Friday, September 26, 2008

Roundup: September 26

Markets

"There is no disagreement that something substantial must be done," Bush said in this morning's very short address to the markets. "We will rise to the occasion." John McCain, having successfully saved capitalism, will debate Obama tonight.

Washington Mutual will go down as the largest bank failure in history after the FDIC engineered the sale of its deposits and some branches to JPMorgan for $1.9bn last night. Biggest in nominal terms, anyway, and, what's more, the FDIC's insurance fund will not take a hit from the failure. JPMorgan offered $7bn for WaMu a few months ago. It seems CEO Killinger may have pulled a "Fuld." Relatedly, Wachovia CDS movements indicate that it may be the next to fall, as many have speculated for months.

Bloomberg runs its second of two pieces in an excellent series on the role of the ratings agencies in the fraudulent or incompetent ratings of MBS. This is crucial reading for anyone interested in the financial history of the last seven years.

Brad Setser points out that the Fed has loaned out on the order of $300bn+ in the past two weeks. Australia's Office of Financial Management will buy as much as AUD4bn of RMBS to try to unfreeze the market in those assets.

Nearly 20% of the S&P 500 -- and 1 in 7 of all listed stocks -- is now covered by the short-selling ban, including IBM and Ford. The convertible bond market has effectively shut down as dealers in convertibles are no longer able to hedge against the underlying. "The short ban is the new Borg." Steven Davidoff picks up some of the pieces from the last week.

California house prices fell 41% in August, pushed down by foreclosure sales. Calculated Risk looks at the house price estimates JPMorgan used to calculate its writedowns on the Washington Mutual purchase -- these include worst-case forecasts of up to 8% unemployment. There's a great chart of house prices against household income too.

The Hudson Institute published its useful monthly overview of major economic indicators. This is one-stop shop for the past month's critical economic statistics.

The Dry Ships Index bodes ill for the world economy.


World

It is the anniversary of the monks' uprising in Burma.

Poland, Ukraine, and a variety of other formerly Soviet countries are calling for the UN and NATO to keep closer tabs on Russia.

Robert Mugabe spoke to the United Nations, blaming sanctions for Zimbabwe's economic collapse, as opposed to state-imposed famine, a massive unrecognized AIDS epidemic, or any of the various other crimes he has perpetrated as President. The New York Times carries a revealing interview with Mahmoud Ahmadinejad.

There is some speculation that the ruling ANC in South Africa may split in the wake of Thabo Mbeki's resignation from the presidency.


US troops exchanged fire with Pakistani forces yesterday on the Afghan border, in the continuation of what has been an under-reported near-shadow war along the border in the last month.

The ongoing shortage of gasoline in the Southeast in the wake of Hurricane Ike has led to more panic buying and long queues.

Science

World CO2e emissions were up 3%in 2007 over 2006, worse than the worstcase scenario from the IPCC's last report. Under this scenario, temperatures could rise by as much as 11 degrees Fahrenheit by 2100, far beyond the catastrophic threshold of 3 to 4.

More methane plumes have been discovered in the Arctic, on the tail of Wednesday's reports of methane bubbling up in Siberia. If the Arctic permafrost begins to melt, it is possible enough methane will be released to trigger a positive feedback loop whose contribution to warming might quickly outpace all human greenhouse gas production -- this is the most important of the doomsday climate change scenarios. It must however be mentioned that some Arctic methane release is normal at all times. It is unknown where these normal sources of arctic methane are or what their sensitivity is to Arctic environmental conditions.

The EU will ban mercury exports from all of its member states starting in 2011.

The Brookings Institution looks at the presidential candidates' stances on transportation.

The Oil Drum runs a primer on winter gasoline blends and why gas prices drop in cooler weather.

This graph of CO2 emissions per passenger mile for various forms of transport provides a fantastic resource for non-specialists to look at their transportation emissions.

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