Thursday, May 31, 2007

S&P 500 priced in Gold / Chart

got gold..... ?

Yesterday, and again today, the S&P 500 (blue line) made a new all-time high (red line). This is an impressive feat considering the severity of the dot-com bust. For some perspective, however, today's chart also presents the S&P priced in another world currency -- gold.

For example, it currently takes 2.32 ounces of gold to “buy the S&P 500.” This results in what is referred to as the S&P 500 / gold ratio or the cost of the S&P 500 in ounces of gold and has been overlaid onto the chart (gray line) of the S&P 500 for ease of comparison. When viewed in this way, the 2002 to 2007 rally isn't nearly as impressive and, in fact, hasn't really been a rally at all. This goes to show that the yardstick matters.
disclosure: long gold, goldbugs/hui,

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Big Investors Jumping Back Into Shaky Home Loans

nice to see that even the smart money is often dumb money......

schön zu sehen das selbst die großen oft genug danebenliegen......

The subprime mortgage business is in tatters: loan volume is plummeting, defaults are rising and some of the biggest lenders have cut back or shut down.

So what is the smart money — private equity, hedge funds and investment banks — doing? They are swooping in and taking over those battered businesses, seeing opportunity amid the wreckage.

>we will see down the road if this was "smart" money"....
>denke das wir erst in zukunft sagen können ob das wirklich alles so smart war

“There is a lot of money pent up,” said Steve Probst, national sales manager with Fairway Independent Mortgage, a lender based in Sun Prairie, Wis. “And a lot of people are betting that the market will snap back quickly.”
Risky Business
It is a risky proposition.
In many parts of the country, there is a glut of unsold homes. Defaults and foreclosures are rising, putting further pressure on home prices and mortgage lending. Some housing industry officials worry that the new infusion of capital may refuel aggressive and risky lending to people with poor credit, known as subprime borrowers, delaying a much needed winnowing of the business.
thanks to Northern Trust. more charts here from Barry Ritholtz

Those dark clouds do not faze the new money in subprime. Among those making the biggest bets is Cerberus Capital Management, which first made its name investing in distressed debt. One of the country’s largest private equity firms, Cerberus has a record of making risky contrarian bets, including its recent agreement to take control of the troubled Chrysler Corporation for $7.4 billion.

Cerberus acquired control of the subprime lender Residential Capital last year, when it led an investment consortium that bought a 51 percent stake in G.M.A.C., the finance arm of General Motors. And in April, Cerberus, which also owns Aegis Mortgage, a subprime lender based in Houston, announced plans to acquire Option One, the troubled mortgage subsidiary of H&R Block.
Taken together, these acquisitions would make Cerberus the biggest subprime lender in the country, far ahead of large mortgage giants like Countrywide, Wells Fargo and others, according to first-quarter lending statistics from Inside Mortgage Finance.....

“They have certainly double-downed and have bought some extremely attractive operations — companies that have dominated their space,” said Brenda B. White, a managing director with Deloitte & Touche Corporate Finance. “But now they’re faced with executing on a plan, whatever that plan might be.”

>read this twice...what a statement...when you double down on something it is more a sign that they bought way to early. and everybody that bought subprime in 2006 was an not lets say it politely "not smart"....

>last euch das argument nochmal auf der zunge zergehen...wenn ich lese das einer "double down" geht heisst das für mich das hier im vorwege viel zu teuer gekauft worden ist. und wer wie in diesem fall in 2006 in den subprime markt eingestiegen ist der hat gelinde gesagt "nicht clever" gehandelt.

This year, when rising mortgage defaults and a credit squeeze on Wall Street have forced many subprime mortgage companies into bankruptcy, some analysts predict that the industry might shrink by a third or more. Many industry officials acknowledged that a shakeout was necessary to cull the industry of the lenders that led in making risky loans and forcing rivals to match them or lose business.

In the last several months, however, private equity firms and others have acquired, taken stakes in or provided fresh capital to companies that wrote nearly 20 percent of last year’s $600 billion in subprime loans. It is, analysts and industry officials suggest, an unusually quick and substantial bet on a distressed business that by most indications is in the early phases of a long-term retrenchment.

Yet trying to time the bottom of a sliding market has been tricky, even for smart-money investors like Cerberus.

For instance, rising defaults and the cost of buying back poorly performing loans from investors left Residential Capital with more than $1.5 billion in losses in the six months that ended in March and the losses are expected to continue. (In March, General Motors, which still owns 49 percent of G.M.A.C., was forced to put an additional $1 billion into the unit because of the division’s mortgage woes.)

Cerberus has insisted on a number of terms and conditions in its deal to buy Option One, suggesting that the firm has become more vigilant about not paying too much. ...

“The investment banks that were buying last year were buying at the high,” said Mr. Burns, who is now chief executive of Vantage Score, a company that provides credit scores that lenders use to evaluate borrowers. (Both Merrill and Morgan have said they are comfortable with what they paid for their subprime acquisitions.).....

