Thursday, April 10, 2008

SAR #8102

Why learn from history when repeating it is so much fun!

Batter Up: Lehman Brothers took another $1 billion hit in liquidating three of its investment funds. The liquidation was blamed on "market disruptions", which sounds much better than "bad investments" or "greed".

On The Up-and-Up: Global carbon dioxide (CO2) emissions have grown over 3% a year since 2000, double the rate in the 1990's when Kyoto lead to promises to diet. At this rate CO2 levels will reach 700 ppm before 2020.

Prime Time: DC Homeland Security and police now monitor more than 5,000 CCTV cameras throughout the city to ensure "public health and safety." Not to mention obedience.

Cart, Horse: In an improvement on established police procedures that call for an investigation of a crime, Bush&Co have, at least in the case of Mississippi Supreme Court Justice Oliver Diaz Jr., found it more useful to investigate and then find a crime to pin on the suspect.

Votes and Volts: It took a team of expert hackers less than a day to take control of a power company's computer network and gain the ability to shut down the grid. Be sure to vote for the candidate of their choice.

Laundry: Lehman's took a bunch of unmarketable leveraged buyout loans and packaged them as collateralized loan obligations (CDOs) simply so they could pass them off to the Fed in exchange for "clean" Treasuries. The Fed went along, but only took 75% of the $2.5 billion. Lehman got stuck with the really, really bad ones. Call 'em and make an offer.

One Forward, Two Back: US exports increased $3 billion in February. Imports increased $6 billion. $151 billion out, $214 billion in, net debt $63 billion. So all we need is a bigger truck?

Anywhere, Anytime: FBI agents, with point-and-click ease and without warrants, can and do intercept e-mails, instant messages, cellphone calls and other communications across the US that tell them what a citizen is saying, to whom, where he is and where he has been. They're pretty sure where he's going, too.

Clunker: Goldman Sachs dumped $500 million of Chrysler's loans at 63 cents on the dollar, to a group of hedge funds. At that price, the yield is more than 20%, assuming that Chrysler stays around long enough to actually pay on them.

Crazy Aunt: FDIC chairwoman Sheila Bair says "we need to come to grips with the need for government intervention. It's not politically popular. We just need to be honest with people that we have a significant problem here and that additional measures are going to have to be taken. And yes, it may cost money." A lot of money. Get a grip.

Fencing: Credit hedge funds are now the weakest link in the credit/debt chain. They have leveraged their $750 billion equity into $45 trillion or more in derivatives. If only 2% of these default, the whole edifice crumbles. It will make the sub-prime crisis "look like a walk in the park."

Three Card Monte: Yesterday we said Citigroup had to take 90 cents on the dollar to get rid of $12 billion of loans to private equity firms. Turns out that Citi also must pay the the first 20% of any losses, which lowers the take to 70 cents on the dollar. And Citi lent the money to the buyers so the buyers would buy. Why? because now, no matter how much they deteriorate, Citi can "mark to market" all the rest of their stinky paper at 90 cents, even if it really falls to 12 cents. My mother wouldn't let me be an accountant.

Schadenfreude: The IMF reports that British banks have run up bigger losses than anywhere else - more than Citi, more than UBS. And because of that, the IMF estimates that Britain will be hit far harder by the coming financial collapse than the US.

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