The solar wind is a paltry 352 km/sec and the proton count is 2.9, so not much to report
there, but the activity for solar cycle 24 is not done for sure. There was an X3 on Oct.
24th (2140 UT), an X1 on Oct 25th (1709 UT), and an X2 on Oct. 22nd (1059 UT). All
three of these explosions produced strong HF radio blackouts over the dayside of Earth.
In each case, communications were disturbed over a wide area for approximately one
hour. Such blackouts may be noticed by amateur radio operators, aviators, and
mariners.
Usually, strong flares are accompanied by massive CMEs--billion-ton clouds of
electrified gas that billow away from the blast site. So far, however, none of the
eruptions from AR2192 has produced a major CME. Without a series of CMEs to rattle
our planet's magnetic field, there have been no geomagnetic storms nor any
widespread auroras. Earth-effects have been limited to radio blackouts.
Now, today, Giant sunspot AR2192 is growing again, which means high solar activity is
unlikely to subside. NOAA forecasters estimate an 85% chance of M-class flares and a
45% chance of X-flares during the next 24 hours. For the third day in a row, Earthorbiting satellites detected an X-class solar flare. The X2-category blast came from giant
sunspot AR2192.
More Banker Witnesses Refusing to Breathe
Back on January 26, a 58-year-old former senior executive at German investment bank
behemoth Deutsche Bank, William Broeksmit, was found dead after hanging himself at
his London home, and with that, set off an unprecedented series of banker suicides
throughout the year which included former Fed officials and numerous JPMorgan
traders.
Following a brief late summer spell in which there was little if any news of bankers
taking their lives, as reported previously, the banker suicides returned with a bang when
none other than the hedge fund partner of infamous former IMF head Dominique
Strauss-Khan, Thierry Leyne, a French-Israeli entrepreneur, was found dead after
jumping off the 23rd floor of one of the Yoo towers, a prestigious residential complex in
Tel Aviv.
Just a few brief hours later the WSJ reported that yet another Deutsche Bank veteran
has committed suicide, and not just anyone but the bank's associate general counsel,
41 year old Calogero "Charlie" Gambino, who was found on the morning of Oct. 20,
having also hung himself by the neck from a stairway banister, which according to the
New York Police Department was the cause of death. We assume that any relationship
to the famous Italian family carrying that last name is purely accidental.
Here is his bio from a recent conference which he attended:
Charlie J. Gambino is a Managing Director and Associate General Counsel in the
Regulatory, Litigation and Internal Investigation group for Deutsche Bank in the
Americas. Mr. Gambino served as a staff attorney in the United Securities and
Exchange Commission’s Division of Enforcement from 1997 to 1999. He also was
associated with the law firm of Skadden, Arps, Slate Meagher & Flom from 1999 to
2003. He is a frequent speaker at securities law conferences. Mr. Gambino is a member
of the American Bar Association and the Association of the Bar of the City of New York.
As a reminder, the other Deutsche Bank-er who was found dead earlier in the year,
William Broeksmit, was involved in the bank's risk function and advised the firm's senior
leadership; he was "anxious about various authorities investigating areas of the
bank where he worked," according to written evidence from his psychologist, given
Tuesday at an inquest at London's Royal Courts of Justice. And now that an almost
identical suicide by hanging has taken place at Europe's most systemically important
bank, and by a person who worked in a nearly identical function - to shield the bank
from regulators and prosecutors and cover up its allegedly illegal activities with
settlements and fines - is surely bound to raise many questions.
The WSJ reports that Mr. Gambino had been "closely involved in negotiating legal
issues for Deutsche Bank, including the prolonged probe into manipulation of the
London interbank offered rate, or Libor, and ongoing investigations into
manipulation of currencies markets, according to people familiar with his role at
the bank."
He previously was an associate at a private law firm and a regulatory enforcement
lawyer from 1997 to 1999, according to his online LinkedIn profile and biographies for
conferences where he spoke. But most notably, as his LinkedIn profile below shows,
like many other Wall Street revolving door regulators, he started his career at the
SEC itself where he worked from 1997 to 1999.
"Charlie was a beloved and respected colleague who we will miss. Our thoughts and
sympathy are with his friends and family,” Deutsche Bank said in a statement.
Going back to the previous suicide by a DB executive, the bank said at the time of the
inquest that Mr. Broeksmit “was not under suspicion of wrongdoing in any matter.” At
the time of Mr. Broeksmit’s death, Deutsche Bank executives sent a memo to bank staff
saying Mr. Broeksmit “was considered by many of his peers to be among the finest
minds in the fields of risk and capital management.” Mr. Broeksmit had left a senior
role at Deutsche Bank’s investment bank in February 2013, but he remained an adviser
until the end of 2013. His most recent title was the investment bank’s head of capital
and risk-optimization, which included evaluating risks related to complicated
transactions.
A thread connecting Broeksmit to wrongdoing, however, was uncovered earlier this
summer when Wall Street on Parade referenced his name in relation to the notorious at
the time strategy provided by Deutsche Bank and others to allow hedge funds to avoid
paying short-term capital gains taxes known as MAPS (see How RenTec Made More
Than $34 Billion In Profits Since 1998: "Fictional Derivatives")
From Wall Street on Parade:
Broeksmit’s name first emerged in yesterday’s Senate hearing as Senator Carl Levin,
Chair of the Subcommittee, was questioning Satish Ramakrishna, the Global Head of
Risk and Pricing for Global Prime Finance at Deutsche Bank Securities in New York.
Ramakrishna was downplaying his knowledge of conversations about how the scheme
was about changing short term gains into long term gains, denying that he had been
privy to any conversations on the matter.
Levin than asked: “Did you ever have conversations with a man named Broeksmit?”
Ramakrishna conceded that he had and that the fact that the scheme had a tax benefit
had emerged in that conversation. Ramakrishna could hardly deny this as Levin had
just released a November 7, 2008 transcript of a conversation between Ramakrishna
and Broeksmit where the tax benefit had been acknowledged.
Another exhibit released by Levin was an August 25, 2009 email from William Broeksmit
to Anshu Jain, with a cc to Ramakrishna, where Broeksmit went into copious detail
on exactly what the scheme, internally called MAPS, made possible for the bank
and for its client, the Renaissance Technologies hedge fund. (See Email from
William Broeksmit to Anshu Jain, Released by the U.S. Senate Permanent
Subcommittee on Investigations.)
