Barclays - it's Double your money time Folks!

Lord Patel invested last Monday in Barclays at 82 p and sold out on Wednesday am @ 118p.

As we speak the shares are trading at 162.9 (and rising) with 107 MN shares changing hands.

That means those who got in at the right time and hung on have doubled their money in 2 weeks. This rise is attributed to the news that Barclays is set to receive bids for iShares, its exchange traded funds business, over this weekend, and will agree a deal by Monday, in a move that could further appease its shareholders, who were today reassured by the financial regulator about the UK bank's capital position.

So no question of any insider trading going on there then as the shares rose strongly ahead of the announcement today about iShares.

Having missed the extra profit on Barclays the shares Lord Patel bought in Lloyds have risen from 57p on Tuesday. They have traded as high as 78 today and setled down at about 73p (up 28%).

Peter Mandelson makes some slippery remarks about US biofuel boondoggle - fist fight in sight ?

In September Lord Patel detailed how a subsidy for US farmers was actually resulting im heavily subsidised biofuels reaching Europe and destroying the domestic EU market -Boondoggling biodiesel - How Uncle Sam subsidises the EU motorist

A shipload of biodiesel derived 100% from palm oil arrives at a Texan or Georgia port, Houston or Savannah - ho;ding say 9 million gallons . At the dock they add , 9,000 gallons (0.1% of the total) of traditional diesel (1 US gallon =3.8litres). This is the "splash and dash" and it is transformed into B99 biofuel blend. Hey presto! The entire load is eligible for the Federal US blenders tax credit.

The US importer of the load applies to the Internal Revenue Service for the credit – a dollar for each of the 9 million biodiesel gallons (approx Euros 20 cents per litre approx 11p) and then the ship hightails it for Rotterdam.

Result is - happy motorists, US taxpayers out millions of tax dollars and the EU biofuel manufacturers stuffed.

The EU complained officially in March 2007 and today Peter Mandelson, the European Trade Commissioner(see pic), has said he "may" investigate....er.. real soon now of dumping in the European biofuels market.

The European Biodiesel Board (EBB) claim that the subsidies have had a perverse effect, sending European imports of biodiesel from the United States soaring from about 100,000 tonnes in 2006 to an expected one million tonnes this year. In most cases B99 blends are sold in the European market as “pure biodiesel” with a tasty discount of up to €180 (£129) a tonne andoften lower than the cost of raw materials in Europe.

“We will certainly examine carefully any case put forward by the EBB,” says Mr Mandeson ..which doesn't leave you with the impression that anyone is breaking much sweat over this boondoggle.

Elliott Mannis, CEO of D1 Oils, one of Britain’s biggest biofuel producers, claims the EU industry is operating at only 10% capacity, mothballed refineries and companies facing administration.

“There is just no way that European manufacturers can compete,” . One British company, Biofuels plc, has cited American subsidies as a key reason for delisting from AIM in July, owing Barclays about £90 million and the shareholders losing all their money (all within 2 years). See Saturday, July 14, 2007 Biofuels plc - all that is green is not golden
Biopetrol biodiesel and glycerine production sales / profits soar about Biopetrol Industries the Swiss based biofuel processor.

Just another example of the Laws of Unintended Consequences when lawmakers decide to use the tax system as more than a source of revenue but want to influence commercial behaviour.

Don't expect any action from Mr Mandelson for a very long time.

How the Watchdogs weren't watching Northern Wreck

Prem Sikka's penetrating analysis of the "Toothless Watchdogs", that haven't barked in the sub prime crisis (Comment is Free and excellent reading ) .....this pithy comment by Whitt says it all

Comment No. 958271 November 29 18:38

"Markets are inherently risky, and no amount of regulation will stop that, unless you remove the prospect of a return on investment, and so defeat the purpose of investment." - Xiangfa*The problem is not that markets are risky. The problem is that the agencies responsible for assessing risks and rating them were telling people that sow's ears were silk purses. It's pretty much the same as meat inspectors coming across three-day-old road kill and then stamping it "Grade A Prime". You can in fact regulate against that.

Volkswagen Affair - Prostitutes Perks and Politicians .... final court cases ...

Klaus Volkert, now 65, was the head of Volkswagen's works council (the state of Lower Saxony is their largest shareholder - with an 18% interest voting rights giving decisive power in decision-making) and was once Germany's most powerful labor representative for the IG Metall union.

His trial resumes on Monday on 48 counts of incitement to embezzlement by receiving €2.5 million in illegal payments from VW for himself and his 7 year relationship with his Brazilian girlfriend , Adriana Barros, (now 43 - see pic) details of which unravelled after his resignation on 30th June 2005.The 81-page indictment took more than two hours to read out at the start of the trial.

Stern claims to have seen e-mail traffic between Mr Volkert and his 43-year-old Brazilian mistress, who was paid more than €23,000 (£16,000) a quarter by Volkswagen for “inter-cultural projects”. One exchange of e-mails has Ms Barros appealing: “I Have Too Much Problems About Money”. Mr Volkert replies (on June 27, 2005): “This is the last you will hear from me, I am ending my job.” He reminds her that she should say she was involved in children’s projects.

It is alleged that Klaus-Joachim Gebauer, a former personnel executiveco-ordinated the payments to Volkert. He faces breach of trust charges "Breach of trust" is too mild a translation of the German "Untreue" which - in its basic meaning - means disloyalty but, in this usage, is the word used for the crime of "corruption".

Gebaur could receive a five-year prison sentence if found guilty.Gebauer, accused of organizing company-paid holidays including prostitutes for works council officials on instructions from Peter Hartz (his boss), has admitted most of the charges against him -- it appears he managed to spend €780,000 within two years without ever having turned in any receipts ... other than a piece of paperon which he would write something to the effect of: "€6,880 spent, in the interest of the company, for the Group Works Council."

Peter Hartz (sometime advisor to Gerhard Schroeder) in the city of Braunschweig this January - he had worked at VW for 50 years pleaded guilty when charged with faces 44 charges of breach of trust involving making secret payments to Volkert between 1995 and 2004 to smooth labor relations and to ensure the works council accepted VW's restructuring plans. Hartz' lawyer, Egon Mueller said that no-one else on the VW board knew of Mr Hartz's payments. Hartz received a two-year suspended sentence and a fine of €576,000.(BBC) (Prosecutors have dropped a separate charge that he had used company funds to pay for prostitutes during business trips.)

German scandal mag Bunte published allegations by the wife of Helmuth Schuster, the former director of Volkswagen's Czech subsidiary, Skoda, who was sacked without explanation or notice . His wife, "Ilona R.," alleges that Viagra and other aphrodisiacs were handed out to supervisory board members during their pleasure trips -- and VW was footing the tab for it. They both enjoyed an opulent and extravagant lifestyle in Prague and his Lamborghini resulted in a popular nickname of "Lambo Schuster."

Herr Schuster however had a range of interesting front companies engaged in odd financial transactions ...An Indian company, Vahishta Wahan,(Although the company has the same initials as VW, it is not part of the VW Group. ) played a role in Schuster's planned business in the country. Whilst negotiating construction of a VW plant in India, Schuster allegedly used VW letterhead to submit a request to Botcha Satyanarayana Rao, the minister of industry of the Indian province of Andhra Pradesh, for €5 million in start-up money. The minister responded to Schuster's request by transferring €2 million to an account held by Vahishta Wahan. Once the money was received in Vahishta Wahan's account, it was promptly transferred to another account -- and ...er....has since disappeared.

