Global Articles on what is going on...posted daily

[sandi66]

Basel pact may trigger bank payouts


By John Greenwood, Financial Post

September 8, 2010

There is a growing consensus Canadian banks will start increasing dividends as early as December in the wake of comments by European officials that global capital rules will be softer than anticipated.

A German central bank official said Wednesday that institutions will be given as much as 10 years to phase in new rules around capital levels, considerably longer than originally expected.

Meanwhile, a spokesman for the Office of the Superintendent of Financial Institutions, the Canadian financial regulator, said OSFI expects to be able to provide banks with more information around what new rules will look like following a meeting of global regulators in Basel, Switzerland, on Sept 12.

“Our aim is to do that as soon as possible after the weekend meetings,” said Rod Giles.

But the regulator is advising firms that it will not approve any decisions to hike dividends or bring in share buy-backs until after the new rules are finalized at the G20 meeting in November.

“The thing is that when we provide a directive or an advisory to the industry, the next step in the process would be for the industry to start to think about their capital plans," Mr. Giles said, adding any plans would still have to get the nod from the regulator.

Canadian banks haven’t raised dividends since the end of 2008 when OSFI first warned them to be more cautious and hold onto their capital.

Launched in the depths of the financial crisis as a way to strengthen the global banking system, the revamp of financial regulations is regarded as one of the biggest changes the industry has undergone in decades.

In the early stages, policymakers and government officials worked together but over the past year some of the unanimity has disappeared as the global economy recovered and players began pursuing their own interests.

Observers said the new regulations are a key test of the G20 and its capacity as forum for important policy reform.

The idea behind the new rules is to make institutions stronger by requiring them to hold more capital, but critics warn that purpose is being undermined by efforts to water down the rules.

For their part, Canadian banks have been leery of the effort, arguing that the new rules effectively penalize them even though they avoided getting hit by the meltdown.

That should give them an advantage over rivals in Europe and the United States that are still recovering from the crisis, but some in the industry worry that may not happen.

Some governments are lobbying to be allowed to delay implementation of the new rules, arguing that their economies could suffer if their banks are forced to raise more capital.

The Canadian Bankers Association says making changes to suit certain countries would be unfair. “The whole issue for all of the banks is to have consistent implementation across all jurisdictions,” said Nancy Hughes Anthony, CBAs chief executive.

She said she is confident Canadian regulators and government officials are backing the industry at international discussions.

Analysts predict banks in this country will likely not be required to raise additional capital.

“We believe the [bank’s] dividend policy going forward will be a function of earnings outlook and power,” said Brad Smith, an analyst at Stonecap Securities Inc., adding he doesn’t see a big “catch-up” dividend from any of the banks.

The fact that OSFI is signalling to the banks that they can finally deploy their excess capital “is a reminder that these are regulated business, which is something people tend to forget in periods of extended prosperity,” Mr. Smith said.

The bottom line is that banks will likely not be in a position to deploy excess capital before December. Analysts speculate National Bank and Toronto-Dominion Bank will likely be the first to increase dividends, likely sometime in early fiscal 2011.


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www.canada.com/business/fp/Banking+pact+trigger+payouts/3497082/story.html?id=3497082

[sandi66]

Ed Stelmach 'buoyed' by U.S. assurances on oilsands - Pelosi pushes for talks to counter 'dirty oil' propaganda

September 9, 2010


Premier Ed Stelmach says he secured some key assurances Wednesday on the energy and environment files during a meeting with U.S. power brokers, and also invited them to the oilsands for a personal tour.

Stelmach, along with a handful of other premiers and federal ministers, dined Wednesday with Nancy Pelosi, the Speaker of the U.S. House of Representatives, and Rep. Ed Markey, chairman of the Select Committee on Energy Independence and Global Warming.

And the main item on the menu was a discussion about energy security and how to reduce the environmental footprint of oilsands development.

The premier said he was assured by Pelosi during a three-hour dinner meeting that while the U.S. hopes to eliminate its dependence on foreign oil, "that does not mean Canada."

Stelmach and Pelosi also agreed to meet more often to provide updates on environmental improvements in the oilsands and to correct "misinformation" about the second-largest proven oil reserves in the world, he said.

"I was quite buoyed leaving the meeting," the premier said in an interview late Wednesday. "All parties agreed the best solution to the environmental challenges is to work collectively across the border."

The political leaders agreed to invest more funding in environmental research and development, such as carbon capture and storage, because "that is the quickest solution to reducing emissions."

The premier said he also came away from the meeting "of the very strong opinion" that Pelosi isn't interested in halting oilsands development. But he served notice that Alberta wants to expand its oilsands markets to Asia and beyond a single U.S. customer.

"I just said 'Look, there are new trade markets developing,'" Stelmach said, adding that Canada and the U.S. "have had this good trade relationship and let's maintain it."

He also invited Pelosi and Markey for a tour of oilsands developments, but it appears that will have to wait until after U.S. mid-term elections in November.

Pelosi, the third-highest ranking Democrat and influential player in Barack Obama's government, is in Ottawa until Friday to attend a summit of G8 speakers.

But she's also scheduled a series of meetings with petroleum companies, environmental groups and senior Canadian politicians on the energy and climate files. She wasn't available for comment on Wednesday.

But U.S. Ambassador David Jacobson, who was hosting the dinner at his Ottawa home, said it's critical that both countries maintain an open dialogue on the controversial issue of oilsands development.

"Striking the right balance between energy security and the environment is complex," Jacobson said in a statement. "The more we talk with each other, the more able we'll be to strike that balance."

Stelmach, Saskatchewan Premier Brad Wall and Quebec's Jean Charest were among the guests invited to the dinner, along with federal Environment Minister Jim Prentice and federal Natural Resources Minister Christian Paradis.

Pelosi also will be meeting today with several stakeholders from the energy sector, as well as with officials from environmental organizations on both sides of the border.

The premiers' talks with the American legislators came just hours after protesters held an anti-oilsands rally on Parliament Hill, urging the U.S. to end its addiction to "dirty oil."

It also fell on the same day that more than two dozen environmental groups from Canada and the U.S. sent a letter to Pelosi and Markey, urging them to cut the U.S.'s reliance on oilsands crude.

The coalition of environmental organizations are also worried about a proposed expansion of the Keystone XL oilsands pipeline from Alberta to Texas, fearing it will increase America's dependence on the resource and risk an environmental disaster.

"It would lock us into decades of consumption of one of the most environmentally destructive forms of oil in the world and would undermine the U.S. transition to a new energy economy," says the letter.

At an Ottawa news conference, three environmental groups said the Stelmach government should apologize to the rest of Canada for growing oilsands emissions that are undermining national environmental efforts.

Marlo Raynolds, executive director with the Albertabased Pembina Institute, said his organization is "gravely concerned" about the provincial government's failure to implement hard caps on emissions from oilsands development.

While green groups dig in their heels, so, too, are supporters of oilsands development.

The Saskatchewan premier said Canadians and Americans both sometimes take the cross-border relationship for granted. He hopes the U.S. will come around and recognize the value of procuring petroleum from a close friend and neighbour that is committed to the environment.

"Who would rather deal with? Would you rather deal with a country that is so inclined, that is prepared to make these investments in the name of the environment . . . or do you want to deal with others that are less interested?" Wall said in an interview with CBC Television.

Bruce Carson, executive director of the Canada School of Energy and Environment at the University of Calgary, said American legislators must recognize that Canadian oil and natural gas will still be replied upon for decades to help fuel the American economy.

"They're going to buy it anyways, so to start posturing that they're not going to buy it from Alberta and they're going to buy it from (Venezuelan President) Hugo Chavez just doesn't make sense," Carson said. "It's so easy to stand on the other side of the border and throw stones."

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www.calgaryherald.com/business/Stelmach+buoyed+assurances+oilsands/3498157/story.html

[sandi66]

Britain Fines Goldman Sachs
By CHRIS V. NICHOLSON
Published: September 9, 2010


The British securities regulator said Thursday that it had fined Goldman Sachs £17.5 million, or nearly $27 million, for failing to disclose the Securities and Exchange Commission’s investigation into the synthetic collateralized debt obligation known as Abacus.
The Financial Services Authority said Goldman Sachs International, the bank’s London-based unit, “did not have effective procedures in place to ensure that its compliance department was made aware of the S.E.C. investigation so that it could consider whether any notifications needed to be made to the F.S.A.”

In an emailed statement, Goldman said only that it was “pleased the matter is resolved.”

The bank agreed to pay $550 million in July to settle with the S.E.C. over allegations of fraud tied to Abacus 2007-AC1, a credit derivative product based on mortgage-backed securities. The agency’s charges, filed in April after a months-long inquiry, led its British counterpart to examine whether Goldman should have disclosed the investigation earlier.

At the heart of the case is Fabrice Tourre, a Frenchman who in 2007 helped create Abacus alongside John A. Paulson, whose hedge fund was betting that the value of the mortgages would decline. Mr. Tourre also helped market the synthetic C.D.O. to investors like ABN Amro and the German bank IKB, both of which lost heavily in the deal. The Dutch bank ABN Amro would later be acquired by Royal Bank of Scotland, while IKB got a government bailout.

The S.E.C. charged that Goldman and Mr. Tourre, now on leave from the bank, failed to inform those investors about Mr. Paulson’s role in selecting a portfolio he thought was likely to default.

In September 2009, Mr. Tourre, who had subsequently moved to London to work for Goldman, was served with a Wells Notice, which is how the S.E.C. notifies people and corporations that it plans to bring an enforcement action against them.

Goldman did not inform the F.S.A. about the notice although senior people at the bank’s London office were aware of it. As a consequence, “Mr. Tourre remained approved in the U.K. and able to perform a controlled function for several months without further enquiry or challenge from the F.S.A.,” the agency said.
It was not until April that Goldman asked to deregister Mr. Tourre from the agency’s list of employees allowed to speak to clients.
Margaret Cole, managing director of enforcement and financial crime at the F.S.A., said that Goldman “did not set out to hide anything.”

But, referring to the bank’s London unit, she added: “The fact that senior business people at GSI in London knew about Mr Tourre’s Wells Notice, but did not consider the obvious regulatory implications for GSI, is very disappointing.”

Goldman’s early cooperation with the F.S.A. knocked 30 percent off of what would have been a £25 million fine, the agency said.
The Abacus case is ongoing in the United States, where Mr. Tourre, the only person named in the S.E.C. complaint, still faces fraud charges since he was not part of the bank’s settlement. Both he and Goldman have denied that they deliberately misled investors about the risks involved with Abacus.

The fine of £17.5 million is nearly half the £33.3 million that the F.S.A. required JPMorgan to pay in June for failing to protect client funds by separating them from the bank’s accounts.

www.nytimes.com/2010/09/10/business/global/10goldman.html

[sandi66]

UPDATE: Goldman Fined By U.K. FSA

Sep 9 2010 | 2:14pm ET

Goldman Sachs has been fined £17.5 million for failing to notify British regulators about a U.S. probe that led to a US$550 million settlement.

The Financial Services Authority levied the fine today. Fabrice Tourre, the Goldman executive accused by the SEC of orchestrating the collateralized debt obligation deal at the heart of the U.S. fraud case against the firm, is based in London. Goldman was accused of misleading investors in the CDO, which was allegedly structured and marketed on behalf of hedge fund Paulson & Co.

“Goldman Sachs International did no set out to hide anything, but its defective systems and controls meant that the level and quality of its communications fell far below what we expect of an authorized firm,” Margaret Cole, head of the FSA, said.

Goldman said it was happy to resolve the matter.


www.finalternatives.com/node/13779

[sandi66]

US Senate, House eye action on China currency Reuters | 2010-09-10 02:10:00

A volatile political environment is boosting the possibility that US lawmakers will pass legislation designed to prod China into letting its currency rise more rapidly against the dollar.

"The chances are certainly on the rise, I think for two reasons," Jeremie Waterman, senior director for China at the US Chamber of Commerce, told Reuters.

The first is the testy political atmosphere ahead of November congressional elections that has many Democrats in fear of losing their seats, and the other is the "very limited progress" Beijing has made revaluing its yuan since a high-profile announcement in June, Waterman said.

China said in June that it would permit market forces greater sway in setting the yuan's value, yet it has only appreciated about 0.6 per cent since then.

Pressure is building in both the House of Representatives and Senate over the issue, creating some nervousness among analysts about the risk that legislative proposals may stir more trade tensions.

A bipartisan group of senators led by New York Democrat Charles Schumer and Republican Lindsey Graham have insisted throughout the year that have more than enough votes to win approval of a China currency bill.

The House Ways and Means Committee already has a hearing set for September 15 when members of Congress who support action on China’s currency would appear, as well as a panel of outside experts.

With a weak recovery constraining job creation and fanning voter anger, sources said they expected the Senate Banking Committee to also hold a hearing on September 16, with US Treasury Secretary Timothy Geithner in the hot seat.

The hearings would occur when frustration at persistently high US unemployment at nearly 10 per cent is a growing threat to Democrats’ chances at retaining control of Congress in November and is a goad to law makers seeking a target for soaring US deficits.

"There is no real question that China’s deliberately undervalued exchange rate is unfair, contributes to global trade imbalances, and costs the United States jobs and economic growth, particularly in the manufacturing sector," Ways and Means Committee Chairman Sander Levin said in a statement on Wednesday.

Unfair price advantage
US lawmakers and some business groups insist the yuan, also called the renminbi, is undervalued so low it gives Chinese manufacturers an unfair price advantage in US markets and has cost millions of lost American jobs.

To date, the Obama administration has declined to name China a currency manipulator in semi-annual reports issued by the US Treasury. Such a declaration would initiate a process requiring discussion with Beijing about its currency policy and potentially clear the way for trade sanctions against its products.

The Nelson Report, a newsletter focused on US relations with Asia, reported the potential back-to-back US Senate and House hearings in its Tuesday edition and raised expectations that Geithner could testify at both.

However, the Senate Banking Committee still has not officially announced a hearing and the US Treasury Department has declined comment on whether Geithner would testify. Ways and Means also has not released a witness list.

Some analysts monitoring the situation in Congress with some alarm for fear it aggravates global trade tensions.

Dan Griswold, director of trade policy at the Cato Institute, said he saw "a real danger" that either the House or Senate could pass China currency legislation, but hoped President Barack Obama would exert enough pressure to keep a bill from reaching his desk.

With Democrats in fear of losing control of Congress, "perhaps they’re desperate to respond to populist worries about the economy and energise their union base," Griswold said.

Lawmakers have threatened to take legislative action against China in the past but backed down in hope that negotiation would eventually succeed in persuading Beijing that it was in its interests and those of the global trade system to let its currency’s value be set by market forces.

Gary Hufbauer, a senior fellow at the Peterson Institute for International Economics, said the House was the more likely of the two chambers to take action on a China currency bill.