At one point in the two-page email, Broeksmit reveals the massive risk the bank is
taking on, writing: “Size of portfolio tends to be between $8 and $12 billion long and
same amount of short. Maximum allowed usage is $16 billion x $16 billion, though this
has never been approached.”
Broeksmit goes on to say that most of Deutsche’s money from the scheme “is actually
made by lending them specials that we have on inventory and they pay far above
the regular rates for that.”
It would appear that with just months until the regulatory crackdown and Congressional
kangaroo circus, Broeksmit knew what was about to pass and being deeply implicated
in such a scheme, preferred to take the painless way out.
The question then is just what major regulatory revelation is just over the horizon for
Deutsche Bank if yet another banker had to take his life to avoid being cross-examined
by Congress under oath? For a hint we go back to another report, this time by the FT,
which yesterday noted that Deutsche Bank will set aside just under €1bn towards the
numerous legal and regulatory issues it faces in its third quarter results next
week, the bank confirmed on Friday.
In a statement made after the close of markets, the Frankfurt-based lender said it
expected to publish litigation costs of €894m when it announces its results for the JulySeptember period on October 29.
The extra cash will add to Deutsche's already sizeable litigation pot, where the bank has
yet to be fined in connection with the London interbank rate-rigging scandal.
It is also facing fines from US authorities over alleged mortgage-backed securities
misselling and sanctions violations, which have already seen rivals hit with heavy fines.
Deutsche has also warned that damage from global investigations into whether traders
attempted to manipulate the foreign-exchange market could have a material impact on
the bank.
The extra charge announced on Friday will bring Deutsche's total litigation reserves to
€3.1bn. The bank also has an extra €3.2bn in so-called contingent liabilities for fines
that are harder to estimate.
Clearly Deutsche Bank is slowly becoming Europe's own JPMorgan - a criminal bank
whose past is finally catching up to it, and where legal fine after legal fine are only now
starting to slam the banking behemoth. We will find out just what the nature of the latest
litigation charge is next week when Deutsche Bank reports, but one thing is clear: in
addition to mortgage, Libor and FX settlements, one should also add gold. Recall from
around the time when the first DB banker hung himself: it was then that Elke Koenig, the
president of Germany's top financial regulator, Bafin, said that in addition to currency
rates, manipulation of precious metals "is worse than the Libor-rigging scandal."
It remains to be seen if Calogero's death was also related to precious metals rigging
although it certainly would not be surprising. What is surprising, is that slowly things are
starting to fall apart at the one bank which as we won't tire of highlighting, has a bigger
pyramid of notional derivatives on its balance sheet than even JPMorgan, amounting to
20 times more than the GDP of Germany itself, and where if any internal investigation
ever goes to the very top, then Europe itself, and thus the world, would be in jeopardy.
At this point it is probably worth reminding to what great lengths regulators would go just
to make sure that Deutsche Bank would never be dragged into a major litigation
scandal: recall that the chief enforcer of the SEC during the most critical period following
the great crash of 2008, Robert Khuzami, worked previously from 2002 to 2009 at,
drumroll, Deutsche Bank most recently as its General Counsel (see "Robert Khuzami
Stands To Lose Up To $250,000 If He Pursues Action Against Deutsche Bank" and
"Circle Jerk 101: The SEC's Robert Khuzami Oversaw Deutsche Bank's CDO, Has
Recused Himself Of DB-Related Matters"). The same Khuzami who just landed a $5
million per year contract (with a 2 year guarantee) with yet another "law firm", Kirkland
and Ellis. One wonders: if and when the hammer falls on Deutsche Bank, will it
perchance be defended by the same K&E and its latest prominent hire, Robert Khuzami
himself?
But usually it is best to just avoid litigation altogether. Which is why perhaps sometimes
it is easiest if the weakest links, those whose knowledge can implicate the people all the
way at the top, quietly commit suicide in the middle of the night...
The Ebola Rockola (Part Two)
With Ebola now turning up in two large American cities, and the White House's new
"Ebola czar" still declining to appear before Congress, a House member tracking the
response to the disease says the Obama administration continues to put politics before
public health.
"It is infuriating," Rep. Blake Farenthold, of the Comittee on Oversight and Government
Reform, told "MidPoint" host Ed Berliner on Newsmax TV on Friday.
n an interview that ranged from travel bans to the behavior of an Ebola-infected New
York physician, the Texas Republican also blasted President Barack Obama and his
new Ebola czar, Democratic political operative Ron Klain.
"They're more interested in politics than dealing with a health care crisis," said
Farenthold.
"He should have been at the hearing today," Farenthold said of Klain, who on Friday
skipped a hearing on Ebola chaired by Rep. Darrell Issa's Oversight and Government
Reform panel. "We need a medical doctor, not a spin doctor."
It was Klain's second noteworthy absence since being named point man on the crisis.
Vote: Do You Approve of Obama’s Job Performance? Vote Here Now.
But Farenthold also signaled that Congress is basically stuck with him.
"We've got to make the best of it," he said. "But if he's going to coordinate all of
government, he needs to coordinate with Congress, who signs the checks."
Farenthold said he wants to hold the administration to its promise to treat Ebola —
which has now spread from western Africa to episodes in Dallas and New York — with
"an overabundance of caution."
He said one cautionary measure is to ban commercial flights between the United States
and the west African countries — Guinea, Sierra Leone, Liberia — hit hardest by an
infectious disease that has already killed more than 4,500 people, according to official
estimates.
Farenthold proposed a workaround: military fights.
"it's not like we don't have any airplanes in the military," he said. "There's C-130s. There
are a ton of military airplanes we can send relief workers, equipment and doctors in. We
don't need to let tourists from these countries come on commercial airliners with
innocent folks."
A critic of the administration's initial plan to set up Ebola screening for passengers at
five U.S. airports, regardless of whether travelers from western Africa landed at one of
the five, Farenthold credited the White House with changing course and instead
ordering all commercial air travel from Ebola-affected countries through those five hubs.
