Copenhagen shows this is China's Century

A Fascinating piece on the closed door talks in Copenhagen from the Guardian UK

Copenhagen was a disaster. That much is agreed. But the truth about what actually happened is in danger of being lost amid the spin and inevitable mutual recriminations. The truth is this: China wrecked the talks, intentionally humiliated Barack Obama, and insisted on an awful "deal" so western leaders would walk away carrying the blame. How do I know this? Because I was in the room and saw it happen.

China's strategy was simple: block the open negotiations for two weeks, and then ensure that the closed-door deal made it look as if the west had failed the world's poor once again. And sure enough, the aid agencies, civil society movements and environmental groups all took the bait.

He goes on to explain how China expertly played on the desperation of the US and other developing countries to pass legislation.

Here's what actually went on late last Friday night, as heads of state from two dozen countries met behind closed doors. Obama was at the table for several hours, sitting between Gordon Brown and the Ethiopian prime minister, Meles Zenawi. The Danish prime minister chaired, and on his right sat Ban Ki-moon, secretary-general of the UN. Probably only about 50 or 60 people, including the heads of state, were in the room. I was attached to one of the delegations, whose head of state was also present for most of the time.

What I saw was profoundly shocking. The Chinese premier, Wen Jinbao, did not deign to attend the meetings personally, instead sending a second-tier official in the country's foreign ministry to sit opposite Obama himself. The diplomatic snub was obvious and brutal, as was the practical implication: several times during the session, the world's most powerful heads of state were forced to wait around as the Chinese delegate went off to make telephone calls to his "superiors".

Their reasons are obvious:

...China's growth, and growing global political and economic dominance, is based largely on cheap coal. China knows it is becoming an uncontested superpower; indeed its newfound muscular confidence was on striking display in Copenhagen. Its coal-based economy doubles every decade, and its power increases commensurately. Its leadership will not alter this magic formula unless they absolutely have to.

Copenhagen was much worse than just another bad deal, because it illustrated a profound shift in global geopolitics. This is fast becoming China's century, yet its leadership has displayed that multilateral environmental governance is not only not a priority, but is viewed as a hindrance to the new superpower's freedom of action. I left Copenhagen more despondent than I have felt in a long time. After all the hope and all the hype, the mobilisation of thousands, a wave of optimism crashed against the rock of global power politics, fell back, and drained away.

Citi Pays Back Tarp for Billions in Tax Savings

This is pathetic

The Internal Revenue Service on Friday issued an exception to long-standing tax rules for the benefit of Citigroup and a few other companies partially owned by the government. As a result, Citigroup will be allowed to retain billions of dollars worth of tax breaks that otherwise would decline in value when the government sells its stake to private investors.

So basically the Government gave Citi a 38 billion dollar tax exemption for paying back tarp money. So all this lip flapping about making profits off tarp is complete and utter crap. I am furious as to how our government is able to get away with doing this.

From Denninger:

Obama was touting the "profits" made by Treasury on the TARP repayments. What he wasn't saying is that not only did we flush the money (from TARP) that went into Chrysler (disclosed last night), we now find out that at the same time he was "touting" the so-called "profits" The President was handing that money straight back to the bailed-out companies via tax breaks!

So no, Mr. President, Treasury (and The American People by extension) did not "make a profit" on TARP, nor "will we recover every penny" that was paid out.

There have been several banks that have failed after receiving TARP money - we will get zero from them. We will get zero from Chrysler and GM. We lost 100% of the money injected into CIT, and now you have handed out billions of tax credits to Citibank.

Where's the so-called "populism" - that is, the protection of "the little guy" while making those who were responsible for this economic mess pay for their sins Mr. President?

If you're a Democrat and believe that you were electing "Hope and Change", you might want to think about what you actually bought with your vote - not what you were sold.

