atp’s posterous

--- un peu remonté monsieur ritholtz! mais bon, je le serai aussi si mes impôts devaient en majeure partie servir de pitance aux hyènes locales…  http://www.ritholtz.com/blog/2008/11/why-bailouts-attract-handout-seekers ---

A truisim of all bailouts: Enormous amounts of taxpayer cash attracts all manner of unsavory, undeserving characters. What was supposed to be a narrow and limited attempt to reduce the systemic risk of a financial collapse has become a taxpayer funded free-for-all.

--- à mon humble avis, dès que le mother-of-all-unwinds touchera à sa fin, l'usd souffrira passablement et le prix de toutes les commodities, food prices y compris évidemment, reprendront de l'altitude rapidement. http://www.ft.com/cms/s/0/d125dbf2-ac2c-11dd-aa46-000077b07658.html?nclick_check=1 ---

The world might face a repeat of this year’s food crisis as the credit crunch encroaches on the agricultural market, leading farmers to cut their planting because of falling prices and lack of finance to buy fertilisers, the United Nations warned on Thursday.

“Riots and instability could again capture the headlines,” the Food and Agriculture Organisation said.

The warning was made despite a fall in the price of most agricultural commodities as farmers harvest bumper crops.

The price of corn, wheat and rice has tumbled between 60 and 40 per cent from all-time highs earlier this year, but in its biennial Food Outlook report the FAO warned against a “false sense of security”.

“Under the current gloomy prospects for agricultural prices, high input costs and more difficult access to credit, farmers may cut their plantings, which might again result in a tightening of world food supplies,” the FAO said in the report.

This year saw agricultural commodity prices jump to a record high, triggering food riots from Haiti to Egypt to Bangladesh, and prompting appeals for food aid for more than 30 countries in sub-Saharan Africa.

Concepción Calpe, a senior economist at the FAO in Rome, said a price surge might take place in the 2009-10 harvesting season, “unleashing even more severe food crises than those experienced recently”.

Lower production and higher prices next year could add to developing countries’ problems in obtaining sufficient credit and foreign exchange to buy agricultural commodities. “Export finance is becoming more difficult to obtain, with banks tightening up the conditions for issuance of letters of credit,” the FAO said.

Thailand and Iran agreed last month to barter rice for oil, the clearest example yet of how the financial crisis, high fuel price and scarcity of food are reshaping global trade.

In spite of the continuing fall in food prices, the world’s food imports’ bill is set to surge above $1,000bn (€785bn, £633bn) for the first time ever, up 23 per cent from last year and 64 per cent higher than in 2006, the FAO said.

Developing countries will spend $343bn this year on food imports, up a record 35 per cent from last year’s $254bn. Some poor countries, the organisation said, were curtailing food imports in an effort to lower their bills.

--- je trouve le concept plutôt intéressant. et nos cousins ricains devraient essayer de le pousser dans d'autres domaines: pourquoi pas proposer le taf de commander-in-chief à oussama? http://www.ny.frb.org/newsevents/news/aboutthefed/2008/oa081031.html ---

Michael Alix has been named a senior vice president in the Bank Supervision Group of the Federal Reserve Bank of New York. He will serve as a senior advisor to William L. Rutledge, executive vice president, Bank Supervision Group....

Most recently, Mr. Alix worked for the Bear Stearns Companies, Inc., where he served as chief risk officer from 2006-2008 and global head of credit risk management from 1996-2006. His prior experience included eight years at Merrill Lynch & Company where he was a director, Asia chief credit officer and a vice president, head of North America financial institutions credit. He began his career with the Irving Trust Company where he served as an assistant vice president and lending officer.

 Mr. Alix holds an M.B.A in finance from the Wharton School of the University of Pennsylvania and a bachelor's degree in economics from Duke University. He is a resident of New Jersey.