"They're trying," he said, adding that "funneling everyone from the affected countries to
the five airports is a step in the right direction. But I don't think it's enough.
"I think we ought to follow the lead of some of our European allies and just say, look, no
travel there on commercial air. And if you need to get in and out for humanitarian or
military reasons, we've got military transports or charter flights that can do that," he said.
Farenthold also questioned the decision-making of Craig Spencer, the New Yorker and
Doctors Without Borders aid worker who returned from treating Ebola patients in Guinea
on Oct. 17, and developed the disease six days later.
Health officials are racing to retrace Spencer's movements, which reportedly included
a subway train ride and a bowling alley excursion in one of the world's most densely
populated cities.
According to reports, Spencer developed fever on Thursday morning and went to a
hospital, where he remains in isolation, and had been taking his temperature daily — in
keeping with protocols coordinated between Doctors Without Borders and the U.S.
Centers for Disease Control and Prevention (CDC).
"The issue is what are the protocols for someone coming back from that area, and there
are conflicting reports," said Farenthold. "But I certainly think taking public transportation
within the first 21 days, getting on a crowded subway in New York, would be
questionable behavior."
"I would be spending as much time as possible in my home, and getting takeout
delivered, rather than going out in public," he said.
Farenthold said he took heart from news that the second Dallas nurse infected with
Ebola has also been declared free of the virus.
Three Dallas infections, beginning with a dying Liberian man, were the first U.S.-based
Ebola cases in history and triggered a national uproar over the federal government's
tardy response to the disease's unprecedented spread.
"I think we are learning from our mistakes," said Farenthold. "We see a lot of
government finger-pointing — one agency pointing the finger at the other, or the CDC
saying the nurses violated protocol — right before they changed the protocol. You've
got nobody willing to accept responsibility.
"But we have moved forward … and I think that's something that's going to be — is —
one of the key factors in keeping Americans safe and limiting the spread of this
disease," he said.
Christie Takes Action – The FAA has yet to respond
“The public in New Jersey needs to know we are prepared and we’re ready to deal with
whatever comes,” Christie said Wednesday, according to WCBS. “We’re constantly
reviewing our protocols and our approaches to make sure that we’re doing it in the best
possible way that we can.”
Travelers displaying Ebola symptoms at Newark's airport would be taken to one of three
New Jersey hospitals. The New York City-area airport is one of five in the U.S. that will
monitor people coming from West Africa, the epicenter of the Ebola epidemic, for 21
days. There have not been any people diagnosed with Ebola in New Jersey so far.
Ebola has become a driving issue ahead of the November midterm elections, with
candidates from both sides of the aisle urging the federal government to pass tougher
protections against the deadly virus that has ravaged West Africa. Federal health
officials say it is nearly impossible for most Americans to catch Ebola. Only one person
has died from the virus in the U.S., and two nurses who treated that patient and
contracted the virus appear to be recovering.
Christie did not add his name to a growing list of politicians who have called for a travel
ban on passengers from West Africa because he said there are no direct flights from the
region to the U.S. But the New Jersey governor did say that President Barack Obama
should consider a visa ban on people from such countries. U.S. Sen. Marco Rubio, RFla., another possible 2016 GOP presidential candidate, said he would sponsor a bill to
temporarily ban visas for people from Liberia, Guinea and Sierra Leone.
"There are no direct flights from these countries to the United States, so what you’d
need to really do is do a visa suspension,” Christie said, according to NJ.com. “That’s a
significant step,” Christie said, “One that I think should be considered, but that’s
ultimately going to be the decision of the president of the United States.”
police officers tasked with working the scene around the Manhattan apartment of Dr.
Craig Spencer, diagnosed with Ebola yesterday, were caught on camera tossing the
gloves and masks they used for their protection into public trash cans.
One video (above via the Daily Mail) shows two police officers discarding first the crime
scene tape used to block off the potentially infected area, then removing their protective
gloves and masks and tossing them into an open-top public waste bin.
The video does not show whether or not the officers had entered Spencer’s apartment.
Earlier reports said that those who did enter were wearing hazmat suits, so it is likely
that they did not. Regardless of their proximity to the patient’s apartment, the incident
raises concern about the degree to which the city is prepared to handle the deadly virus
and how closely safety protocol is being followed by those involved.
Civil Forfeiture Goes the Next Step: Bank Accounts with too
much money in them
The Internal Revenue Service has been seizing money from the bank accounts of
individuals and businesses with no proof, or even charges filed, that they are guilty of
any crime.
Now, the IRS claims that it will stop — but will it?
Using a law, the Civil Asset Forfeiture Reform Act of 2000, that allows the feds to seize
money from suspected gangsters, drug dealers and terrorists, the IRS has put innocent
people into bankruptcy and massive debt and taken the money a military father saved
from his paychecks to put his kids through college, solely by tracking the amounts that
people put into their bank accounts.
FAX BLAST SPECIAL: Audit The I.R.S
When no criminal activity is charged, The New York Times reports, the IRS often
negotiates to return only part of the seized money, leaving impoverished citizens with
little option but to either accept the IRS’ offer or continue a lengthy and very expensive
legal battle to try to get their legitimately earned money back.
The problem has been growing. The Institute for Justice estimates that from just 114
seizures in 2005, the IRS made 639 seizures in 2012, and in only 20 percent of the
cases were any criminal charges ever pursued.
Under the Bank Secrecy Act, banks report transactions larger than $10,000 to federal
authorities, but also report a pattern of regular, smaller deposits which appear designed
to get around the act. This alone can be enough to trigger a seizure, the Times reports,
and banks filed over 700,000 “suspicious” reports last year.
One involved a 27-year-old Long Island candy and cigarette distribution company, BiCounty Distributors, which made daily cash deposits, usually under $10,000. When the
IRS seized $447,000 from the company, it refused to return it, despite the fact that there
was no crime to prosecute, and instead offered a partial settlement.
The company is now $300,000 in debt and attorney Joseph Potashnik told the Times, “I
don’t think they’re (the IRS) really interested in anything. They just want the money.”
Army Sgt. Jeff Cortazzo was saving up for his daughters’ college education when the
IRS seized $66,000 of his money – it cost him $21,000 to get the remainder back.
