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World View & Market Commentary.
Forest first; Trees second.
Focused on Real & Knowable facts that filter through the "experts" fluff and media hyperbole. Where we've been, what the future may hold and developing a better way forward.
“Wave (B) up will likely be a 3 to 4 month rally, and a last opportunity to raise cash before a cataclysmic decline occurs starting by mid-2009 and lasting into 2010. This is a Grand Supercycle wave {IV} Bear Market occurring, correcting a wave {III} up that started before the United States of America existed. Grand Supercycle degree waves change nations and empires. It is of a higher degree than the Great Depression of the 1930’s, meaning the fallout will be worse. So use this gift, wave (B) up, to prepare. Do not rely upon any lines of credit at any financial institution. They could yank them. Cash is king in a Depression. Look for cash from all sources. A bird in hand is worth two in the bush. Build up cash. Bank FDIC insured accounts, U.S. Government short-term securities, Gold and Gold coins, these are the primary assets in our conservative investment portfolio model, an investment educational tool – not trading advice – and it has outperformed the stock market, the real estate market, and pretty much all markets by a country mile in 2008. That asset mix still looks good to us as we head into 2009 and especially 2010.”
- with permission, Robert McHugh, Ph.D https://www.technicalindicatorindex.com
Haven Trust Bank, Duluth, Georgia, was closed today by the Georgia Department of Banking and Finance, and the Federal Deposit Insurance Corporation (FDIC) was named receiver.
As of December 8, 2008, Haven Trust had total assets of $572 million and total deposits of $515 million. BB&T agreed to assume all of the deposits for $112,000. In addition to assuming all of the failed bank's deposits, BB&T will purchase approximately $55 million of the failed bank's assets. The FDIC will retain the remaining assets for later disposition.
The FDIC estimates that the cost to the Deposit Insurance Fund will be $200 million.
Haven Trust is the 24th bank to fail in the nation this year, and the fifth in Georgia. The last bank to be closed in the state was First Georgia Community Bank, Jackson, GA, on December 5, 2008.
Sanderson State Bank, Sanderson, Texas, was closed today by the Texas Department of Banking, and the Federal Deposit Insurance Corporation (FDIC) was named receiver.
As of December 3, 2008, Sanderson State Bank had total assets of $37 million and total deposits of $27.9.
The FDIC estimates that the cost to the Deposit Insurance Fund will be $12.5 million.
Sanderson State Bank is the 25th bank to fail in the nation this year, and the second in Texas. The last bank to be closed in the state was Franklin Bank, SSB, Houston, TX, on November 7, 2008.
Ecuador Defaults on Bonds, Seeks Restructuring
By Stephan Kueffner
Dec. 12 (Bloomberg) -- Ecuador won’t make a $30.6 million bond interest payment due Dec. 15, putting the country in default for a second time this decade, President Rafael Correa said.
“The country is in default,” Correa told reporters in his office in Guayaquil. He said the government will seek a restructuring with bondholders.
By defaulting, Correa, 45, fulfills a threat he made during his 2006 presidential campaign and reiterated throughout the first two years of his term. His decision comes as a deepening global economic slump throttles demand for oil, the country’s biggest export. Ecuador, which defaulted in 1999, owes about $10 billion to bondholders, multilateral lenders and other countries.
“Ecuador is moving further into isolation,” said Vicente Albornoz, head of the Cordes research institute in Quito. “The hardliners in the government won.”
To contact the reporter on this story: Stephan Kueffner in Quito at skueffner@bloomberg.net
Last Updated: December 12, 2008 14:33 EST
The Bush administration will consider ... using ... the Troubled Asset Relief Program, White House spokeswoman Dana Perino said Friday. "A precipitous collapse of this industry would have a severe impact on our economy, and it would be irresponsible to further weaken and destabilize our economy at this time," she said.