In Angola, Schuster had also begun a promising project in 2005 . Through a Washington-based firm called Ancar Worldwide Investment Holding, he started a project that was to have assembled VW and Skoda cars in Luanda at affordable prices.The holding company had 51% Ancar Angola. The remaining 49 percent went to Angolan investors, including Tchize dos Santos, a daughter of President Eduardo dos Santos, and VW importer Antonio "Mosquito" M'bakassi. ..... no much seems to have happened since.

Now there is much more torrid speculation because former CEO Ferdinand Piëch, who now heads the supervisory board of VW is is due to give evidence on January and denies any role in the affair.Radio station NDR reported that the former chief financial officer of VW, Bruno Adelt, and the current head of VW's luxury car subsidiary, Rupert Stadler, are to testify as witnesses during the trial of Volkert and Gebauer. Stadler ran Piëch's office from 1997 until 2002 while Piëch was CEO of VW.

Naturally Politicians were in line when the trough was being filled and Ingolf Viereck and Hans-Hermann Wendhausen, prominent Social Democrats sitting in the Lower Saxony state legislature, pocketed salaries from both the government and Volkswagen. The practice was anything but unusual at Volkswagen, where members of the state and federal parliaments regularly appeared on the payroll. But when news of it leaked out, Viereck and Wendhausen promptly terminated their VW contracts and stopped receiving VW salaries. (VW were also paying 6 other legilsators at the time)

Jürgen Gansäuer, president of the Lower Saxony Parliament, has said Wendhausen and Viereck must pay back €766,474, they received from Volkswagen while serving in Parliament over 10 years.

Lower Saxony filed a lawsuit May 31 2005 with the administrative court in Braunschweig, Germany, to force the two to repay the money plus interest. This was upheld on 16 November 2005 and he appealed - HHW he will not stand in the elections in Spring 2008.

As Volkert faces the court again his defence team argues that he is innocent of breach of trust. Since Volkswagen paid these sums to Mr Volkert, he cannot be said to have damaged the company. The slush fund was approved by the top management. It was an accepted instrument of labour policy.

Mr Volkert may well go free (and keep his mouth shut) ... to the relief of some very senior VW management and ...er .... some politicians.

PS : One person who remains to be charged in relation to the VW case is former teacher Hans-Juergen Uhl - now an MP for the centre-left Social Democrats.

A former member of VW's works council, he has been charged with two counts of being an accessory to breach of trust, and five counts of making false statements while under oath.

Although federal lawmakers voted to lift his parliamentary immunity in November 2006 so he can be prosecuted, he currently remains in parliament and has denied any wrongdoing.

Just as a background ..Hans-Juergen Uhl As a former Volkswagen Works Council member, is accused of consorting with prostitutes paid for by VW in Barcelona and Seoul. According to the investigation, Uhl is said to have participated in at least 10 sex parties, including on journeys to Mexico, Shanghai, Pamplona and several times in Hanover. A further eight charges are barred by the statute of limitations.

According to statements by Klaus Joachim Gebauer, who was responsible for the payments that funded the Works Council members pleasure trips, Uhl not only received regular payment for prostitutes he used personally, Uhl and he had also undertaken “scouting trips” to Barcelona and Budapest to seek out the best places to find prostitutes.

For the Volkswagen Works Council “everything had to be right, and everything had to be the best,” Gebauer said in his statement.

Moreover, Uhl, according to the indictment, had given five depositions in which he said he had never used prostitutes at the firm’s cost. The district attorney had 21 witnesses, beside Gebauer and other Volkswagen employees there are also several prostitutes. Files full of evidence with extensive statements and reports from the red light milieu have been presented to the court, while Uhl continued to deny all charges.

Finally on 4th June he resigned from his seat and the SPD and on the 14th June pleaded guilty and sentenced to 280 days.

Here is a nice picture from the Daily Mail of Ms. Adriana Barros.

Northern Rock -the sharks get bitten on the bum, but others join in for the kill...?

Philip Richards, is CEO of Hedge Fund manipulators RAB Capital. Philip Richards is "is one of the City’s most successful fund managers" (Bloomberg).

RAB Capital bought 6.66% of Northern Rock In September at 275 per share.They also bought some more to raise their stake to 7.1% on October 1st at 195p.

With the current share price at 82p each (ish) Mr Philips has lost his investors so far approx £40 Mn. (Lord Patel has fit of schadenfruede)

Jon Wood, the former UBS trader is CEO of SRM Global Master Fund a Monaco based hedge fund also bought 6.44% (27,131,125 shares) of Northern Rock on 21st November at 85p per share.

With their joint holding, they are threatening to make life difficult for Northern Rock, The Treasury, the FSA and the BOE - they could force an EGM (as owners of 10% of the company)....much goo it may do them.

It would be nice if they were told to fuck off - no such luck, as every day passes the prospect of the taxpayers £25 Bn (and rising) investment into the North East housing market being liquidated recedes....

Meanwhile the ECB is said to be ready to flood Europe with funds this coming week....

Wall Street Journal today ;

" Euro-zone banks are hoarding cash in moves reminiscent of August, pushing up short-term borrowing rates and prompting the European Central Bank to say on Friday it will pump extra funds into markets next week and through the beginning of next year, if necessary." (1st time since September 6th)

".... three-month U.S. dollar London interbank offered rate, or Libor, is also rising. It was quoted Friday at 5.04%, compared with 4.98% on Monday."

The only rational solution is for the BOE to assume control over NR (by legislation if necessary), neither the Gubment or the BOE can allow blackmail or sale with no or little prospect of recovery of the loans made.

Only be nationalisation and run-off / sale of the loans can they be assured of recovering some of our money. King should demand this or resign ... failing that he should be strung up outside Threadneedle Street as a warning against talking about "moral hazard" and not having the balls to really stand up and be counted.

Meanwhile Lord Patel draws your attention to his post on August 13th Lombard Street. Walter Bagehot 1873 before all this was made public and just a week after the NR Board and the BOE were talking secretly about loans of £30Bn.... 2 weeks after the Board had declared a divided rise of 33% on the basis of increased profits of 1%.

Bagehot wrote ...

"...[a very high interest rate] will operate as a heavy fine on unreasonable timidity, and will prevent the greatest number of applications by persons who don't require it. The rate should be raised early in the panic, so that the fine may be paid early; that no one may borrow out of idle precaution without paying well for it; that the banking reserve may be protected as far as possible."

Too little and too fucking late and now we all pay the fucking price of their "timidity".

Socialist Republic of Vietnam sees manufacturing investment from US and Taiwan soar as economy expands by 8% p.a.

Wilbur Ross and his WL Ross & Co. made US$380 Mn. in an afternoon selling their interest in International Steel group - and had a brief (and unsuccesful foray) foray through his International Coal Group in UK Coal plc announced a major investment in Communist Vietnam (More correctly Cộng hòa Xã hội Chủ nghĩa Việt Nam - Socialist Republic of Vietnam) on June 19th 2007.Vietnam was accepted into the WTO on November 7, 2006 just before a historic visit by George Bush (President of the United States)for the 14th APEC summit in November 2006 - that's him with President Nguyen Minh Triet and Uncle Ho looking over his shoulder - George was defending Texas at the time the US were exporting democracy to Saigon.