Richard Weber, the chief of Criminal Investigation at the IRS, said in a written statement
in response to the Times story, “After a thorough review of our structuring cases over
the last year… IRS-CI will no longer pursue the seizure and forfeiture of funds
associated solely with ‘legal source’ structuring cases unless there are exceptional
circumstances justifying the seizure and forfeiture and the case has been approved at
the director of field operations (D.F.O.) level.”
Income Inequality Police
We learned last week that new Federal Reserve Chair Janet Yellen is not so much our
nation’s central banker as class warrior in chief. In a widely publicized speech Ms.
Yellen parroted all of the left’s talking points on the divide between rich and poor. “The
extent of and continuing increase in inequality in the United States greatly concern me,”
she lectured. “It is no secret that the past few decades of widening inequality can be
summed up as significant income and wealth gains for those at the very top and
stagnant living standards for the majority.”
Actually, that’s a factually dubious claim given that the 1980s and 1990s saw wide gains
for the middle class and even those at the bottom of the income pyramid. Middle
income families saw a more than 30% inflation-adjusted rise in income in those years.
From 1982-1997 those who started out as poor actually saw faster income gains than
those who started out as rich, according the U.S. Treasury Department study on income
mobility. Upward mobility defined that era of broad-based prosperity.
Ms. Yellen also failed to note that the income gap is widening today because this has
been the slowest recovery from a recession since the 1930s. Compared the other
economic recoveries since 1960, Our national output is about $1.6 trillion (in inflationadjusted dollars) behind; and compared to the Reagan recovery in the 1980s, we’re
now $2.2 trillion behind, according to the Joint Economic Committee of Congress.
SPECIAL: Join the Tea Party REVOLUTION! The Obama Regime must be
dismantled!
Ms. Yellen never mentions that Obamanomics has made inequality much worse.
Almost all of the income gains under Barrack Obama have gone to the top 5% in
income.
Her silence on this point shouldn’t be too surprising because she has supported most of
Obama’s economic policies. She has also been a cheerleader of the Fed’s easy money
policies which have benefited those at the top and almost no one else. She never
spoke out against the nearly $8 trillion in debt spending since the end of 2008, the big
tax increase on investment in 2013, the expansion of welfare benefits, and other
policies that have backfired. One could argue the best way to reduce inequality is to
repeal everything that President Obama has done since he entered office.
The real estate bust also exacerbated inequality, she concludes. “Since housing
accounts for a larger share of wealth for those in the bottom half of the wealth
distribution, their overall wealth is affected more by changes in home prices,” she says.
“Homeowners in the bottom half of households by wealth reported 61 percent less
home equity in 2013 than in 2007. The next 45 percent reported a 29 percent loss of
housing wealth, and the top 5 lost 20 percent.” Again, this is because of federal
housing policies at FHA, Fannie Mae, and Freddie Mac that encouraged mortgages to
people who couldn’t afford them.
Ms. Yellen conveniently failed to mention the role the Federal Reserve that she runs
played in allowing unqualified borrowers easy access to mortgage loans to purchase
homes at prices inflated by the Federal Reserve’s monetary policies.
According to Ms. Yellen, “Public funding of education is another way that governments
can help offset the advantages some households have in resources available for
children.” But if money were the answer the problem, districts in Washington, D.C.,
Chicago, Los Angeles, and NYC would be leading the way in performance. After all,
these districts spend more than the national average. Why do they have some of the
worst schools with the highest dropout rates?
Yellen is correct to point out the failures of our public education system. Young adults
from economically challenged backgrounds are certainly being deprived of opportunities
which could propel them forward. School choice programs to allow the poor and
minorities better education options are working and should be expanded, but Ms. Yellen
dared not take on the teacher unions.
It wasn’t all bad. At one point she noted: “it appears that it has become harder to start
and build businesses.” That’s for sure. The United States has steadily dropped in the
rankings of economic freedom, as our colleagues at the Heritage Foundation has
documented.
But Ms. Yellen ignored most of the ideas that truly will ignite growth and raise incomes
for the poor. Marriage, the dignity of work, income tax cuts to promote investment here,
cutting our corporate tax, replacing welfare with work, preparing our workers with the
skills they need to fill millions of unfilled jobs. These are the “values rooted in our
nation’s history,” to borrow a phrase from the Fed chief, that could allow the poor to rise
up.
This might have been an occasion for Ms. Yellen to use her new perch as Fed chief to
boldly challenge the whole litany of tired liberal talking points on inequality. She could
have warned that when we focus on economic fairness and not growth, we get neither –
as the Obama years have demonstrated.
That’s so disappointing because we’ve tried all of these ideas for five years, and we still
have record income inequality. The nation’s Fed chief ought to be a loud and clear
voice for growth – not class envy
The $600 Trillion Time Bomb
Do you want to know the real reason banks aren't lending and the PIIGS have control of
the barnyard in Europe?
It's because risk in the $600 trillion derivatives market isn't evening out. To the contrary,
it's growing increasingly concentrated among a select few banks, especially here in the
United States.
In 2009, five banks held 80% of derivatives in America. Now, just four banks hold a
staggering 95.9% of U.S. derivatives, according to a recent report from the Office of the
Currency Comptroller.
The four banks in question: JPMorgan Chase & Co. (NYSE: JPM), Citigroup Inc.
(NYSE: C), Bank of America Corp. (NYSE: BAC) and Goldman Sachs Group Inc.
(NYSE: GS).
Derivatives played a crucial role in bringing down the global economy, so you would
think that the world's top policymakers would have reined these things in by now – but
they haven't.
Instead of attacking the problem, regulators have let it spiral out of control, and the
result is a $600 trillion time bomb called the derivatives market.
Think I'm exaggerating?
The notional value of the world's derivatives actually is estimated at more than $600
trillion. Notional value, of course, is the total value of a leveraged position's assets. This
distinction is necessary because when you're talking about leveraged assets like
options and derivatives, a little bit of money can control a disproportionately large
position that may be as much as 5, 10, 30, or, in extreme cases, 100 times greater than
investments that could be funded only in cash instruments.
The
world's gross domestic product (GDP) is only about $65 trillion, or roughly 10.83% of the
worldwide value of the global derivatives market, according to The Economist. So
there is literally not enough money on the planet to backstop the banks trading these
things if they run into trouble.
