from banks.
The Treasury agreed to inject $5 billion into GMAC in December 2008, as part of a broader rescue of the auto sector, and another $7.5 billion in May after the stress tests were completed. That $7.5 billon was considered by the Treasury to be a down payment, with additional funds likely coming later.
The government's existing 35.4% stake in GMAC is likely to eventually increase, a move that could give the government more control over the firm, including the right to appoint additional directors to GMAC's board. GMAC is subject to pay restrictions imposed by the government's pay czar.
GMAC, founded in 1919, provides wholesale financing for thousands of General Motors and Chrysler dealerships across the U.S., meaning scores of local distributors would be unable to bring cars onto their lots if GMAC were to collapse.
The new capital will likely allow GMAC to avoid placing its ailing mortgage unit, Residential Capital LLC, or ResCap, into bankruptcy, these people said. GMAC had set the end of the year as a deadline for deciding ResCap's fate after losses from loans made to borrowers with shaky credit dragged down GMAC's results in 2009. The mortgage unit lost $2.7 billion through the first three quarters of 2009 following $9.96 billion of losses in 2008 and 2007.
The fate of ResCap was a flash point between the board and GMAC's former chief executive, Alvaro de Molina, who was ousted in November following clashes with the government and his directors. Board member Michael Carpenter succeeded Mr. de Molina. Some board members were upset, saying management had left out bankruptcy as an option; management's view was that it had presented all options, including a potential sale, and the board was unable to make a decision.
The mortgage-related write-downs to be announced as early as this week will affect assets held by ResCap and Ally Bank, GMAC's online bank. Ally Bank was created after the company received approval in late 2008 to convert to a bank holding company and qualify for government money under TARP. The arrangement left the Federal Reserve with regulatory authority over the parent.
Ally's pursuit of deposits at high rates became a key leg of its strategy, since deposits provide a cheap form of funding, but the taxpayer-assisted approach rankled competitors and the Federal Deposit Insurance Corp. Ally and FDIC reached an agreement that requires GMAC to keep its rates at certain levels in exchange for FDIC's support, according to people familiar with the situation.
Tuesday, 29 December 2009
Reading - The Federal Reserve still doesn't know how to get rid of excess liquidity
• The Wall Street Journal - Fed Proposes Tool to Drain Extra Cash
The Federal Reserve on Monday proposed selling interest-bearing term deposits to banks, a move the U.S. central bank would make when it decides to drain some of the liquidity it pumped into the economy during the financial crisis. The new facility is intended to help ensure that the Fed can implement an exit strategy before a banking system awash with Fed money triggers inflation. Fed Chairman Ben Bernanke has described term deposits as “roughly analogous to the certificates of deposit that banks offer to their customers.” Under the plan, the Fed would issue the term deposits to banks, potentially at several maturities up to one year. That would encourage banks to park reserves at the Fed rather than lending them out, taking money out of the lending stream.The central bank said the proposal “has no implications for monetary policy decisions in the near term.” “The Federal Reserve has addressed the financial market turmoil of the past two years in part by greatly expanding its balance sheet and by supplying an unprecedented volume of reserves to the banking system,” it said. “Term deposits could be part of the Federal Reserve’s tool kit to drain reserves, if necessary, and thus support the implementation of monetary policy.” Michael Feroli, an economist at J.P. Morgan Chase, said “it’s another step forward in the exit-strategy infrastructure, but it’s been well flagged in advance, so it’s not a surprise.” When Fed officials decide to tighten credit, they would likely use the term-deposits program ahead of — or in conjunction with — adjusting their traditional policy lever, the target for the federal funds interest rate at which banks lend to each other overnight. The Fed also said Monday that its balance sheet rose slightly to $2.2 trillion in the week ending Dec. 23. The Fed’s total portfolio of loans and securities has more than doubled since the beginning of the financial crisis. As part of its efforts to fight the downturn, the central bank is buying $1.25 trillion in mortgage-backed securities, a program it says will end in March. The Fed now holds $910.43 billion in mortgage-backed securities, it said Monday.