"My guess is that the administration’s position would be not to blast it frontally, but to try to slow it down in the House in a quiet way," Hufbauer said.

sify.com/finance/us-senate-house-eye-action-on-china-currency-news-news-kjkckzfadjf.html

[sandi66]

Iraq to Pay $400 Million for Saddam¡¯s Mistreatment of Americans
¡°There were originally billions of dollars of claims from thousands and thousands of cases,¡± said one Iraqi official.

SEP 10 2010


By Jane Arraf / Baghdad ¨C Iraq has quietly agreed to pay $400 million in claims to American citizens who say they were tortured or traumatized by Saddam Hussein¡¯s regime after his 1990 invasion of Kuwait.




The controversial settlement ends years of legal battles and could help Iraq emerge from United Nations sanctions put in place two decades ago ¨C a step Iraqi leaders see as a prerequisite to becoming fully sovereign.




The Iraqi foreign ministry said the $400 million settlement, signed last week with James Jeffrey, the new US ambassador to Iraq, resolves legal claims inherited from the former regime and was in line with negotiations to end the sanctions.




Settling the claims, which were brought by American citizens, has been seen as a key requirement for Washington to be willing to push for an end to the UN sanctions.




There was a lot of pressure on the Iraqi government to do something that gets Congress off their back.




Known as ¡°Chapter 7¡å sanctions after the part of the UN charter that deals with international threats to peace, they were imposed against Iraq after Saddam Hussein¡¯s 1990 invasion of Kuwait and never fully lifted.




As part of the Status of Forces Agreement between Iraq and the United States, which provides the legal basis for the presence of American troops here, the US committed itself to helping Iraq emerge from Chapter 7.




Claims for kidnapped children, CBS reporter, and othersLaw firms representing the American families pressed Congress for years to approve a measure that would allow foreign governments accused of sponsoring terrorism to be sued in the United States. They finally won an amendment lifting immunity for states accused of sponsoring terrorism.




Senior Iraqi officials who asked to remain anonymous because of the sensitivity of the issue said Iraq and legal firms representing the American families had agreed to a $400 million payout to settle up to eight groups of claims.




The claims include compensation for emotional distress from the children of two contractors seized near the Iraq-Kuwait border in 1990, Americans held as human shields in an effort to prevent a US attack, and the case of CBS News reporter Bob Simon and his cameraman who were held after being arrested along the border with Kuwait.




US courts had previously awarded at least two multimillion-dollar settlements, later appealed. The Bush administration at the time had argued that the money, held in US trust, was needed to help rebuild Iraq. Lawyers have previously said they expected individual claims to average between $400,000 and $500,000 under the final settlement.

¡°There were originally billions of dollars of claims from thousands and thousands of cases,¡± said one Iraqi official.

The claimants included an American boy who was seen frozen-looking on Iraqi television while Saddam Hussein asked him if he¡¯d enjoyed his breakfast after he and his family were prevented from leaving the country.

Settlement money to come from frozen assetsAfter Saddam¡¯s invasion of Kuwait, the regime rounded up several hundred American citizens in an effort to deter the attack launched by the United States several months later to drive Iraq out of Kuwait.

The money comes out of a roughly $900 million fund in frozen assets held by the US government to settle unresolved contracts under the Oil for Food program.

The program was an exemption to the sweeping trade sanctions in the 1990s, under which Iraq was allowed to sell oil to foreign buyers under supervision to buy food and medicine. It ended with the 2003 war, leaving dozens of countries and companies with unfulfilled contracts.

Senior Iraqi officials said the settlement was aimed at protecting Iraqi funds being held abroad. The Development Fund for Iraq, created by the UN, holds Iraq's current oil revenue as well as money from the former Oil for Food program and other frozen assets. The mandate of the advisory body which oversees it expires at the end of this year and Iraq needs US and international support to replace it with direct control of its revenue.

Iraq is still paying compensation to Kuwait under Chapter 7 sanctions ¨C so far $27.6 billion ¨C and continues to devote 5 percent of its oil revenues to a UN fund for Kuwaiti compensation. Baghdad, which argues that it needs the funds for reconstruction, is trying to cut that percentage in half.

Kuwait has taken additional measures such as seizing an Iraqi Airways plane on its first flight to London this year.

Iraq argues that it can¡¯t be fully independent while it is still under Chapter 7.

Why the settlement is controversialDespite Iraq¡¯s potential oil wealth, the country has major economic problems, including widespread poverty, 30 percent unemployment, and an infant mortality rate among the highest in the region. Oil revenue, which the US believed would fund reconstruction when it invaded Iraq, has been limited by ongoing attacks and an infrastructure that will take billions of dollars in investment and years to repair.

The settlement is controversial not only because of Iraq's pressing developmental needs, but because it holds the current government accountable for Saddam Hussein¡¯s actions.

¡°A lot of blood has flowed since then and a lot of it is Iraqi blood. It¡¯s arguable that the suffering was not caused by the current Iraqi government or the Iraqi people,¡± says one senior Iraqi official. ¡°This is politics, this is not justice.¡±

dinartrade.org/iraq-to-pay-400-million-for-saddams-mistreatment-of-americans/

[sandi66]

Iraq Transfers 3 Tons of Gold into CBI to support Dinar
by
Labman
View Profile View Forum Posts Private Message View Blog Entries View Articles Iraq Transfers 3 Tons of Gold into CBI to support Dinar
07 Feb 2010 23:27



Plan to increase the value of the dinar against the dollar and the deletion of three zeroes

Finance Ministry has prepared a plan to increase the value of the dinar against the dollar and then delete the three zeroes from the dinar's value to contribute to the advancement of the Iraqi economy during the coming period with the Iraqi central bank denied the rumors making the dollar worth 1000 dinars and said in a statement issued by the Ministry of Finance:, the Minister Baqir Jabr said During his recent visit to the Jordanian capital Amman, said the CBI chagrin financially estimated $ 22 billion and three tons of gold intended to support the Iraqi dinar. He said that successful fiscal policy pursued in Iraq have contributed to increasing the value of the Iraqi dinar against the dollar, noting that the dollar exchange rate dropped significantly during the current year, stressing that all efforts will be channeled to the deletion of three zeros from the value of the dinar.

On the other hand denied the authoritative source in the Iraqi Central Bank rumors making the dollar worth 1000 dinars, or a change denominations or raise zeros from the current currency.

He said in a press statement that the bank has been following with great interest the phenomenon of low demand for the dollar in the local exchange markets, stressing that such information or rumors surrounding the aim of achieving commercial gain emergency for some users at the expense of the public.

translate.google.com/translat...ogle.com&twu=1

www.dinarrumor.com/content.php?150-Iraq-Transfers-3-Tons-of-Gold-into-CBI-to-support-Dinar

[sandi66]

Joint Press Release

Board of Governors of the Federal Reserve System
Office of the Comptroller of the Currency
Federal Deposit Insurance Corporation

For immediate release September 12, 2010

U.S. Banking Agencies Express Support for Basel Agreement

The U.S. federal banking agencies support the agreement reached at the September 12, 2010, meeting of the G-10 Governors and Heads of Supervision (GHOS).1 This action, in combination with the agreement reached at the July 26, 2010, meeting of GHOS, sets the stage for key regulatory changes to strengthen the capital and liquidity of internationally active banking organizations in the United States and around the world.

The U.S. federal banking agencies actively supported the efforts of the GHOS and the Basel Committee on Banking Supervision (Basel Committee) to increase the quality, quantity, and international consistency of capital, to strengthen liquidity standards, to discourage excessive leverage and risk taking, and to reduce procyclicality in regulatory requirements. The agreement represents a significant step forward in reducing the incidence and severity of future financial crises, providing for a more stable banking system that is less prone to excessive risk-taking, and better able to absorb losses while continuing to perform its essential function of providing credit to creditworthy households and businesses.
Today's agreement represents a significant strengthening in prudential standards for large and internationally active banks.

The GHOS agreement calls for national jurisdictions to implement the new requirements beginning January 1, 2013. The GHOS announced that the new numerical minimum requirements would be phased in over two years beginning on January 1, 2013, and that certain capital deductions and the phase-in of capital buffers would occur over time from January 1, 2014, to no later than January 1, 2019. This transition period is designed to give institutions the opportunity to implement the new prudential standards gradually over time, thus alleviating the potential for associated short-term pressures on the cost and availability of credit to households and businesses. Consistent with this objective, supervisors will be evaluating an institution's capital adequacy on the basis of the then-applicable standards as well as the strength of an institution's plans to meet future standards as they come into effect.

The U.S. federal banking agencies support and endorse the efforts of the GHOS and the Basel Committee to strengthen the capital position of large and internationally active banks. The Dodd-Frank Wall Street Reform and Consumer Protection Act requires the establishment of more stringent prudential standards, including higher capital and liquidity requirements for large, interconnected financial institutions. Moreover, the Basel Committee continues work on the development of measures to improve the loss absorbing capacity for systemically important financial institutions. This work would augment the standards announced by the GHOS today.


--------------------------------------------------------------------------------

Footnotes
1. The GHOS is the oversight body of the Basel Committee on Banking Supervision. Return to text

Media Contacts:
Federal Reserve Board Barbara Hagenbaugh 202-452-2955
OCC Robert Garsson 202-874-5770
FDIC Andrew Gray 202-898-7192

2010 Banking and Consumer Regulatory Policy Last update: September 12, 2010

www.federalreserve.gov/newsevents/press/bcreg/20100912a.htm

[sandi66]

SEPTEMBER 13, 2010, 7:37 A.M. ET

Treasury Official Sees Sustained Yuan Move For Extended Period

WASHINGTON (Dow Jones)--A senior U.S. Treasury official on Friday called China's decision to continue its currency appreciation "a move in the right direction."

The official declined to comment on the pace of currency reform in China, but added, "We expect to see sustained progress over an extended period." The administration has been reluctant to judge whether the rate of change is satisfactory based on short-term moves, but has kept quiet pressure on Beijing at the highest levels.

China's tightly controlled currency hit a new high against the dollar Friday, a development many are interpreting as a fresh attempt by the government to deal with rising U.S. political pressure to allow the yuan to rise in line with market rates.

Beijing's decision follows meetings earlier this week between U.S. National Economic Council Director Lawrence Summers and other senior White House officials with Chinese leaders, and ahead of House and Senate hearings on the yuan where Treasury Secretary Timothy Geithner is to testify.

Appetite in Congress to take action against China is high with an election looming. Rep. Tim Ryan, one of the lead co-sponsors for legislation in the House addressing China, said the appreciation hadn't changed his mind about moving forward his bill. "We've seen this situation before...and then they go back to the same tricks," said Ryan, a Democrat from Ohio, a manufacturing state threatened by China's burgeoning productivity.

China had sought to blunt some international pressure over the value of the yuan in June, announcing ahead of the Group of 20 meeting earlier this year it would begin moving toward a floating yuan again. But the currency has only appreciated a fraction of a percent over the past several months, frustrating lawmakers who say the currency is undervalued between 20% and 40% and a major contributor to the U.S.'s massive trade deficit.

China says the issue on the yuan is overly politicized in the U.S. They point to the 20% appreciation between 2005 and 2008, when the U.S. deficit actually grew, and say the U.S.'s problems are structural and have little to do with China's currency.

Eswar Prasad, A Cornell University economist and former head of the International Monetary Fund's China Division, called Beijing's move a strategic move ahead of the U.S. elections, predicting another similar adjustment before the campaign concludes.

"It is highly likely to allow for another 1% to 2% appreciation before November," he said.

By delaying appreciation while the dollar depreciated against the euro and yen, Prasad says the Chinese have effectively targeted two goals: relieving political pressure in the U.S., and easing the pain for their own exporters.

Officials in Beijing say China is committed to long-term reform and a major adjustment--such as the type that many U.S. legislators are seeking--would not only harm their economy, but damage the U.S. economy.

But many of these arguments fall on deaf ears.

Mike Wessel, a former aide to House Democratic Leader Richard Gephardt and member of the congressional advisory board the U.S.-China Economic and Strategic Review Commission, said, politically speaking, the move is too little, too late.

"Quite frankly, I think people are sick and tired of repeating that same old song," he said. "The appetite for action in Congress is quite strong....there's lack of trust after repeated years of intransigence and reversals."

While Beijing's move isn't likely to assuage House legislators, the administration and groups such as the U.S.-China Business Council--which is made up of multinational companies with significant interests in China--may be able to persuade senators to slow-walk the measure until after the November elections. Without the added heat of the campaign, momentum for full passage may dissipate.

online.wsj.com/article/BT-CO-20100913-705025.html

[sandi66]

US OPENING NEWS INCLUDING: Basel 3 reforms provided transparency and confidence to the market

Monday, September 13, 2010 •

• Jump in Chinese retail sales and industrial production helped risk-appetite



Proactiveinvestors recommends
Noventa soars after confident outlook for Marropino tantalum mine restart Persian Gold gets a seat at the table in IranSolomon Gold : On a mission with Newmont to discover the South Pacific’s next giant orebody• Basel 3 reforms provided transparency and confidence to the market

• EU Commission boosted its 2010 Eurozone GDP forecast

• RANsquawk European Morning Briefing Video: www.youtube.com/watch?v=AVs6tIbZ-ac

Overnight News

ASIA

Lead 10-year JGB futures dipped to an 11-week low overnight, hurt by a rise in Tokyo share prices, and technical charts pointed to the potential for further losses. However, later in the session JGBs pared earlier losses to trade near unchanged. Nikkei rose 0.9% to a three week closing high after more upbeat China and US data helped sooth investor worries that global economic growth would slow. (RTRS)

In other news, China's major economic indicators picked up in August after slowing for several months, data issued over the weekend show, an unexpected rebound that could help prospects for global growth.
• Chinese CPI (Aug) Y/Y 3.5% vs. Exp. 3.5% (Prev. 3.3%)
• Chinese PPI (Aug) Y/Y 4.3% vs. Exp. 4.5% (Prev. 4.8%)
• Chinese Retail Sales (Aug) Y/Y 18.4% vs. Exp. 18.0% (Prev. 17.9%)
• Chinese Industrial Production (Aug) Y/Y 13.9% vs. Exp. 13.0% (Prev. 13.4%)
• Chinese New Yuan Loans (Aug) Y/Y 545.2bln vs. Exp. 500.0bln (Prev. 532.8bln) (WSJ/RTRS)

Also, China’s latest inflation numbers bolster the case for a rise in interest rates, according to Li Daokui a member of the PBOC monetary policy committee. He said that China should raise deposit interest rates because the acceleration in inflation is eroding the value of bank savings. (China Business Journal / Xinhua)

GLOBAL

Global regulator and central bank governors have reached a deal on Basel 3, a sweeping reform that will force banks to hold more capital to withstand financial shocks (RTRS/Sources)
Highlights include:
• Increasing the minimum common equity requirements from 2% to 4.5%, weighted according to the banks risk profile.
• Banks will have to hold a capital conservation buffer of 2.5%
• Total common equity requirement will therefore be 7%
• Banks have until 2018 to comply. (5 years for minimum ratios and a further 3 years for buffer requirements)
• Banks which fail to meet the 2.5% buffer will be stopped from paying dividends , but will not be forced to raise cash.

