Saturday, March 8, 2008

SAR #8069

"The gears of capitalism are pretty much grinding to a halt,"
Mirko Mikelic, Market Analyst

Terminex: "The credit crisis is spilling over to the next asset class, agency bonds," said Philip Gisdakis, senior credit strategist at UniCredit SpA in Munich. "There's never just one cockroach. If you see one highly leveraged hedge fund going bust, then there's another on the way."

The Sting: The Ballistic Missile Defense program is the longest running scam in the history of the Pentagon, with a record $12.3 billion for missile defense in this year's budget. The stated enemies are Iran and al Qadea, neither of which has ICBMs. But it creates employment and compensates any number of Republicans for their endowments.

Follow the Bouncing Ball: As explained in yesterday's SAR, Carlyle Capital was leveraged at 32 to 1. All told, hedge funds manage $2 trillion of investors' money. If that $2 trillion is leveraged at 32 to 1 as Carlyle was, then hedge funds owe the banks just over $60 trillion. Big money at my house.

End of (Good) Times: The median US household earned $48,201 in 2006, down from $49,244 in 1999. While median household income dropped 2.1%, house prices doubled, gasoline tripled. How high was up, how far is down?

Mine's Bigger : Former Treasury Secretary Larry Summers estimates that 30% of houses with mortgages -- about 15 million in all -- are likely to be worth less than their mortgages by the end of the year. Estimates that the mortgage bust will only reach $400 billion in losses are "substantially optimistic".

Dis-employment: February's loss of 63,000 jobs is viewed as a blow to the economy. Understatement. It takes 150,000 new jobs every month just to keep up with population growth. We lost 131,000 jobs in production while 38,000 new government jobs were created - mostly in the Army.

Start Here : Iraqi Oil Minister Chahristani announced that the contracts foreign oil companies have signed with regional Kurdish authorities "will not be recognized by the government of Iraq or Exxon. Companies will not be allowed to work in Iraqi territory unless bribes are paid to politicians in the Green Zone." Or words to that effect.

Want Fries With That? Over 10,000 food distributors - including ConAgra, General Foods, Nestle and H.J. Heinz - sold the meat recalled from the Hallmark slaughterhouse. It could still be on store shelves. Or maybe not. USDA undersecretary for food safety Richard Raymond says that information is “proprietary” and would not be released because naming the gulity might drive customers away.

Uncertain Trumpet: In 1999 Abdul Razzaq Hekmati helped free 3 anti-Taliban leaders from a Taliban jail and became a hero to the anti-Taliban resistance. He died December 30, 2007 at Guantanamo, where he had been held for five years as a terrorist, his claims to the contrary. It would have been easy enough to verify his claim, but his captors knew best. Did I mention that we now have secret courts in which to try Americans?

Who, Me ? A bill to crack down on fraud in taxpayer-funded projects has a loophole that exempts abuse in US contracts performed abroad. Like in Iraq. An investigation is being faked into why and how this could have slipped into the legislation. I'd like to know why it wasn't discovered before they voted on it.

Good Old Days: The banks demanded that Jefferson County, Ala, post additional collateral on $200 million in credit derivatives gone bad. The interest-rate swaps were meant to lower the county's borrowing costs and protect it from spikes in interest rates. The county was being clever and trying to make an extra 0.5%. Not having any collateral, they lost the $200 million. Comeuppance is a word Mother liked to use.

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