• Bloomberg.com - Fed Proposes Term-Deposit Program to Drain Reserves
The Federal Reserve today proposed a program to sell term deposits to banks to help mop up some of the $1 trillion in excess reserves in the U.S. banking system. The plan, subject to a 30-day comment period, “has no implications for monetary policy decisions in the near term,” the central bank said in a statement released in Washington. Fed Chairman Ben S. Bernanke is preparing tools and strategies to shrink or neutralize the inflationary impact from the biggest monetary expansion in U.S. history. Central bankers are also conducting tests of reverse repurchase agreements and discussing the possibility of asset sales. Term deposits may help the central bank “assert operational control over the federal funds rate” once officials decide to lift the overnight bank lending rate from the current range of zero to 0.25 percent, said Lou Crandall, chief economist at Wrightson ICAP LLC in Jersey City, New Jersey. Excess cash “would be locked up” rather than put downward pressure on the federal funds rate, he said.The Fed won’t begin raising interest rates until the third quarter of 2010, according to the median estimate of 62 economists surveyed by Bloomberg News in the first week of December.
• The Financial Times - Fed to offer term deposits to banks
The US Federal Reserve plans to offer term deposits to banks as part of its “exit strategy” from the exceptionally loose monetary policy used to fight the recession. In a consultation paper released on Monday the Fed said it planned to change its rules so that it could pay interest on money locked up at the central bank for a defined period. The Fed added that the well-flagged rule change - designed to allow it more influence over the $1,100bn in excess reserves held by banks - was part of “prudent planning. . . and has no implications for monetary policy decisions in the near term”. It is one of a number of measures that has been outlined over the past few months by Ben Bernanke, chairman of the Fed, as an option to drain liquidity from the financial system in a manner that protects the economic recovery while heading off the threat of inflation.
• The Federal Reserve - Notice of proposed rulemaking; request for public comment.
The Board is requesting public comment on proposed amendments to Regulation D, Reserve Requirements of Depository Institutions, to authorize the establishment of term deposits. Term deposits are intended to facilitate the conduct of monetary policy by providing a tool for managing the aggregate quantity of reserve balances. Institutions eligible to receive earnings on their balances in accounts at Federal Reserve Banks (”eligible institutions”) could hold term deposits and receive earnings at a rate that would not exceed the general level of short-term interest rates. Term deposits would be separate and distinct from those maintained in an institution’s master account at a Reserve Bank (”master account”) as well as from those maintained in an excess balance account. Term deposits would not satisfy required reserve balances or contractual clearing balances and would not be available to clear payments or to cover daylight or overnight overdrafts. The proposal also would make minor amendments to the posting rules for intraday debits and credits to master accounts as set forth in the Board’s Policy on Payment System Risk to address transactions associated with term deposits.
We believe the proposal of this new tool signals the Federal Reserve is still flailing around trying to look busy so everyone is assured they have a plan. The fact is they have no plan and are still throwing everything on the wall to see what sticks. From the November 4 FOMC minutes:
Participants expressed a range of views about how the Committee might use its various tools in combination to foster most effectively its dual objectives of maximum employment and price stability. As part of the Committee’s strategy for eventual exit from the period of extraordinary policy accommodation, several participants thought that asset sales could be a useful tool to reduce the size of the Federal Reserve’s balance sheet and lower the level of reserve balances, either prior to or concurrently with increasing the policy rate. In their view, such sales would help reinforce the effectiveness of paying interest on excess reserves as an instrument for firming policy at the appropriate time and would help quicken the restoration of a balance sheet composition in which Treasury securities were the predominant asset. Other participants had reservations about asset sales–especially in advance of a decision to raise policy interest rates–and noted that such sales might elicit sharp increases in longer-term interest rates that could undermine attainment of the Committee’s goals. Furthermore, they believed that other reserve management tools such as reverse RPs and term deposits would likely be sufficient to implement an appropriate exit strategy and that assets could be allowed to run off over time, reflecting prepayments and the maturation of issues. Participants agreed to continue to evaluate various potential policy-implementation tools and the possible combinations and sequences in which they might be used. They also agreed that it would be important to develop communication approaches for clearly explaining to the public the use of these tools and the Committee’s exit strategy more broadly.