With Ho Chi Minh City based Phong Phu Corporation, a major cotton textile and clothing manufacturer , Ross's International Textile Group is investing heavily in a joint venture and developing a joint strategic investment footprint in Vietnam.Vietnam is the third-largest oil producer in Southeast Asia with output of 400,000 barrels per day - and the second largest rice exporter in the world after Thailand.

ITG’s Burlington WorldWide division and Phong Phu have been partners since June last year in a previously announced an $80 million cotton fabric and clothing manufacturing complex under construction in Da Nang, Vietnam, (Tourane province under the French) the site if the USAF's largest base in the Vitenam war. The Burlington Co pants manufacturing operation will commence employing up to 500 operatives from the end of October . Expat website

Now they have signed a Memoranda of Understanding with President Nguyễn Minh Triết, to discuss any potential privatization advisory" that WL Ross "with its proven investment expertise, can provide." This also commits them to explore various real estate related joint ventures and the other looks to a potential WL Ross strategic investment in the currently state-owned Phong Phu "as the latter privatizes through an initial public offering."

Wilbur L. Ross, Jr., WL Ross & Co.’s founder and chairman said "Vietnam is among the most rapidly growing countries in the world and we are delighted to have the opportunity to commit additional capital to support that growth. We are especially eager to broaden and deepen our relationship with Phong Phu and are committed to help that management to change from being a State Owned Enterprise to becoming a privatized business. "WL Ross and Phong Phu are parties to two of the three agreements signed here today.

One commits them to explore various real estate related joint ventures and the other looks to a potential WL Ross strategic investment in the currently state-owned Phong Phu "as the latter privatizes through an initial public offering."

In addition, the two will discuss "any potential privatization advisory" that WL Ross "with its proven investment expertise, can provide."

Phong Phu Textile Co. is currently a state-owned company with over 5,000 employees. They have another joint venture, Coats Phong Phu., Ltd. (CPP) between Coats Holdings Ltd. and Phong Phu Textile Company (Vietnam). It was established on July 25th, 1989. The total capital investment is US$14.6 million that is contributed 75% and 25% respectively by the foreign and Vietnamese partners.

CPP has 2 factories located in Ho Chi Minh city and Hanoi and 1 representative office in Danang. CPP is currently the leading thread supplier in Vietnam with nearly half of the total market share and approximately 800 customers.

Taiwanese companies expand in Vietnam in preference to China as incentives are offered

Taiwan’s Hon Hai, the world’s largest (and fastest growing) electronics parts maker, and Compal, the second-biggest contract laptop manufacturer,recently announced a combined $5.5 billion in investments in production facilities in Vietnam.

China has scrapped value-added tax rebates on certain export lines and introduced measures to discourage low-end export-processing trade - the practice of assembling imported components into finished goods for re-export.

Seizing the opportunity Vietnam is offering (very) generous tax breaks and rent-free land to selected foreign investors.

Thailand and Cambodia are trying to muscle in on the act, seeking to divert some of the money that might previously have flowed to China, before the authorities began to get worried by signs the economy was overheating.

Taiwan is now the third-largest foreign investor in Vietnam, with cumulative investment of US$9.1 billion through July, according to Vietnamese Government information.

Taiwan government data showed that investments it approved in Thailand more than tripled in the first half of the year, compared with just a 2.5 % gain for China.

Hon Hai plans are to to boost investments to $5 billion in the next 2/3 years as the Vietnamese economy has expanded more than 8% a year over the past few years.

Tax incentives are also key: one Hon Hai unit managed to get a four-year corporate tax waiver and a 50 % tax waiver for nine years after that for a planned investment in Vietnam’s Bac Giang province, according to the Vietnamese government.

Notebook PC maker Compal Electronics has also been given huge incentives to build its planned US$500 million plant in Vietnam, including a 10-year corporate tax exemption and rent-free land in exchange for using locally made parts.

Pic is the Krait Snake relatively common in Vietnam . This striking black and white banded snake is nocturnal and one of the most dangerous snakes in Asia, and bites without hissing. In addition to this, the bite which injects a powerful nuerotoxin not unlike the cobra's ,is virtually painless, but often fatal, especially if ignored. Deaths from this snake are probably under reported, since most occur at night and unattended.

"Vietnam is a remarkable country. For decades you had been torn apart by war. Today the Vietnamese people are at peace and seeing the benefits of reform. The Vietnamese own their own businesses, and today the Vietnamese economy is the fastest growing in Southeast Asia. Vietnamese students have great opportunities here at home and broad. The Vietnamese people are traveling around the world and sharing this ancient culture with peoples of the world. And the United States, as well as other APEC partners, look forward to strengthening our ties."

President George W. Bush November 17, 2006

See a previous post about Vietnamese investment here.

FSA will suspend dealing in Northern Rock shares before trading starts Monday

UPDATE 8.30 Monday 17th - this is both crazy and criminal - Darling was on "Today" program cool as a cucumber - we are monitoring the situation..... the following was a the sceanario which could have recovered the situtation. The situation will be resolved but NOT recovered.

The shareholders are totally fucked and those with term depsotits face a very uncertain future - it is entirely possible that the contagion will spread today to A&L, B&B, and Barclays.

9 o'clock - Probably judging by the laid back if not comatose Adam Applegarth the Directors haven't arrived at the office yet. They should immediately declare themsleves insolvent and the FSA suspend the share price.

Then flog the lot off. Evidently it is so poisonous as the majors have turned their nose up - and one feels they would do so at any price. Too many of those 125% loans on 6 times salary etc.,

-------------
Followed by Directors calling in Administrators at mid-day.

BOE will pick up (ie taxpayer) costs of this total fuck up as NR is dismembered and flogged off.

Then the hunt will be on for the next stock to short ... B&B, A&L, Paragon ? and dare we suggest Barclays ?

If Mervyn WanKing hadn't organised it so well most observers would have thought such an epic fuck up was not possible.

Community Support officers will be out in force beating off the Grey Panthers.

Perhaps the role of Sir John Geive (ex Home Office supremo in the great reign of the none eyed King and goat)as 2IC to WanKIng will bear a little more examination in this matter before al the dust settles.

The FSA, Insolvency, Shadow Directors, and how the Bank of England fucked up BIG style over Northern Rock - Tip to get to head of Queue on Monday

On Friday morning a Statement was issued by the Financial Services Authority and posted on their website Friday 15th September - note the date of issue ....

Liquidity support facility for Northern Rock Plc Tripartite Authorities Statement 14 September 2007
The FSA judges that Northern Rock is solvent, exceeds its regulatory capital requirement and has a good quality loan book.

This was followed later in the day by a further statement as the queues built up during Friday

FSA statement on Northern Rock PLC and market conditions
14 September 2007

Commenting on the statement made by the tripartite authorities this morning in relation to Northern Rock, the chairman of the FSA, Callum McCarthy, said:

"The FSA's judgement on Northern Rock is that we believe it is solvent, meets all capital requirements and has a good quality loan book.

This was followed by (note date change)

FSA Statement: Northern Rock
15 September 2007

The FSA reiterates that it judges Northern Rock to be solvent and that savers can continue to deposit (!) and withdraw funds.