Anecdote of the Day

“At a party given by a billionaire on Shelter Island, the late Kurt
Vonnegut informs his pal, the author Joseph Heller, that their host, a
hedge fund manager, had made more money in a single day than Heller had
earned from his wildly popular novel, Catch-22, over its whole history. Heller responds, ‘Yes, but I have something he will never have: Enough.’ “

Scary: North Korea Revalues Currency

From the Washington Post:

TOKYO -- Chaos reportedly erupted in North Korea on Tuesday after the government of Kim Jong Il revalued the country's currency, sharply restricting the amount of old bills that could be traded for new and wiping out personal savings.

The revaluation and exchange limits triggered panic and anger, particularly among market traders with substantial hoards of old North Korean won -- much of which has apparently become worthless, according to news agency reports from South Korea and China and from groups with contacts in North Korea.

Apparently the North Korean Government has punished those who have been saving their cash and running businesses that the government hasn't been able to control. Their solution? To devalue the currency, bankrupting these individuals.

The revaluation replaces 1,000-won notes with 10-won notes but strictly limits the amount of old currency that can be exchanged, news reports said.

According to two Web-based groups with sources in the North, that limit was set Monday at 100,000 won, which at current black-market rates amounts to $40. All North Korean currency that individuals possess in excess of that amount becomes worthless under the revaluation.

Amid widespread protests, the limit was raised to 150,000 won in cash and 300,000 won in bank savings

Here's the kicker:

the government did not explain why the revaluation had occurred.

Asset Bubbles of the past 10 years and the fed

A really fascinating chart showing Apparently easy money has just led to more and more Asset Bubbles and its looking like gold is turning into another one of them. Hopefully Bernanke isn't just blowing smoke when he makes comments like this.

“The best approach here if at all possible is to use supervisory and regulatory methods to restrain undue risk-taking and to make sure the system is resilient in case an asset price bubble bursts in the future.”

Given his comments on protecting the dollar as a store of wealth, consider me suspect.

Food Stamps up 32% Since 2007

The Number of Americans receiving food stamps has increased by 10 million over the past two years, resulting in a program that now feeds 1 in 8 Americans and nearly 1 in 4 children.




http://www.nytimes.com/interactive/2009/11/28/us/20091128-foodstamps.html

Glen Beck and the Dollar Carry Trade

Remember how a couple of days ago I was explaining how this runup in the market is nearly perfectly correlated to the decline/debasement of the USDollar? Well for those of you who want things explained as simply as possible Glen Beck does an excellent job. Love him or hate him he really got it right this time. Please Make sure to watch all 3 parts.

This is what "Made In China" really gets you

Not $20 DVD players, not cheaper toys, not cheaper clothes or steel but the kind of pollution that ruined American waterways for more than a half century and in some cases permanently. This photojournal is what you should think of the next time you pick up an item that is made in China. In some way shape or form someone is paying.






Please click over and see the rest.

Buy American or European and pay for someone increasing their quality of life instead of ruining the land they live in.

The State Of Commercial Real Estate

Hey citizens of Pontiac you know that $55.7 Million we took from you?

Pontiac -- Nearly 35 years after taxpayers spent $55.7 million building the Pontiac Silverdome and a year after a $20 million sale fell through, city officials have sold the arena once called the most desirable property in Oakland County.

The price: $583,000.

Niiiice.

99% depreciation over 35 years, plus of course all the money poured into property taxes and maintenance.

"The citizens of Pontiac deserve better," Seay said. "This is pennies on the dollar (of what it cost). It goes to show how bad times are ... Worse, we don't even know who bought it."

This sale is emblematic of the general state of Commercial Real Estate. Bluntly, too many people built too much crap on wishes and dreams - dreams they financed with other people's money, either the taxpayer's (in this case) or with some poor fool who believed the prospectus on some CMBS deal that screamed "PRIME Commercial Space!"

Well, perhaps. But there are only so many business interests that can inhabit a given area and turn a profit, especially when you send all the good jobs overseas to CHINA and INDIA, rendering unemployed the middle-class call-center employee who used to make $30,000 a year but now makes zero while the Indian or Chinese employee makes $2/day.

Worse, all real estate (that has buildings on it anyway) has a carrying cost, meaning that if you don't have a revenue-producing use for it the value is actually negative. In the case of the Silverdome basic maintenance on the building and grounds is about $1.5 million a year. If you can't make enough to cover those costs, "ownership" just bleeds you out.