“They’re taking enormous risks here in hoping that they’ll be able to stabilize these businesses, keep them going, and get the types of regulatory approval they need to originate and service mortgages,” said Rick Antonoff, a partner in the bankruptcy and restructuring practice at the law firm of Pillsbury Winthrop Shaw Pittman. “They have put a lot of capital in already, and it’s going to take additional capital to keep these businesses going for a while.”....

In April, Accredited Home Lender, a San Diego-based lender, raised $230 million in loans from Farallon Capital, an investment firm based in San Francisco. The mortgage company agreed to pay a 13 percent interest rate and penalties if it sought to pay off the debt ahead of time. The company also gave Farallon warrants that would allow it to increase its stake in Accredited to 19 percent, from 7 percent. The warrants allow Farallon to buy the company’s shares for $10 apiece, a discount to the stock’s $13.99 closing price yesterday.
>here the anti spin from Rodger Rafter ...they are often just throwing good money after bad money.
>oder oft genug wird auch einfach gutes geld schlechtem hinterhergeworfen.wie dies klasse beipsiel von Rodger Rafter beweist.
They announced today that a hedge fund (Farallon) will loan them $200 million at 13% interest for 5 years. That interest rate is already extremely high, given the state of the corporate debt market these days, but Farallon also gets 3.3 million warrants priced at $10 and "rights to purchase additional equity securities."

Farallon has an interest in keeping LEND afloat. They bought 1,975,000 shares during Q4 of 2006, most of that was probably above $30 as they hit 1,579,349 shares (a 6.3% stake) on November 2nd.

Another hedge fund, Second Curve Capital, that bought an 8.5 percent stake in Accredited in early February when the stock was trading at $25 to $30, has increased its stake in the company to 11.2 percent as the stock has fallen.

Citadel, an aspiring financial conglomerate based in Chicago, picked up the lending business of ResMae for just $22 million. Ellington Management, a hedge fund based in Greenwich, Conn., that specializes in mortgage-backed securities, has agreed to pay an undisclosed sum for the lending business of Fremont General, which has not made a subprime loan in almost three months and has cut 2,400 jobs in its lending business.....
Undeterred by a Slump
“There is a lot of fear that expansion starts again because liquidity is coming in,” said Stephanie Christie, a senior vice president in charge of nonprime lending at Wells Fargo Home Mortgage. “The industry needs to be very serious about prudent underwriting and make sure we don’t go back to making bad loans.”...
disclosure: short KBW Mortgage Finance Index
to bad that nobody can short ceberus subrpime exposure.........

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Fighting over their castles / UK / Economist

there is not much to add..... the chart says it all.....and the fact that they have a have a (shadow) "housing minister" makes it even more weird....

dem ist nicht vile hinzuzufügen....der chart spricht für sich...... und die tatsache das die sogare "einen hausminister" haben kann einem schon merkwürdig vorkommen....

How a long boom in house prices has altered Britain

OF ALL the forces that have changed Britain over the past decade or so, the long bull market in housing is perhaps the strongest—and the most anonymous. High house prices have done their work quietly, reshaping concentrations of wealth and stoking clashes over supply. Other rich countries have had house-price booms too, but Britain's has been faster and more furious (see chart). And high levels of home ownership (Britons are more likely to own bricks than even Americans but less likely to own equities) have magnified their effect.

As problems go, the fact that the proportion of properties fetching £1m ($2m) or more in 1996 prices has increased more than tenfold since then (according to Nationwide, a mortgage provider) seems a nice one to have. For a decade, buying a house has been a one-way bet, which is one reason why more people are anxious to make it. But this windfall largely represents transfers from young to old. Those who have houses may choose to help their children get one too—over 40% of first-time buyers now receive help from their parents, according to the Council of Mortgage Lenders. But children whose parents do not own homes will be left behind....
High property prices have also intensified conflicts over supply. MPs frequently receive complaints from constituents about new housing developments in their neighbourhoods. These are now balanced by complaints from parents who worry about their children staying at home indefinitely, stretching adolescence into a fourth decade. Since 2000 the number of loans made to first-time buyers has declined to levels last seen in the early 1990s, when interest rates touched 15% and many people could not afford to borrow.

Below the bottom rung of the private housing ladder, a different sort of conflict has arisen. One side-effect of high prices has been to increase demand for the social housing that is home to about 4m households. Unfair allocation of subsidised housing has become a favourite theme for the right-wing British National Party (BNP). Last year its candidates prospered in local elections by whispering that Nigerian immigrants were being favoured. Similar stories abound in areas that have seen lots of immigrants arrive from eastern Europe. Last month Margaret Hodge, a Labour minister, suggested that indigenous folk should have first refusal.

These problems are likely to get worse as the housing supply, which has only crept up while prices have been rocketing, comes under pressure from a bulge in demand. This stems from two trends. The first is a rising population, thanks to increased longevity and higher net immigration (up from 50,000-60,000 a year in the mid-1990s to an annual average of 185,000 in the three years to 2005). The second is that more people are living alone. As a result, the number of households in England will increase from 21.1m in 2004 to 26m by 2026, according to official projections......

