SAR #8068

The time to panic is before everyone else does.

Domino: Turns out, according to the Canadian Prime Minister , it was Clinton, not Obama, who assured him on NAFTA. Of course it was, NAFTA was Bill's Good Idea.

Bigger Truck: Citigroup is now attempting to borrow $2.5 billion by issuing bonds paying 6.875%. At the same time Citi continues to pay $6.6 billion annually in dividends. This is not an approach recommended by Harvard Business School.

May I ? South Africa's electric company says applications for new service for any project larger than a townhouse will take at least six months to approve. Life after the energy peak.

Mighty, Fallen: Washington Mutual (WaMu) was cut by S&P to BBB, saying the bank faces steep losses on its $227 billion loan portfolio and may not be able to repay its debts. Is this more exciting news if you know that WaMu is the biggest savings and loan in the US and one of our principal mortgage lenders?

Muzzle: In a 2006 book, reporter James Risen disclosed CIA/Mossad operations against Iran's supposed nuclear program. The Bush administration has hauled him before a secret court. The object is to intimidate other reporters. And you didn't know about the secret courts because they are, well, secret. But Bush gets far more millage from them if you know they exist. Fear. This administration does fear very, very well.

Leverage: Carlyle Capital raised $669 million in capital and used it to borrow $21.8 billion to buy US government (Freddie/Fanny) AAA-rated mortgage derivatives. The plan was to profit from the spread between what the derivatives were paying and the cost to borrow the $21 billion. They missed a $37 million margin call this week because there is no market for the AAA-rated derivatives, government or no government. After going through a $1.4 billion loan in January, Carlyle could not come up with $37 million to meet the margin call.

Sure Thing: If you roll the dice and get twenty consecutive throws of snake-eyes, do you think the next roll will have to be a natural seven? Me neither, but Ben Bernanke seems to; how else to explain relying on another round of actions that have had no effect so far?

Conundrum: For the credit markets to get back to some semblance of normalcy, bad loans have to liquidated. But that will cause failures of institutions that are simply too big to be allowed to fail. The damage their failure would do to the banking system is incalculable. The natives would become restless.

Candide: Industry reports say that existing oil fields are declining 4.5% a year and will pump 10 million barrels a day (mbd) less in 2010 than today. They also predict that world wide demand will increase from 84 mbd to 92 mbd by 2010, crating a 18 mbd gap between supply and demand. No combination of new fields discovered in the last 15 years that can produce that much oil. Go fill up the car while gas is still cheap.

A Bit Fuzzy: Focus Capital, a $1bn hedge fund, has been forced to liquidate its portfolio after missing margin calls from its banks. After paying the fund's management $86 million in 2007, only $200 million in assets remained . Wouldn't want management to work for free.

Party On: The GOP is the party of business. Right? When George W Bush was inaugurated in 2001, the euro was trading at 94 cents and gold cost $266 an ounce. Now euros are $1.52 and gold is $985 an ounce.