Welcome to the "new normal."

If this doesn't send a shiver up your spine on the "quality" of regional banks that are stuffed to the gills with commercial real estate loans made in the last few years, you're not paying attention.

Don't worry, you soon will be, as nearly all of these deals are interest-only and have to roll over between now and 2013.

They can't and won't.

Rail Traffic - A very bullish sign?

The most interesting weekly statistic last week was rail traffic, which held steady. Why is that interesting? Because by now rail traffic should be well into its seasonal decline (last year the decline was a "cliff dive"), but traffic has generally held steady at September-early October's levels or even improved, as shown on this graph:



This is a bullish sign for the economy if this keeps up.

Market Trivia

Since first closing above 10,000 (March 29, 1999), how many times, on a closing basis, has the Dow Jones Industrial Average traversed that level?


Answer: 29 Times (Highlight over the blank area to get your answer)

Barrons: US Government = Worlds Worst trader

From Barrons

THERE ARE SOME LISTS YOU WANT TO SEE your name on, and others you'd rather not. It would be nice to make the Forbes 400, for instance, but not so great to be mentioned in the obituaries.

When listing the worst traders of all time, many of you would include some sports teams that made infamous deals. In football, the Atlanta Falcons traded Brett Favre to the Green Bay Packers. In baseball, you can debate whether the Chicago Cubs trading Lou Brock to the St. Louis Cardinals for Ernie Broglio was worse than the Philadelphia Phillies trading Ryne Sandberg and Larry Bowa to the Cubs for Ivan DeJesus. As bad as those swaps were, there is one that's far worse.


To paraphrase my friend Mark Fisher, founder of MBF Clearing and one of the biggest energy trader/brokers in the world, the federal government let the trade of the century slip through its fingers at the depths of the financial crisis. Worse, Warren Buffett had already drawn up the perfect blueprint, in steps so easy even a Treasury secretary could follow. Doesn't that make the government a candidate for worst trader of all time?

Long before his acquisition of the Burlington Northern Santa Fe (ticker: BNI) railroad, the Oracle of Omaha agreed, on Sept. 23, 2008, to invest $5 billion in Goldman Sachs (GS) through a purchase of perpetual preferred stock. The shrewd chairman and CEO of Berkshire Hathaway also got warrants to buy up to $5 billion of Goldman common shares at $115 each, some 8% below where the stock was trading at the time.

In a single bold stroke, when Goldman and the global markets needed it most, Buffett put his money and reputation on the line. He stood to own roughly 10% of the bank, and his convertible shares also pay a fat 10% dividend.

Yet even with this trade serving as a very public model, what did then-Treasury Secretary Hank Paulson ask for? When the Wall Street giants had their backs to the wall, he gave them billions of our taxpayer dollars for a relative pittance. In mid-October 2008, Goldman and Morgan Stanley (MS) each got $10 billion from the Treasury; Bank of America (BAC), Citigroup (C), JPMorgan Chase (JPM) and Wells Fargo (WFC) each got $25 billion.

Fast-forward to Oct. 21 of this year, and now Paulson's successor at Treasury, Timothy Geithner, is telling us what a great investment the government made in Goldman. His office touts the 23% return on our $5 billion in taxpayer money. Let's compare that with what we might have gotten with terms similar to Buffett's.

Goldman was trading at $115, so a $5 billion stake bought the taxpayers 43 million shares. With the stock subsequently running up to $180, that $5 billion stake would be worth $7.8 billion, a gain of $2.8 billion. But wait, it gets better -- or worse, depending on your view. Given the added kicker of warrants on another $5 billion, 8% under the market, we'd also own warrants for 43 million shares at $105. So we'd have made another $3.2 billion.

Thus, the total gain before dividends would be $6 billion on a $5 billion investment. Last time I checked, that's 120% on our money, versus the 23% that Hank got us. I didn't go to Dartmouth, as Secretaries Paulson and Geithner did, but I think Buffett got the better deal.