Thursday, October 23, 2008

Roundup: October 23


The Washington Mutual CDS auction appears to have gone off without any problems, after Lehman settlement also completed successfully. The blogosphere loves Derivative Dribble's CDS primer.

Libor is flat. New numbers from the BIS show a clear contraction in international banking. FT Alphaville warns banks will need more money to remain solvent -- even as AIG says it will. Emerging currencies are plummeting against the dollar and yen. The Financial Ninja carries a series of charts that would be more frightening if they did not simply indicate the (ever less) surreptitious nationalization of the financial system. Initial jobless claims came in at 478k, up 15k and worse than expected.

The IMF is preparing loan packages in consultation with a number of countries but hasn't yet revealed the size of the loans or the conditions likely to be placed on them. The US will hold a G20 summit November 15. New Zealand has cut base rates by 1%. OPEC meets in Vienna tomorrow. CDS on Russian sovereign debt were trading over 1000bp today as S&P put the country's debt on negative outlook, and CDS on Ukraine were trading over 2800bp. Germany is reportedly drawing up plans for a fiscal stimulus package. Sarkozy has announced the creation of a French sovereign wealth fund capitalized to the tune of $200bn and has suspended France's taxe professionnelle on investment effective immediately.

New disclosure by the bond insurers points to a worsening of losses not in subprime, but in prime loans. Foreclosures were up dramatically in Q3, though slightly stalled by changes in local legislation that make it harder to foreclose on borrowers. Calculated Risk comments on the limited success of government mortgage-modification schemes so far - and comments that credit card charge-offs may yet increase.

Credit Slips comments on the possibility of a new wave of layaway plans as a model for consumer credit as Kmart announces layaway in advance of what is widely expected to be a disastrous holiday retail season.

ArcelorMittal is reviewing its $35bn capital program. Gazprom warned conditions in the credit market may make it harder to refinance its existing debt. Daimler has written its stake in Chrysler down to zero. Goldman Sachs is laying off 10% of its employees. Nokia is linking the price of borrowing under its revolving credit facilities to its CDS prices.

Alan Greenspan's ludicrous testimony to Congress has made him the new favored whipping boy in the media outlets that sang his praises -- and the omnipotence of the Federal Reserve -- through the rise and fall of the dot-coms, and hailed him as the savior of the American economy after September 11.

Interactive Brokers' Thomas Peterffy says that centralized trading of CDS by the CME could put other classes of futures and options trading at risk of a market failure in the CDS market.

Roubini is warning of asset-dumping as "hundreds" of hedge funds fail.

Zheng Bingwen talks to the Oxford International Review about perceptions of the China Investment Corporation.


The mechanics of the natural gas business make a gas producers' OPEC unlikely, Steve Mufson writes -- Russia, Iran, and Qatar held talks in Tehran yesterday over such an organization. Kommersant says declarations about a gas cartel come from "politicians, not natural gas professionals" and that the idea, an old one, is unlikely ever to come to fruition. Meanwhile, Russia is meeting with OPEC countries and says it is considering creating an oil production reserve.

The French have captured 9 Somali pirates in the Gulf of Aden and handed them over to Puntland authorities. NATO says that when the antipiracy force arrives in a few days rules of engagement for the task force will be ready.

An editorial in Johannesburg's Business Day argues that ZANU-PF never had any real intention of negotiating in good faith to solve Zimbabwe's problems. Zimbabwe's economic collapse has hit children harder than adults, IRIN reports, with many out of school and working on the streets. The Telegraph reports Mugabe's regime is widely suspected to embezzle money intended for aid which passes through the Reserve Bank of Zimbabwe.

Gordon Brown's government is trying to calm recently reignited discussion around the issue of disestablishing the Church of England.

Agreement has been reached on a new African free trade zone, although such agreements have been reached before.

Mxolisi Ncube writes on the split in the ANC and its consequences for the stability of the South African economy and the protection of human rights.

Human rights reform under Turkey's AKP has seen advances and setbacks -- but the nature of that country's politics make a straightforward assessment difficult.

Azerbaijan is stuck in an uncomfortable dance between Russia and the US, writes the NYT, with Russia taking the lead in pushing for negotiations between Azeri and Armenian leaders to resolve the status of Nagorno-Karabakh.


Lord Stern calls in the Guardian for a low-carbon route to growth and says now -- recession -- is the time to build towards that future. Hear, hear. Meanwhile, Jose Maria Aznar is questioning the reality of anthropogenic climate change and calling global warming a "new religion."

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