The capital, circa 1860
To see how these conflicts are playing out, take a look at London. The city's population has been rising steadily, and yet parts of its centre are becoming less densely populated. Westminster, and Kensington and Chelsea, two expensive boroughs, are the most popular places to own second homes, according to council-tax returns. Add to that the fact that London attracts wealthy foreigners who are willing to pay several million pounds for a home to live in part-time, and the result is a city whose most desirable parts are emptying.

Yet away from London's expensive centre, things are getting more cramped. Election-registration officials in east London, a favoured destination for new arrivals, report finding 15 registered voters living at a single terraced house with a couple of bedrooms. ...

A political head of steam is building behind the idea of fixing things by building more homes. Gordon Brown, the prime-minister-to-be, has argued for this recently. It will be hard to sell to the 70% of households who already own their homes, however, and especially hard for the Conservative Party, which is strong in the south-east where people think their neighbours are too close now.

Yet Michael Gove, the shadow housing minister, believes his party will accept a bonfire of planning restrictions when it is convinced that there is a good, economically liberal case for it. “The longer it goes on unchanged, the worse it gets,” says Mr Gove. Which seems a melancholy verdict on what has looked for a decade like the closest thing yet seen to a mass lottery win.

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U.S. Economy Expanded at a 0.6% Annual Rate in First Quarter / weakest in more than 4 years

thank god that the housing spillover is "contained".... more from paper money

nur gut das die probleme im immomarkt nicht auf die wirtschaft ausstrahlen.....

U.S. economy grew last quarter at a 0.6 percent annual rate, the weakest in more than four years, as housing slumped, the trade deficit widened and businesses reduced inventories.

The gain in gross domestic product is the weakest since the last three months of 2002 and compares with a 1.3 percent pace initially estimated last month, according to revised figures from the Commerce Department today in Washington.

Last quarter may prove to be the low point for the economy as recent reports showed business spending improved and leaner stockpiles prompted factories to boost production, economists said. Such an outcome would bear out forecasts by Federal Reserve policy makers, who this month reiterated that growth will pickup for the rest of this year and into next

>the same "experts" that saw a strong q1 at the end of 2006....

>von den gleichen hellen köpfen ide ende 2006 ein starkes q1 2007 erwartet haben....

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Wednesday, May 30, 2007

Our Economy Right Now / starring Schiff, Roubini, Shiller, Lereah, Heli-Ben etc

this is just brilliant! Thanks! this video is spot on!

made from !!!!

and found on


Foreign U.S. Notes Rise to 80 Percent / "Reverse Marshallplan"

staggering number......Roach calls this some kind of "reverse Marshallplan".

noch fragen....Roach nennt das ganze passenderweise ne art "reverse Marshallplan"
There is a striking twist to the current globalization. Unlike the lobalization of the early 20th century when capital flowed from the rich countries of the developed world to the “settlement economies” such as Argentina, Australia, and Canada, the opposite is true today. In the current globalization, the incremental saving for the advanced economies of the developed world has been provided almost entirely by the transfer of capital from the poor countries of the developing world (including oil producers). The United States, with its massive current account deficit, is the major beneficiary of this “reverse Marshall Plan” – absorbing more than 70% of the world’s surplus saving over the past three year

For the moment, at least, financing the U.S. budget deficit may be getting less arduous as foreign investors now own a record 80 percent of the Treasury notes due in three to 10 years.

Not since the 19th century have foreigners held so much American debt, said Alan Taylor, a professor of economic history at the University of California, Davis. International investors own $672 billion of the $835.4 billion Treasuries due in three to 10 years,

While the Central Bank of China in Taipei and the Bank of Korea say they have had their fill of Treasuries, the 22 percent rise in U.S. dollar reserves led by Brazil and China during the past year makes Treasuries irresistible.

>especially when you look at all the currency losses making it one of the worst investments it is getting even better when you read this "Taxpayers on the hook for $59 trillion"

>das gilt natürlich besonders wenn die ganzne währungsverlusteb mitberücksichtigt werden.....und erst recht bei 59 trillionen zukünftiger verbindlichkeiten ( oben)......

Yields on U.S. government bills, notes and bonds are higher than similar- maturity debt sold by Japan and the countries sharing the euro. That's partly why foreign holdings of U.S. securities have doubled since 2002.

``Those dollars need to go somewhere and the natural place to go to is Treasuries,'' said Charles Comiskey, the New York- based head of U.S. government bond trading at HSBC, Europe's largest bank by market value. ``They're not bought for fundamental reasons but for necessity.''....

>but how long can and will this this continue....?
>aber ob das immer weitergehen kann........?

American long-term interest rates would be about 1.5 percentage points higher without foreign capital flowing into the $4.4 trillion of outstanding Treasuries, according to a 2005 Federal Reserve study by Professors Francis and Veronica Warnock at the University of Virginia in Charlottesville. The U.S. Department of the Treasury says non-Americans hold at least 52 percent of all notes and bonds.