Callum McCarthy, chairman of the FSA, said:

"To be absolutely clear, if we believed that Northern Rock was not solvent, we would not have allowed it to remain open for business.

The FSA could NOT close the company's business , the most it could do is to suspend the share quote until the companies affairs were put in order pending a re-quote or sale to third party(ies).

There are two tests of solvency ;

1. Inability to pay debts as they become due.
2. Insufficient assets to cover liabilities.

Northern Rock borrows money wholesale and lends it to people to buy houses. Due to the interbank rate (LIBOR) now exceeding Base Rate by over 1 % their sums don't add up. Loans are due for repayment and cannot be replaced = without recuorse to the BOE. Can they pay their debts as they become due ? - NO . Then they are insolvent.

In UK law, the people who decide that a company is solvent / insolvent are the Directors. When they judge themselves insolvent they are obliged by Company Law, to undertake certain legally prescribed steps, which effectively places control of the company out of their hands - into those of receivers, administrators.

If the BOE hadn't stumped up, the Directors would have had to file for Administrators to be called in. Period.

If the BOE hadn't stumped up, the Directors could not continue in business as they had lost their ability (and confidence of lenders) to raise capital to continue to fund their loans. Period.

That is the simple, clear, transparent unvarnished TRUTH.

It is not the duty of the FSA to determine solvency / insolvency, they do not have the time, staff, expertise, legal / statutory responsibity. Their only source of information is the Directors the Company.

Furthermore that was then , this is now. Withdrawals , by person , post or by the badly functioning website will have reduced their asset base - with little prospect that the situtation will only worsen as time passes.

Regardless of the funds provided by the BOE which simply increases their liabilities - and it is likely (the terms of their funds have not been published) are payable on demand and have no term agreed.

Furthermore it is inscreasngly evidence that these funds held by NR ...

"As announced on 20 August 2007, Northern Rock only has a £75 million direct exposure to the US sub-prime market which is all rated AAA, and a £200 million
exposure to the US CDO market, within which there is indirect exposure to US sub-prime.

We also have £325 million of investments in a number of Structured Investment Vehicles (SIVs)of which £305 million is bank sponsored. Included in the £200 million of CDOs referred to above is a modest exposure of £22 million of SIV "Lites

... are a Northern CRrock of shite and at best can be priced at 10 cents on the, dollar wiping out any profits for this Financial Year.

There is evidently little room for cutting capital / labour costs as they have to simply manage 20% of the mortgages in the UK and operate on the narrowest of margins at the best of times.

The Sunday blats claim that major banks have turned up their noses at a take over, they can simply pick up any business as it falls.

The FSA have 4 Statutory objectives two of which are ;

1 . Market confidence: maintaining confidence in the financial system; public awareness: promoting public understanding of the financial system;
2. Consumer protection: securing the appropriate degree of protection for consumers;

It is evident that the FSA have made claims which are patently dishonest - they have claimed Northern Rock is solvent (although these statement have become less emphatic and more convoluted "if we believed that Northern Rock was not solvent, we would not have allowed it to remain open for business. " .. presumably as they now realise their folly of overstatement.).

It is not their job to either determine insolvency or to give comfort to Directors, or to make public statements to that effect.

It is significant that the Board have not made a public statement that they are trading whilst solvent / insolvent.

Even Angela Knight, chief executive of the British Bankers' Association trod carefully and chose her words well (and advisedly) ..."This isn't about solvency, this is about a short-term problem that the Northern Rock has in getting liquidity _ that is, getting some cash from the normal interbank lending market."

The Tri-partite Authority couldn't have fucked this up more royally - Tommorrow the queues will be bigger, the dumb ox of a CEO, Adam Applegarth will vaguely blame those damn yanqis and claim "Business as normal" and Westminster's headless chickens with no or little understanding (or experience - except Vince Cable of the Lib Dems who talks 100% common sense) of banking or business will alternately wring their hands and cry Woe! Woe ! Sharp mortgage holders will take a holiday for payments, safe that they can withold payments whilst the ordure hits the airconditioning and pay up as and when requested - icreasing liquidity problems.

There is a very good case for claiming that the FSA have acted as Shadow Directors and falsely made statements - knowing them to be false, that have encouraged or instructed the Directors to continue trading whilst insolvent. Director's responsibility is to the company and not to the shareholders. Directors have an obligation to act in the company's best interests.

By acting as they did the FSA have acted against the interests of the company. If the company had filed for Administration as required under the Companies Act the disposal of assets would have been orderly and at a cost that truly reflected the value of those assets.

Their action - even if it was sanctioned / approved / made jointly by the MOU , the BOE , The Treasury , the Chancellor of the Exchequer and Prime Minister was illegal.

Nowthe BOE have to find a buyer, the big banks have turned up their noses , the truffle hounds from the vulture funds will be sniffing the air - the same people who have gobbled up the closed pension funds. The FSA can explain how this result squares with their objective of ..."Market confidence: maintaining confidence in the financial system".

How to get to the head of the queue in the morning.

Dress like the lady in the picture. Service will be guaranteed

US debt limit has risen 70% under Dubya

The US Congress through the The Senate Finance Committee ( Chairman Max Baucus,DEM Montana) must approve any increase in borrowing powers of the US Government.

On Wednesday they approved an US $850 billion increase to US$9.815 trillion lest the Government default as its current borrowing limit of $8.965 trillion (agreed March 20thth 2006) is reached. (Federal debt Friday was US8.929 Tr.)

The committee approved the bill on a voice vote and the full Senate will approve by early October (they have no fucking choice having voted for the 'o8 Budget spending bonanza). Treasury Secretary Henry Paulson has been urging Congress to act quickly to avoid unnerving financial markets that are already jittery over rising mortgage foreclosures.

At current rates of pissing the taxpayers money into the Iraqi sand, on Osprey, B2, bridges to nowhere etc., that will give Bush and his spendthrifts the ability to continue borrowing into 2009, well after next year’s presidential and congressional elections.

This will be the 5th increase in the U.S. borrowing limit during Dubya's Presidency when U.S. borrowing limits stood at US$5.6 trillion and will shortly have risen by 70%.

Meanwhile the US$ has slumped to it's lowest ever against the Euro and the Oil price is bumping up against US$80 a barrel.

Northern Rock - the rewards of reckless lending

UPDATE 1900 hrs The Northern Rock and Alliance & Leics. websites for customers have been down since late last night so customers cannot log onto their accounts.

Listening / watching the media response to the BOE decision to fund Northern Rock we repeat ;

There are two tests of solvency ;

1. Inability to pay debts as they become due.
2. Insufficient assets to cover liabilities.

Northern Rock borrows money wholesale and lends it to people to buy houses. Due to the interbank rate now exceeding Base Rate by over 1 % their sums don't add up. Loans are due for repayment and cannot be replaced. They are insolvent.

In UK law, the people who decide that a company is solvent / insolvent are the Directors. When they judge themselves insolvent they are obliged by Company Law, to undertake certain legally prescribed steps, which effectively places control of the company out of their hands - into those of receivers, administrators.

The Money jugglers of the City have shrewdly put (switched) the onus for judging insolvency upon the FSA - who are hopelessly ill -equipped to make such judgements - and of course rely totally upon the information the Directors provide them with.