Compounding the problem is the fact that nobody even knows if the $600 trillion figure
is accurate, because specialized derivatives vehicles like the credit default swaps that
are now roiling Europe remain largely unregulated and unaccounted for.
Tick…Tick…Tick
To be fair, the Bank for International Settlements (BIS) estimated the net notional value
of uncollateralized derivatives risks is between $2 trillion and $8 trillion, which is still a
staggering amount of money and well beyond the billions being talked about in Europe.
Imagine the fallout from a $600 trillion explosion if several banks went down at once. It
would eclipse the collapse of Lehman Brothers in no uncertain terms.
A governmental default would panic already anxious investors, causing a run on several
major European banks in an effort to recover their deposits. That would, in turn, cause
several banks to literally run out of money and declare bankruptcy.
Short-term borrowing costs would skyrocket and liquidity would evaporate. That would
cause a ricochet across the Atlantic as the institutions themselves then panic and try to
recover their own capital by withdrawing liquidity by any means possible.
And that's why banks are hoarding cash instead of lending it.
The major banks know there is no way they can collateralize the potential daisy chain
failure that Greece represents. So they're doing everything they can to stockpile cash
and keep their trading under wraps and away from public scrutiny.
What really scares me, though, is that the banks
think this is an acceptable risk because the odds of a default are allegedly smaller than
one in 10,000.
But haven't we heard that before?
Although American banks have limited their exposure to Greece, they have loaned
hundreds of billions of dollars to European banks and European governments that may
not be capable of paying them back.
According to the Bank of International Settlements, U.S. banks have loaned only $60.5
billion to banks in Greece, Ireland, Portugal, Spain and Italy – the countries most at risk
of default. But they've lent $275.8 billion to French and German banks.
And undoubtedly bet trillions on the same debt.
There are three key takeaways here:



There is not enough capital on hand to cover the possible losses associated with
the default of a single counterparty – JPMorgan Chase & Co. (NYSE: JPM), BNP
Paribas SA (PINK: BNPQY) or the National Bank of Greece (NYSE ADR: NBG)
for example – let alone multiple failures.
That means banks with large derivatives exposure have to risk even more money
to generate the incremental returns needed to cover the bets they've already
made.
And the fact that Wall Street believes it has the risks under control practically
guarantees that it doesn't.
Seems to me that the world's central bankers and politicians should be less concerned
about stimulating "demand" and more concerned about fixing derivatives before this
$600 trillion time bomb goes off.
Why Oil is Going Down in Price
The U.S. Gulf Coast—home to the world's largest concentration of petroleum
refineries—is suddenly awash in crude oil.
The U.S. Gulf Coast—home to the world's largest concentration of petroleum
refineries—is suddenly awash in crude oil. Russell Gold has details on MoneyBeat.
Photo: Getty Images.
So much high-quality U.S. oil is flowing into the area that the price of crude there has
dropped sharply in the past few weeks and is no longer in sync with global prices.
In fact, some experts believe a U.S. oil glut is coming. "We are moving toward a
significant amount of domestic oversupply of light crude," says Ed Morse, head of
commodities research at Citigroup.
Related

Shell Drops Louisiana Plant
Unthinkable five years ago, the abundance of petroleum reflects surging output from oil
fields in West Texas and North Dakota, as well as new pipeline routes to move crude to
the refining and petrochemical complexes that line the coasts of Texas and Louisiana.
And the glut on the Gulf Coast is likely to grow. In January, the southern leg of
TransCanada Corp.'s Keystone pipeline is set to begin transporting 700,000 barrels a
day of crude from the storage tanks of Cushing, Okla., to Port Arthur, Texas.
The ramifications could be far-reaching, including lower gasoline prices for American
drivers, rising profits for refineries and growing political pressure on Congress to allow
oil exports. But the glut could also hurt the very companies that helped create it:
independent drillers, who have reversed years of declining U.S. energy production but
face lower prices for their product.
Globally, the surge in supply and tumbling prices are attracting notice. On Monday, a
delegate to the Organization of the Petroleum Exporting Countries said Saudi Arabia is
selling oil to the U.S. for less than it would fetch in Asia. Nonetheless, the Saudis have
continued to ship crude to refineries they own in Texas and Louisiana, according to U.S.
import data, further driving down prices.
The strongest indication of a glut is the falling price of "Louisiana Light Sweet," a blend
purchased by refiners along the Gulf Coast. Typically, a barrel of Louisiana Light Sweet
costs a dollar or two more than a barrel of crude in Europe.
But on Wednesday, a barrel of Louisiana crude fetched $9.46 less than a barrel of
comparable-quality crude in England.
With growing crude flows from North Dakota, Texas and other parts of the country,
refineries can force U.S. oil producers to offer large discounts. "It's definitely a buyer's
market," says Judith Dwarkin, chief energy economist at ITG Investment Research.
Mark Papa, executive chairman of EOG Resources Inc., one of the largest U.S. crude
producers, says the fat profit margins that energy producers raked in earlier this year
are over. "It was kind of like found money and it wasn't going to last," he says.
To be sure, Mr. Papa doesn't expect such a glut that "we end up with a ruination of oil
prices," he says, the way natural-gas overproduction has caused that fuel's price to
remain near multiyear lows.
Some industry officials argue that U.S. light crude will simply displace more "heavy"
imported oil. But many Gulf Coast refineries are set up to turn the more viscous crude
into diesel fuel, and converting their facilities to process additional light oil wouldn't be
easy.
U.S. drivers are finally benefiting from the surge in U.S. oil production. While up from
recent lows, a gallon of gas cost, on average, 12.2 cents less in the week ended
Monday than it had a year earlier, according to the Energy Information Administration.
"We're awash in cheap energy," says Paul Smith, the chief risk officer at Mobius Risk
Group, an energy adviser in Houston.
Refiners like Valero Energy Corp. and Marathon Petroleum Corp. can buy up cheap
U.S. crude and beat global refineries in the diesel market. U.S. refiners have increased
exports 22% between June and October, and they now control about 20% of the global
market for traded diesel, jet fuel and other products, according to Bernstein Research
energy analysts.