Madoff Confessed $50 Billion Fraud to Workers Before FBI Arres
By David Voreacos and David Glovin
Dec. 12 (Bloomberg) -- Bernard Madoff had confessed to employees this week that his investment advisory business was “a giant Ponzi scheme” that cost clients $50 billion before two FBI agents showed up yesterday morning at his Manhattan apartment.
“We’re here to find out if there’s an innocent explanation,” Agent Theodore Cacioppi told Madoff, 70, who is considered a pioneer of modern Wall Street.
“There is no innocent explanation,” Madoff told the agents, saying he personally traded and lost money for institutional clients. He said he “paid investors with money that wasn’t there” and expected to go to jail. With that, agents arrested Madoff, according to an FBI complaint.
The 8:30 a.m. arrest capped the stunningly swift downfall of Madoff and businesses bearing his name that specialized in trading securities, making markets and advising wealthy clients. Many questions remain unanswered, including whether Madoff’s clients actually lost $50 billion. The complaint and a civil lawsuit by regulators describe a man spinning out of control.
Madoff, a white-haired man, appeared in federal court in downtown Manhattan at 6 p.m., wearing a white-striped shirt and dark-colored pants. U.S. Magistrate Judge Douglas Eaton described the securities-fraud charge against him and set a $10 million bond at a hearing where Madoff said nothing. Madoff later posted the bond, secured by his apartment and guaranteed by his wife.
Madoff’s firm had about $17.1 billion in assets under management as of Nov. 17, according to NASD records. At least 50 percent of its clients were hedge funds, and others included banks and wealthy individuals, according to the records.
The firm was the 23rd-largest market maker on Nasdaq in October, handling an average of about 50 million shares a day, exchange data show. It handled orders from online brokers for some of the largest U.S. companies, including General Electric Co. and Citigroup Inc.
Scrambling to Unravel
Prosecutors are joining regulators at the Securities and Exchange Commission, which filed a civil lawsuit, in scrambling to unravel the collapse of Bernard L. Madoff Investment Securities LLC. The broker-dealer and investment adviser was housed in a lipstick-shaped building at 885 Third Ave.
A rapid series of events in early December preceded the firm’s demise, according to the arrest complaint and SEC lawsuit.
In the first week of December, Madoff told a worker identified as Senior Employee No. 2 that clients had requested $7 billion in redemptions, he was struggling to find liquidity, and he thought he could do so, according to the FBI and SEC.
Senior employees “previously understood” that the investment advisory business managed between $8 billion and $15 billion in assets, according to the documents.
‘Under Great Stress’
On Dec. 9, Madoff told a colleague identified as Senior Employee No. 1 that he wanted to pay bonuses in December, or two months earlier than usual. The next day, Madoff got a visit at his offices from the employees. They said he appeared “under great stress” in prior weeks, according to the documents.
Madoff told his visitors that “he had recently made profits through business operations, and that now was a good time to distribute it,” according to the FBI complaint.
When the workers challenged that explanation, Madoff said he “wasn’t sure he would be able to hold it together” at the office and preferred to meet at his apartment, Senior Employee No. 2 told investigators.
At Madoff’s apartment, he told the employees that his investment advisory business was a “fraud” and he was “finished,” according to the FBI complaint.
‘One Big Lie’
He said he had “absolutely nothing,” that “it’s all just one big lie,” and that it was “basically, a giant Ponzi scheme,” Agent Cacioppi wrote in the complaint. The senior employees understood Madoff to be saying he had paid investors for years out of principal from other investors, the agent wrote.
The business had been insolvent for years, said Madoff, who then made a stunning disclosure -- he estimated losses at more than $50 billion. Madoff said he had $200 million to $300 million left, and he planned to pay employees, family, and friends.
Madoff, who had also confessed to a third senior employee, said he planned to surrender to authorities within a week, according to the complaint.
Cacioppi and another agent beat Madoff to the punch.
After saying he had no “innocent explanation,” Madoff confessed “it was all his fault,” Cacioppi wrote.