If the BOE hadn't stumped up, the Directors would have had to file for Administrators to be called in. Period.

If the BOE hadn't stumped up, the Directors could not continue in business as they had lost their ability (and confidence of lenders) to raise capital to continue to fund their loans. Period.

That is the simple, clear, transparent unvarnished TRUTH.

On Tuesday Governor King was waffling on about "penal rates" and days later lends these reckless Directors at below LIBOR.

Yesterday Darling was waffling on about "old Fashioned Banking" and then accedes to propping up this train wreck.

Why ?

Because the wonderful , sparkling, carefully crafted City mountain of debt, the product of 10 years of Gordy's alleged Prudence, is crashing out of control, the Bank of England is out of control.

Take note that the latest tranche of £4.4 billion relief fund issued by the BOE on Tuesday was drained by the major banks in minutes -
Abbey and Halifax have increased Tracker mortgage rates by 0.1% - 0.2 %... and there is more to come.

Take note, this didn't happen over night, the warning signs have been there for years. Trade deficits have built up, Fiscal deficits have built up and been concealed / camouflaged by PFI / PPP etc., Revenue have declined by theft, loss of North Sea oil and gas and sheer incompetence.

UPDATE 1600 Hrs

So you ask ,how come they say they are on track to make a profit - well look back to the statement last night from the Directors of NR remember - Profit calculation " excludes any provisions that may have to be taken through the profit and loss account in respect of today's crisis".;

"As announced on 20 August 2007, Northern Rock only has a £75 million direct exposure to the US sub-prime market which is all rated AAA, and a £200 million exposure to the US CDO market, within which there is indirect exposure to US sub-prime.

We also have £325 million of investments in a number of Structured Investment Vehicles (SIVs)of which £305 million is bank sponsored. Included in the £200 million of CDOs referred to above is a modest exposure of £22 million of SIV "Lites

Now that is a total £555 Mn of assets they call " a direct exposure of £75Mn" - Note well they don't say they are worth £75 Mn. They are in fact worthless - and maybe that £555 Mn. worth of assets is worth at best 10 cents on the dollar so your £500 Mn. profits evaporates as a £500 Mn hole opens up in the balance sheet.

As is the share price now below the Float price of £4.52 in Oct 1997)

Egg on Face time ...
10th August 2007 note to Investors..."Investors in the banking sector should look to Northern Rock and HBOS for both value and growth, according to specialist broker Keefe, Bruyette & Woods."

To read a little history of the wankers at Threadneedle Street go here

Bank of England is out of control...

... in the sense that the BOE is not IN control.

Mervyn King, the Governer of the BOE wrote to the Chairman of the House of Commons Treasury Committee , T.Hon. John McFall MP in advance of his meeting them with the Monetary Policy Committee (MPC) members on the 20th September .

Three distinct policy instruments can be deployed by central banks: interest rates, money market operations, and other general liquidity support operations.

1. The fiddling with interest rates is mostly a form of delusional self importance exercised by the MPC and is a one trick pony with which they try to adjust the wholly spurious way UK Domestic inflation is calculated.

2. Money market operations are described by King thus ..

" ...the smooth functioning of the payment system among banks – the short-term money markets and what is known as the high value payment system. Central banks discharge that responsibility by providing reserves that enable banks to settle among themselves. In the reform of our money market operations a year ago, we made very clear, and this is a unique feature of the British system, that the banking system as a whole will get the reserves that it itself requests."

In other words they merely act as managers, responding as required to market con ditions.

3. So King ponders ....

" So, third, is there a case for the provision of additional central bank liquidity against a wider range of collateral and over longer periods in order to reduce market interest rates at longer maturities?"

"On the one hand, (my father was always asking for one handed accountants and economists) the provision of greater short-term liquidity against illiquid collateral might ease the process of taking the assets of vehicles back onto bank balance sheets and so reduce term market interest rates. But, on the other hand, the provision of such liquidity support undermines the efficient pricing of risk by providing ex post insurance for risky behaviour. That encourages excessive risk-taking, and sows the seeds of a future financial crisis."

There has however been a lengthy history of excessive risk taking which the BOE have sat and watched develop.. CDO's , slicing and dicing, and all manner of asset backed but assetless parcels of debt swapped around on shorter and ashirter terms to finance deeper and riskier debt with near banks and veru distant banks such as hedge funds and outright fraudsters.

Now the crunch has arrived ... as he outlines on Page 9 ...

In addition, central banks, in their traditional lender of last resort (LOLR) role, can lend “against good collateral at a penalty rate” to an individual bank facing temporary liquidity problems, but that is otherwise regarded as solvent. The rationale would be that the failure of such a bank would lead to serious economic damage, including to the customers of the bank. The moral hazard of an increase in risk-taking resulting from the provision of LOLR lending is reduced by making liquidity available only at a penalty rate. Such operations in this country are covered by the tripartite arrangements set out in the MOU between the Treasury, Financial Services Authority and the Bank of England.

Because they are made to individual institutions, they are flexible with respect to type of collateral and term of the facility. LOLR operations remain in the armoury of all centralbanks.

Now the credit crunch has delivered up it's first victim. The Bank is caught between a Northern Rock and a Hard place. With nearly 20% of all UK domestic mortgage lending, with some £24 Bb. of customers deposits, they cannot finance their £113 Bn. loan book.

The shareholders have sensed the impending crisis, with the shares halving in value in the last 6 months. Now the BOE as LORL is going to bail them out.

"The moral hazard of an increase in risk-taking resulting from the provision of LOLR lending is reduced by making liquidity available only at a penalty rate."

Bollocks. The Bank is forced to keep them afloat because the ripples would run, far, wide and deep - the decision is not financial, it is political. Next bank up for support will be Barclays - we will learn more in the morning when the BOE makes a statement about bailing out the improvident bankers of Northern Rock.

Meanwhile 3 month LIBOR is nearly 125 basis points over base rate and will go up further after the BOE announcement. Mortgage rates will rise for lenders, unrelated to BOE Base Rates which the Bank fondly imagines that it manages - remote from the actual, real market.

The guys who run the financial services know what a bag of shite they have been hawking around, they have withdrawn from inter-bank lending because they know what a heap of ordure it all is.

Prudent savers will be moving their deposit accounts out of Northern Rock in the morning... where to ?Try Santander AKA Abbey.

Ford US sales drop off cliff in July.

"The weakened national economy has had the same effect on Detroit as always. It’s still true – when the nation catches a cold, Detroit catches pneumonia. "

Mayor of Detroit Kwame M. Kilpatrick
2002-2003 Budget Message

Ford Motor Co.'s sales dropped 14.4 % in August which they have blamed on declining sales as they wean themselves off low-profit sales to rental and fleet buyers.

1. Car sales fell 33.7 % 64,864 versus the same month last year.

2. Light truck sales slipped 2.3% to 152,572.

In August, sales to individual retail customers were down 13 % , but daily rental sales dropped 44 %.

Ford plan to close 16 factories by 2012 and saw sales decline 12% in the first 8 motnhs of 2007
Ford's two top-selling cars, the mid-sized Fusion and the small Focus, both saw big declines in August, with the Focus down 14.7 percent and the Fusion off 19.1 percent.

Ford have announced in a desperate sales boosting measure running through september to Oct. 1st that offers up to $1,000 (€736) cash incentives on most 2007 and 2008 models on top of all existing sales and lease offers.