San Antonio-based Valero, the nation's largest oil refiner, all but stopped importing
lightweight crude to the Gulf Coast and Memphis a year ago because there was so
much U.S. product available, says spokesman Bill Day. It is also shipping crude from
Texas and Louisiana all the way up to its refinery in Quebec because the price of Gulf
Coast oil is so low.
The surge in U.S. oil production has been swift. From virtually no output five years ago,
the Bakken Shale formation in North Dakota will pass one million barrels a day this
month, according to federal data. The Eagle Ford Shale deposit, in South Texas,
passed the one-million-barrel mark in May and is nearing 1.3 million barrels a day.
Both giant oil fields were unleashed by the combination of two technologies—horizontal
drilling to position wells to run through layers of petroleum-rich rock, and hydraulic
fracturing to break up dense geological formations.
"Not one person saw this coming," says Paul Sankey, an energy analyst at Deutsche
Bank. He says he expects growing production to eventually push prices of West Texas
Intermediate crude, the U.S. benchmark, below $80 a barrel, down from $97.38
Thursday. The industry "will start screaming" for Congress to lift the export moratorium,
he says.
Adam Bedard, a market analyst for High Sierra Energy, a subsidiary of NGL Energy
Partners LP, agrees that pressure will rise on the federal government to loosen crude-oil
export restrictions, which date back to the 1973 OPEC oil embargo. Oil storage in the
Gulf region appears to be filling up, he says. "It's like someone built a superhighway
where there wasn't one before.”
The Price of Oil as a Weapon of the Cold War
The drop in prices is providing a boost to the U.S. economy and U.S. consumers, but it
could put a dent in revenues in countries such as Russia, Iran, and Iraq, where oil
exports play an enormously important role in supporting economic growth and
government finances. Europe, meanwhile, is only partially benefiting from the decline in
prices because the euro has been weakening, making it relatively more expensive for
Europeans to purchase oil, which is priced in dollars.
(NASDAQ)
While it isn't unusual for oil prices to fall this time of year -- between the summer driving
season and the winter heating season -- deeper factors are at play this year. Here are
four of the most important.
1. Global oil production is growing, led by the United States.
Thanks to shale oil drilling largely in North Dakota and Texas, U.S. crude oil production
has climbed to 8.5 million barrels a day, its highest level since 1986. Including natural
gas liquids, U.S. oil output is nearly even with Saudi Arabia. Production of "tight" oil -from the fracking of shale -- has gone from a marginal slice of U.S. output to nearly 4
million barrels a day since 2010. North Dakota is producing more than Libya.
One symbol of this surge came last weekend, when energy giant Conoco loaded an oil
tanker in Alaska and had it set sail for South Korea, the first cargo of Alaska North
Slope crude to go to Asia in over a decade. (An exception to the ban on U.S. crude oil
exports allows some exports from Alaska.) It was the first in what Citigroup's head of
global commodities research, Edward Morse, says will "become an armada" of about
100,000 barrels a day. The industry is also increasing pressure on the Obama
administration to allow oil exports from ports along the Gulf of Mexico.
Russia's oil production is growing, too. The country's output is approaching its postSoviet high of 11.48 million barrels a day, reached in 1987. Russia produced 10.64
million barrels of crude and condensate in January, according to Russian data quoted
by Bloomberg News.
Prices have also been driven down by a recovery in production in Libya, where civil war
has intermittently shut down the country's oil wells. But Libya is currently producing
925,000 barrels a day, a 14-month high, according to Argus Global Markets, a
respected industry newsletter.
2. World consumption is anemic.
China's oil consumption, up about 2 percent since last year, isn't growing as fast as
expected. U.S. vehicle fuel efficiency requirements, set by the Obama administration in
2009, are working. As a result, motor fuel consumption is mostly flat.
European economies, meanwhile, are weak. Combined with the weak euro -- which is
near its all-time low -- that means Europeans are less inclined to use energy. and a
strong U.S. dollar means that other countries won't feel the full benefit of lower oil
prices.
3. The drop in prices will inflict economic and political damage. That might not be
such a bad thing.
Crude oil and oil products made up 46 percent of Russia's budget revenues in the first
eight months of this year. At a time when the West is trying to sanction Russia for its
incursions in Ukraine, a 10 to 20 percent drop in oil prices could prove powerful. Still, it's
still a far cry from the 1980s, when Saudi Arabia produced enough oil to flood the
market and drive prices down so far that many experts say it sped up the fall of the
Soviet Union. That's not going to happen now, but Russia could be squeezed a bit.
Iran, whose oil exports are limited by sanctions related to its refusal to limit its nuclear
program and open it up to greater international scrutiny, will also suffer a setback. Iran's
oil minister Bijan Namdar Zangeneh late last month called on the Organization of the
Petroleum Exporting Countries to keep oil prices from falling any further. “Given the
downward trend of the oil prices, the OPEC members should make efforts to offset their
production to keep the prices from further instability,” Zangeneh said according to
Shana, a news agency supported by Iran's oil ministry.
Countries hoping for an OPEC rescue are counting on Saudi Arabia, the swing
producer. It's hard to tell what Saudi Arabia is thinking. It cut production by 400,000
barrels a day in August; it could do that again. OPEC doesn't have a formal meeting
again until Nov. 27, but discussions are still going on.
The drop in oil prices also squeezes U.S. domestic producers and could make some
shale oil prospects less attractive. Saudi Arabia might be hoping that U.S. shale oil in
North Dakota or Canada's oil sands -- where costs can run high and transportation
expensive -- is shut down first.
4. Caution is wise, because a rebound in oil prices is easy to imagine.
Before 2008, the average annual price of West Texas Intermediate crude oil -- a U.S.
benchmark -- was never more than $66 a barrel. It briefly fell below $90 a barrel on
Thursday, down about $14 since late June. But that's still high by historic standards,
and it could go back up again for three reasons.
First, at this time of year, many refineries shut down for repairs and maintenance. When
they come back on line, prices could recover.
Second, there can be a bit of irrational exuberance. The United States has made huge
strides in slashing oil imports, but it's still a big net oil importer.
Finally, consumption bounces back when prices drop and economies recover. U.S. total
oil consumption rose 2.5 percent in 2013, the largest increase since 2004.