“Madoff also said that he was ‘broke’ and ‘insolvent’ and that he had decided that ‘it could not go on,’ and that he expected to go to jail,” the agent wrote. “Madoff also stated that he had recently admitted what he had done to Senior Employee Nos. 1, 2, and 3.”
Law School
Madoff founded the firm in 1960 after leaving law school, according to the company’s Web site. His brother, Peter, joined the firm in 1970 after graduating from law school, it said.
Bernard Madoff, who owned more than 75 percent of his firm, and his brother Peter are the only two listed on regulatory records as “direct owners and executive officers.”
Bernard Madoff was influential with the Nasdaq Stock Market, serving as chairman of the board of directors, according to the FBI complaint.
He was chief of the Securities Industry Association’s trading committee in the 1990s and earlier this decade. He represented brokerages in talks with regulators about new stock- market rules as electronic-trading systems and networks grew.
He was an early advocate for electronic trading, joining roundtable discussions with SEC regulators considering trading stocks in penny increments. His firm was among the first to make markets in New York Stock Exchange listed stocks outside of the Big Board, relying instead on Nasdaq.
Madoff’s Web site advertises the “high ethical standards” of his firm.
“In an era of faceless organizations owned by other equally faceless organizations, Bernard L. Madoff Investment Securities LLC harks back to an earlier era in the financial world: The owner’s name is on the door. Clients know that Bernard Madoff has a personal interest in maintaining the unblemished record of value, fair-dealing, and high ethical standards that has always been the firm’s hallmark.”
The case is U.S. v. Madoff, 08-MAG-02735, U.S. District Court for the Southern District of New York (Manhattan).
Senate Rejects Auto Industry Bailout After Talks Fail
By Nicholas Johnston and John Hughes
Dec. 11 (Bloomberg) -- The Senate rejected a $14 billion bailout plan for U.S. automakers, in effect ending congressional efforts to aid General Motors Corp. and Chrysler LLC, which may run out of cash early next year.
“I dread looking at Wall Street tomorrow,” Majority Leader Harry Reid said before the vote in Washington. “It’s not going to be a pleasant sight.”
The Bush administration will “evaluate our options in light of the breakdown in Congress,” spokesman Tony Fratto said.
The Senate thwarted the bailout plan when a bid to cut off debate on the bill the House passed yesterday fell short of the required 60 votes. The vote on ending the debate was 52 in favor, 35 against. Earlier, negotiations on an alternate bailout plan failed.
GM said in a statement, “We are deeply disappointed that agreement could not be reached tonight in the Senate despite the best bipartisan efforts. We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis.”
Reid said millions of Americans, “not only the autoworkers, but people who sell cars, car dealerships, people who work on cars,” will be affected. “It’s going to be a very, very bad Christmas for a lot of people as a result of what takes place here tonight.”
Asian stocks and U.S. index futures immediately began falling after Reid’s comments. The MSCI Asia Pacific Index slumped 2.2 percent to 86.13 as of 12:33 p.m. Tokyo time, while March futures on the Standard & Poor’s 500 Index slipped 3.4 percent.
‘Deja Vu’
“Remember when the first financial bailout bill failed” in Congress in late September, said Martin Marnick, head of equity trading at Helmsman Global Trading Ltd. in Hong Kong. “The markets in Asia started the slide. Deja vu, this looks like it’s happening again.” Congress approved a financial-rescue plan weeks later.
Senator George Voinovich, an Ohio Republican, urged the Bush administration to save the automakers by tapping the $700 billion bailout fund approved earlier this year for the financial industry.
“If this is the end, then I think they have to step in and do it -- it’s needed even though they don’t want to do it,” Voinovich said.
Connecticut Democrat Christopher Dodd, who helped lead the negotiations, said the final unresolved issue was a Republican demand that unionized autoworkers accept a reduction in wages next year, rather than later, to match those of U.S. autoworkers who work for foreign-owned companies, such as Toyota Motor Corp.