Lower Treasury yields help keep down borrowing costs for companies and U.S. home buyers. The yield on U.S. corporate bonds was 5.82 percent last week, compared with a 10-year average of 6.05 percent, according to data compiled by Merrill Lynch & Co. Rates on 30-year mortgages rose 16 basis points last week to 6.37 percent, down from 7.94 percent in May 1997 and the average 6.70 percent over the past decade, data from Freddie Mac, the government-chartered mortgage company, show. ....

Percentage of Deficit
The last time foreigners owned so much U.S. debt was in the mid-19th century, when state and corporate bonds for the construction of railroads, canals and highways were purchased by Europeans, said Taylor, the University of California professor. .....
>and now....consumption, houses, war, debt....but no investments!
>und heute...keine investments, nur neue schulden um den kaufrausch weiter auszuleben und masslos über die verhältnisse zu leben und kriege zu finanzieren.

Central banks, whose currency reserves swelled to $5.4 trillion this year, are buying Treasuries with dollars accumulated from exports of goods and oil to America. Foreigners owned less than 35 percent of Treasuries in 2000. Crude prices have tripled during the same period.

Central banks, including the People's Bank of China, have said they plan to increase investments in bonds other than Treasuries, adding to concerns that waning demand would push up U.S. market rates.

`Reaching a Limit'
Japan, the biggest foreign holder of Treasuries, with $612 billion, has reduced investments in U.S. government bonds this year, from $623 billion. The country doesn't plan to ``drastically'' cut U.S. assets, Vice Finance Minister Hideto Fujii said last week.

International investors ``can't keep buying safe, simple Treasuries forever,'' said HSBC's Dyer, who based his estimates on June 2006 Treasury data. Foreigners are ``reaching a limit.''

At the same time, Treasuries are becoming more attractive to foreign investors as yields on emerging market debt and non- investment grade corporate securities approach record lows compared with government bonds, said O'Donnell.

Speculative-grade corporate bonds yielded an average 2.44 percentage points more than Treasuries last week, matching the record low in 1997, according to Merrill Lynch & Co., which started collecting the data in 1986. The average yield premium on emerging market debt narrowed to 1.49 percentage points, the smallest since JPMorgan Chase & Co. began collecting such data in 1997.

Treasuries due in 10 years yield 48 basis points, or 0.48 percentage point, more than German 10-year bunds, down from 116 basis points a year ago. The U.S. notes yield 314 basis points more than Japanese 10-year bonds, little changed from 317 this time last year.

`Reasonably Priced Assets'
``In the grand scheme of global opportunities, Treasury rates near 5 percent may perversely be the most reasonably priced assets around,'' said O'Donnell.

Central bank efforts to diversify reflect the growth of reserves more than the desire to hold less U.S. debt. China's swelled in the first quarter by a record $136 billion to $1.2 trillion, prompting the government to set up a group to pursue other investments. China last week bought a $3 billion stake in Blackstone Group LP, the New York-based private-equity firm led by Stephen Schwarzman.

China more than doubled its holdings of Treasuries in the three years ended March 31 to $420 billion, according to U.S. government data. Members of the Organization of Petroleum Exporting Countries did the same, increasing their investments to $113 billion. Brazil now owns $70.6 billion of U.S. government debt, up fivefold since 2004.

Central banks used their growing reserves to purchase a net $284.5 billion of so-called agency debt sold by government- chartered companies Fannie Mae of Washington and Freddie Mac in McLean, Virginia last year. They bought a net $485.2 billion of corporate bonds.
here is the take from minyanville on this datapoint

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"Heatmap Property Taxes"

click on the headline to read the realated story from the wsj. i recommend to read the the spot on summary from mish

klickt auf die überschrift um die geschichte des wsj zu lesen. ich empfehle aber eher die auf den punkt gebrachte zusammenfassung von mish


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Battle at Kruger: The real Wild Life / a must see clip!!!!!

Hat Tip to for digging the web to find this fascinating clip!!!!!

also thanks to Barry Ritholtz for bringing it to my attention

make sure you see the entire clip. this is one of the best i´ve ever seen. fascinating!

ihr müßt dieses clip unbedingt bis zum ende sehen. ich habe vergleichbares noch nicht gesehen. faszinierend!

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Peter Shiff on Bloomberg about China´s Stock Market

this interview was shot yesterday before the 7% plunge just after the Chinese announced the trading tax increase.... the interview is more about the yuan and how the $ is toast... nice on the headline to start the interview

dieses interview ist von gestern bevor der aktienmarkt 7% verloren hat und nachdem die chinesen die erhöhung der steuern bei aktiengeschäften angekündigt geht in dem interview mehr um den yuan und warum der us $ wohl weiter probleme haben wird....klickt bitte auf die überschrift um das interview zu starten

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Tuesday, May 29, 2007

something smells fishy / Pimco on the employment data

nothing new to readers of the blogging world. it is very telling when one of the most important statistics is almost useless....remember this when you hear the "experts" yelling on cnbc etc after the number from can expect a mega revision downward in august......if you want more on this topc surf the labels with lots of frustrating details on how flawed the data is......

dürfte für leser der blogs nichts neues sein. es ist aber bezeichnend wenn eine der wichtigsten erhebungen komplett nutzlos ist....immer wieder lustig wenn man mit diesem wissen die "experten" auf allen kanälen zu sehen bekommt....erneut an diesem freitag zu bewundern..... es ist jetzt schon klar das die nächste revision eine echte hausnummer gen süden sein wird ..wenn ihr mehr details zur erhebung wissen möchtet bitte unter den labels stöbern..

