Category Archives: Finance

Open Letter To The Secretary-General Of UN

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Open Letter to Secretary-General of United Nations
Wednesday, December 9th 2009, 2:07 AM EST
Co2sceptic (Site Admin)

Dear Secretary-General,

Climate change science is in a period of ‘negative discovery’ – the more we learn about this exceptionally complex and rapidly evolving field the more we realize how little we know. Truly, the science is NOT settled.

Therefore, there is no sound reason to impose expensive and restrictive public policy decisions on the peoples of the Earth without first providing convincing evidence that human activities are causing dangerous climate change beyond that resulting from natural causes. Before any precipitate action is taken, we must have solid observational data demonstrating that recent changes in climate differ substantially from changes observed in the past and are well in excess of normal variations caused by solar cycles, ocean currents, changes in the Earth’s orbital parameters and other natural phenomena.

We the undersigned, being qualified in climate-related scientific disciplines, challenge the UNFCCC and supporters of the United Nations Climate Change Conference to produce convincing OBSERVATIONAL EVIDENCE for their claims of dangerous human-caused global warming and other changes in climate. Projections of possible future scenarios from unproven computer models of climate are not acceptable substitutes for real world data obtained through unbiased and rigorous scientific investigation.
Specifically, we challenge supporters of the hypothesis of dangerous human-caused climate change to demonstrate that:

Variations in global climate in the last hundred years are significantly outside the natural range experienced in previous centuries;

Humanity’s emissions of carbon dioxide and other ‘greenhouse gases’ (GHG) are having a dangerous impact on global climate;

Computer-based models can meaningfully replicate the impact of all of the natural factors that may significantly influence climate…”

For the rest of the post and the complete list of signatories, see Climate realists.

China Warns of Gold Bubble

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The Telegraph reports that China warns of a gold bubble:

“Experts say that China is putting a floor under the gold price but does not chase rallies once they are under way.

There is also a double-edged twist to news that Barrick Gold, the world’s biggest gold mining company, has closed the final 3m ounces of its notorious hedge book ahead of schedule. While the move is a bet that prices will continue to rise, it also means that Barrick has been a big buyer of gold lately. These purchases have now stopped. One of the key drivers behind the spike this autumn has been removed.”

This article is one of the few out there that takes into account the time lag between an announcement and an action. Many of the events that reporters tout as proof that the gold price will spike much higher right way are actually events that have taken place in the past – for eg., purchases at lower prices – or are hedges that have a more complex function than the usual retail investor has in mind, with the siren call of “gold´s going to the moon, jump in now or you´ve lost it forever” sounding in his ears.

Take trader  John Paulson´gold purchase.  It took place in January, apparently. And remember that it was a position taken by his hedge-fund, with his clients money. Paulson gets his fee no matter how that trade turns out long term, and if his fee is a percentage of the assets under management, a purchase when the price is high is better than one at rock bottom, even if his clients´profits are not maximized that way. (sorry: thoughtless blunder there)

Notice finally that Paulson´s own fortune is in gold to a much lesser extent – only about $250 million of his reported $6 billion net worth. That comes to about 4% of his assets….(Correction: that´s 6.8 billion and less than 4%)

Not an earth shaking proportion by any means.

So, what gives?

Muslims Should Withdraw Money from Swiss Banks..

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Teheran Times:

“Turkish State Minister and Chief Negotiator for EU talks Egemen Bagis has urged Muslim nations to withdraw their money from Swiss banks.

Bagis’ comments came in response to a recently approved ban on the construction of new minarets in Switzerland.

Following a weekend referendum, the construction of any new minaret was declared illegal in Switzerland, a move which drew sharp criticism from Muslim and European countries, as well as the UN and the Vatican.”

More Fall Out From Dubai On Indian Market

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Business Standard:

“Segments of the economy such as consumer durable and core industrial growth that are driving the current recovery in the Indian economy are purely a function of domestic stimulus initiatives and remain to that extent relatively insulated,” HDFC Bank said in a report today.

However, areas such as exports, remittance, banking and construction as well as real estate are likely to see further damage, the report added.

Exports are going to be the most affected by Dubai woes, as the UAE region is now India’s largest export destination toppling the United States.

Besides, bullion trading in Dubai is likely to be impacted, which may have ripple effect for India as around $29 billion of gold from the country is being traded in Dubai.”

Madoff -Related Accounting Firm Does Dubai´s Accounts..