‘Saddened’
“More than saddened, I’m worried this evening about what we’re doing with an iconic industry,” Dodd said. “In the midst of deeply troubling economic times we are going to add to that substantially.”
Republican Bob Corker of Tennessee, who negotiated with Dodd, said, “I think there’s still a way to make this happen.”
Earlier today, White House spokeswoman Dana Perino warned that an agreement was necessary for the U.S. economy.
“We believe the economy is in such a weakened state right now that adding another possible loss of 1 million jobs is just something” it cannot “sustain at the moment,” Perino said.
Also earlier, South Dakota Republican John Thune suggested that if talks collapsed, the Bush administration might aid automakers with funds from the financial-rescue plan approved by Congress in October.
“I think that is where they go next,” Thune said. “I wouldn’t be surprised if they explore all options.” The Bush administration thus far has opposed that option, which was favored by Democrats.
To contact the reporters on this story: Nicholas Johnston in Washington at njohnston3@bloomberg.netJohn Hughes in Washington at Jhughes5@bloomberg.net
“Wave (B) up will likely be a 3 to 4 month rally, and a last opportunity to raise cash before a cataclysmic decline occurs starting by mid-2009 and lasting into 2010. This is a Grand Supercycle wave {IV} Bear Market occurring, correcting a wave {III} up that started before the United States of America existed. Grand Supercycle degree waves change nations and empires. It is of a higher degree than the Great Depression of the 1930’s, meaning the fallout will be worse. So use this gift, wave (B) up, to prepare. Do not rely upon any lines of credit at any financial institution. They could yank them. Cash is king in a Depression. Look for cash from all sources. A bird in hand is worth two in the bush. Build up cash. Bank FDIC insured accounts, U.S. Government short-term securities, Gold and Gold coins, these are the primary assets in our conservative investment portfolio model, an investment educational tool – not trading advice – and it has outperformed the stock market, the real estate market, and pretty much all markets by a country mile in 2008. That asset mix still looks good to us as we head into 2009 and especially 2010.”
- with permission, Robert McHugh, Ph.D https://www.technicalindicatorindex.com
Bank of America to Cut 30,000 to 35,000 Positions
By Kevin Reynolds and David Mildenberg
Dec. 11 (Bloomberg) -- Bank of America Corp., the third- largest U.S. bank, said it plans to cut 30,000 to 35,000 positions over the next three years because of its acquisition of Merrill Lynch & Co. and the weak economic environment.
The final number of job cuts won’t be decided until early next year, the Charlotte, North Carolina-based company said in a statement today. The takeover of the New York-based investment bank is expected to be completed later this month.
The cuts will occur throughout the companies, affecting all lines of businesses and staff units, Bank of America said.
“As many reductions as possible will be made through attrition,” the lender said.
GMAC Fails to Meet Conditions to Convert to Bank Dec. 10
By Ari Levy
(Bloomberg) -- GMAC LLC, the auto and consumer lender seeking federal aid, failed to obtain enough capital to become a bank holding company and may abandon the effort, casting new doubt on the company’s ability to survive.
A debt exchange by GMAC and its Residential Capital mortgage unit designed to bolster the company’s finances didn’t attract enough participation, GMAC said today in a statement. So far, GMAC remains short of assembling $30 billion in regulatory capital that Federal Reserve requires, and the regulator has said the conversion won’t be approved if the requirement isn’t met.
GMAC has pinned its hopes for recovery on its plan to become a bank holding company and gain access to federal rescue programs. The Detroit-based company gave debt holders another three days to consider its exchange offer, adding that if it doesn’t complete the swaps and win Fed approval by Dec. 31, “it would have a near-term material adverse effect on GMAC’s business, results of operations, and financial position.”
Less than 25 percent of GMAC and ResCap’s existing debt covered by the exchange offer has been tendered, the statement said. GMAC needs about 75 percent participation for the plan to work, the statement said.
Last Updated: December 10, 2008 08:37 EST