Here at PIMCO, we continue to expect the unemployment rate to go up. Thus, we are still (painfully, since December) long of duration, concentrated in the front end of the yield curve. And why are we still bearish on employment growth?

First and foremost, unemployment is a lagging variable, notably of momentum in discretionary aggregate demand. And discretionary aggregate demand has been unambiguously decelerating in recent quarters, and not just in residential construction, as displayed in the chart below.
The Great Puzzle
So why hasn’t the unemployment rate already risen? It’s the great puzzle, in the words of San Francisco Fed President Janet Yellen. The short answer to the puzzle is that the labor force participation rate has fallen, accounting fully for the drop from 4.7% to 4.5% for the unemployment rate over the last year. But this doesn’t make sense when you look at nonfarm payroll growth, which, again in the words of Ms. Yellen, has been gangbusters.
The labor force participation rate is decidedly pro-cyclical, meaning that it goes up as tight labor markets induce new entrants into the labor market; and it goes down when soggy labor markets lead the discouraged unemployed to drop out of the labor force. So, the short answer to the puzzle is the right answer only if nonfarm payroll growth really ain’t gangbusters.

And new research by both Ray Stone4 of Stone and McCarthy and Sheryl King5 of Merrill Lynch suggest this is indeed the case. Please refer directly to their research for the exhaustive details, but the bottom line is simple. Detailed data in the Bureau of Labor Statistics (BLS) Business Employment Dynamics (BED) release, which comes out with a two-quarter lag, show employment growth of only 19 thousand in 2006Q3, while the nonfarm payroll tally for that quarter was over 450 thousand. More recently, the BLS’s more timely Job Opening and Labor Turnover Survey (JOLTS) for April – last month! – showed job openings rose only 24 thousand, with this series essentially flat since last August. The JOLTS report also showed that new hires in March (this data subset is released with a one month lag) fell 29 thousand.

Something smells more than fishy here. Not that I’m accusing the BLS of any skullduggery. None! Rather, it is a historical fact that nonfarm payrolls – before annual benchmark revisions, which continue for six years! – understate employment early in recoveries (leading to the inevitable contemporaneous label of "jobless recovery"), while they overstate employment late in expansions.

And a key reason is that the BLS, while very good at counting heads at existing firms, must make an assumption, in real time, about the birth-death rate for firms, so as to estimate the net gain/loss in jobs as firms open and close, a never-ending feature of a capitalist economy. In the early years of expansions, the birth assumption systematically is too low and the death assumption is systematically too high, which results in "jobless recoveries," which turn out to be not-so-jobless recoveries upon revision. The exact opposite holds in the late years of expansions and particularly in recessions. Such is the case, it would appear, at present.

Thus, in contrast to last August, when the job tally for the year ending March 2006 was revised up some 800 thousand, a stunningly large revision, the opposite is likely to unfold in this August’s benchmark revision for the year ending March 2007. Not to suggest, I hasten to add, that a downward revision equal to last year’s upward revision is in the cards. The honest answer is that we don’t know how big it will be. But available data, notably the BED and JOLTS data, point squarely to a downward revision.

So what, you say. Economists always bellyache about the quality of the data when they go against their forecasts. This is true. It is also true, however, that poor data can make for poor policy making, if and when the data is taken to be religiously true. This is particularly the case if the data is known to be lagging data of the business cycle, as is the case with the unemployment rate. Acting on the data, or refusing to act because of it, is the stuff of policy mistakes, sometimes known as recessions
as i´ve said before they should hire the "statz crew"..... :-)

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China down 6% / China Triples the Tax on Stock Trades

why did it take so long to act seriously......... now the damage is already done......interesiting to see how the markets will follow up point at the day 200 from 300 stocks of the csi 300 were limit down (10%)!

warum hat das ganze so lange gedauert......nun ist der schaden angerichtet....entscheidend wird sein wie der morgige tag verlä laufe des heutigen handels waren zeitweise 200 der 300 aktien im csi 300 limit down (10%)!

HONG KONG, Wednesday, May 30 — In an abrupt reversal, China’s finance ministry announced early Wednesday morning that it would triple the tax on stock trades, a move aimed at braking what many business executives and economists inside and outside China now see as a stock market bubble.

Just seven days ago, the finance ministry and the State Administration of Taxation took the unusual step of publicly denying that they had any plans to change the tax on stock trading.

>stocks gave risen another 7 percent during this period

>in diesem zeitraum sind die aktien weitere 7% gestiegen

But the finance ministry reversed itself with a statement on its Web site early Wednesday morning noting that increased had been ordered by the State Council, the cabinet of the Chinese government.