No other vehicle manufacturers have posted August sales figures yet.

Bear Stearns - serial NY Bankruptcy Court appearances - fugitive UK citizen in the dock in Vienna - white collar crime - banking Caribbean style

Bear Stearns have an enviable and envied reputation as bankers / advisors / investors but on June 22nd they let it slip that 2 hedge funds specializing in subprime debt run by its asset management arm were facing a sudden wave of withdrawals by investors - followed very soon after on August 4th by Bear Stearns CEO Warren J. Spector resigning on a Sunday afternoon.

Warren, 49, had spent his whole business career with BS and was, after CEO cigar chomping James Cayne ,73, (5.6 million, or 5.6 %) the largest individual shareholder (75,000, or 0.064 %).

As a life master of bridge at age 16 in 1974 he will have plenty of time to spend at tournaments where he is seen as a world class player - maybe he delicious wife Margaret Whitton, who played Molly in the soft porn movie "9 1/2 Weeks," in 1986 can be sent out to earn a crust for the family.

The two funds that got creamed in so-called collateralized debt obligations, or CDOs, backed by home-loan bonds and other "assets" were"Bear Stearns High-Grade Structured Credit Strategies Master Fund Ltd., 07-12383 " which raised US $642 million on the launch last last summer. (Ralph Coffi managed the fund and to lose 20% in it's brief 10 mionth life - they had "re-stated losses" in April from 6.5% to 18.97 or 23% for the year). It looks like investors have lost their shirt and attoney's are hovering on behalf of distressed clients.

A sister and less ambitiously titled fund - " Bear Stearns High- Grade Structured Credit Strategies Enhanced Leverage Master Fund Ltd., 07-12384," fared better but flunked all the same. However the 4 year old fund which launched with US$916 has been thrown a US$3.2 Bn lifebelt by Bear Stearns. (NYSE : BSC: shares stood at US$145.46 then - Friday 31/7/07 they closed @ US$18.6)

The SEC announced opening a "preliminary enquiry" on June 24th - but don't hold your breath.

The Boston office of the SEC began examining the collapse of Amaranth Advisors , a hedge fund that lost nearly $6 Billion last fall from a series of wrong-way bets on the natural gas market. To date, nothing has come of that inquiry. (Yes. That is right 6 BILLION)

Judge Lifland in the Bloomberg) S. Bankruptcy Court, Southern District of New York (Manhattan) this week refused to grant protection from U.S. lawsuits for Bear Stearns Cos.' two bankrupt hedge funds, finding the Cayman Islands wasn't the proper jurisdiction for them to liquidate assets.``The only adhesive connection with the Cayman Islands that the funds have is the fact that they are registered there,''

``There are no employees or managers in the Cayman Islands, " he added in his written judgement," the investment manager for the funds is located in New York, the administrator that runs the back-office operations of the funds is in the United States along with the funds' books and records, and prior to the commencement of the foreign proceeding, all of the funds' liquid assets were located in the United States.''

Which is by way of a preamble to a fascinating and older appearance for Bear Stearns before Judge Lifland about a re-heated case of white collar crime. Bear Stearns was ordered by Judge Burton Lifland in February, 2007,to repay investors US$125.1 million in an outfit called the Manhattan Investment Fund run by Michael Berger for which Bear Stearns was the fund custodian and as such reported its performance to Ernst & Young, the fund's administrator, and to Deloitte & Touche the independent auditor.

Judge Lifland in U.S. Bankruptcy Court, Southern District of New York (Manhattan) adjudicated that they aided and abetted Berger’s common law fraud and breach of fiduciary duty. He said they had "(failed) to act diligently in a timely manner." Bear Stearns were said in court to have ignored clear signs (and its suspicions) that MIF’s manager was defrauding investors. Allegations were also made that margin requirements were waived or reduced.

The Court considered that Bear Stearns was required to do more than simply ask Berger if he was doing wrong. It had to consult any ‘easily obtainable sources of information that would bear on the truth of any explanation received from the potential wrongdoer’.

Investors had already recouped some of their money in a 2001 class action against Ernst & Young and Deloitte & Touche.

In May 2007, Bear Sterns filed an appeal. They brought a motion to dismiss the investors’ claim on the basis that Bear Stearns’ actions did not substantially assist Berger’s fraud. Th e New York Court granted the motion to dismiss: a clearing broker does not provide substantial assistance to a fraud simply by clearing trades. Failing to enforce margin requirements, continuing to execute trades despite margin violations, or executing trades in order to reduce a loan of money under margin do not constitute substantial assistance, because credit and margin regulations are designed to protect the viability of brokers, not investors.

A recent examination (27th August 2007) of the case concluded that if the proceedings arising from the collapse of MIF against Bear Stearns had been brought under English and not New York law, Bear Stearns may well have been found liable to contribute to MIF’s assets. Two legal reports cover the two appearances of of Bear Stearns about their role as custodian of MIF here and here See also here re british Virgin islands law.

How you may ask did Bear Stearns end up being sued by investors in a fund which they only held custody - well, as ever there hangs a fascinating tale of ambition, youth, greed, optimism and fear of prison.

Michael Wolfgang Berger , (pic) it appears, was born in the UK (and is a UK citizen) and grew up in Salzburg, Austria. The young man (then 21) arrived in New York in 1993 to work for securities broker-dealer Financial Assets Management, based in Columbus, Ohio.

Only 2 years later he set up Manhattan Investment Fund, an open end investment company under the laws of the British Virgin Islands (‘BVI’). Through a wholly owned New York company, Manhattan Capital Management Inc (‘MCM’), Berger served as the investment manager and advisor for MIF . This sold to dozens of offshore investors ,shares valued at $100, with a minimum investment of 250 shares with the intention of investing by shorting the (then !) soaring dot.com stocks which he said were due for a correction.

A brilliant idea but 5 years ahead of the market.

Using his connection through highly respectable FAM he hailed onboard blue chip Wall Street operators, Bear Stearns, Ernst & Young and Deloitte Touche as custodians, administrators and auditors.

In his first few months his assets shrunk to US$5.6 Mn.

He then made the seond mistake, he told his investors they had grown to US$17.9Mn.

Somehow he obtained FAM letterhead and made his third mistake.

He used this kosher stationery to report growing assets which had dwindled by end 1998 to US$3.9MN.

He told investors that funds had grown to US$263.2 Mn.

His assets were $27.7 million by end 1999 bu he reported a doubling since the last year of funds to US $515.3 million.

At this time Deloittes modified their audit - Berger fired them.Mistake number 346 by then as Deloitte withdrew retrospectively their audit assurances for years 1996/1997 and 1998.

In December 1999 the Securities and Exchnage Commission came calling and by November 2000 he was telling a New York District Court who had decided that there was sufficient evidence that Berger was operating a Ponzi scheme ..

"I came here today not only to plead guilty but to express my apologies to all of the shareholders in the fund and to tell you that I am extremely sorry for what I did. My misrepresentations arose out of my conviction that the technology sector was overpriced and my inability to face the fact that my strategy of selling short technology stocks was not working. I was unable to change my course no matter how long the market moved against me or how great the losses were. Throughout, it was my hope that I would ultimately make money for investors."