Adam Sieminski, administrator of the federal Energy Information Administration,
has warned that world petroleum consumption will climb 38 percent between 2010 and
2040, almost entirely because of growth outside the Organization of Economic
Cooperation and Development countries. That could mean much higher prices.
Interstellar
Christopher Nolan writes, directs, and produces another stunning masterpiece. He is a
British-American film director, screenwriter, and producer. He created several of the
most successful films of the early 21st century, and his eight films have grossed over
$3.5 billion worldwide.[2]
Having made his directorial debut with Following (1998), he gained considerable
attention for his second feature, Memento (2000). The acclaim of these independent
films afforded Nolan the opportunity to make the big-budget thriller Insomnia (2002),
and the more offbeat production The Prestige (2006); both were well-received critically
and commercially. He found further popular and critical success with The Dark Knight
trilogy (2005–2012) and Inception (2010).
In his latest epic motion picture, Intersellar, a wormhole (which can theoretically connect
widely separated regions of spacetime) is discovered, explorers and scientists unite to
embark on a voyage through it, transcending the normal limits of human space travel. [6]
Among the travellers is a widowed engineer, Cooper (McConaughey), who must decide
whether or not to leave his two children behind to join the voyage and attempt to save
humanity from an environmentally devastated Earth[7] by finding a new habitable planet
in another galaxy.
Interesting factoid. Dr. Kip Thorne wrote a book called Black Holes and Time Warps.
He designed, and you paid for the construction of two matching LIGO’s; one in Hanford
Washington and the other in Livingston, Louisiana. I have personally visited both
facilities and spoken with the directors and staff engineers.
The late Carl Sagan, a Thorne contemporary, write a book that became a movie by the
same title; Contact. Matthew McConaughey starred in both movies. The movie cost
about $165 million to make, requiring a dual studio deal to get it done.
Nolan’s propensity to utilize characters that are often emotionally disturbed and morally
ambiguous, facing the fears and anxieties of loneliness, guilt, jealousy, and greed let the
everyday person relate to his movies. By grounding "everyday neurosis – our everyday
sort of fears and hopes for ourselves" in a heightened reality, Nolan makes them more
accessible to a universal audience.
But, I see an overall trend in really successful movies to do two things. First, they
provide an image of hope that somewhere on Earth is a man of steel. I mean someone
who is incorruptible and powerful enough to stop all the bad guys from killing and all the
greedy guys from raping the planet and its inhabitants.
The other is a possibility of global escape. Sure, each person wishes for a frontier to
which they can run to make a new life of bounty for themselves without anyone else
redistributing their success. But, I mean the whole of society wants an assurance that
there is something after this. An afterlife, without all the religion. A bountiful and
challenging new world to which we, or our children can be transported to begin again.
I know, good planets are hard to find, but there is in this movie the chance of finding it
and getting there. Let’s go watch it together.
November the World will Turn…?
The Republicans are going to recapture the Senate, picking up more seats than most
any forecaster expects. And the House GOP is going to add to its majority.
But then comes the big story: The beginning of a new conservative revolution.
The idea that nothing much will change if the GOP captures the whole Congress is just
plain wrong. The politics and policies in Washington are about to change in a major
way.
Obama may still be president. But he is going to be immediately confronted with a flood
of new bills that will change the debate on tax reform, energy, healthcare, education,
international trade, and regulations.
Obama will no longer be able to hide behind Harry Reid, who has stopped all voting on
these matters. And Mitch McConnell, as Senate majority leader, will be able to move
forward the reform ideas of his caucus and House policy leaders like Paul Ryan, Jeb
Hensarling, Kevin Brady, and many others.
Obama’s head will spin with all the new paperwork on his desk. He may even have to
cut back on his golf game.
Of course, because of his left-wing ideology, Obama may veto everything. But if he
does, he’s setting up a new Republican agenda for the 2016 presidential race. Either
Hillary Clinton completely jumps the Obama ship, or she’s pulled way left by the
Democratic Party’s Bill de Blasio/Elizabeth Warren/Sandinista wing. Either way she’s in
trouble.
Tax Reform
understand which approach is being used. The tax-inclusive rate will always be lower
than the tax-exclusive rate, and the difference grows as the rates rise. At a rate of 1
percent the difference is negligible, but a 50 percent tax-exclusive rate corresponds to a
33 percent tax-inclusive rate—a 17-percentage-point difference.
total sales tax rate that households would face would likely be significantly
higher than the federal rates indicated above, because existing state sales tax would be
added. In addition, most or all state income taxes would probably be abolished in the
absence of a federal income tax system, since the state income tax systems depend on
the federal system for reporting of income and other information. Today’s state income
taxes would likely be converted to sales taxes, adding considerably to the combined
sales tax rate.
Oil Access and the Keystone Pipeline
This is low hanging fruit that has already been fought out politically, and the
Republicans know the battle field, but you do not know what it all means. Money, that’s
what. Not really a better deal on oil, because it is hard to get and hard to extract and
hard to pump.
The proposed northern extension of the nearly 2,000-mile Keystone XL pipeline would
connect Canada’s tar sands to refineries along the Gulf of Mexico, moving almost the
equivalent of America’s total import of similar crude from Venezuela. This would seem
to be a positive for the U.S.
If most of that oil actually stayed in the U.S.
The Keystone XL is designed to promote exports of Canadian tar sands oil and its
refined products to non-U.S. markets, especially China and Latin America. China is now
the largest foreign investor in Canada’s tar sands, representing 52 percent of all foreign
investment since 2003. Ironically, the XL pipeline may increase gasoline prices for
Americans and reduce national energy security – not bolster it, as promoters claim
(Public Citizen).
Of course, the pipeline would still make huge profits and there would still be significant
jobs in the U.S. during construction and refining. But the U.S. would carry the greatest
share of the risk while getting the smallest share of the benefits (Kevin Grandia).
And then there’s the properties of this oil itself that enter into the risk portion of the
analysis. Compared with conventional crude, heavy oil extracted from tar sands has to
be at higher temperatures and pressures in order to flow. And still the tar sands have to
be boiled to separate the heavy oils, and then diluted with light hydrocarbons and
methane to flow. Since this mixture is the most viscous, sulfurous and acidic form of oil
produced today, it may just be a bit hard on the pipelines. Again, riskier to the United
States.