US

The United States’ job market is recovering at a better rate than it did after its past two recessions despite high unemployment, according to US Treasury’s Kruger. (FT)

In other news, in a WSJ survey 3 in 5 economists expect the Fed to resume large scale purchases of securities but by a 3 to 2 margin, most of them think that would be a mistake. Economists continued to cut their growth forecasts for the rest of the year and into 2011. Most don't expect the Fed to raise rates from the current 0% to 0.25% range until some time after Q2 2011, while more than a quarter don't see higher rates until 2012. (WSJ)

Bonds

EUROPEAN GOVERNMENT BONDS

Bund futures traded lower for the entire European session amid renewed risk-appetite and strength in equities. European peripheral 10-year bond yield spreads with respect to bunds have seen tightening, however a well received BTP auction from Italy had a muted market reaction. Moving into the North American open, prices are trading in negative territory.

In other news, the EU Commission boosted its 2010 Eurozone GDP growth forecast at 1.7% vs. 0.9% previously, adding that the recovery is stronger than forecast However it said that the global recovery is losing momentum, and lingering sovereign debt tensions may weigh on the outlook. (RTRS/Sources)

Elsewhere, Greece can meet the demands of international lenders and avoid defaulting on loans without needing to impose more austerity measures, Greek Prime Minister Papandreou said on Sunday. It was also announced that former ECB Vice-President Papademos will become his economic policy adviser in an unpaid role. On Friday the IMF announced they will release EUR 2.57bln to Greece after a loan review, saying that Greece has made a strong start on the program and Greece’s fiscal strategy is on track. (RTRS)

GILTS

NYSE LIFFE Gilt futures traded in tandem with bunds in negative territory throughout the European session, and moving into the North American open have maintained weakness.

In other news, Britain risks sliding into a double-dip recession before the end of this year as the government's promised austerity measures spook businesses into their own hefty cutbacks, according to research. The accountancy firm BDO warned today that confidence among UK companies had been hammered in recent weeks. Businesses are now at their least optimistic since the depths of the recession last year, and BDO believes this indicates that the economy may start contracting again as early as the fourth quarter of 2010. BDO’s optimism index – which reflects how businesses expect trading to develop two quarter ahead – tumbled to 93.1 in July, reaching levels not seen since the deepest parts of the recession between November 2008 and July 2009. (Guardian/RTRS)

EQUITIES

European bourses traded in positive territory during the European session amid renewed risk-appetite. Better than expected Chinese economic figures (retail sales and industrial production), certainty and transparency over Basel 3 reforms as well as the EU Commission boosting its 2010 Eurozone GDP forecast all played in favour of equities. DAX underperformed its European peers in early trade following news that Deutsche Bank filed voluntary public takeover offer for Deutsche Postbank and plans EUR 9.8bln capital increase. However, later in the session Deutsche Bank’s shares recovered after it reaffirmed its 2011 profit target, and said it has no plans to make a more attractive offer for the Postbank. Weakness in the USD index buoyed commodities that in turn helped basic materials sectors. Moving into the North American open, equities are trading in positive territory with financials and basic materials as the best performing sectors.

FX

Risk-appetite has been the underlying theme during the European session, which in turn exerted pressure on the USD index, with both GBP/USD and EUR/USD trading in positive territory. However, moving into the North American open, GBP/USD came off its highs amid market talk of model names selling in the pair.

In other news, US Treasury Secretary Geithner said that China has made very little progress on letting the exchange rate of the CNY reflect market forces. (WSJ)

COMMMODITIES

WTI Crude futures have traded higher throughout the European session on renewed risk appetite following stronger than expected economic data out of China at the weekend, with addition price support from the continued closure of the Enbridge Energy Partners Line 6A pipeline in Illinois.

Oil & Gas News:
• Goldman Sachs in a weekly report has predicted that WTI crude prices will rise to between USD 85 and USD 95 for the rest of the year as inventories decline.
• Enbridge Energy Partners has drained most of the oil from a damaged pipeline in Illinois, the Line 6A pipe which supplies more than one third of the oil from Canada to Mid-West USA. However, there is no estimate for when the pipeline will re-open.
• An industry source from the Gulf has said that a cut in OPEC production in October is out of the question, as Oil is stable in a USD 70 to USD 75 range.
• Kazakhstan, Central Asia's largest oil producer, plans to produce 81 million tonnes of crude and gas condensate next year.
• Iraq resumed crude flow through its northern Kirkuk-Ceyhan pipeline, which carries a quarter of Iraq's oil exports, after a halt of less than a day.



proactiveinvestors.co.uk/columns/ransquawk/3400/us-opening-news-including-basel-3-reforms-provided-transparency-and-confidence-to-the-market--3400.html

[sandi66]

Which Time Is Different: Gold or Sovereign Debt Levels?

by: Steven Levinson September 13, 2010

I was in an unfortunate internet debate (that I regret) with a poster of the future value of gold and he remarked something to me that made ponder my initial stance. I argued that sovereign debt levels are unsustainable and he highlighted the perceived astronomical price of gold as he sarcastically exclaimed, “Please, pile away into the trade…. This time is different! It has to be!”

Though I remained entrenched in my position, I confess that this made me reevaluate my initial views (as I believe any good trader/investor constantly should). I asked myself: “Am I falling for TTID syndrome?” As gold prices hit nominal record highs such as did oil in 2007, and sovereign debt levels reach their own absolute record highs, I was forced to wonder, which of us is falling for TTID syndrome? After careful study of both sovereign debt levels and the price of gold, I am further bullishly convinced on gold. In my article, I will attempt to demonstrate that the risk of sovereign default (or something similar) remains extremely high and that the price of gold is currently undervalued.

To begin, debt-to-GDP levels are high- not only in nominal terms but in historical relative terms, using the United States for example.

As you can see, debt levels are reaching historical peaks that have not been encountered since World War II. However, in contrast to that period, we no longer have a mobilized economy, a young, burgeoning population, and a massive trade surplus. But, does this scenario necessarily invoke the possibility of sovereign debt crisis? Is this time different?

Fortunately, to help the settle the debate, there actually a book called “This Time is Different” recently released by Carmen M. Reinhart and Kenneth S. Rogoff. The book is a dry, academic book, heavy on charts, graphs, and mathematical formulas; it has been called a “Masterpiece” by the Financial Times and “Essential Reading” by the Economist and has been wonderfully enlightening to me.

The book is 463 pages long, so no, I will not summarize but the following graph is something that is extremely troubling.

Wow. Now, pretending we don’t currently do not know anything about the state of the world, if only there was some kind of mathematical formula if certain countries were at high risk of default. Fortunately, Reinhart and Rogoff offer one. They split the countries of the world into three groups: Club A with continuous access to capital markets, Club B with limited debt tolerance (where the fun happens), and Club C with no access to capital markets. Club B is then split into four subcategories with “Type IV countries” as the most debt intolerant. For the sake of brevity, I will only focus on Type II, III & IV (quasi-debt intolerant and debt intolerant countries)

Countries are ranked on their Intuitional Inventory Country Credit Ratings (to factor in perception) and a ratio of external debt to GNI (to monitor sustainability). A score below 47.5 in the IIR and a percentage of 35% or above are considered extremely healthy, and at risk for default. It took me awhile to find the data from II, WB, and IMF and here are some of the winners:

•Hungary: 56.9, 122%
•Portugal: 62.6, 227%
•Italy: 70.4, 133%
•Ireland: 67.5, 1,424% (yes, that is correct)
•Greece: 43.9, 175%
•Spain: 66.7, 171%
•UK: 81.5, 404% (thrown in for fun)

The external debt-to-GNP levels over 100 “run a significant risk of default” and the average ratio of defaulters in recent history (during and since the debt crises in the early 1980s) has been 69.3 for middle-income countries (though one could fairly argue that a country that defaults, is predisposed to defaulting, and thusly, would most likely default at lower ratios). Russia (1998) and Argentina (2001) defaulted at rates of 58.5 and 50.8 respectively. Ladies and gentleman, we are one oil shock, one Israeli bombing run, one major terrorist attack, one North Korean playday, one failed bond auction, and one developing world revolution from fiat currency hell (including an unimaginable amount of other inconceivable blacks swans); the international financial system is at a precipice.

Furthermore, even if nations avoid outright default, many have chosen to pursue inflation, devaluation, or debasement. Niall Ferguson, author of The Ascent of Money, a must-read, outlined six possible reactions to unsustainable debt levels. Invariably, with only one exception, countries have chosen to either inflate/devalue currencies or default on debt.

Thus, we return to the question: “Is this time different?” Does the rate of sovereign debt crises remain forever flatlined like the Fed Funds rate (i.e. free money to banks!) or should we come to expect future sovereign debt issues that put enormous pressure on fiat currencies vis-à-vis gold? Where does this leave countries not supported by Germany in the eurozone? Even within the eurozone, do the new financial regulations recently proposed include stipulations for an “orderly default” as Angela Merkel, the savior of Europe, has suggested?

In addition, although this throws off the flow of my argument a bit, I would like to address some counter-points.

First, for someone who sees the 2003-Present blip on chart 2 and argues, “well, there are bound to be some sovereign defaults but I am sure it will not hamper the entire global economy”. These are probably the same people that saw the chart for real estate prices and consumer debt levels in 2005 and argued for the “soft landing” (funny how no one talks about that anymore), or who saw the subprime mess “contained” (ditto). Reinhart and Rogoff argue that sovereign defaults depend on a country’s willingness. That is why countries such as Turkey (1978), Brazil (1983), Argentina (2001), and Russia (1998) can default on relatively benign levels (compared to now) levels of external debt-to-GNI of 21.0, 50.1, 50.8, and 58.5.

Though “Europe” or other countries can maintain every intention to stave off default, if one country is forced into default due to any number of black swan scenarios, it creates a “moral hazard” that weakens other countries’ willingness to take the pain and suffering to satisfy their own debts. That is the “contagion effect”, and why we refer the phenomena as a “wave” or as “dominoes”, and why the second chart looks like a metropolis skyline. If Greece defaults, why shouldn’t we?

Secondly, for someone that argues the industrialized nations will be able to recover economically in time and straighten their budgets and implement significant austerity before there is an issue (“significant” and “issue” purposely chosen), is underestimating the precariousness of the central banks’ position. Because private investment and lending has not increased, pulling government spending too soon will lead to a “deflationary death spiral”. If this were not the case, why would Obama, Geithner & Co. fully aware of the fear surrounding sovereign debt that has been priced into Greek bonds and gold, choose to match record national debt with a record budget deficit? Tightening too soon would drive us into a massive depression ala The Great Depression, which would make the debt untenable in its own right, forcing governments to keep spending high and liquidity rampant.

Also, what exactly is austerity? When each Greek citizen owes $250,000 dollars to pay government liabilities when debt and pensions are included, is only borrowing 300% more than the legal limit outlined by the Maastricht treaty count (3% deficit to GDP), can this really be called austerity? Although the United States’ external debt is still quite manageable, the United States government (not including public debt) owes $130 trillion including Fannie/Freddie, states’ debts, and unfunded pension, Medicare, Medicaid, and Social Security liabilities (on 4.4 trillion dollar revenue, with an already $1.47 trillion dollar annual deficit). I argue that the extent of the liability and the polarized, poisoned climate in Washington almost necessitates a debt crisis, whether real or imagined, to give politicians enough political capital to make government expenditures reasonable. Do you think either Republicans or Democrats want to be the party that killed your pension, your Medicare, your Social Security?

This, I believe, is an almost a logical proof that we will be forced to hear US debt crisis in the news before politicians muster enough will and political capital to make the necessary and drastic structural changes. When sovereign debt comes to a head, which I hope I have inevitability and historical unsustainably, whether the outcomes is a deflationary death spiral, massive inflation, or outright default, either scenario will drive the price of gold bonkers.


Returning to gold, is this time different for the precious metal? Is gold massively overpriced?

I’m sure most Seeking Alpha readers have read the articles by Cullen Roche and Henrique Simoes that boldly declare that gold is heading for a correction. The Nomura chart is particularly striking.





Cullen calls the move into gold “irrational” and Simoes writes:

Gold looks expensive relative to stocks and to agriculture commodities on a historical basis. My view is that there is a great risk in opening new gold long positions at these price levels and the risk of a sudden, large market correction is quite high.

Ignoring that Simoes is only pointing out the obvious (“gold looks expensive relative to stocks…”), this is cheap, cheap, cheap analysis and neither tells us why these graphs are particularly important. I, in my limited knowledge, will attempt to argue that these graphs

First, oil is traded in US dollars and one would expect that any weakness in the dollar to be reflected in oil prices, which in turn, would be reflected in the oil to gold ratio. However, while a level of risk of dollar devaluation is priced into oil, oil is currently trading on supply and demand issues. The appreciation of gold-to-oil is a natural reflection of gold’s rise to dollar. Furthermore, gold-to-oil is trading at a ratio of 16x’ lower than in the 90s, and higher than in the 2000s, a period of the great bull market in oil, and before the real risk of sovereign default was priced since 2008 (due to a causes as the doubling in two years of the US national debt)

Secondly, the chart comparing gold to corn is misleading. From June 2008 to June 2010 (the end of the chart), corn prices have fallen a whopping 50% So the recent run up of corn vis-à-vis gold may have more to do with corn than it does gold.





Third, the S&P suffers from the same problem as oil as it is also traded in dollars so any weaknesses in the dollar would be inherently reflected in the gold-to-S&P chart. While one could hypothesis that the threat of devaluation and inflation could be reflected in the S&P stocks (in this case, vis-à-vis equities of companies), I would argue that it would be extremely difficult to predict the effect of a loss of faith in fiat currencies would have in stocks. In all likelihood, sovereign debt issues would make stocks weaker, as reflected in the markets during the 2010 European sovereign debt crises and the Chilean hyperinflation to name some examples. Furthermore, the stock market has proven time and time again its inefficiencies and misallocation (see: Nasdaq Bubble 2000; 2008, all of).

I argue that the Nomura graphs which Simoes and Cullen present are as useful to predicting the value of gold as a milk-to-gold chart, or even a “how Steven Levinson feels on Sundays” to gold chart, or any chart other than what has been driving the price of gold recently: sovereign debt and currency fears... Cheap, cheap, cheap analysis.

Here are charts that I believe are more useful that show gold is cheap. I would also like to link Stephen Loeb’s article.

Real price of gold:












Basically, from the charts, I want to convey that gold is not extremely overpriced in nominal terms, and its recent increases only track the increase in the money supply (which has been on steroids since the early 1990s, and is now blasting off in search of stars). Furthermore, it appears that the threat of sovereign default or currency devaluation, which appears likely in historical context and nominal terms, is yet not fully priced into the precious metal.