--- je sais, je sais, ca fait un moment qu'il tourne ce dialogue. mais il a juste trop sa place dans mon "album de la crise", donc le voici. http://www.nakedcapitalism.com/2008/10/s-wed-do-deal-structured-by-cows-and.html ---

Most eyes were on the plunging equity markets today, and the rating agencies must be plenty glad for the air cover. The House Oversight Committee unearthed some real dirt today. From CNBC (hat tip reader Michael): In a hearing today before the House Oversight Committee, the credit rating agencies are being portrayed as profit-hungry institutions that would give any deal their blessing for the right price.

Case in point: this instant message exchange between two unidentified Standard & Poor's officials about a mortgage-backed security deal on 4/5/2007:

Official #1: Btw (by the way) that deal is ridiculous.

Official #2: I know right...model def (definitely) does not capture half the risk.

Official #1: We should not be rating it.

Official #2: We rate every deal. It could be structured by cows and we would rate it.

A former executive of Moody's says conflicts of interest got in the way of rating agencies properly valuing mortgage backed securities.

Former Managing Director Jerome Fons, who worked at Moody's until August of 2007, says Moody's was focused on "maxmizing revenues," leading it to make the firm more "issuer friendly."

Bloomberg gives Moody's top billing in this sorry affair:
Employees at Moody's Investors Service told executives that issuing dubious creditworthy ratings to mortgage-backed securities made it appear they were incompetent or ``sold our soul to the devil for revenue,'' according to e-mails obtained by U.S. House investigators.

The e-mail was one of several documents made public today at a hearing of the House Oversight and Government Reform Committee in Washington, which is reviewing the role played by Moody's, Standard & Poor's and Fitch Ratings in the global credit freeze.

``The story of the credit rating agencies is a story of colossal failure,'' Committee Chairman Henry Waxman, a California Democrat, said at the hearing. ``The result is that our entire financial system is now at risk.''...

Former executives from S&P and Moody's told lawmakers today that credit raters relied on outdated models in a ``race to the bottom'' to maximize profits.

Jerome Fons, a former managing director of credit policy at New York-based Moody's, told lawmakers that originators of structured securities ``typically chose the agency with the lowest standards, engendering a race to the bottom in terms of rating quality.''

--- osons espérer un semblant de transparence supplémentaire de la part de notre bonne vieille Bonne Nurse Suisse lorsqu'il s'agira de communiquer à quel prix les actifs d'ubs ont été acheté par le spv, autrement dit, lorsqu'il s'agira d'avouer dans quelle proportion le cadeau offert à ubs était énorme… http://www.nakedcapitalism.com/2008/11/fed-stonewalling-on-giving-details.html ---

 In case you somehow managed to miss it, our friendly pawnbroker of last resort central bank has been taking lots of crap collateral in return for loans under its alphabet soup of facilities. As we are learaning in our housing meltdown, collateral may not prove to be worth as much as it was said to be at the time the loan was made. Inquiring minds are curious as to what, exactly the Fed has taken, particularly as the numbers are becoming stratospheric.

Bloomberg has asked nicely for some of this information, and is now being forced to sue under to the Freedom of Information Act, and the Fed intends to fight! This ought to be a scandal, but after the TARP, the electorate is seems resigned to taxpayer money being thrown at floundering financial enterprises with little in the way of checks or prudence. If the Fed indeed was taking conservatively valued collateral as it has always claimed it was, there would be no reason for it to attempt to squash this request. The Fed's argument, as I infer, is the loans were made by the Federal Reserve Bank of New York, which isn't a federal agency and thus not subject to the FOIA.

--- bon ben finalement non, on ne verra pas les foreign reserves de la chine fondre de 30% en 2 ans pour stimuler sa demande domestique. "4 trillion chinese stimulus package" n'était que de la publicité mensongère! http://macro-man.blogspot.com/2008/11/what-does-4-trillion-yuan-buy.html ---

Friday was a milestone in the evolution of the ongoing financial crisis. No, not the employment data, which was execrable (and prompted Goldman to raise their unemployment rate forecast to an eye-watering 8.5%.) In fact, Friday was notable because it was the first time in quite a while that Macro Man can recall being bored at the office.