Which may be no problem at all if the pipelines are installed as designed, with epoxy
coatings and other corrosion-reducing technologies. But we keep installing crappy pipe
and cutting corners.
All in all, the cost/benefit is not in America’s favor.
The tar sands are also a contentious issue within Canada (John Richardson, Esquire).
Building a pipeline that takes the tar sand crude to the Canadian Pacific Coast is
meeting fierce citizen resistance. The Canadian government is employing rather
draconian tactics in squashing this opposition, including destroying scientists careers if
they discuss scientific results that do not support the tar sands development (Thomas
Homer-Dixon). This is a different kind of cost to that country.
I’m not sure why Canada doesn’t just build refineries near the tar sands and then move
the refined products to the coast where new port facilities would be built to handle the
super-tankers from China. It would be a lot more lucrative for Canada in the long-run,
and less environmentally risky. But it would require more up-front capital and
construction and take a bit longer than using our refineries.
Freedom will one Day Expire
Shortly after being elected secretary-general of the International Telecommunication
Union (ITU) at a high-level meeting in South Korea Thursday, Zhao Houlin told Seoul’s
official news agency that while everyone supports the idea of freedom of speech, what
constitutes censorship is open to differing interpretations.
“We [at the ITU] don’t have a common interpretation of what censorship means,” the
Yonhap agency quoted Zhao as saying. “A country can ask people not to watch
pornography, and some consider this as also kind of censorship. We have not got a
common definition.”
Asked about China’s rigidly-enforced censorship of politically sensitive material, Zhao
replied, “Some kind of censorship may not be strange to other countries.”
China is infamous for curbing access to online material it deems subversive, using
sophisticated technology both to block it and to track down and ultimately punish cyber
dissidents.
Zhao, the ITU’s deputy secretary-general since 2006, was the only candidate nominated
for the top post, and received 152 votes from the 156 countries present and voting at
the conference. In his acceptance speech, he thanked “all Chinese friends who have
worked hard to promote my candidature over the last two years.”
The newly elected International Telecommunication Union chief, Zhao Houlin of China,
speaks to media in Busan, South Korea on Thursday, October 23, 2014. (Photo:
ITU/Flickr)
For the next four years, Zhao will head an agency which repressive regimes like China,
Russia, Cuba and Iran have sought to use to promote international – that is, U.N. –
control over the Internet, an effort opposed by liberal democracies.
The battle played out at an ITU-organized information summit in Tunisia in 2005, and
again at the ITU-convened World Conference of International Telecommunications
(WCIT) in Dubai in 2012.
The Dubai event ended with countries deeply divided over a raft of proposals to revise a
longstanding binding global telecommunications treaty, some of which critics said would
stifle Internet innovation and growth, and open the door to repressive measures by
governments opposed to online free speech.
In the end the U.S., Europeans and other mostly Western democracies refused to sign
the new treaty agreement.
Under the current, so-called “multi-stakeholder model,” a not-for-profit body called the
Internet Corporation for Assigned Names and Numbers (ICANN) has since the late
1990s been responsible for overseeing Web domains and assigning protocol
addresses. The Commerce Department’s National Telecommunications and Information
Administration (NTIA) has oversight of ICANN.
Supporters say the system has worked, and has been largely free of U.S. government
interference. But the likes of China and Russia are opposed to what they view as
unacceptable U.S. control.
Last March, the Obama administration announced that when NTIA’s contract expires in
Sept. 2015 it plans to relinquish its oversight of ICANN, opening the way for proposals
for a new stewardship mechanism which the administration stipulated must “maintain
the openness of the Internet.”
The Commerce Department sought to allay concerns that this would lead to U.N.
control, with assistant secretary Lawrence Strickling telling reporters, “I want to make it
clear that we will not accept a proposal that replaces the NTIA’s role with a governmentled or intergovernmental solution.”
‘Under the auspices of U.N. institutions’
Autocratic governments are continuing to push back, and the current three-week ITU
policy-making conference in the South Korean city of Busan is the latest arena.
In a policy statement delivered there (translation provided by the Heritage Foundation),
Russian delegate Nikolay Nikiforov said Moscow believes rules governing information
and communication technologies “should be developed under the auspices of U.N.
institutions.”
“They should be based on adherence to the principles of non-interference in the internal
affairs of states and their equal rights in the management of the Internet, the sovereign
right of states to control the Internet in the national information space …”
In the U.S. policy statement in Busan, coordinator for international communications and
information policy Daniel Sepulveda, voiced hope that the conference would move
ahead in a spirit of consensus, but also cautioned against any efforts to stifle free
expression or innovation online.
“This specialized agency of the United Nations exists to encourage and enable the
deployment of telecommunications over air and wire and to ensure that those networks
are interoperable and secure,” he said.
“We are not here to dictate or control how people use that connectivity to express
themselves, organize, or create and operate the services that are enriching the lives of
the 2.7 billion people connected to the Internet today.”
In an article last month Sepulveda and two other State Department officials involved in
cyber and human rights policy predicted that Internet governance would arise in Busan.
“There are some actors who want to radically change the existing multi-stakeholder
approach to Internet governance by centralizing control over the Internet under an
intergovernmental organization, effectively giving governments sole authority over the
choices that affect the Internet’s design and operation,” wrote Sepulveda, Christopher
Painter and Scott Busby.
They gave three reasons to oppose this:
--The Internet’s dynamism would be diminished, due to slow decision-making processes
in intergovernmental institutions;
--Stakeholders in civil society, academia and industry would be left out of Internet
policymaking; and
--“Intergovernmental controls would inevitably encourage repressive regimes to attempt
to introduce censorship or content controls.”
Lois Lerner: Valerie’s Private Assassin
Sunday on Fox News Channel's "MediaBuzz," Bob Woodward said there are, "lots
of unanswered questions," about the Obama administrations involvement in the
IRS scandal surrounding the targeting conservative groups for extra scrutiny.
Woodward said, "The reality now in my view that in the Obama administration, there are
lots of unanswered questions about the IRS, particularly. If I were young, I would take
Carl Bernstein and move to Cincinnati where that IRS office is and set up headquarters
and go talk to everyone."