Berger realised he was facing the district court recommendation of an 87-month sentence and a $424 million fine when he should appear for sentencing on March 1, 2002. He ran. The FBI started looking.

Unmarried, Berger was known to date models drove BMW's and Mercedes-Benz, and loves yachts and the nautical life of luxury lifestyle and once had a place in the Hamptons on Long Island where he loved to spend weekends with his girlfriends.

On July 9th this year, 7 years later he was found driving a red Opel Corsa saloon in Wels, on the motorway between Vienna and Salzburg, Austria and appeared in court in Vienna.

Austrian Banks, BA-APPROX., First bank and the RLB NOe Vienna - made losses in his funds according to the Standard newspaper and will no doubt be keen to see what happens now.
How much of the US$400Mn. lost by investors will be recovered remains to be seen.

Don't hold your breath but as Austria does not have an extradition treaty with US, and the UK has super express extradition to the US on demand (courtesy Tony Blair et.al.) his country of birth , like that of the traitor and radio broadcaster for Nazi Germany Lord Haw Haw (William Joyce) in World War II will no doubt figure highly.

So when you are invited to invest in a fund that is registered in the British Virgin Islands, Cayman islands etc., etc., there is a very, very good reason , even if blue chip names are involved.

Your chances of getting your investment back if things go tits up are remarkably slim.

Which may be why Bear Stearns shares have been heading south so fast in the past few weeks.... and why Michael Wolfgang Berger ended up in Austria.

Meanwhile keep an eye open for Margaret Whitton (see pic) slated as Executive producer of "The Loop" to be produced next year .

Bob Murray shuts Tower Mine, Utah - another death trap with shocking safety record

Utah Governor Jon Huntsman Jr. said last week about mine owner Bob Murray "If it takes every dollar this guy has in his bank account, he needs to bring closure to this darn thing. We've got families of six good people who are currently sitting in that mine,"

Murray owns two other mines in Utah in addition to the Tower Mine: Crandall Canyon and West Ridge. Operations at the Crandall Canyon Mine have been halted since Aug. 6, when a cavity in the mine collapsed, trapping six miners .

The Governor's remarks riled Bob, so he wrote to Huntsman blaming him for putting hundreds of mining jobs in Carbon and Emery counties at risk.

Bob made good on his threat to cut jobs in Utah's coal country.

He met with workers at the Tower Mine in Carbon County at 7 a.m. on Saturday . During the meeting, Murray told workers he is shutting down the mine (which employed 300 workers) and offered workers there jobs at his other mines in Illinois and Ohio. West Ridge is still in operation.

Since 2004 Tower mine had had 785 safety violations, about half of them “significant and substantial.” Since 2004, it received four “imminent danger withdrawal orders,” leading to parts of the mine being closed down.

Federal inspectors cited Aberdeen mine for serious negligence with 42 violations since 2004, the most of any Utah mine.

Sounds like Bob is quitting whilst he is ahead and has some more dead miners families to deal with.

It's been 19 days since the roof collapsed at the Crandall Canyon coal mine in Emery County.

Six men are missing and most likely dead at the bottom of a deathtrap of a coal mine using questionable retreat mining methods. Three more men perished in a rescue attempt that, from all appearances, was poorly planned and slow to develop.

What chance is there that Stickler and the MSHA can control this Neanderthal mine owner ?

Phelps Dodge / Freeport-McMoRan Company - why they hate the smell of formaldehyde 24/7 in Morenci, Arizona. Cost of copper and capitalism

Federal Emergency Management Agency (FEMA) provided trailers for Katrina refugees. It was discovered that unsafe levels of formaldehyde, a componeent of the glue used in the wood ply to make them was perfusing some of the 120,000 they had purchased.

Revelations of high formaldehyde levels caused the government to offer to buy back or replace trailers sold to evacuees at a discount under a federal program. As of May, FEMA had received 140 complaints and replaced 47 trailers. It also said it would not continue to put storm victims into the trailers.

So they sold 60 of them them to copper company, Phelps Dodge ( from March 19th 2007 a Freeport-McMoRan Company - "the world's largest publicly traded copper company" who took them over) ,to house their copper mine workers in Morenci and Safford, Arizona. Employees live rent ree and the company pay the utilities. Estimated median household income in 2005: $42,600 (it was $46,010 in 2000)/ Estimated median house/condo value in 2005: $0 (it was $0 in 2000)

For US8$ you can have a company guided tour round the open pit mines - the largest in the world - "The orientation also will cover safety while on the tour. " - so no chance of seeing the trailer park then - not even for kids, " Because of safety regulations, children younger than 9 are not permitted on a tour."

Employees living in the ex FEMA trailers complained of the smell, irritation causing watery eyes, sore throats, nausea and breathing difficultis in both adults and children.

Formaldehyde testing was conducted in 9 trailers by Associated Consulting Technologies Inc. of Tucson for the company . In a letter to Phelps Dodge, industrial hygienist William Martin wrote, "Mitigation of the formaldehyde exposures is recommended," placing the last word in italics for emphasis.

Random tests conducted on July 30 had found levels ranging from 0.08 to 0.68 part per million, about half of the level found in FEMA trailers. That is below 0.75 ppm, the Occupational Safety and Health Administration's permissible level for workplaces. OSHA's regulation is designed to protect adult employees working eight-hour shifts. Travel trailers, described as "temporary housing," have been home to some miners and their families for six months.

The level was 3 times what the Department of Housing and Urban Development (HUD) allows for components in manufactured homes. HUD has no rule for trailers.

Paul Boman, Phelps Dodge health and safety manager, as a result sent a letter to the trailer families on August 16th describing the test results and suggesting they could reduce concentrations of the chemical by keeping windows open and running fans or air-conditioners 24 hours a day. (the company pays utilities)

Finally he ended the letter ;

"If you are uncomfortable with this situation, please remember that you may, if you wish, find other living arrangements,"

The reason they are living in the trailers is that there is no other housing available in the area.

Here is the copper price over the last 5 years which explains why Phelps Dodge are digging it out as fast as they can. ..and here is the Freeport-McMoRan Company (FCX) share price over that period.

.. and this is what Zero and beyond - the safety policy which Paul Boman, Phelps Dodge health and safety manager is paid to implement..

...and that's zero fucking true.

More at azcentral.com by Dennis Wagner

NB: FCX closed Aug 22nd US$ 85.59 up US$ 4.30 (5.29%) see this investor discussion forum

Lombard Street. Walter Bagehot 1873

"The mercantile community will have been unusually fortunate if, during the period of rising [asset] prices, it has not made great mistakes. Such a period naturally excites the sanguine and the ardent; they fancy that the prosperity they see will last always, that it is only the beginning of a greater prosperity. They altogether overestimate the demand for the article they deal in, or the work they do. They all in their degree – and the ablest and the cleverest the most—work much more than they should, and trade far above their means."

"The fact is that the owners of savings, not finding in adequate quantities their usual kind of investments, rush into anything that promises speciously, and when they find these specious investments can be deposed of at a high profit, they rush into them all the more."

"The good times of too-high price almost always engender much fraud. All people are most credulous when they are most happy; and when much money has just been made, . . . . there is a happy opportunity for ingenious mendacity."

Plus ca change

See here for one analysis of the Fed's policy and Bagehot's prescription in Lombard Street of large loans at high rates to settle markets.