If I may add personal opinion without charts, graphs, stats, and links (ignore if you’re a financial empiricist like me); Everything we have seen appears to be caused by the excessive liquidity and borrowing beginning in the early 1990s; and that the financial pain has slowly moved one rung up the ladder since the middle of the decade: the American/European consumer (2006-7), the Countrywide, Golden West type banks (2007-2008), the big banks Lehman, Wachovia, Bear Stearns, etc. (2008-2009), PIIGS-type countries (2009-2010), and the big countries (2010+). The debt, quite simply, needs to work itself out. The recent Greek bailout by the European Union can be compared to the Countrywide Financal firesale to Bank of America (BAC): indicative of deeper problems, and good money thrown after bad to “shore up” the financial system.


If the situation comes to a head, and it appears it inevitably will, there will be a rush to the hardest of the hard assets (things countries fight wars over: bullion, oil, food, profitable land). As the system restructures and rebalances, someone in these assets will be able to cash out and snatch up depressed assets such as equities in solid companies.

If I may conceptualize a bit (also feel free to ignore), imagine the present is 1913. You are a Parisian discussing geopolitics and global economy, with no ideas the economic and material devastation that awaited you in the 20th century. As you take a long drag from your cigarette, you remark upon the world around you; how the telegram (internet) has facilitated cross-continental communication, how unprecedented levels of trade have bound countries together – especially between the superpowers UK and Germany (Chimerica), how innovative and extraordinary federal intervention by the American government in response to the Panic of 1907 to create the Federal Reserve makes future financial panics extremely unlikely, how Argentina- the world’s largest emerging market- has railroads now and is now the world’s 5th largest economy, how the destructiveness of weaponry born in the 2nd Industrial Revolution makes warfare extremely unlikely, and just how interconnected we all our and that, as far as you could see, things just appear so darn settled.

seekingalpha.com/article/224846-which-time-is-different-gold-or-sovereign-debt-levels

[sandi66]

Buffett, Gold and the Gold Standard

by: Stephen Yu September 13, 2010

I am a big fan of Warren Buffett's. I have followed and owned shares in his company, Berkshire Hathaway (BRK.A, BRK.B) since the mid-90's. I have read Alice Schroeder's analysis of the firm, published in 1999 when she was at Paine Webber. I have made my pilgrimage to the Capitalist Woodstock in Omaha. I even have the company's Diamond Edition Monopoly game, still sealed after 5 years. So given this history, it may come as a surprise that I hold gold along with Berkshire shares in my portfolio. After all, the Oracle did say,

Gold gets dug out of the ground in Africa, or someplace. Then we melt it down, dig another hole, bury it again and pay people to stand around guarding it. It has no utility. Anyone watching from Mars would be scratching their heads.

Well, in case you are scratching your head, I DO NOT have a multiple personality disorder. I agree with the Oracle on general investment approach, but I have a different opinion on gold. First, gold does have utility. One, it is an excellent electrical conductor. Computers, electronics and appliances will not work very well without it. Two, from the Pharaohs of ancient Egypt to today’s ordinary citizens, people have been making jewelry from gold because of its beauty. So again, gold has utility. But Mr. Buffett is not a scientist or a fashion designer. As such, he is not referring to physical properties or appearance when he refers to utility. As an investment guru, he is referring to investment utility. You know – cash flow, dividends kind of stuff. And on that, the Oracle is correct. Gold does not generate cash flows, not unless you keep trading it – something that Mr. Buffett eschews. However, that does not mean that gold has no value outside of industrial and jewelry uses.

By now, you may cite store of wealth, hedge against inflation, insurance against black swans, etc, etc. To these, I say yes, gold does have these merits. But after reading this, I hope you will agree that these properties, in addition to conductivity and beauty, are rather superficial compared to gold’s ultimate value.

Gold’s greatest value, I believe, is something that we, the people, have abandoned a couple generations ago when Nixon was president. Those who know U.S. history know that I am talking about the gold standard. As Alan Greenspan understood nearly half a century ago (see article), but seems to have long forgotten, the gold standard and freedom go hand in hand. The gold standard keeps politicians honest. Without tying money supply to something tangible (e.g. gold), politicians, like tyrants throughout history, can print money without constraint to support their extravagance or repression and cover up their incompetence. And excessive money printing eventually exerts its invisible but ruinous hands on the citizens via inflation, arbitrary distribution of wealth and instability. The gold standard prevents this and it holds rulers responsible for their action. It makes the government fear the people. And as Thomas Jefferson says,

When the government fears the people, there is liberty. When the people fear their government, there is tyranny.

For those smarty pants out there, I know that a hard currency in the form we used in the past is not foolproof. For example, when Europe was using silver (and gold as well) as its currency during the middle ages, the discovery of an abundance of silver in the New World caused inflation. But this could have been remedied by simply maintaining the convertibility of the currency to the proportion of silver’s availability, rather than to the metal’s physical weight. In the end, no matter the shortcomings, it is far harder for politicians to manipulate a hard currency than a fiat one. And there lays the greatest value of gold – liberty.

History books call the U.S. Constitution the most important document of mankind. The Constitution establishes checks and balances in our government, thereby protecting our freedom. Similarly, the gold standard keeps politicians honest and preserves our liberty. How much is liberty worth?

seekingalpha.com/article/224814-buffett-gold-and-the-gold-standard?source=article_lb_author

[sandi66]

The Case for a Correction in Gold

September 13, 2010

Chris Vermeulen of thegoldandoilguy.com makes a case that gold is forming a top and could be due for a pullback in this article, an excerpt below:

Wed Sept 8th, 2010
I am going to step out on a limb in this report and cover what I think to be an intermediate top in the precious metals sector. Everyone I speak with and from the hundreds of emails I get I would say the vast majority are bullish on gold and silver. That being said, I feel we are 3-8 days away from a pop and drop in the price of gold.

In short, I feel precious metals are on the verge of a sharp correction which may only last a few days, but the drop will be substantial. I still think we could see a few more up days or sideways session before this happens as the June high for gold bullion should be penetrated before the market truly reverses back down.

Anyone long gold, silver or PM stocks should be thinking of tightening their stops and for the gold bugs to mentally prepare them selves for a correction.

When I look at a chart of GLD, the gold ETF, we could be due for a correction that may have already started on Thursday, a day after Vermeulen's article. I previously called for a pullback here on June 19th and then made a case for a breakout in this article at $118.54. I think the obvious key level to watch is $123.56, failure to break through this level in the short-term indicates a double top has formed. The long-term and intermediate term trends are still positive but in the short-term I think caution is still warranted. Watch the 20 day simple moving average as a potential level of support in the upcoming week, failure to hold it could mean the $118.40's and 50 day moving average will be tested.

seekingalpha.com/article/224808-the-case-for-a-correction-in-gold?source=article_lb_author

[sandi66]

Bank Stocks Climb as Basel Gives Firms Eight Years to Comply

By Jann Bettinga and Yalman Onaran -

Sep 13, 2010 8:12 AM

Bank stocks rose in Europe and Asia as regulators gave firms more time than analysts expected to comply with stiffer capital requirements aimed at preventing future financial crises.

France’s Credit Agricole SA and Dexia SA led the Bloomberg Europe Banks and Financial Services Index. The benchmark was up 1.8 percent at 1:05 p.m. in London at a one-month high. The 224 member MSCI AC Asia Pacific Financials Index rose 1.7 percent at 6 p.m. Hong Kong time, set for its biggest gain since July 8.

At a meeting in Basel, Switzerland yesterday, regulators reached a compromise that more than doubles capital requirements for the world’s banks, while giving them as long as eight years to comply in full. Germany had sought to give firms a decade to make the transition, while the U.S., U.K. and Switzerland pushed for a maximum of five years.

“The implementation period is much longer than expected, which is generous to the sector,” Credit Suisse Group AG analysts including Jonathan Pierce wrote in a note to clients today. “The fact that the sector now has a greater degree of certainty about capital requirements going forward ought to act as a material positive catalyst.”

The Basel Committee on Banking Supervision will force lenders to have common equity equal to at least 7 percent of assets, weighted according to their risk, including a 2.5 percent buffer to withstand future stress. Banks that fail to meet the buffer would be unable to pay dividends, though not forced to raise cash. Lenders will have less than five years to comply with the minimum ratios and until Jan. 1, 2019 to meet the buffer requirements.

‘Positive Step’

“The agreement reached is a very positive step forward which will create a much more resilient banking system in the future while ensuring that banks will be able to maintain lending to the real economy,” U.K. Financial Services Authority Chairman Adair Turner told reporters in Basel today. “It’s a very, very balanced package.”

The decision will reduce uncertainty about banks’ capital, and allow some to raise their dividends, Morgan Stanley analysts Henrik Schmidt and Huw van Steenis said in a report today.

“Nordic banks will be the first to raise dividends, followed by the Swiss,” they wrote. JPMorgan Chase & Co., U.S. Bancorp and Northern Trust Corp. may be among the first U.S. firms to increase their dividends, according to Morgan Stanley.

Shares Jump

Credit Agricole jumped 6 percent to 11.63 euros as of 2:05 p.m. in Paris trading, and Societe Generale was up 5.1 percent at 46.15 euros. Dexia advanced 5.1 percent to 3.38 euros in Brussels. In Frankfurt, Deutsche Bank AG rose 1.7 percent to 48.51 euros and Commerzbank AG, Germany’s second-biggest lender, advanced 2.3 percent to 6.43 euros.

The cost of insuring bank bonds against default plunged to a five-week low. The Markit iTraxx Financial Index of credit- default swaps on the senior debt of 25 banks and insurers fell 9.5 basis points to 120 as of 1 p.m. in London, the lowest level since Aug. 10, according to JPMorgan Chase & Co.

European banks are less capitalized than U.S. counterparts and may be required to raise more funds under the new Basel rules. Agricultural Bank of Greece, Banco Popolare SC, Credito Valtellinese Scarl and Banca Monte dei Paschi di Siena SpA may fail to meet the 7 percent ratio in 2012, analysts at Goldman Sachs Group Inc. said in a report to clients today.

Italian Lenders

Eugenio Cicconetti, an analyst at UniCredit Corporate and Investment Banking in London, said Italian banks, which have some of the lowest capital levels among European lenders, will benefit from the extra implementation time. Monte dei Paschi rose 3 percent to 1.04 euros and Banco Popolare advanced 4.2 percent to 4.90 euros in Milan trading.

The rule-making process, which began in 2009, has pitted countries against each other. Some, including Germany, said higher capital requirements would hurt their banks and curb lending at a time when global economic recovery is faltering. Germany led the fight for lower ratios and a slower time frame for implementation, according to participants in the talks.

“We have very precisely agreed upon the transition period which will permit that this standard won’t hamper the recovery,” said European Central Bank President Jean-Claude Trichet, speaking on behalf of central bankers from the G-10 nations in Basel today. “It’s good for the global economy, good for growth.”

Deutsche Bank

Germany’s 10 biggest banks, including Frankfurt-based Deutsche Bank and Commerzbank, may need about 105 billion euros ($134 billion) in fresh capital because of new regulations, the Association of German Banks estimated on Sept. 6.

While Germany didn’t get the deadlines extended all the way, it won some concessions for its state-owned banks, which may have a harder time to comply. Government capital injections will continue to count as common equity until the end of 2017, even if they were in a form that the new Basel rules consider as not qualifying. State banks get an extra five years of exemptions to rules tightening the definition of capital.

“German banks should have more breathing room,” Citigroup Inc. analyst Ronit Ghose said in a note to clients today. “French banks such as Societe Generale and Credit Agricole should now have more time to augment capital adequacy.”

Deutsche Bank, Germany’s biggest lender, is seeking to raise at least 9.8 billion euros in a stock sale. The lender expects to fulfill the Basel requirements no later than the end of 2013, and won’t need fresh capital to meet requlatory standards after its stock sale, Chief Executive Officer Josef Ackermann said today.

Transition Phase

Axel Weber, president of the German central bank, who attended yesterday’s meeting in Basel, expressed satisfaction with the outcome. Germany, which had withheld its signature from the committee’s July agreement, signed up to yesterday’s plan.

“The gradual transition phase will allow all banks to fulfill the rising requirements for minimum capital and liquidity,” Weber said in a statement. “The unique characteristics of German financial institutions that aren’t stockholder corporations are thus appropriately catered for.”

Germany’s VOEB association of public sector banks, which represents the country’s state-owned Landesbanken, said today the transition times are “too short” and the new requirements will place a “heavy burden” on German banks.

End to Uncertainty

Other European banks will fare better. Credit Suisse, whose losses from the credit market meltdown were about one-third those of its main Swiss rival UBS AG, said in a statement yesterday that it expected to comply with the new rules “without having to materially change our growth plans or our current capital and dividend policy.”

U.K. banks are unlikely to have difficulties meeting the capital requirements, JPMorgan Cazenove analysts led by Carla Antunes da Silva said in a report.

“We expect the market to respond positively to a more regulatory certain environment and we would expect investors to focus on capital return for those banks where we see the strongest balance sheets,” the analysts wrote. HSBC Holdings Plc, Europe’s biggest bank, may boost its dividend, they said.

Banks in Asia have high capital ratios and will be able to avoid the degree of fundraising needed elsewhere to meet a new international standard, said Zhu Min, a special adviser to the International Monetary Fund.

Asia Banks

“Today if you look at the whole of Asia, Tier 1 capital is more than 10 to 12 percent,” and as a result “I don’t think Asian banks at the moment will go to the markets to raise a lot of capital,” Zhu, a former deputy governor of China’s central bank and vice president of Bank of China Ltd., said on Bloomberg Television from Tianjin.

Commonwealth Bank of Australia, the nation’s biggest lender, rose 1.6 percent after Australia’s Treasurer Wayne Swan said the nation’s banks will “comfortably meet” the new requirements. Mitsubishi UFJ Financial Group Inc., Japan’s biggest lender, led banks higher in Tokyo, rising 2 percent.

The committee also gave banks until the end of 2017 to comply with the tighter definitions of capital and said that a new short-term liquidity standard wouldn’t be implemented until the beginning of 2015. While a separate long-term liquidity rule has been shelved under pressure from the banking industry, the short-term rule was expected to go into effect earlier. The two liquidity rules would require banks to hold enough cash and easily cashable assets to meet liabilities.

Bank of America, Citigroup

“Extending these deadlines -- liquidity, buffers, capital definitions -- should be a relief to banks,” said Frederick Cannon, an analyst at Keefe, Bruyette & Woods in New York.

Of the 24 U.S. banks represented on the KBW Bank Index, seven including Bank of America and Citigroup would fall short of the new ratios based on calculations using the revised definitions of capital, Cannon said in a Sept. 10 report.