It seems as if markets have mentally shut down and are content to limp into the end of the year. Liquidity has certainly dried up amongst many of the products that Macro Man trades, and declining volumes in a number of exchange-traded assets also bear testament to a lack of engagement. Moreover, the ever-reliable blog traffic indicator has shown a reasonable decline in eyeballs from the panicky markets of a month ago. As always, that is perhaps explainable by the dearth of quality of the commentary in this space...but nevertheless it would appear to indicate a waning interest in the day-to-day saga of the financial meltdown.

So it was with much elation that Macro Man and other punters greeted Sunday's announcement of a 4 trillion yuan Chinese stimulus package. Hurrah! A return to working on the weekends and wondering where Wellington will open FX rates on Sunday evening (London time.)

The rationale for the package is fairly obvious. Both anecdotal evidence and official data appear to indicate that the Chinese economy has hit something of a brick wall. Smoothed industrial production growth, for example, has hit six-and-a-half year lows. The property sector has also come under the cosh, and the Shanghai composite index is down 65% on the year following a 7% overnight rally.

Strangely, there appears to be quite a difference in opinion of how significant the package actually is. A number of the measures had been previously announced; still others represent the allocation funds that would have been spent anyways. Moreover, only a minority of the funds are coming from the central government, so the source of the remainder of the money is a trifle opaque.

The ultimate impact is also somewhat nebulous. One shop that Macro Man likes on China has left its 2009 growth forecast unchanged at a below-consensus 7.5%. Another has suggested annual stimulus along the lines of 1.5% per annum.

Predictably, markets have seized on the headline figure (which equates to roughly $586 billion) and rallied risk assets without bothering to consider the substance of the program. Given that much of the stimulus appears to be focused on rural housing and infrastructure (which, again, was going to see plenty of investment anyways), it's not immediately clear to Macro Man why the announcement merits a 2% rally in S&P futures, for example, other than a knee-jerk "buy first, ask questions later" reaction.

Of course, the size of the announcement demands that we ask the question: what exactly does 4 trillion yuan buy?

Lets consider some of the options:

1) 9.25 billion barrels of oil, using the front contract WTI futures price. Of course, there might be a little bit of slippage if China tried to print that particular ticket.

2) Real Madrid, Barcelona, Man United, Chelsea, AC Milan, Bayern Munich, Inter Milan, Arsenal, Juventus, Liverpool, Lyon, Roma, Schalke, Ajax, Rangers, Valencia, Benfica, Celtic, Stuttgart, Werder Bremen, Porto, PSV Eindhoven, Sevilla, Villareal, and Lille......39 times over.

3) Per July's modest proposal, Alaska, Idaho, Kansas, Montana, North and South Dakota, and Nebraska. They'd raise $560 billion, based on the Macro Man's calculations. And hey, they're all "red states"....just don't tell China that "red" means "Republican", and perhaps the new administration could get them to pay a premium!

4) HSBC, JP Morgan, Wells Fargo, B of A, Citigroup, and Deutsche Bank. It's not immediately obvious why China would want to buy these institutions, however; perhaps they'd be buying expertise in how to account away losses?

5) US fourth quarter Treasury issuance. Old habits die hard....

6) Ford and GM....plus Boeing, 3M, Google, and Exxon. It would be ironic if the US government nationalized the US automakers and flogged them off to a foreign buyer just after some American cars received the first non-scathing reviews in the history of Top Gear.

7) The entire market cap of Russia, Mexico, Hungary, and Ireland. They might have trouble taking possession in one of those places, however.

--- quoi? toujours pas passsé sa licence de pilote de canader? http://ftalphaville.ft.com/blog/2008/11/11/18081/alors-jean-claude-voici-le-crunch/ ---

Last week, from Trichet:

We see no credit crunch, certainly not when you look at the figures that have been published… Since mid-September we have a very, very, big, significant intensification of intentions which are associated in particular, but not exclusively, with the collapse of Lehman Brothers and since then we are in a situation where we have to be particularly attentive but I cannot say at all that at the moment we are seeing a credit crunch…On the contrary we continue to see outstanding credit continue to growth.