Morgan Stanley post massive profits growth

Whilst the tabloids worry about Venture capitalist's immodest earnings , the 2nd largest stockbrokers in the world (by volume) Morgan Stanley's income increased a whopping 40%.

For Q2 ending May 31st 2007 MS posted net income of US$2.6 billion, or US$2.45 a share, compared with US$1.8 billion, or US$1.75 a share, for Q2 2006.Gross revenue soared 32% to US $11.5 billion.

Chairman and CEO John Mack(appointed June 30, 2005) said, "Morgan Stanley ...(have) now achieved seven straight quarters with ROE above 20 percent, and we're well on our way to reaching our goal of doubling 2005 earnings over five years."

Simultaneously MS have opened their MSREF VI International Real Estate Fund fund, with $8 billion of equity commitments in which investments will include non-U.S. real estate assets, portfolios and companies, primarily in developed markets. To date, the MSREF funds have acquired real estate assets totaling $83.5 billion, with assets under management of $31.6 billion.
(MS total assets under management or supervision at May 31, 2007 were $560 billion, up $106 billion, or 23 percent, from a year ago.)

Kevin Warsh a member of the Board of Governors of the Federal Reserve System (nominated by POTUS and there until 2018) is an ex employee of MS working there from 1995 to 2002, and made VP and Executive Director in the Mergers and Acquisitions Department.

His appointment was famously described by Noam Scheiber , Editor of the New Republican ....

"Other than a Harvard Law degree and four years in the White House, the only qualification that jumps out at you is the $165,000-plus his father-in-law has donated to various Republican committees since 2002. Warsh may be perfectly capable of hazarding opinions about the future of the economy. But, by that standard, there are tens of thousands of people entitled to a seat on the Fed. ...Appointing someone like him to the Federal Reserve board dramatically lowers the bar for future appointments, which makes it more likely that the body of powerful technocrats will come to be dominated by political hacks. ...The only way you appoint Kevin Warsh to a seat on the Federal Reserve board is if you have little respect for the practice of economic policy-making and you're not ashamed to admit it."

...but he is married to the daughter of Ronald Lauder , friend of Ariel Sharon, Chairman of the New York Port Authority who sold the WTC to Larry Silverstein who also has half shares in CETV with Sir Ronald Cohen's Apax Partners who will be replacing the role of Lord Levy the midget Karaoke King (after his FO funded monster leaving bash last night) as the representative for Israel and it's many friends in the UK Government.

More rate rises on the near horizon

As the UK market chewed over the Bank of Englan's last MPC minutes and Mervyn King being out voted over a UK rate rise, it is worth noting that the yield on 10-year US Treasury notes - which influences US interest rates on mortgages and corporate loans, gained almost 4 basis points, or 0.04 percentage point, to 5.12 percent.

US gas prices hit record levels and it isn't Memorial Day yet

AAA's Daily Fuel Gauge Report reports the national average for a gallon of regular gasoline (US 3.6 litres) at a high of US $3.114, up from $3.103 on Wednesday and 8.7% higher than a month ago.

Gas stocks are below those one year ago and refineries are reporting production mishaps daily - refiners won't pass up the opportunity to cash in on Memorial Day (May 28th) price hikes.

ConocoPhillips reported a shutdown due to a leak on a sulfur recovery unit at its Sweeny, Texas They also announced closing a 67,000 barrel-per-day gasoline-producing catalytic cracking unit at its 146,000 barrels-per-day Broger, Texas, refinery for a month.

On Wednesday, Valero reported "boiler problems and steam-system issues" at it's huge Houston refinery are units are offline are offline and not producing fuel - but expects to be back to normal early next week.

Due to bad weather conditions, two tankers have been diverted to the Gulf Coast from the East Coast disrupting market flows and producing supply disruptions will will knock on to higher pump prices.

With refiners operating at maximum utilisation and oil prices hovering around US$64 a barrel,with uncertainties in Iraq/Iran /Nigeria there is no prospect of any price falls real soon now.

Should any US readers be contemplating a trip to the UK, pump prices for regular unleaded gasoline are (4.6 litres per gallon) hovering just below US$2 a litre - pushing US$7 for a US gallon - so stop bitching. (For UK pump prices go here - to feel really pissed off go here to discover Channel islands pump price for regular unleaded is about 65p per litre !!)

Kicker - Rooftop Sat-Nav extra in 5 chanel stereo STOP PRESS Ex WBO champion Chris Eubank is selling his Hummer H2 make a bid here

Cerberus gobbles up nearly all of Daimler

United Autoworkers, President Ron Gettelfinger, has announced that they have given their approval to Cerberus Capital Management taking on 80.1 % of Daimler Chrysler stock and injecting US$7.4 BNn - saying that it is in the best interests of their workers and that they are, "satisfied, now,that the decision has been made that our membership and management can focus on designing, engineering and manufacturing the finest quality products."

DaimlerChrysler (to be renamed Daimler) will retain 19.9% - and write off US4- $5,4 Bn from this year's profits and will aso see see a cash outflow of up to US$900 to discharge long-term Chrysler liabilities.

New York based Cerberus is one of the largest vulture capitalists private equity outfits in the world , with holdings in excess of US$24 Bn , in May 2005they bought Daimler Chrylser's share of an aircraft finance company debis AerFinance.

US Attorney Carol Lam (pic) began an investigation into 14-term Republican congressman from Redlands, Calif. Jerry Lewis's contributors in 2006. He is the Chairman of the Defence Appropriations Sub- Committee and had previously ensured the continued funding of a US$1 Bn. contract with a Cerberus company, MCI in 2003 , whose managment of a navy /Marine computer network was subject to problems of cost overruns and poor management. MCI (the company that rose out of Bernie Ebbers spectacularly bankrupt World.com has been a major subcontractor since 2000 on an $8.8 billion project to build a secure computer network for the Navy and Marines.

It appears that Cerberus had thoughtfully provided the Congressman with at least US$110,000 for his Future Leaders PAC funds the day previously at a New York fund raiser.

Carol Lam also oversaw the investigation that led to the corruption conviction of then-Rep. Randy "Duke" Cunningham, R-Calif., who pleaded guilty in late 2005 to accepting $2.4 million in bribes. He was sentenced in March 2006 to eight years and four months in prison.

On May 11, 2006, the Los Angeles Times reported that the Cunningham probe was being expanded to look at the actions of another California Republican, then-House Appropriations Committee Chairman Jerry Lewis.

On the same day chief of staff to Attoney General Alberto Gonzalez , Kyle Sampson, sent a fascinating e-mail to deputy White House counsel William Kelley, asking Kelley to call to discuss "the real problem we have right now with Carol Lam that leads me to conclude that we should have someone ready to be nominated on 11/18, the day her 4-year term expires."

The e-mail did not spell out what the "real problem" was, and it was unclear whether Kelley and Sampson talked later - it's contents became public as part of a congressional investigation into the firings last year of Lam and seven other U.S. attorneys, and the Bush administration's changing explanations as to what role politics or performance played.

On March 18th this year Kyle Sampson resigned.

Another group company is IAP Worldwide Services a leading government contractor providing "a broad spectrum of services focused on global mission support for the Department of Defense and other U.S. government agencies." They recently hit the news as they had the contract for running the Walter Reed Hospital whose failings hit the headlines in February.