“The new standard is 7 percent, and that’s very high,” said Scott Talbott, senior vice president at the Washington- based Financial Services Roundtable, which lobbies on behalf of U.S. banks. “It will curb lending. The stronger the banks, the weaker the economic recovery will be.”

The Association of Financial Markets in Europe, which represents banks on that continent, welcomed the extended transition periods provided to its members for compliance. The group said it still has “significant concerns,” including the possible outcome of the Basel committee’s continuing work on the largest financial institutions.

With yesterday’s decision, the Basel committee has completed most of its work on a package of reforms it will submit to leaders of the Group of 20 nations who are meeting in November in Seoul. The committee has yet to agree on revised calculations of risk-weighted assets, which form the denominator of the capital ratios to be determined this weekend. The Basel committee has another meeting scheduled for Sept. 21-22 and said it may gather in October to finish its work.

www.bloomberg.com/news/2010-09-13/banks-climb-as-regulators-allow-eight-years-to-meet-capital-requirements.html

[sandi66]

Budget Chairman Spratt Faces Challenge Over U.S. Deficit He Tried to Cut

By Catherine Dodge -

Sep 13, 2010 12:00 AM ET

Democrats across the U.S. are under fire for enabling out-of-control deficits and for being Washington insiders. The poster child for both attacks may be Representative John Spratt of South Carolina.

As chairman of the House Budget Committee, Spratt, 67, is the lawmaker in charge of saying no to colleagues’ demands to spend more and tax less. He says his top priority if re-elected is fixing the “wretched condition” of U.S. fiscal affairs by reducing a deficit projected at $1.34 trillion this year.

He may not get the chance. Even though few legislators command as much respect or have tried harder to balance the needs of holding down the deficit and expanding the economy, Spratt’s bid for a 15th term is rated a tossup by the Washington-based nonpartisan Cook Political Report.

“Take a yard sign; take a bumper sticker,” Spratt told a group of voters gathered on an August evening at a community center in rural Cheraw, population 5,500. He said he needs their help “this year more than ever before.”

Spratt isn’t the only senior Democrat considered vulnerable. Others threatened by a Republican resurgence in the November congressional elections include Missouri’s Ike Skelton, elected in 1976 and head of the Armed Services Committee; Earl Pomeroy from North Dakota, who is seeking his 10th term, and Chet Edwards of Texas, a 10-term lawmaker who is chairman of an appropriations subcommittee.

Top Concerns

As Americans overwhelmingly call the deficit one of their top concerns in polls, Spratt’s Republican challenger, state Senator Mick Mulvaney, 43, is looking to tap that sentiment.

“People here don’t understand why the government isn’t going through the same thing they are going through,” Mulvaney, a former lawyer now in the restaurant business, told supporters at a $25-per-person August fundraiser in Rock Hill, a suburb of North Carolina’s border city of Charlotte.

Spratt, a Yale Law School graduate who studied economics at Oxford University, hasn’t faced a race this competitive since he survived the 1994 Republican takeover of the House. This year, he is being buffeted by budget woes, said Nathan Gonzales, political editor at the nonpartisan Rothenberg Political Report in Washington.

“Republicans don’t have to connect very many dots to link Spratt to the things voters are upset about,” Gonzales said.

Spratt won another term by 25 percentage points in 2008, in a district President Barack Obama lost by 7 points, and is one of the few southern Democrats who don’t distance themselves from the party. He backed Obama’s $940 billion health-care plan and the $814 billion economic stimulus.

Big-Spending Initiatives

Republicans have seized on those measures as examples of government initiatives that bloat the federal deficit.

Being portrayed as a big-spending lawmaker is an unfamiliar position for Spratt, who fought rising deficits under Republican President George W. Bush and cites his work on the 1997 balanced budget agreement as one of his top achievements.

The deal led to a budget surplus of $127 billion at the end of Democrat Bill Clinton’s presidency in 2001. In 2009, when Bush left office, the deficit was $1.4 trillion.

“There’s a difference between trying to stimulate the economy with short-term policies and longer-term policies that put the budget back on track,” Spratt said in an interview.

Spratt serves on a bipartisan panel that in December will propose ways to cut the deficit. He says everything should be on the table, including the big-ticket items of Social Security, Medicare and Medicaid, and tax increases and cuts.

Pay-As-You-Go

He favors a continuation of pay-as-you-go rules that require tax cuts or new spending to be paid for with tax increases or spending cuts elsewhere. Spratt also backs legislation that would allow the president to amend spending bills passed by Congress that he deems wasteful.

Mulvaney wants to roll back all discretionary spending, excluding defense and homeland security, to 2008 levels and cap future increases at the inflation rate. House Republican leader John Boehner’s office has estimated that would save about $100 billion in the first year. The rollbacks would affect federal agencies including education and housing.

Mulvaney proposes rescinding all unspent money from last year’s $814 billion economic stimulus plan, which his campaign says would save at least $230 billion.

The White House called the idea of unspent stimulus funds a “myth” in an Aug. 11 website article by Chief Economic Adviser Jared Bernstein. He said 94 percent of the money is obligated through payments already made, promised tax cuts, or projects under contract. The remaining 6 percent has been awarded or soon will be, he wrote.

Send ‘People Packing’

Representative Chris Van Hollen, a Maryland Democrat, said in an interview last week that canceling stimulus funds would “send a lot of people packing from their jobs.”

Mulvaney supports paying non-military government workers the going private-sector rate, which he said would save about $40 billion a year, and freezing federal hiring and pay raises for the next year to save another $30 billion.

Congress must “shape a leaner, more efficient federal government that places more focus on its primary functions,” he said.

On Social Security, Medicare and Medicaid, which make up 40 percent of the federal budget, Mulvaney avoided offering specific proposals. He said Social Security may need to be changed for future generations without affecting benefits for those near retirement. He doesn’t favor letting people invest their Social Security taxes in private accounts.

Bush Tax Cuts

Mulvaney supports permanently extending the tax cuts enacted during the Bush administration in 2001 and 2003. Extending all of the tax cuts would cost $3.3 trillion over the next decade, including $1.1 trillion to keep the cuts for the wealthiest Americans, according to an analysis by the Pew Economic Group.

Spratt’s congressional district is in the north-central part of South Carolina. Textile mill closings have helped push its unemployment rate to about 14 percent, above the 9.6 percent national rate.

John Russell, 67, spent 40 years working in textiles before losing his job six years ago. He has backed Spratt and is undecided this time, saying he blames both parties for the deficit.

“If I’m in trouble and go out and borrow all this money, am I better off? I don’t think so,” he said.

Spratt’s first television ad stresses his efforts to help district residents and businesses. And his standing in Washington works in his favor with some voters. Republican Gary Williams, 60, credits him with saving as many as 100 jobs at his Rock Hill company, Williams & Fudge Inc., which collects delinquent student loans.

Spratt removed a loan program that provides about 40 percent of the company’s revenue from legislation that shifted student loans from private lenders to the U.S. government.

“It takes a while to get seniority in Washington,” said Williams, who worked to defeat Spratt in the 1990s and now has contributed the maximum $4,800 allowed to his campaign.

www.bloomberg.com/news/2010-09-13/budget-chairman-spratt-faces-challenge-over-u-s-deficit-he-tried-to-cut.html

[sandi66]

Deutsche Bank to Raise $12.5 Billion for Postbank, Regulation

By Aaron Kirchfeld -

Sep 13, 2010 7:40 AM ET

Deutsche Bank AG, Germany’s largest bank, plans to raise at least 9.8 billion euros ($12.5 billion) in its biggest-ever share sale to take over Deutsche Postbank AG and meet stricter capital rules.

Deutsche Bank expects to offer between 24 euros and 25 euros a share in cash to Postbank investors to increase its 29.95 percent stake, the bank said yesterday. Postbank dropped as much as 7.5 percent to 25 euros in Frankfurt trading after Josef Ackermann, Deutsche Bank’s chief executive officer, told reporters in Frankfurt he doesn’t plan to improve the offer.

Ackermann is preparing the biggest rights offer in Europe this year as he seeks to reduce Deutsche Bank’s dependence on investment banking by gaining control of Postbank, a consumer lender based in Bonn. The funds will also help Frankfurt-based Deutsche Bank meet new rules from global regulators that more than doubled banks’ capital ratios.

“Deutsche Bank is doing it all at once -- bidding for Postbank and topping off its coffers,” said Peter Thorne, a London-based analyst at Helvea Ltd. who is reviewing his rating on the stock. “This will help them move into line with their international peers in terms of capital.”

Deutsche Bank rose 80 cents, or 1.7 percent, to 48.50 euros by 1:19 p.m. in Frankfurt, after dropping 4.6 percent on Sept. 10, giving the company a market value of 30 billion euros. Postbank declined 1.97 euros to 25.07 euros, valuing the lender at 5.5 billion euros.

Postbank Writedown

Deutsche Bank said the offer is fully underwritten by a group of banks including UBS AG, Banco Santander SA, Bank of America Merrill Lynch, Commerzbank AG, HSBC Trinkaus & Burkhardt AG, ING Groep NV, Morgan Stanley and Societe Generale SA. The bank plans to publish a prospectus on the sale Sept. 21.

Deutsche Bank expects to issue 308.6 million new shares in Germany and the U.S., it said. Shareholders will be able to purchase one new share for every two they own. The company intends to book a charge of about 2.4 billion euros in the third quarter as it marks down the value of its existing Postbank holding.

Ackermann, who previously said the bank would only raise capital for acquisitions, is trying to build up the bank’s so- called stable businesses of retail banking and asset management, and reduce reliance on investment banking, which accounted for 78 percent of pretax profit in the first half.

The retail business, including Postbank, would have more than 10 billion euros of annual revenue and pretax earnings of more than 3 billion euros by 2015-2016, Ackermann said.

Strengthening Equity Capital

“We can expand our strong position in our home market, take a leading position in the European retail banking business and significantly enhance Deutsche Bank’s revenue mix,” Ackermann, 62, said in an e-mailed statement. “Furthermore, with this capital increase we are strengthening the bank’s equity capital in light of expected regulatory changes.”

In the past four years, Deutsche Bank acquired Berliner Bank AG and Nuremberg-based Norisbank AG, as well as ABN Amro Holding NV’s commercial-banking operations in the Netherlands and private wealth manager Sal. Oppenheim Group. The bank has no plan for further acquisitions, Ackermann said today.

Deutsche Bank’s bid for Postbank coincides with a global effort by regulators to write rules that will prevent a repeat of the financial crisis, which caused writedowns and credit losses of almost $1.8 trillion worldwide, according to data compiled by Bloomberg. Deutsche Bank dodged the worst of the credit crunch and eschewed a state bailout.

‘One Fell Swoop’

“Deutsche Bank may think that if they come with one fell swoop the immediate negative effect of dilution will be forgotten over time,” said Matthias Engelmayer, a Frankfurt- based analyst at Independent Research GmbH. “I doubt that most Postbank shareholders will accept the offer. This is a tactical bid and they’ll probably make a better one.”

Postbank’s Tier 1 capital ratio, a measure of financial strength, fell to 6.6 percent under the most severe scenario of the European Union stress tests conducted in July, compared with the 6 percent minimum required to pass. Deutsche Bank’s ratio, by contrast, stood at 9.7 percent under the toughest test.

Germany’s 10 biggest lenders may need about 105 billion euros in fresh capital because of new regulations, the Association of German Banks estimated on Sept. 6.

Regulators from 27 nations announced yesterday that they more than doubled banks’ minimum capital ratios and gave lenders as much as eight years to comply in full.

The Basel Committee on Banking Supervision’s main governing body, meeting in Basel, Switzerland, said banks worldwide need to have common equity equal to at least 4.5 percent of assets, weighted according to their risk profiles. Regulators will introduce a further 2.5 percent buffer. Banks that fail to meet that buffer would be stopped from paying dividends, though not forced to raise cash, the committee said in a statement.

Ackermann said Deutsche Bank will fulfill the Basel requirements by the end of 2013 and won’t need a further capital increase to do so. He said that “all in all” Deutsche bank supports the Basel reforms.

Controlling Stake

Deutsche Bank will likely boost its stake in Postbank to about 60 percent if minority shareholders accept the offer. The German firm agreed to buy a stake in Postbank in September 2008 from Deutsche Post AG and then renegotiated the transaction in January 2009 after the collapse of Lehman Brothers Holdings Inc. roiled financial markets.

In the first step, Deutsche Bank acquired a 22.9 percent stake from Deutsche Post, which it raised to almost 30 percent over time by purchasing additional shares on the market. Deutsche Bank also bought a mandatory exchangeable bond that will be converted into a 27.4 percent Postbank stake in February 2012.

Additionally, Deutsche Bank has an option to buy Deutsche Post’s remaining 12.1 percent stake between three and four years after the deal was completed in February 2009.

Lower Cost

Deutsche Bank also has a so-called “open window” until Feb. 25, 2011, to make an offer for the remaining minority 30.6 percent stake at a minimum price of the three-month volume weighted average price of Postbank’s shares, which is currently 24.50 euros, according to Citigroup analysts.

This is “significantly” below the 45 euros that Deutsche Bank would have to offer subsequently based on the price of the mandatory exchangeable bond, Citigroup Inc. analyst Kinner Lakhani wrote.

“The takeover offer to the shareholders of Postbank allows us to minimize the total costs of the acquisition,” Ackermann said.

Postbank’s supervisory and management boards will comment on the offer after the lender reviews the bid, the bank said in a separate statement.

www.bloomberg.com/news/2010-09-12/deutsche-bank-to-raise-eu9-8-billion-for-postbank-regulation.html

[sandi66]

Euro to Drop More Against Dollar Among Least-Liked Currencies



By Matthew Brown -

Sep 13, 2010 7:05 AM ET

The euro is losing out to the dollar as renewed concern over the solvency of nations from Portugal to Ireland points to another slump for the common European currency.

Hedge funds and other large speculators have increased bets on a weakening of the euro to the highest level in almost two months, according to data from the Commodity Futures Trading Commission. Investors are paying close to the most in three months to insure against losses on Greek and Spanish bonds, while yields on Irish and Portuguese government debt surged to records relative to benchmark German bunds last week.

TD Securities Inc., the most accurate foreign-exchange forecaster in the six quarters ended June 30, and Bank of America Corp. say the euro will drop versus the dollar even as the U.S. economic recovery slows. While a weaker currency would boost German exports, the predictions show that a $950 billion European bailout fund hasn’t been enough to shore up confidence amid credit downgrades of Portugal and Ireland.

“Both the euro and the dollar are weak currencies, but the euro-region’s problems are more difficult to solve than those in the U.S.,” said Derek Halpenny, European head of currency research at Bank of Tokyo-Mitsubishi UFJ Ltd. in London. “It’s an ugly contest and the euro’s going to win.”

Weaker Euro Forecast

The euro slid 1.7 percent to $1.2679 last week, and declined 1.9 percent to 106.72 yen, within 2 yen of the weakest level in nine years. The single currency traded at $1.2807 and 107.66 yen as of 11:50 a.m. in London today.