By raising the tax, the government now runs the risk of being blamed by the Chinese public if it sets off a stock market rout. A composite index of yuan-denominated A shares traded in Shanghai and Shenzhen plunged 6.3 percent at the opening on Wednesday

Millions of citizens have invested their savings in a stock market that has nearly quadrupled since the start of last year.

The Chinese government has long used changes in the stock trading tax to influence share prices, raising or lowering the tax at least six times in recent years. Investors have watched the level of the tax carefully as an indication of the government’s position.

China started to levy stamp duty in 1990, and initially set the rate at 0.6 percent. This is the eighth time the government has adjusted the rate of the tax.

The last time the government raised the tax was on May 10, 1997, when it was lifted to 0.5 percent from 0.3 percent. The Shanghai Composite Index rose 2.3 percent after the announcement.

``The stamp tax is the latest gesture by the Chinese government to warn investors,'' said Phil Chen, who manages $154 million at Grand Cathay Securities Investment Trust Co. in Taipei.

``The trouble is, Chinese investors probably won't care if a few breadcrumbs are dropped in the transaction as they have such extraordinary returns on their investments

The market had rallied sharply for the last week as investors interpreted last week’s decision to leave the tax unchanged as a sign that the government would let the market set its own course.

The finance ministry is tripling the stamp tax on stock trading to 0.3 percent, from 0.1 percent, effective Wednesday....

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Bush on Global Warming :-)!!!!

thanks to mish and his

make sure you also get "global warming for dummies"

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Monday, May 28, 2007

Sovereign-wealth funds / Economist

besides the indirect effect that they are fueling the bond market leading to lower yields and extreme risk taking the state owned investment vehicles are more and more directly impacting the equity market....great news for global stock markets and definitly better than buying us i´ve written before i think that the us market will benefit the least from this move (action in congress, diversification out of the $, unocal and ports deal etc......)

neben dem indirekten effekt das sie den bondmarkt überfluten und damit die renditen drücken und damit u.a. die z.zt. waghalsigen übernahmen mitermöglichen greifen die staatlichen investmentfonds immer mehr dirkt in das geschehen an den aktienmärkten ein. fantasticshe news für die weltweiten aktienmärkte...und immer noch besser als us staatsanleihen zu kaufen....und wie ich bereits vorher geschrieben habe glaube ich das die us am wenigsten von dieser entwicklung profitieren werden (man beachte nur das geschehen im us congress, diversifikation aus dem $, die geplatzten unocal und hafendeal usw.....)

China's investment in Blackstone shows how government investors are flourishing at the heart of the financial system

WITH $1.2 trillion in foreign-exchange reserves and the pool growing by more than $1 billion every day, China casts a giant's shadow over the global financial markets, even if it has mostly used the money to pile up American Treasury bonds. The announcement on May 21st that it would invest $3 billion of its reserves in Blackstone, a New York-based private-equity firm soon to issue shares, shows that it is prepared to barge into murky private markets as well as liquid public ones. It is not the only inscrutable country to be cosying up to the inscrutable private-equity industry. Around the world, a secretive society is emerging of governments flush with foreign assets, some of them petrodollars, that are increasingly calling the shots in international finance. The Blackstone deal is likely to stir others to invest their money even farther away from prying eyes than they do already.

Like China, whose proposed Blackstone stake is part of $300 billion that the government plans to set aside this year for investment purposes, dozens of countries have set up what are now commonly referred to as sovereign-wealth funds. They manage money drawn from reserves, natural-resource payments and the like. China is chiefly concerned to diversify its foreign reserves, but other sovereign-wealth funds own national, as well as international, assets.

The top 12 each have anything from $20 billion to hundreds of billions of dollars to invest (see table). Recently, Japan, Russia and India have reportedly been considering setting up funds along similar lines. Some estimates put the size of the funds at $2.5 trillion by the end of this year (in contrast, hedge funds are thought to have a mere $1.6 trillion), with another $450 billion in transfers from reserves being added annually. Including capital appreciation, the amount could swell to $12 trillion by 2015.

To the extent governments have traditionally held investment assets, it was to protect domestic currencies and banks from crisis. Since the funds were for emergencies, they were of a type that could be liquidated easily—initially the holdings were in precious metals, lately they have been in dollars. The idea of building up an endowment to replace shrinking natural resources did not exist.

That process may have started inadvertently in 1956 when the British administration of the Gilbert Islands in Micronesia put a levy on the export of phosphates—bird manure—used in fertiliser. The manure has long since been depleted. However, a once-tiny set-aside of money has become the Kiribati Revenue Equalisation Reserve Fund, a $520m investment portfolio that has grown to about nine times the tiny atoll's GDP.

A similar approach is now common among oil-producing countries, which, it is estimated, account for two-thirds of the assets in these sovereign-wealth funds, and are keen to diversify their national revenues, aware that their wealth is being pumped away. They have typically invested along similar lines to central banks, holding bonds, dollars and bank deposits. Temasek, (details a Singaporean entity created in 1974 to pool state-owned investments, started to change the mindset. It subsequently evolved into an even more complex investment vehicle. The heady combination of state-control, success and secrecy, entranced other governments.