But from Bank of America this morning comes a note entitled “the credit crunch is starting”:

A genuine credit crunch, i.e., an exogenous contraction in credit supply, was hard to substantiate in the Eurozone until the summer. However, the picture is now changing for the worse with the data for credit origination and corporate debt issuance for September, when the credit market turmoil intensified spectacularly. In the three months to September, the flow of new loans to the corporate sector fell to €334bn in annualized terms, the lowest level since October 2005 (see Figure 11).

Furthermore, even if credit supply was still relatively abundant before September, financing costs had already started to rise significantly. The average rates on floating mortgages rose from 5.0% in June 2007, before the financial market turmoil started, to 5.80% in September 2008 (last available data). The average rate for corporate investment loans rose from 5.17% in June 2007 to 5.588% in September 2008.

In the second half of 2008, refinancing costs are likely to rise further, since banks have until now absorbed a large share of the increase in their own refinancing costs in their interest rate margins. On top of the increase in bank loan rates, corporations in the Eurozone are now facing a steep increase in their market debt costs. The interest rate on low-risk corporate debt from major Eurozone real economy names have shot up 250 bps in the recent weeks.

--- rebond du pétrole? et ouais, dès que le mother-of-all-unwinds touchera à sa fin, les credit constraints s'estomperont, le dollar se raffaiblira et le pétrole retrouvera ses ailes. jouons la re-backwardation… http://ftalphaville.ft.com/blog/2008/11/11/18074/is-it-a-bird-no-its-a-super-contango/  ---

Oil prices may be falling, but how long can we expect them to stay low?

Writing in today’s FT, Daniel Yergin, Chairman of Cambridge Energy Research Associates, warns that lower prices will force energy companies to scale back their budgets and hold back on new projects (fossil and green).

[…]

Goldman Sachs catches onto this theme in their latest note. They’re noting the intensification of the contango structure of the forward curve (the price of oil into the future). The contango has been steepening, with most analysts attributing it largely to three factors: A supply glut at the front end of the curve, the higher cost of financing into the future, and the belief that tightness may return to the market soon - a fact ever realised by the abandonment of projects by Independent and National oil companies.

According to Goldman though the steepening has more to do with credit constraints than anything else. They write:

While historically these extreme degrees of contango, often referred to as super-contango, are associated with full inventories and therefore due to constraints on available storage, this time they are likely attributable to constraints on available credit. This indicates that the impact of the credit crunch on the oil market is not waning and continues to exacerbate the pressure on prices coming from weakening economic fundamentals.

Credit constraints are not only distorting the incentives to hold inventories but also limiting the ability to close arbitrage opportunities along the forward curve. The recent worsening of the dislocation in the oil forward curve indicates that the impact of the credit crunch on the oil market is not waning to any significant degree and continues to exacerbate the pressure on prices coming from weakening economic fundamentals.

They highlight the fact that timespreads have now breached the limit typically set by the cost-of-carry, which means those buying oil in the future are willing to pay a premium beyond and above the cost-of-carry and storage of oil bought today in the spot market.

Goldman says that in the past 20 years this has only happened in 1998 and temporarily at the end of 2001 and 2006. Each of those times, storage capacity was an issue. There wasn’t enough of it available meaning if you wanted to buy oil today to store and sell into tomorrow, you expected a premium for your efforts. But there is no such storage shortage today. The reason people are expecting a premium to sell oil into the future this time is due to limited access to credit and strong preference for cash.

--- nos fins spécialistes comptables ont mis au point une formule qui transforme actifs toxiques en or, archimède doit être en train de se retourner dans sa tombe! http://ftalphaville.ft.com/blog/2008/10/31/17661/accounting-changes-a ---

Deutsche Bank has recorded a profit instead of a loss in its most recent results by using new accounting provisions designed to mitigate the impact of the financial crisis on European banks. DB is the first big European bank to use the opportunity to avoid having to account for some of its assets at their market value, reclassifying almost €25bn of assets as loans that it will now hold until maturity.