The currency shared by 16 European nations will end 2010 at $1.25 and depreciate to as low as $1.22 next year, according to the median forecast of at least 19 estimates compiled by Bloomberg as of last week. It will climb 1.2 percent to 109 yen by year-end, while the dollar will rise 4.7 percent to 88 yen, separate estimates show.

The euro rebounded 12 percent from a four-year low on June 7 through Aug. 6 as investors focused on worse-than-forecast U.S. economic data, while European statistics surpassed predictions. U.S. private payrolls increased a less-than- estimated 71,000 in July, a Labor Department report showed Aug. 6. Germany grew 2.2 percent in the second quarter from the first three months of the year, the fastest expansion in two decades, the Federal Statistics Office said a week later.

The European Union-led financial backstop fended off speculators betting on the euro’s breakup as concern over swelling budget deficits sent borrowing costs soaring from Dublin to Athens to Madrid. After plunging in the days following the May 10 announcement, 10-year bond-yield spreads over German bunds have doubled in Ireland, Greece and Portugal.

Rally Fades

The euro’s rally slowed as Portugal’s debt grade was cut two notches to A1 on July 13 by Moody’s Investors Service on prospects for weak economic growth. Standard & Poor’s lowered Ireland’s credit rating one step to AA- on Aug. 24, citing the rising cost to the government of bailing out Dublin-based Anglo Irish Bank Corp., which S&P said may reach 35 billion euros ($44.7 billion). The Finance Ministry said on Sept. 8 it will split the lender into a so-called good bank and an asset recovery entity.

Signs are also growing that Germany’s economy, the engine of euro-region growth this year, is sputtering. Exports unexpectedly fell 1.5 percent in July, while factory orders slid, Federal Statistics Office and Economy Ministry reports showed last week. Labor Department data on Sept. 3 showed companies in the U.S. added more jobs than estimated last month, while July’s figure was also revised higher.

Yen Outperforms

“I look at Europe now and say this is what we’ve been looking for,” said John Taylor, who heads FX Concepts LLC in New York, the world’s biggest currency hedge fund. “The U.S. payroll data was pretty good. Then the problems with Europe kicked us. That’s the story, Europe is kicking us down the hole.”

The euro and the dollar have both underperformed the yen, which has gained 13.9 percent this year, according to Bloomberg Correlation-Weighted Currency Indexes.

Japan’s currency strengthened as record-low interest rates in the U.S. and Europe made so-called carry trades, in which the yen is sold for higher-yielding alternatives, less appealing. Three-month dollar Libor, a measure of interbank borrowing costs, was 6.3 basis points more than the equivalent yen rate at the end of last week, compared with an average spread of 252 basis points over the past 10 years.

The euro has slid 10.1 percent this year, while the dollar is 1.7 percent higher, the correlation-weighted indexes show.

Bond Spreads

Futures traders are raising bets the euro will weaken further. The difference in the number of wagers on a decline in the euro compared with those on a gain, or so-called net shorts, was 23,699 on Sept. 7, compared with net shorts of 25,569 a week earlier, the most since the week ended July 16, according to the Washington-based CFTC. They were at 3,731 the week ended Aug. 13, an eight-month low.

Credit-default swaps and the bond market also indicate renewed concern about the region. An index of Greek, Irish, Portuguese and Spanish swaps reached 461 basis points last week, approaching a record of 499 points set on June 24, CMA prices show. The yield on Irish 10-year government bonds rose to 381 basis points over similar-maturity German bunds on Sept. 8, the highest on record, while the Portuguese-German yield spread widened to 372 basis points, also the most ever.

The Association of German Banks said last week the nation’s 10 biggest lenders may need about 105 billion euros in fresh capital to comply with new rules from the Basel Committee on Banking Supervision, crimping lending and risking slower economic growth. Frankfurt-based Deutsche Bank AG plans to raise at least 9.8 billion euros, partly to meet the new standards, Germany’s largest bank said in a statement yesterday.

‘Unavoidable Reckoning’

The euro’s depreciation will gather pace next year as reduced government spending to shrink budget deficits across the region starts to bite, according to Adam Cole, head of global currency strategy at Royal Bank of Canada Europe Ltd. in London.

“A sharp step-up in financing requirements and the effects of austerity measures will lead to an unavoidable reckoning in the first half of 2011,” said Cole.

Weakness in the euro-area economy may not be enough to counter the effects on the dollar of additional stimulus measures by the Federal Reserve if the U.S. recovery falters, according to Morgan Stanley.

Fed Chairman Ben S. Bernanke said Aug. 27 that more tools are available should the economy need them after the central bank adopted a policy of reinvesting the proceeds from its holdings of mortgage-backed securities into Treasuries.

Carry Trade Favorite

Bond investors from Newport Beach, California-based Pacific Investment Management Co., owner of the world’s biggest bond fund, to Goldman Sachs Group Inc. in New York are projecting the U.S. central bank may push Treasury yields down to 1950s’ levels with another round of quantitative easing.

Lower U.S. interest rates also make the dollar a favorite for carry trades. The Fed’s benchmark target for overnight loans between banks is a range between zero and 0.25 percent, while the European Central Bank’s main refinancing rate is 1 percent.

The yen has traditionally been the most popular currency to fund carry trades because Japanese investors tend to recycle the proceeds from the nation’s trade surplus abroad in search of greater returns. The Bank of Japan has held its benchmark overnight lending rate below 0.5 percent since 1995.

“Whether there is QE or not, speculation of further easing is dollar negative,” said Ronald Leven, executive director and currency strategist at Morgan Stanley in New York. “The slowdown in the U.S. will have an echo in Europe, but that’s going to take time to play out.”

Exports Supported

The bank revised its forecasts for the euro against the dollar on Sept. 7, predicting an advance to $1.36 by year-end, before sliding to $1.24 by the fourth quarter of 2011.

Europe’s economy is seeing some benefits from a weaker euro. German exports jumped 8.2 percent in the second quarter from the first quarter, the nation’s statistics agency said on Aug. 24. The euro tumbled from as strong as $1.3692 to as low as $1.1877 in the period.

As the region’s recovery slows, growth is likely to lag behind the U.S. because of structural deficiencies such as operating a one-size-fits-all monetary policy for countries with diverse labor markets, economies and competitiveness levels, said Ken Dickson, a money manager in Edinburgh at Standard Life Investments, which oversees $220 billion, according to the company website.

QE Risk

“There’s going to be continued pain in the non-core areas of Europe,” he said. “As the performances in the different parts of Europe continue to drive in different directions, the case for a weaker currency to help with the transition will be strong.”

While Moody’s and S&P haven’t threatened the U.S. with an imminent ratings downgrade, the economy has an unemployment rate of 9.6 percent, within 0.5 percentage point of the highest level in 26 years. At 9.1 percent of gross domestic product, the budget deficit for the current fiscal year will be the second- largest in the past 65 years, according to Congressional Budget Office projections.

“More quantitative easing in the U.S. is a risk, but the Fed is going to need a lot more evidence of economic weakness before it can make that decision,” said Shaun Osborne, chief currency strategist at TD Securities in Toronto. “We see still ongoing strains in the euro-zone sovereign credit space and banking space, which may be the more dominant theme moving into year-end.”

www.bloomberg.com/news/2010-09-12/euro-seen-dropping-more-against-dollar-among-currencies-traders-like-least.html

[sandi66]

Trichet Confident Basel Rules Will Be Implemented in U.S.

By Christian Vits and Jana Randow -

Sep 13, 2010

European Central Bank President Jean-Claude Trichet, speaking on behalf of the world’s central bankers, said he’s confident U.S. authorities will implement the new Basel rules on banking regulation.

“I have full confidence in the U.S. authorities concerned, and all the authorities concerned, that were here yesterday and today, to implement the standards,” Trichet said at a press conference at the Bank for International Settlements in Basel, Switzerland, after chairing the so-called Global Economy Meeting today. “It’s up to the supervisors to control with the maximum amount of energy the respect of the standards which we decided on the global level.”

The Basel Committee on Banking Supervision said yesterday it will require lenders to have common equity equal to at least 7 percent of assets, up from 2 percent currently, including a 2.5 percent buffer to withstand future shocks. Banks that fail to meet the buffer would be unable to pay dividends, though not forced to raise cash.

“What has been decided is what’s necessary for all banks at a global level,” Trichet said. “We’re in a global economy, which is a pertinent entity economically and financially, and we have to get a level playing field.”

The definitions of what counts as capital and how risk is assessed have also been tightened. Some banks, such as Bank of America Corp. and Citigroup Inc., will be restricted in how much cash they can return to shareholders and pay their employees in years to come. Others, like Deutsche Bank AG, have already announced plans to raise additional capital. Banks have as long as eight years to comply fully with the requirements.

Trichet said the new rules will enhance the resilience of the banking system and will foster, not hinder, the global economic recovery.

“We’ve foreseen a transition period without threatening the global recovery, which we’re observing at the global level,” he said. “It’s good for the global economy, good for growth.”

www.bloomberg.com/news/2010-09-13/trichet-says-he-s-confident-basel-regulations-will-be-implemented-in-u-s-.html

[sandi66]

Monday, September 13, 2010

US Stocks Poised To Rally As New Banking Rules Are Unveiled

US stock-index futures rallied this morning as regulators around the world finalized the Basel III accord, a new set of banking rules directed at preventing another financial crisis.


The Basel III accord will force financial institutions to maintain a common equity equal to at least 7 percent of risk-weighted assets. Under the new rules, financial institutions would be required to increase their capital cushions to 4.5% from 2% and will be prohibited from paying dividends if the requirement is not met.

Financial institutions will have less than five years to comply with the minimum common equity requirement and until Jan. 1, 2019 to meet the capital cushion requirement. The phase-in period for the capital cushion requirement was longer than expected, giving banks more breathing room. Banks are currently required to have common equity equal to 2 percent of total assets.


Futures on the Dow Jones Industrial Average, S&P, and NASDAQ advanced 0.84%, 0.79%, and 0.75%, respectively.


The US dollar index, which tracks the performance of the US dollar against a basket of six other currencies, declined by 0.807% to 82.20.


Commodities


Oil futures advanced 0.31% to $78.40 per barrel. Gold futures declined 0.06% while silver and copper futures edged upward slightly by 0.53% and 1.83%, respectively.


Pre-market movers


CME Group (NASDAQ:CME) rallied 3.8% in pre-market trading. ArcSight (NASDAQ:ARST) soared 25.5% after it was announced that HP (NYSE:HPQ) would acquire the company for $1.5 billion. HP edged up higher by 0.39% in pre-market trading.


Bank stocks rallied after it was announced that they would receive a longer than expected phase-in period for the new banking rules. Goldman Sachs Group (NYSE:GS), Bank of America (NYSE:BAC), and Citigroup (NYSE:C) rose 1.3%, 2.4%, and 1.2%, respectively.


AutoZone (NYSE: AZO) retreated 1.2% after receiving a downgrade to Sell from Neutral at Goldman Sachs. Staples (NASDAQ:SPLS), Northeast Utilities System (NYSE:NU) also posted losses, retreating 2.3% and 1.4%, respectively.

www.proactiveinvestors.com/companies/news/8341/us-stocks-poised-to-rally-as-new-banking-rules-are-unveiled--8341.html

[sandi66]

Regulators agree to tougher bank rules


Sunday, Sept. 12, 2010

Banks have more clarity, and the world a little more stability, following the announcement on Sunday in Basel, Switzerland that representatives from 27 countries have agreed to a new regulatory reform package for banks.

The Basel Committee on Banking Supervision (BCBS), the global body that sets international standards for the financial institutions, achieved consensus from a host of central bankers including Mark Carney, Governor of the Bank of Canada and Ben Bernanke, chairman of the U.S. Federal Reserve, on the new minimum requirements of capital banks must reserve as protection against future losses.

The new rules, which are aimed at avoiding future financial crises, mean the capital ratio banks will be required to hold will increase from its current 4% to 4.5% of assets with an additional buffer of 2.5%. In addition, the bar has been raised with respect to the quality of that capital. Policymakers announced that under the new guidelines, only common shares will be considered as part of the Tier 1 capital. Under the current rules, only 2% of the Tier 1 capital must be common stock and there is no buffer requirement.

Despite tighter definitions and higher ratios for Tier 1 capital, the committee gave generous time lines for implementation: banks will have five years to comply to minimum ratios and three more years to hit the levels required for a buffer. Banks that fail to meet that buffer could not pay dividends, but the committee stopped short of forcing them to raise cash.

“The agreements reached today are a fundamental strengthening of the global capital standards,” said European Central Bank chief Jean-Claude Trichet, who chairs the group of regulators. “Their contribution to long-term financial stability and growth will be substantial. The transition arrangements will enable banks to meet the new standards while supporting the economic recovery,” he added.

The announcement brought a positive response from industry watchers in Canada.

“Because European banks are not as well capitalized, the rules were calibrated to work for them, the weaker banks,” said Peter Routledge, banking analyst for the National Bank of Canada. As a result, “it was a little less stringent on the Canadian banks then I anticipated. I would imagine the [Canadian] banks are feeling quite comfortable and optimistic,” he added.

For months, German policymakers expressed concern that their institutions would not be able deal with tougher capital requirements because their economies have not yet fully recovered from the 2007 crisis. The fear is that the Basel III rules would put pressure on weaker banks forcing them to raise more capital, seek government aid, or simply collapse.

Deutsche Bank, which saw its shares plummet 4.6% last Friday in anticipation of the new regulations, announced on Sunday that it aims to raise 9.8-billion euros through a rights offering. The capitalization plan, meant to bolster its balance sheet, has led to much speculation that other European banks, including Commerzbank in Frankfurt, will follow suit.
.

www.financialpost.com/news/Basel+Committee+agrees+bank+regulatory+reform+package/3513795/story.html

[sandi66]

Alternative asset management deals get regulatory boost

Mon Sep 13, 2010 3:03pm BST

NEW YORK (Reuters) - Alternative asset management deals may outpace traditional fund manager transactions this year for the first time ever, as regulatory pressures prompt banks to shed hedge fund and private equity assets, a new study shows.

Alternative asset manager deals, which included divestments by such banks as Citigroup Inc (C.N) and Bank of America Corp (BAC.N), more than doubled to 52 in the first half of the year, according to a report by Freeman & Co released on Monday.

Such deals have already exceeded 31 transactions in the traditional asset management space in the first half of 2010, Freeman said.

Alternative manager deals should exceed 100 this year, with acceleration in the second half due to U.S. financial reform legislation and international regulatory initiatives, according to Freeman, an independent advisory firm focused on the financial services sector.

In contrast, traditional manager deals may only reach 70-75 transactions in 2010, Freeman predicts.

"There is some real regulatory pressure that's causing transaction that you probably wouldn't see otherwise," Freeman Chief Operating Officer Eric Weber said.