Recently, central bankers have also begun wondering whether they have a fiduciary duty to make higher returns from the public wealth under their supervision, which could mean placing at least some part of foreign-exchange reserves in high-yielding, if less liquid, investments. In Asia this question has become increasingly pertinent in the past two years, as reserves have mushroomed.

The result has been a torrent of money into a finite pool of assets. There is no precedent for such fortunes suddenly to find their way into global financial markets, and they help explain the waterfall of liquidity that has driven up the value of risky (and less risky) assets of all descriptions around the world. The world's entire supply of shares is $55 trillion, and bonds account for a similar amount. Sovereign-wealth funds could soon become the most important buyers of such assets, and many others besides. If so, the world will witness the intriguing spectacle of its largest private companies being owned by governments whose belief in capitalism is often partial.

The last time governments were this involved in sinking money into private assets, the process tended to be called nationalisation. Now the funds are invested both abroad and domestically. A new term will have to be coined: internationalisation, perhaps.

Northern light
Of the biggest sovereign funds, only Norway's provides anything close to transparency. Each year it discloses its investment portfolios and returns. ... here are the details

Andrew Rozanov, of State Street Bank, argues that the lack of well-defined obligations and the ability to retain funds indefinitely while not having to reveal results is an investment advantage. The funds can harvest the benefits of volatility and illiquidity unavailable to the risk averse. It would not be surprising if some did particularly well. On the other hand, the same factors that could lead to higher returns could also lead to corruption and untoward political intervention.

But the kind of assets the funds invest in—big ones—can generate frictions even when run properly. Temasek has been embroiled in controversy in Thailand after it bought Shin Corp, one of the country's telecoms companies, from Thaksin Shinawatra, the country's deposed prime minister. China is no stranger to such tensions. In an event that still rankles, CNOOC, the state-controlled oil company, was blocked in America, supposedly on national-security grounds from acquiring Unocal, an oil company.

It is quite possible that by purchasing a non-voting interest in Blackstone, China will be able to bypass the restrictions that might prevent it doing Unocal-style deals in Europe and America......

China still has vast holdings of state assets, and its embryonic stockmarket is bubbling over—if anything it needs more publicly traded companies. Like other countries with sovereign-wealth funds, it would appear to need more expertise in selling companies that it owns, rather than learning how to buy the ones it does not

>just the news from yesterday involving state investment vehicles....
>hier ein paar beispielmeldungen vom montag in sachen staatliche investments...

Singapore Air, Temasek May Buy 24% of China Eastern
OMX Shares Advance on Report Dubai May Outbid Nasdaq
Norsk Hydro preparing $30 bln bid for Alcan Pogo sells Northrock to Abu Dhabi Energy

and this were news from a bank holiday....
und das waren die meldungen vom pfingsmontag....

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Quote of the Day.....Hedge Funds & Private (Pirate) Equity

this quote sums it up......thanks to Hussman (click headline)

ein treffender kommentar....dank geht an hussman (überschrift klicken)

Smartest comments of the week: Ray Dalio of Bridgewater Associates, who manages about $160 billion in assets for clients including central banks and foreign governments, quoted in Barron's

"Hedge funds and private-equity firms today are like the dot-coms in 2000: Ask for money and you'll get it. They bid up the prices of everything. The amount of money flowing is almost out of control, and it's making everything overvalued. A client of mine said it's like there are 11,000 planes in the sky and only 100 good pilots -- an accident is bound to happen. Just like the dot-com bust, the winners and losers will be sorted out but the technological advances won't stop. There is a greater differentiation of managers now than ever before. ”
thanks to Rodger Rafter for the term "Pirate Equity" :-)

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truck, railroad and port news from april / not a pretty picture...

i think this cartoon sums it up......... :-)

dieser cartoon fasst das ganze recht gut zusammen..... :-)

ALEXANDRIA, Va. — The American Trucking Associations’ advanced seasonally adjusted For-Hire Truck Tonnage Index decreased 2.2 percent in April, after posting a 1.2 percent jump in March.

On a seasonally adjusted basis, the tonnage index declined to 112.1 (2000 = 100) in April from 114.6 the previous month. After March’s year-over-year increase, which was the first since June 2006, April’s tonnage was 2.7 percent below the same month in 2006......

Trucking serves as a barometer of the U.S. economy because it represents nearly 70 percent of tonnage carried by all modes of domestic freight transportation, including manufactured and retail goods.
Trucks hauled 10.7 billion tons of freight in 2005. Motor carriers collected $623 billion , or 84.3 percent of total revenue earned by all transport modes.......

ATA represents more than 37,000 members covering every type of motor carrier in the United States.
Railroads Feel Profit Pinch as U.S. Automakers Trim Production

hat tip to Russ Winter

April’s container data from the Port of Los Angeles is in, and is consistent with other “reports from the field”. 368,683 loaded containers came in, versus 370,171 in April last year, which is down 0.4%

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Gas Pains / The Daily Show

time for mad max IV....? zeit für mad max IV...?