The Federal Reserve first hinted at term deposits almost two months ago, although exactly what they were talking about was left vague until now.
Remember that the Federal Reserve has to withdraw over a trillion dollars of excess liquidity. The easiest way to do this is to sell hundreds of billions of MBS, Treasuries and agencies. As the bold highlighted passage above implies, they are scared to death of doing this, so they propose complicated schemes to withdraw liquidity like reverse repos and now term deposits.
We have argued that these schemes will not work. They cannot be done in the sizes necessary or enough to even matter. The Federal Reserve could possibly drain tens of billions of dollars via these schemes, but collectively that will amount to a rounding error when the goal is to withdraw over a trillion in excess reserves.
The Federal Reserve does not want to admit defeat, so they continue pursuing these strategies that will not make a difference. We believe they also do it to “look busy” as they are taking measurements and notes as to how to withdraw all the liquidity they have pumped in. They think this will give the market comfort that someone is on the case and that inflation expectations will not get out of control. The market is not buying this. Inflation expectations, s measured by TIPS inflation breakeven rates, are going vertical.
As to term deposits, the Federal Reserve is proposing an illiquid short term instrument for banks to invest in. Banks would buy these instruments and “lock up” the excess reserves they now have. This would have the same effect as draining excess reverses. The maturities of these instruments would be as long as one year.
It is unclear if there will be a secondary market for these instruments, and if so, how liquid it will be.
Without a secondary market, buyers of these instruments face huge reinvestment risk. The future course of short term interest rates is arguably to the most uncertain it has been in decades. Will the Federal Reserve stay near zero until 2012 or will they be forced to raise rates in the first half of 2010? Given all this uncertainty, who wants to lock up money in something that cannot be sold before maturity? This is especially true given the Federal Reserve’s statement that the “maximum-allowable rate for each auction of term deposits would be no higher than the general level of short- term interest rates.”
The general level of short-term interest rates is set on known instruments that have generations of history and active secondary markets. If the Federal Reserve wants to introduce a new, and wholly unknown instrument with an uncertain secondary market and offer no interest rate premium, then we cannot see how this will work beyond a token amount after some arm twisting to get them sold. The Federal Reserve will have to offer a premium for uncertainty and illiquidy to make this fly in any major way, something they said they will not do.
Complicated Is Simple
The Federal Reserve owns 80% of AIG. With each passing day it looks like the Federal Reserve is adopting AIG Financial Product’s business practices. That is, when faced with a financial problem, they create complicated tools (like CDS). When critics says these new products will not work, tell them they do not know what they are talking about and create even more complicated tools to dazzle everyone. Once the tools are so complicated that no one understands them, you will be hailed as an expert with no peer. You might even be named TIME’s Person of the Year.
It appears that even after thoroughly dominating the US legislative, judicial and executive branches, the long tentacles of the squid have been no better than the Mongolian hordes at overcoming the Chinese Wall (which is ironic seeking how easy it is to ignore the same construct internally between the firm's prop and flow traders...and yes, we will be posting our response to Goldman shortly, we have not forgotten). In the meantime, half a world away, a small Chinese power generator, Shenzhen Nanshan Power, is blatantly refusing to honor contracts with Goldman Subsidiary J. Aron for $80 million in derivative losses, and it appears that China itself has decided to stand behind the small company.
Shenzhen Nanshan Power (000037.SZ) (200037.SZ) said in a statement that it received several notices from J. Aron & Company, a trading subsidiary of Goldman Sachs (GS.N), for at least $79.96 million as compensation for terminating oil option contracts.
"We will not accept the demand by J. Aron for all the losses and related interests," said Nanshan, in line with the stance it took last December.