These deals have also received a boost as managers come under pressure to consolidate to increase scale and manage costs, especially as fund sizes have shrunk due to losses during the financial crisis, Weber said.

"You have a fund that's gone from $2 billion to $1 billion, and they are like, 'Wow, maybe we should think about partnering,'" Weber said.

The uptick in deals is also a sign that alternative asset portfolios are increasingly being seen as a necessary part of a diversification strategy, Weber said.

"You probably want to have some part of your strategy address your clients' demands for alternative asset products," Weber said. "It's another marker that alternatives are here to stay."

VOLCKER RULE

The Volcker rule, named for former Federal Reserve Chairman Paul Volcker, restricts banks from proprietary trading and places limits on the size of private equity or hedge fund investments.

Some U.S. banks have been shedding assets. Last month, media reports said Morgan Stanley (MS.N) was planning to spin off hedge fund unit FrontPoint Partners.

Earlier this summer, Citi agreed to sell its private equity unit to StepStone Group LLC and Lexington Partners. Bank of America was shedding a $1.2 billion commitment to funds managed by Warburg Pincus LLC WP.UL and spun off a $1.9 billion portfolio of private equity investments.

Despite the activity, though, overall deal volume in the sector was depressed in terms of assets under management, Freeman said.

Assets under management that changed hands fell to $417 billion in the first half of this year from $2.7 trillion a year ago and is on pace to be much lower than in the past five years, as the large transformational deals become scarce, Freeman said.

uk.reuters.com/article/idUKTRE68C2VP20100913

[sandi66]

Citigroup Tumbles in European Rankings as Dealmakers Depart

Sep 14, 2010 2:00

Citigroup Inc. is losing market share in European investment banking as the last partially U.S. government-owned securities firm slides down the rankings for merger advice, stock sales and bond offerings.

At least 12 European managing directors have left this year to competitors including Bank of America Corp. and Barclays Plc’s investment banking unit. The bank fell to eighth from first in providing merger advice on European transactions this year valued at $61 billion compared with about $140 billion in the same period last year, data compiled by Bloomberg show.

“Citigroup’s primary objective right now is to rebuild its balance sheet and prove to the market that it is functioning properly,” said Richard Bove, an analyst at Rochdale Securities in Lutz, Florida with a “buy” rating on the stock. “Until it can do that, everything else is secondary.”

Citigroup hasn’t led a single initial public offering in Europe, the Middle East and Africa this year after underwriting only one in 2009. It was one of the region’s top 10 arrangers from 2006 to 2008 when it was involved with 43 IPOs, according to data compiled by Bloomberg. There have been 85 IPOs in the region this year, according to the data.

The bank ranks ninth in the U.S. on M&A advice this year, down from fifth last year, the data show. In Asia-Pacific, it dropped to 17th place from fourth, the data show. Globally, the firm is the eighth-ranked adviser for mergers this year after advising on about $157 billion of takeovers, down from third last year. Goldman Sachs Group Inc., the top-ranked adviser, worked on $305 billion of deals in 2010.

‘Departures Were Mutual’

Former Citigroup bankers in London, who declined to be identified because they have moved to new firms, cited slowing deal-flow, the firm’s focus on investment banking outside of Western Europe and the prospect of shrinking bonuses for the moves.

“Several of the departures were mutual, and in some cases welcome,” Citigroup said in an e-mailed statement. “We have also made a number of important new senior hires, and plan to announce more over the next few weeks. Our banking franchise in Europe, Middle East and Africa is vibrant and expanding.”

Citigroup’s revenue globally from advisory, debt and equity underwriting fell 42 percent to $674 million in the second quarter of 2010. JPMorgan Chase & Co. posted a 37 percent drop in those businesses to $1.41 billion for the same period. That compares with a 21 percent decline in investment banking revenue at Morgan Stanley.

Revenue Declines

The New York-based firm, which has been BHP Billiton Ltd.’s British corporate broker for more than two years, missed out on advising on the miner’s $40 billion bid for Potash Corp. of Saskatchewan Inc. in August. Two Citigroup bankers in London who declined to be identified because the talks were private said the firm had expected to win an advisory or financing role given its broking relationship. The bank also advised BHP in its attempted takeover of Rio Tinto Group in 2008, according to Bloomberg data.

Citigroup is one of two corporate brokers in the U.K. to BHP Billiton, according to data company Hemscott Plc. It became the company’s broker in 2008, Hemscott said. Corporate brokers, unique to the U.K., help companies liaise with investors and comply with London Stock Exchange rules. Brokers also often manage stock and bond offerings and their roles often lead to advisory work. Illtud Harri, a London-based BHP spokesman, declined to comment.

Bankers Exit

“The bank that is hemorrhaging senior relationship managers shouldn’t be surprised that the relationships will travel with them,” said Scott Moeller, a professor at Cass Business School in London and a former investment banker at Deutsche Bank AG and Morgan Stanley.

The departures started in 2009 when Barclays Capital hired Citigroup executives, including Thomas King, head of banking for Europe, Middle East and Africa, and M&A bankers Matthew Ponsonby and Jim Peterkin.

Automotives banker Reid Marsh, financial institutions banker Thomas Demeure and global banking co-chief operating officer Richard Blackburn left Citigroup in London this year for Barclays Capital. Telecommunications adviser Bill Kennish, 44, left for Macquarie Group Ltd. in May, and Julian Mylchreest, former co-head of the energy banking team, moved to Bank of America in July.

The bankers were unavailable or declined to comment through their press offices. Citigroup declined to make available for interview Raymond J. McGuire, 53, global head of investment banking, and Manuel Falco and James Bardrick, joint chiefs of banking in Europe, the Middle East and Africa.

Citigroup Deals

The firm has still been involved in some of the world’s largest transactions, according to data compiled by Bloomberg. The firm advised America Movil SAB on its $17.5 billion purchase of Carso Global Telecom SAB in Mexico, the largest transaction in the region this year. The firm also counseled Oslo-based Norsk Hydro ASA on the purchase of mine assets from Rio de Janeiro-based Vale SA in May in a $4.9 billion transaction.

The lender is also adding senior bankers in Europe, hiring seven managing directors this year. Gilles Graham joined from Nomura Holdings Inc. to advise clients in the financial services industry and former Morgan Stanley banker Pawel Graniewski joined as head of Polish banking.

The firm “has a new strategy in place” that focuses increasingly on emerging markets, said Richard Staite, analyst at Atlantic Equities Partners LLP in London, who has an “overweight” recommendation on the stock. “As part of this new strategy, some of Citigroup’s investment banking activities in London and New York will be given less emphasis than they were prior to the crisis.”

China Expansion

The bank plans to almost triple its workforce in China to as many as 12,000 people in the next three years, Stephen Bird, Citigroup’s co-chief executive officer of the Asia-Pacific region, said in an interview on Aug. 31.

The firm agreed in March to pay $519 million for an additional stake in the company that controls Banco de Chile, the country’s second-biggest lender. At a forum in Davos, Switzerland, this year, CEO Vikram Pandit said consumers in those regions are set to spend more and that returns on emerging-market investments are likely to be “robust.”

Pandit, 53, announced a plan to exit more than two dozen businesses after the bank received a $45 billion bailout in late 2008. Citigroup, which repaid $20 billion of the bailout money in December, is still 18 percent owned by the U.S. Treasury Department. The U.S. plans to sell its remaining shares by the end of 2010.

www.bloomberg.com/news/2010-09-14/citigroup-sinks-in-european-investment-banking-as-a-dozen-dealmakers-exit.html

[sandi66]

China's currency hits fresh high against US dollar
By ELAINE KURTENBACH (AP) – 1 hour ago

SHANGHAI — China's currency advanced to a fresh high against the U.S. dollar for the third straight trading day Tuesday, as U.S. lawmakers prepared for hearings on Beijing's foreign exchange policies.

China's central bank set the yuan-dollar parity rate at 6.7378 on Tuesday, after putting it at 6.7509 on Monday and 6.7625 on Friday. The yuan closed at 6.7618 on Monday.

China's leaders routinely shrug off complaints that the tightly regulated yuan is undervalued, giving the country's exporters an artificial advantage over U.S. manufacturers. But the crescendo of criticism over the issue in Washington as November elections approach appears to be encouraging Beijing to move a bit faster on allowing the yuan to gain in value.

"They seem to be throwing them a bone, but it remains to be seen how much good it will do," said David Cohen, regional economist for Action Economics in Singapore.

China's parity rates for foreign exchange are weighted averages of prices — given by banks known as market makers because of their ability to quote both buy and sell rates — excluding highest and lowest offers.

By late Tuesday, the yuan was trading at 6.7455 to the dollar, after hitting a low of 6.7446.

Beijing limits the yuan's daily fluctuations to 0.5 percent, preventing any wider swings, and enforces tight limits on foreign exchange dealings, allowing them mainly for trade purposes. The yuan has gained about 1.3 percent in value against the dollar since June, when Beijing severed an 18-month link, saying it would allow a more flexible exchange rate.

The yuan actually weakened against the dollar in August, prompting some economists to scale back forecasts for gains in its value. Most expect a maximum 5 percent annual rate of increase.

China reported relatively strong trade, retail sales and other economic data for August, relieving worries that the economy may be headed for a "double-dip" slowdown that would discourage further gains in the yuan that might hurt the country's exporters.

"They do seem to be managing a soft landing that would allow them to tolerate appreciation," Cohen said.

The dollar's recent weakness may also be adding to upward pressures on the yuan: The dollar has recently traded near a 15-year low against the Japanese yen as investors continue to see the Japanese currency as a safe haven for their money amid worries about the U.S. economy.

China has followed a policy of letting the yuan rise when the dollar falls, and letting it weaken when the dollar gains, in effect neutralizing the impact of any changes on its exporters, says Tom Orlik, an analyst in Beijing for Stone & McCarthy Research Associates.

"I don't think we're looking at rapid progress," Orlik said, noting worries that the economy will still slow further. "I think we'll just see the yuan creeping up a little bit."

Premier Wen Jiabao, speaking to a business conference Monday, defended China's huge trade surplus, saying it was not intentional. But he offered no new measures to ease tension with Washington over the trade surplus, and did not mention Beijing's currency controls.

"We do not pursue surpluses in trade," Wen told about 1,500 business leaders attending a meeting of the Geneva-based World Economic Forum.

"China's economic growth has created major opportunities for multinational companies," he said. "It has become an important engine for the world economic recovery."

Tension has risen as U.S. lawmakers face pressure to create jobs ahead of November elections, with some pushing for a bill that would impose sanctions on China if it does not do more to let the yuan rise.

The House Ways and Means Committee is due to meet Wednesday to discuss the issue, after China reported its second-biggest trade surplus this year in August, at $20 billion.

On Monday, U.S. Treasury Secretary Timothy Geithner was quoted by The Wall Street Journal as saying Beijing had done "very, very little" to allow the yuan to rise since promising a more flexible exchange rate in June.

"It's very important to us, and I think it's important to China, I think they recognize this, that you need to let it move up over a sustained period of time," Geithner was quoted as saying.

The yuan's modest advance may lend Geitner and others symbolic support as they fend off calls for harsher measures, said Orlik.

"It gives the administration a fig leaf, if you like, to say, 'Look it's not as fast as you'd like or as fast as we'd like either, but there has been some progress,'" he said.

www.google.com/hostednews/ap/article/ALeqM5i-U1bQxgH2wJzlhvl4VPAyH6JMnQD9I7IV980

[sandi66]

Yuan Surges to Highest Level Since 1993 Before U.S. Hearing

By Bloomberg News - Sep 13, 2010 10:37 PM ET

China’s yuan surged to the strongest level since 1993 on speculation the government will allow faster appreciation to head off U.S. trade sanctions as its economy improves.

The central bank fixed the reference rate at 6.7378 per dollar, the highest level since a peg against the dollar was scrapped in July 2005, before the U.S. House Ways and Means Committee discusses China’s currency policy tomorrow and Sept. 16. Premier Wen Jiabao said yesterday at a World Economic Forum meeting in Tianjin that the economy is in “good shape.”

“China doesn’t want to see the relationship with the U.S. get hurt because of the currency issue,” said Lu Ting, a Hong Kong-based economist at Bank of America-Merrill Lynch. “There will be more space for yuan appreciation also because signs show the economy will have a soft landing.”

The currency gained 0.3 percent to 6.7446 per dollar as of 10:16 a.m. in Shanghai, after climbing 0.5 percent in the last three days, according to the China Foreign Exchange Trade System. It touched 6.7470, the strongest level since the central bank unified official and market exchange rates at the end of 1993.

“China’s economy is now in good shape, featuring fast growth, gradual structural improvement, rising employment and basic price stability,” Wen said. China’s government in the past week reported pickups in industrial output and retail sales for August, as well as a third straight monthly trade surplus of more than $20 billion.

U.S. Pressure

Failure to allow yuan gains risks provoking legislators in the U.S., the world’s biggest economy, to approve a bill offering protection against imports from countries that “misalign” currencies. The U.S. Commerce Department yesterday imposed import duties of as much as 99 percent on Chinese-made steel pipes following a complaint from U.S. Steel Corp.

China, which had a $227 billion trade surplus with the U.S. in 2009, has been the subject of more complaints filed over unfair trade than any other nation, according to data compiled by the World Bank.

Twelve-month non-deliverable forwards rose 0.15 percent to 6.6483 per dollar, reflecting bets the currency will strengthen 1.5 percent, according to data compiled by Bloomberg.

Lu said the yuan will rise to 6.6 by the end of 2010.

www.bloomberg.com/news/2010-09-14/yuan-surges-to-highest-level-since-1993-on-u-s-pressure-robust-economy.html

[sandi66]

Canadian Currency Strengthens to Three-Week High as Risk Demand Increases

By Chris Fournier -

Sep 13, 2010 4:33 PM ET

Canada’s dollar strengthened to a more than three-week high versus the greenback as optimism about growth in the U.S. and China, the world’s two largest economies, fueled investor appetite for higher-yielding assets.

The currency, nicknamed the loonie, capped its second weekly gain on Sept. 10, the day Statistics Canada reported employers added more jobs in August than economists expected, and two days after the Bank of Canada raised interest rates for the third time since May.

“The Bank of Canada rate hike and ensuing employment report has lent a nice push” to the Canadian dollar, Michael Leavitt, a Montreal-based institutional-derivatives broker at MF Global Canada Co., said via e-mail. He predicts the currency may head towards C$1.0500 to C$1.0100 versus the greenback.

The Canadian currency rose 0.9 percent to C$1.0284 at 4:19 a.m. in Toronto from C$1.0370 on Sept. 10. The dollar, known as the loonie for the waterfowl on the C$1 coin, climbed as much as 1 percent to C$1.0266, the strongest level since Aug. 19. One Canadian dollar purchases 97.24 U.S. cents.