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From the Independent:

“Dubai World will start a formal process next week that will see it invite leading banks, including HSBC, Royal Bank of Scotland (RBS), Lloyd’s Banking Group and Standard Chartered, to create a steering committee to represent the many lenders. KPMG has been lined up by the lead banks to represent them in negotiations, with a formal appointment expected once the compilation of the five-to-six bank steering committee is finalised.

My Comment:

Now, KPMG is the big four accounting firm that gave Madoff´s representations to Tremont Group Holdings (a US fund that Madoff purportedly hoodwinked) a thumbs up.  The Tomchin Family Charitable Trust, one of numbers of investors who were allegedly scammed by Madoff,  has launched a lawsuit against KPMG and Tremont for negligence in monitoring one of Tremont´s funds that invested with Madoff.

The lawsuit included a list of other Madoff clients that included Victoria de Rothschild of the banking family of the Rothschilds and a Tory party contributor:

“Also on the list of Mr Madoff’s British clients is Lady Victoria de Rothschild, who is related to Nathaniel Rothschild, the co- chairman of Atticus Capital, the hedge fund.

Lady Victoria is a well-known figure on the society circuit and became known more recently as a lender to the Tory party, having set up a special company that gave the party a £1,014,000 loan that is due to be repaid in 2010.”

(Times Online, February 5, 2009)

KPMG has also been hit with a $1b lawsuit for “reckless and negligent” auditing of failed subprime broker, New Century Financial, reportedly the first major case against an auditor arising from the financial crisis.

My Comment

So we have a Madoff-tainted accounting firm KPMG, with multiple legal problems, representing the banks that loaned to Dubai on one side, and  (as I noted before) French banking legend Rothschild on the other side, heading up the restructuring efforts for Dubai….

Wiki has a list of KPMG´s legal infractions that includes this:

“In February 2007 KPMG Germany was investigated for ignoring questionable payments in the Siemens bribery case.[29] (Siemens agreed to pay a record $1.34 billion in fines to settle the case in December, 2008.) In November 2008 the Siemens Supervisory Board recommended changing auditors from KPMG to Ernst & Young.[30]

In 2006, Fannie Mae sued KPMG for malpractice for approving years of erroneous financial statements.[31]

In March 2008 KPMG was accused of enabling “improper and imprudent practices” at New Century Financial, a failed mortgage company[32] and KPMG agreed to pay $80 million to settle suits from Xerox shareholders over manipulated earnings reports.”

Some confidence-builder… a bank that´s been closely connected to the Madoff scam and to the Fannie and Freddie case (and hence, to Goldman Sachs)…

And, how about this:

KPMG and Deloitte were brought in to investigate India´s ¨Madoff¨” – the fraud- riddled IT outsourcing giant Satyam (now Mahindra Satyam, its post-merger avatar – over the objections of the Institute of Chartered Accountants, India´s regulator, which said KPMG was not registered with it and would thus not be subject to its code of conduct or disciplinary proceedings.

Dubai Government Thumbs Its Nose at Creditors

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After tentatively implying that there would be a back-stop to Dubai World´s debt problems, the Dubai Government on Monday disowned any legal obligation to Dubai World and told creditors that they needed to take responsibility for their loans.

“Creditors need to take part of the responsibility for their decision to lend to the companies,” said Abdulrahman al-Saleh, director general of Dubai’s department of finance. “They think Dubai World is part of the goverment, which is not correct.”

(Reuters)

My Comment:

What´s going on here? The back and forth isn´t recent, but has been going on the whole year, with Dubai implying at one time that its debt load was taken care of, and at another, that it still had more problems; and in this instance, first seeming to back up Dubai World and then, backing-off from its backup….

The timing and vacillation seem to suggest that the government is testing the market and the reaction of investors before making its move. Not good.

And it leaves open the possibility, already raised by UBS in a recent Bloomberg piece, that the problems exceed the $80 billions of government liabilities and might extend to off-book structures that are not presently known.

Update:

After weekend assurances from Dubai that its much richer fellow-emirate Abu Dhabi, seat of the UAE federal government, would help, and that liquidity would be assured for local and international banks that needed it (through a “special additional liquidity facility”), Asian markets recovered this morning from their sell-off last week. But this morning, the local stock exchanges have been hit hard and this new announcement could provoke a second sell-off in world markets, especially in the UK FTSE, since British banks, especially Royal Bank of Scotland, have loan exposure to Dubai World.

Then, there´s also the exposure that UK banks have to other investments where Dubai World holds a stake.

And there´s the indirect exposure US banks have to Dubai through ties with UK banks.

India Fears Effects of Dubai Meltdown

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After earlier assurances that the Dubai meltdown wouldn´t impact the Indian market much, top officials now admit in published reports that the Indian labor market could be affected.