"We will try our best to negotiate with J. Aron and resolve the dispute peacefully...but the possibility of using a lawsuit can not be ruled out when talks fail," it added.
"J. Aron told us in one notice that if we do not pay the money, they will reserve the right to launch a lawsuit and will not send us any further notice."
The State Assets Supervision and Administration Commission said in September that it would back state-owned companies in any legal action against the foreign banks that sold them oil derivatives, which resulted in losses when oil prices dived late last year. [ID:nPEK14474]
A Beijing-based Goldman Sachs corporate communication official declined to comment.
Not sure what Hank Paulson's former firm would comment: alas the Chinese communist party still has to be filled with Goldman alumni. That being said, this is precisely the track that Goldman has been focusing on for the past few years. At this point, the firm realizes all too well that dominating power politics in China in the near futures is far more critical than complete control over D.C., as there is little the world's most important company can do domestically in the context of taxpayer capital transfer without a full fledged revolution.
Sunday, 27 December 2009
Earth's north magnetic pole is racing toward Russia at almost 40 miles a year due to magnetic changes in the planet's core
The core is too deep for scientists to directly detect its magnetic field. But researchers can infer the field's movements by tracking how Earth's magnetic field has been changing at the surface and in space.
Now, newly analyzed data suggest that there's a region of rapidly changing magnetism on the core's surface, possibly being created by a mysterious "plume" of magnetism arising from deeper in the core.
And it's this region that could be pulling the magnetic pole away from its long-time location in northern Canada, said Arnaud Chulliat, a geophysicist at the Institut de Physique du Globe de Paris in France.
Magnetic north, which is the place where compass needles actually point, is near but not exactly in the same place as the geographic North Pole. Right now, magnetic north is close to Canada's Ellesmere Island.
Navigators have used magnetic north for centuries to orient themselves when they're far from recognizable landmarks.
Although global positioning systems have largely replaced such traditional techniques, many people still find compasses useful for getting around underwater and underground where GPS satellites can't communicate.
The magnetic north pole had moved little from the time scientists first located it in 1831. Then in 1904, the pole began shifting northeastward at a steady pace of about 9 miles (15 kilometers) a year.
In 1989 it sped up again, and in 2007 scientists confirmed that the pole is now galloping toward Siberia at 34 to 37 miles (55 to 60 kilometers) a year.
A rapidly shifting magnetic pole means that magnetic-field maps need to be updated more often to allow compass users to make the crucial adjustment from magnetic north to true North.
Geologists think Earth has a magnetic field because the core is made up of a solid iron center surrounded by rapidly spinning liquid rock. This creates a "dynamo" that drives our magnetic field.
(Get more facts about Earth's insides.)
Scientists had long suspected that, since the molten core is constantly moving, changes in its magnetism might be affecting the surface location of magnetic north.
Although the new research seems to back up this idea, Chulliat is not ready to say whether magnetic north will eventually cross into Russia.
"It's too difficult to forecast," Chulliat said.
Also, nobody knows when another change in the core might pop up elsewhere, sending magnetic north wandering in a new direction.
Saturday, 26 December 2009
Friday, 25 December 2009
Japanese government approved on Friday a record trillion-dollar budget - 181 percent of gross domestic product
TOKYO — The Japanese government approved on Friday a record trillion-dollar budget for the next fiscal year that encompasses ambitious welfare outlays to help households cope with the country’s deep economic woes, but the scale of new spending could renew investor jitters about the government’s burgeoning debt.
Prime Minister Yukio Hatoyama, who took office in September after landmark elections that ended an era of single-party rule in Japan, has been trying to strike a balance between a budget big enough to kick-start economic recovery while keeping new lending in check.
He has been distracted, however, by mishandled negotiations over the fate of a Untied States military air base in Japan and by a campaign finance scandal. On Thursday, Mr. Hatoyama apologized to the nation after two aides were charged with falsely reporting donations, though he denied any wrongdoing on his part.