The loonie advanced before reports this week forecast by Bloomberg surveys to show retail sales in the U.S., Canada’s biggest trading partner, rose in August for a second month and consumer prices increased.

The Basel Committee on Banking Supervision yesterday gave lenders up to eight years to comply with higher capital requirements intended to prevent future crises, easing concern added regulations would crimp banks’ ability to generate profit. China’s industrial production and retail sales rose last month more than forecast, data showed.

‘Optimistic Mood’

“Markets are in an optimistic mood following China’s data over the weekend and the Basel results,” Sacha Tihanyi, a currency strategist in Toronto at Bank of Nova Scotia’s Scotia Capital unit, said via instant message. “There is optimism heading into a very busy U.S. data week. This lighter mood in the U.S. certainly helps the Canadian dollar.”

Employers expanded payrolls last month by a net 35,800 jobs, the statistics agency said Sept. 10. A Bloomberg News survey forecast a gain of 30,000 jobs in August. The Bank of Canada raised its benchmark overnight rate by 25 basis points to 1 percent, matching similar moves in June and July.

Europe’s economy may grow 1.7 percent this year, almost twice as fast as previously forecast, the European Commission said in a report published today.

Stocks climbed, with the Standard & Poor’s 500 Index gaining 1.1 percent. Crude oil for October delivery touched $78.04 a barrel in New York, the highest level in a month. Crude is Canada’s biggest export.

Sales

China’s industrial output rose 13.9 percent in August from a year earlier, data released Sept. 11 by the National Bureau of Statistics showed, compared with a 13 percent expansion forecast in a Bloomberg survey. Retail sales were up 18.4 percent in August from a year earlier, versus an 18 percent increase forecast in a separate survey.

The euro gained against 10 of its 16 major counterparts on speculation the regulations from the Basel Committee, which reached a compromise as it seeks to rein in the risk-taking that caused the financial crisis, will give European banks time to raise additional funds. The greenback was the worst performer.

The loonie fell 0.6 percent to C$1.3235 per euro, while gaining 0.3 percent to 81.36 yen. It gained for the fourth straight day versus the pound, advancing 0.4 percent to C$1.5863. It will weaken by year-end to C$1.05 per U.S. dollar, says the median of 33 estimates in a Bloomberg News survey of economists.

‘Bearish Sentiment’

“Bearish sentiment” has increased for the U.S. dollar versus the loonie, George Davis, chief technical analyst at Royal Bank of Canada’s RBC Capital Markets unit, wrote in a note to clients. Resistance levels at C$1.0364 and C$1.0390 are expected to “cap the topside” for the U.S. currency, while a sustained break below C$1.0287 would “expose congestive support” for the greenback at C$1.0249, he wrote.

Support and resistance refer to the lower and upper boundaries, respectively, of a trading range, where buy and sell orders may be clustered.

Canada’s currency depreciated to C$1.0853 on May 25, the weakest level since November, after reaching parity with the greenback on April 6 for the first time in almost two years.

The loonie traded on a one-for-one basis with the U.S. currency in September 2007 for the first time in three decades, capping a five-year run on the back of booming demand for the nation’s commodities, from which it derives about half its export revenue.

Bonds Erase Losses

Government debt rose today, reversing losses. The 10-year benchmark bond yielded 2.95 percent after earlier rising above 3 percent for the first time in a month. The price of the 3.5 percent security due in June 2020 rose 18 cents to C$104.58.

The 10-year yield will rise to 3.27 percent by the end of this year, according to the median of 8 economists’ forecasts in a Bloomberg News survey.

Bank of Canada Governor Mark Carney is scheduled to speak tomorrow in Berlin about financial reform. His remarks will be published on the bank’s website at 10:45 a.m. New York time.

Timothy Lane, the central bank’s deputy governor, speaks the following day in St. John’s, Newfoundland. His remarks will be published on the website at 11:45 a.m. New York time.

BNP Paribas SA said investors should sell the pound and the U.S. dollar against the Canadian dollar as the Bank of Canada raises interest rates and the nation benefits from potentially stronger commodities demand. Canada in June became the first Group of Seven country to increase borrowing costs after last year’s global recession. The central bank has lifted the benchmark rate twice since then, bringing it to 1 percent from a record low 0.25 percent.

“If the global economy recovers, the subsequent positive terms-of-trade shock will heavily favor Canada relative to the U.K.,” a team of analysts in London led by Hans-Guenter Redeker said today in an investor report. “Even in the case where the global economy would go for a double-dip, clean balance sheets will favor the Canadian dollar.”

www.bloomberg.com/news/2010-09-13/canadian-currency-gains-to-almost-three-week-high-as-risk-demand-increase.html

[sandi66]

SEPTEMBER 14, 2010, 5:21 A.M. ET

Franc Hits Parity Against Dollar

LONDON—The sky-high Swiss franc hit a major new milestone Tuesday, shooting up to parity against the dollar for the first time since a spell of broad-based dollar weakness in December 2009.

The Swiss currency—seen as a refuge in times of global economic stress—has rattled up to a series of record highs against the euro of late. Now investors are buying it against the dollar in growing numbers too, illustrating the franc's broadening appeal and the depth of nerves about global financial markets.

Some traders say that further gains for the so-called Swissie against the dollar may be tough, as such psychological high-points often offer hefty resistance for short-term shifts.

Still, the clear momentum in the dollar's decline against the franc may continue to draw in new participants. Since the start of June, the dollar has slipped by 15% against the franc, in a smooth downturn.

"A lot of major currency pairs, like sterling or the euro against the dollar, are stuck in ranges, whereas the dollar's move against the franc is showing a clear trend," said Daragh Maher, a currencies analyst at Credit Agricole Corporate & Investment Bank in London. "When we have got other currency pairs ranging, that makes selling the dollar against the franc attractive," he said.

The Swiss National Bank has pursued an aggressive strategy of seeking to hold down its currency in the past, in an effort to deflect deflationary pressures, which build as the strong currency makes imports cheaper. Since June, it appears to have stepped back from that stance, noting that signs of deflation have disappeared.

The SNB's next monetary policy decision is due Thursday, and that may provide further signals on its willingness to intervene in the currency markets again.

The dollar was recently trading at 1.0022 franc, having dipped as low as 0.9996 franc earlier Tuesday. The franc was also climbing against the euro, which traded at 1.2920 franc. The all-time euro low stands at 1.2765 franc, seen Sept. 7.

online.wsj.com/article/SB10001424052748703376504575491203068602766.html?mod=googlenews_wsj

[sandi66]

Eiffel Tower evacuated in bomb scare

September 15, 2010 5:51AM

FRENCH police evacuated the Eiffel Tower and the park surrounding the Paris landmark today after a bomb alert.

A police officer said about 25,000 people were in the area at the time of the scare but added that they left calmly shortly before 9pm local time.

The officer, speaking on condition of anonymity, said the alert was sounded either after a threat was phoned in or following the discovery of a suspicious package.

The people evacuated, mostly French and foreign tourists, were asked to stay on the nearby Seine river banks, and the tower area and Champ de Mars park were also declared off limits.

The scare happened just hours after the French parliament passed a law prohibiting wearing a full-face veil in public, meaning a ban will come into force early next year if it is not overturned by senior judges.

The bill makes no mention of Islam, but President Nicolas Sarkozy's government promoted it as a means to protect women from being forced to wear Muslim full-face veils such as the burqa or the niqab.

There has not been any suggestion so far that the two events are linked, however.

www.news.com.au/breaking-news/eiffel-tower-evacuated-in-bomb-scare/story-e6frfku0-1225923283680

[sandi66]

Italy’s 1.5 billion euro ‘mob haul’

14/09 19:39 CET

It is being dubbed the biggest mob haul ever. Italy has seized Mafia-linked assets worth around 1.5 billion euros.

The probe centres on Sicilian businessman Vito Nicastri, known as ‘Lord of the Wind’ because of his vast holdings in alternative energy concerns.

As alleged links with mob leaders are investigated, the head of Italy’s anti-Mafia agency DIA presented the crackdown as a preemptive strike.
“We are preventatively targeting assets, because we want to weaken the criminal organisations, both in military and economic terms,” said General Antonio Girone.

Questions are being asked over whether organised crime is trying to ‘go green.’ Investigators say Nicastri’s companies ran wind farms as well as factories that produced solar energy panels.

Assets seized include bank accounts, fast cars and luxury yachts.

www.euronews.net/2010/09/14/italy-s-15-billion-euro-mob-haul/

[sandi66]

Anti-mafia police make largest asset seizure
By Guy Dinmore in Rome

Published: September 14 2010 19:31 | Last updated: September 14 2010 19:31

Italian anti-mafia police have made their largest seizure of assets as part of an investigation into windfarm contracts in Sicily. Officers confiscated property and accounts valued at €1.5bn belonging to a businessman suspected of having links with the mafia.

Roberto Maroni, interior minister, on Tuesday accused the businessman – identified by police as Vito Nicastri and known as the island’s “lord of the winds” – of being close to a fugitive mafia boss, Matteo Messina Denaro.

General Antonio Mirone, of the anti-mafia police, said the seized assets included 43 companies – some with foreign participation and mostly in the solar and windpower sector – as well as about 100 plots of land, villas and warehouses, luxury cars and a catamaran. More than 60 bank accounts were frozen.

Until his arrest last November, Mr Nicastri, based in the inland hill town of Alcamo, was Sicily’s largest developer of windfarms, arranging purchases of land, financing and official permits. Some projects were sold through intermediaries to foreign renewable energy companies attracted to Italy by generous subsidy schemes.

In an interview with the Financial Times at his head office in Alcamo last year, Mr Nicastri denied any wrongdoing and welcomed police probes. “It is like going to the hospital and having check-ups and you come out without doubts about your health,” he said.

Police confirmed that Mr Nicastri, 54, had been released after his arrest on suspicion of fraud last year and had not been ­re-arrested. Italy’s tough anti-mafia laws give authorities powers unparalleled in Europe to seize assets as a precautionary measure.

The police statement said Mr Nicastri was suspected of being close to mafia gangsters, and that investigations had revealed that Sicily’s Cosa Nostra and Calabria’s ‘Ndrangheta had infiltrated Sicily’s renewable energy sector.

Mr Nicastri was not immediately available for comment but a colleague in his Alcamo office called the seizures an “injustice”.

The renewable energy sector is under scrutiny across much of southern Italy. Some windfarms, built with official subsidies, have never functioned.

A separate probe in Sardinia has involved political allies of Silvio Berlusconi, prime minister. They have denied bribing officials to win tenders.

Mr Berlusconi’s government is proud of its record of cracking down on the mafia, seizing more than €10bn in assets and arresting more than 5,800 suspects since taking office in May 2008.

While commending Mr Maroni’s tenure, critics, including prominent anti-mafia magistrates, have attacked legislation seen to favour the mafia, such as last year’s tax amnesty and proposed restrictions on police use of wiretapping.

Mr Nicastri sold most of his windfarm projects to IVPC, a company near Naples run by Oreste Vigorito, also president of Italy’s windpower association. Mr Vigorito was also arrested last November on suspicion of fraud and later released. He denied wrongdoing.

www.ft.com/cms/s/0/c96d2de2-c02b-11df-b77d-00144feab49a.html

[sandi66]

French Senate passes ban of full Muslim veils
By ELAINE GANLEY (AP) – 3 hours ago

PARIS — The French Senate has voted overwhelmingly for a bill banning the burqa-style Islamic veil everywhere from post offices to streets, in a final step toward a making it law.

The Senate voted 246 to 1 Tuesday in favor of the bill, which has already passed in the lower chamber, the National Assembly.

Any dissenters have 10 days to challenge the measure in the Constitutional Council watchdog, but that is considered unlikely.

THIS IS A BREAKING NEWS UPDATE. Check back soon for further information. AP's earlier story is below.

PARIS (AP) — The French Senate debates Tuesday whether to ban the burqa-style veil, a move that affects only a tiny minority of the country's Muslim women but has significant symbolic repercussions.

Muslims believe the latest legislation is one more blow to France's second religion, and risks raising the level of Islamophobia in a country where mosques, like synagogues, are sporadic targets of hate. Some women have vowed to wear a full-face veil despite the law.

The proposed law was passed overwhelmingly by the lower house of parliament, the National Assembly, on July 13. The expected green light from the Senate would make it definitive once the president signs off on it — barring amendments and an eventual legal challenge.

The measure would outlaw face-covering veils in streets, including those worn by tourists from the Middle East and elsewhere. It is aimed at ensuring gender equality, women's dignity and security, as well as upholding France's secular values — and its way of life.

Kenza Drider, however, says she'll flirt with arrest to wear her veil as she pleases.

"It is a law that is unlawful," said Drider, a mother of four from Avignon, in southern France. "It is ... against individual liberty, freedom of religion, liberty of conscience, she said.

"I will continue to live my life as I always have with my full veil," she told Associated Press Television News.

Drider was the only woman who wears a full-faced veil to be interviewed by a parliamentary panel that spent six months deciding whether to move ahead with legislation.

Muslim leaders concur that Islam does not require a woman to hide her face. However, they have voiced concerns that a law forbidding them to do so would stigmatize the French Muslim population, which at an estimated 5 million is the largest in western Europe. Numerous Muslim women who wear the face-covering veil have said they are now being harassed in the streets.

Raphael Liogier, a sociology professor who heads the Observatory of the Religious in Aix-en-Provence, says that Muslims in France are already targeted by hate-mongers and the ban on face-covering veils "will officialize Islamophobia."

"With the identity crisis that France has today, the scapegoat is the Muslim," he told The Associated Press.

Ironically, instead of helping some women integrate, the measure may keep them cloistered in their homes to avoid exposing their faces in public.

"I won't go out. I'll send people to shop for me. I'll stay home, very simply," said Oum Al Khyr, who wears a "niqab" that hides all but the eyes.

"I'll spend my time praying," said the single woman "over 45" who lives in Montreuil on Paris' eastern edge. "I'll exclude myself from society when I wanted to live in it."

The law banning the veil would take effect only after a six-month period.

The Interior Ministry estimates the number of women who fully cover themselves at some 1,900, with a quarter of them converts to Islam and two-thirds with French nationality.

The French parliament wasted no time in working to get a ban in place, opening an inquiry shortly after Conservative President Nicolas Sarkozy said in June 2009 that full veils that hide the face are "not welcome" in France.

The bill calls for euro150 ($185) fines or citizenship classes for any woman caught covering her face, or both. It also carries stiff penalties for anyone such as husbands or brothers convicted of forcing the veil on a woman. The euro30,000 ($38,400) fine and year in prison are doubled if the victim is a minor.

It was unclear, however, how authorities planned to enforce such a law.

"I will accept the fine with great pleasure," said Drider, vowing to appeal to the European Court of Human Rights in Strasbourg if she gets caught.

www.google.com/hostednews/ap/article/ALeqM5jBLvcjYl38M5uHzhqlF2IV8WWOywD9I7QQIO0