“Annual remittances to India from UAE is about 2 billion US dollars, out of the $52 billion sent by Indian expats from across the world.Two-thirds of the six million people living in Dubai are Indians, more than 60 per cent of them Malayalis, much to the worry of Kerala’s Finance Minister T M Thomas Isaac.“One main fear,” he notes, “is that the credit to realty sector in Dubai would be frozen for some time. It could seriously affect the construction sector, thereby our workers.” There is also concern about the fate of Kochi’s Smart City project as the Dubai-based real estate giant TECOM is already alleged to be in a bad shape.Most of the Indians employed in the UAE, according to recruitment agencies, are in the real estate sector, financial services and retail.“The Middle East meltdown,” says E Balaji of Chennai-based headhunting firm Ma Foi Management Consultants, “will lead to at least 25 per cent contraction in the job market. It can have a ripple effect.”

My Comment:

I´m assuming that the job market refered to is the job market for Indians in the Middle East….

Meanwhile, the rupee has come under pressure as the Indian stock market sold off on the events in Dubai.

Rothschild Helps Dubai Put Assets On Auction Block

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From The Daily Telegraph:

“Paul Reynolds, head of Rothschild’s advisory operations in the Middle East, was this week asked to work for the Dubai government’s chief restructuring officer alongside Aidan Birkett of Deloitte, who was appointed on Wednesday.

The team is tasked with assessing the group’s assets, which is likely to result in a large scale sell-off of assets as varied as the QE2 cruise liner; Turnberry, the golf course that hosted this year’s Open Championship; and a raft of properties.”

My Comment:

This was the first I´d read about Rothschild´s involvement in Dubai, but it turns out Rothschild has been advising Dubai about the potential bankruptcy of Dubai World and its subsidiary Nakheel for a while.  The advice is in connection with the bond issue to funnel money to Nakheel through something called the FSF (Financial Support Fund), which will apply certain tests (equivalent to the US “stress” tests) to pick and choose which of Dubai World´s operations will qualify.

“Those seeking FSF cash will have to demonstrate they have a long-term plan for financial and commercial viability, not least because the cash will have to be repaid, probably within a three- to five-year time frame. …..

It is worth noting, too, that the Dubai financial sector appears to fall outside the Rothschild guideline of FSF eligibility. Although they are obviously a key part of ongoing economic development, the emirate’s banks are generally regarded as being in a comparatively healthy condition, well-capitalised and with acceptable levels of non-performing loans. But whether the Rothschild strategy would allow a big financial institution with a high real-estate exposure to qualify for FSF funding is open to debate.”

More at Global Reearch.

What´s interesting is that Dubai World´s real estate assets wouldn´t qualify, which means that a lot of expensive real estate, some of it in New York and London, is likely to be on sale for cheap, although Dubai itself is stating that it will not allow itself to be forced to sell its prize assets at what it considers unfair prices.

Now with Dubai´s own property prices already down 50-60% from their 2008 peaks (with another 20% to go), what´s a firesale in London or New York property going to do to prices already showing signs of entering the famous second dip?

The Culture of “Da Boyz”

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In a piece on Pamela Martens, the former Wall Street whistle blower,  who last year unearthed the black box of Markit, as well as the Primex dark pool, Stephen Metcalf discloses the culture of  “da boyz.”

Whistle-blower´s Grim Tale, Stephen Metcalf, The Observer, December 1, 2002

“The secret to Wall Street’s systemic chauvinism is simple: The Street is insulated against litigation and bad publicity. All employees at the major investment banks must sign a mandatory arbitration clause, effectively giving away their right to sue their employer. Claims are adjudicated in what amounts to an industry-controlled private justice system, by arbitration panels staffed overwhelmingly by white males in their 50’s and 60’s. In mandatory arbitration, no depositions are made public, and awards have ironclad gag provisions. So Wall Street can continue to smile, and smile, and be a villain. One anecdote in particular conveys the full horror of the situation. When two female Smith Barney employees complained of strikingly similar episodes involving a male co-worker, in which the man forced himself on them physically, the firm waited four years before conducting a hearing. “A week before the hearing,” Ms. Antilla writes, Smith Barney “forced the two women to undergo examinations by a psychiatrist of the brokerage firm’s choosing.” One of the women was subjected to a Gulag-quality interrogation. The grilling included “questions about her sex life, the opening of her gynecological records, and queries about her menstrual periods, her marital counseling, and her divorce. The psychiatrist even had copies of her therapy records.” The woman finally broke down when the psychiatrist asked her to recite in reverse order the names of the U.S. Presidents.”