Addressing the country for the second night in a row on Friday, Mr. Hatoyama, who leads the Democratic Party, urged the public to stay focused on the task of rebuilding an economy recovering from its worst recession since World War II.
The record $1 trillion budget for the year starting in April reorients spending to households by allocating more to welfare and education at the expense of public works projects, where the ousted Liberal Democrats had poured a large amount of government funds.
Mr. Hatoyama hopes the generous welfare spending will encourage households to consume more, offering a much-needed boost to the economy.
“Together with all of you, I want to build a better Japan, a new Japan,” Mr. Hatoyama said at a news conference. “I have adhered to the principle that people matter more than concrete,” he said.
Japan will issue fresh debt worth a record $485 billion, in line with an earlier estimate, he said. The new borrowing brings Japan’s public debt to about $9.4 trillion, or 181 percent of gross domestic product, at the end of March 2011, by far the highest in the industrialized world.
Dogging Mr. Hatoyama’s budgeting efforts has been a plunge in tax revenue as Japan’s export-oriented economy struggles with a falloff in international trade brought on by the global economic crisis.
Tax receipts, at about $405 billion, are expected to make up less than half the government’s budget, forcing the government to borrow more than it receives in revenues — another postwar first.
Citing tough finances, the government abandoned a campaign pledge to cut an unpopular tax on gasoline, and it has backtracked on promises to abolish tolls on Japanese highways. But the government stuck with its ambitious social agenda, which includes cash payments to child-rearing households and free public high school education.
Though most voters had appeared to be willing to give Mr. Hatoyama time to deliver on his promises, public support for him is waning. A public opinion poll recently showed his approval rating had fallen below 50 percent, from a post-election high of 71 percent.
The campaign financing scandal has further eroded his credibility. At first, the allegations of improper accounting raised few anxieties among voters because much of the money involved was from Mr. Hatoyama’s own coffers or from his mother, an heiress to the fortune of the Japanese tire maker Bridgestone.
But the charges have increasingly painted Mr. Hatoyama as a leader out of touch with the economic plight of average Japanese at a time of high unemployment and persistent deflation.
The falling support puts the Democrats in a potentially precarious position ahead of elections for Parliament’s Upper House, which must be held next year. The Democrats hope to clinch a majority in that chamber to match their control of Parliament’s powerful Lower House.
Vintage Reagan! 1961 speech warned that socialism would be introduced in America through healthcare takeover
Thursday, 24 December 2009
Tuesday, 22 December 2009
I've already written a lot about investors in Las Vegas coming in with cash and pushing the organic buyers to the sidelines.
Well apparently it's happening all over now, making me wonder just what exactly is going to happen to all those investor-owned properties?
This morning, as I was heading downstairs from the National Association of Realtors' monthly existing home sales lockup, my chaperone (yes, they send me with a lovely young woman every month, just to make sure I don't report the numbers or even a hint before 10am — fair is fair) was telling me that she's in the market for a condo in Northern Virginia. I said she should be able to get a great deal, given the total collapse of the condo market there and the steep number of foreclosed properties. She said she thought the same thing, until she got out there and found herself having to compete with cash-only investors.
Cash is king in real estate these days.
That should come as no surprise. The banks are the bulk of the home sellers out there today, and they are hungry for cash. We all knew there was a lot of cash on the sidelines, and here it is. I asked the Realtors' chief economist Lawrence Yun today about double counting. I've been hearing a bit about this possible scenario, where investors are buying up properties and flipping them quickly, so one home is getting two sales counts in just a few months. Mr. Yun admitted there was some of that, but added something even more interesting: "What I hear is about large bulk purchase initially which do not show up in the MLS service, so we don't capture that in our sales statistics."
The bulk purchases are by large investors, hedge funds in some cases, that are buying up big blocks of foreclosed properties.
So what are they doing with them??
Well, some will try to fix them up and rent them out, but the rental market is so depressed right now, that's not the most lucrative path. Others are just flipping them. But there is clearly a large inventory of unoccupied homes out there. I'm interested to see what happens to all those properties in 2010.