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China climbing to new highs / party on......

another day another record...... this performance reminds me more and more of the final stages of the nasdaq bubble..... i never could imagine that i would witness such an effort twice within 8 years....fascinating times.... and i´m proud that i havn´t tried to short this madness......thanks in part to the limited products available :-)

jeder tag ein neuer meilenstein....diese entwicklung erinnert mich immer mehr an die letzten zuckungen des nasdag 1999/2000...ich hätte mir nicht träumen lassen das ich etwas ähnlichens binnen 8 jahren ein zweites mal erleben an spannung kaum zu überbieten....bin ehrlich stolz das ich noch nicht der versuchung erlegen bin hier was auf der short seite zu probieren.....hängt wohl auch mit der schwierigkeit zusammen das die produkmöglichkeit hier noch sehr eingeschränkt sind :-)

May 28 (Bloomberg) -- China's CSI 300 Index rose above 4000 for the first time, driven by a surge in new investors who are ignoring warnings of a bubble to enter a market that's doubled this year.

China International Marine Containers Co. and Tsingtao Brewery Co. were among 11 stocks to rise by the 10 percent daily limit on the 298 member index. Jiangxi Copper Co. climbed after the price of the metal gained by the daily cap in Shanghai.

``There is lots of liquidity flowing into the market,'' said Fan Dizhao, who helps manage about $1.8 billion at Guotai Asset Management Co. in Shanghai. ``Even fund mangers dare not sell their shares at this stage, as no one knows when the rally will be over.''

The nation's Ministry of Education warned students not to get involved in stock trading because they may be unable to bear their losses if the investments turn sour, the official Xinhua News Agency reported today.

The benchmark CSI 300 climbed 87.33, or 2.2 percent, to 4072.58 at the close. Investors opened more than 300,000 accounts a day last week, even as former Federal Reserve Chairman Alan Greenspan called the rally unsustainable and said the market may undergo a ``dramatic contraction''.

China Petroleum, Asia's biggest oil refiner, also known as Sinopec, jumped 0.67 yuan, or 5.4 percent, to 13.07. China International Marine, the world's largest maker of freight containers, gained 3.17 yuan, or 10 percent, to 34.82. Baoshan Iron & Steel Co., China's biggest steelmaker, climbed 0.42 yuan, or 3.3 percent, to 13.12.

New Accounts
Households are shifting funds into the stock market, seeking better returns than they can get on their bank deposits. The central bank's benchmark one-year deposit rate, a ceiling for deposit rates commercial banks can offer, is 3.06 percent, little more than the nation's 3 percent inflation rate. The CSI 300 has risen 206 percent in the past year.


Investors opened 362,719 accounts at brokerages on May 24, the fifth straight day the tally has exceeded 300,000, according to figures on the China Depository & Clearing Corp.'s Web site. So far this year, 20.9 million accounts have been opened, four times the amount in 2006, the clearing house's data shows.

``This kind of bubble is not driven by fundamentals. It's driven by liquidity,'' said Agnes Deng, who helps manage $3.5 billion at Standard Life Investments Asia in Hong Kong.

>what a statement.........if it was driven by fundamentals it wouldn´t be a bubble.....

>was für eine aussage.....wenn etwas durch fundamentales gerechtfertigt ist kann es wohl kaum eine blase sein...

The CSI 300 is now valued at 46 times earnings, making the mainland market the most expensive in the Asia-Pacific region.

Risk Declaration
Greenspan last week joined central bank Governor Zhou Xiaochuan and Asia's wealthiest man Li Ka-shing in warning of a bubble on China's stock market. The index fell 0.5 percent the day after Greenspan's comment. It resumed its gains the next day, closing 1.7 percent higher.

The CSI 300, which tracks yuan-denominated A shares listed on China's two exchanges, has climbed 14 percent since May 6, when the central bank's Zhou said he was concerned about stock valuations. It also rose to a record after billionaire Li on May 17 said the market ``must be a bubble.''

The country's stock regulator last week ordered brokerages to make investors sign a declaration that they are aware of the risks when opening stock-trading accounts.

>hasn´t worked in germany and the rest of the world in 1999...helpless effort....maybe they should try/use a more drastical warning like this one..... :-)

>das hat bei uns und im rest der welt keinerlei auswirkungen gehabt...hilfloser versuch...evtl. sollten etwas drastische worte von seiten der offiziellen gewählt werden...... :-)

The pace of gains on the stock market has increased speculation that the government will take cooling measures.

``Some investors simply keep buying shares, since there were no crackdown measures by regulators,'' said Fan at Guotai Asset Management. .....

China Life Insurance Co., the nation's biggest insurer, gained 1.17 yuan, or 3 percent, to 40.20. Ping An Insurance (Group) Co., the second biggest, rose 2.56 yuan, or 4.1 percent, to 64.48.
Insurance companies have been approved in principal to invest in real estate in China, .... There are no policy restrictions regarding real estate investment by insurance companies, it said.

The Shanghai Composite Index, which tracks the bigger of China's stock exchanges, gained 2.2 percent to 4272.11. The Shenzhen Composite Index, which covers the smaller one, added 2.4 percent to 1264.05.

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