Weekend Update – April 24, 2010

Baltic Dry Index. 3013 +07

LIR Gold Target by 2019: $3,000.

There are only two tragedies in life: one is not getting what one wants, and the other is getting it.

Oscar Wilde.

The good news this morning is that BP’s ruined oil well in the Gulf of Mexico doesn’t appear to be leaking any oil. Perhaps one of the last brave acts of the missing oil workers was to activate the huge blowout preventer that can seal the oil well down on the sea bed. An ecological disaster seems to have been averted.

The bad news this morning is that one of the PIIGS got badly roasted yesterday as Greece officially requested emergency aid from the Eurozone and IMF. If granted the full rescue package of 45 billion Euro, my guess is that it postpones the Greek default into 2011. Score another victory to the great vampire squids who effectively went short Greece. I suspect that it’s a case of one pig roasted four more to go, as the spec attack will likely transfer over to the “P” or the “S”. Effectively it also ends the pretence of the monetary union that the stability and growth rules are in effect and have any meaning now that the first Euroland bailout is underway.

Personally, I don't think there's intelligent life on other planets. Why should other planets be any different from this one?

Bob Monkhouse

Greece seeks aid from EU and IMF
Billions of euros of emergency loans will arrive in Athens within days, after the Greek Prime Minister officially requested assistance from fellow euro members and the International Monetary Fund.
By Edmund Conway, Economics Editor in Washington Published: 5:54PM BST 23 Apr 2010

George Papandreou formally activated a bail-out of an expected €45bn (£39bn), after worried investors pushed up the yield on Greek benchmark government bonds beyond 8pc, and fears grew that the country may be forced to default. The activation comes significantly earlier than expected, with teams from the IMF and EU having only begun their preparatory look through the country's finances on Monday.

It marks the first time a euro member has had to be bailed out either by their fellow states or by the IMF, and will be seen as a further blow to the broader single currency. Although the news helped support the currency on Friday, pushing it up half a penny against the pound to 87.02p, some members of the G20, which met in Washington on Friday, fear that the euro project may struggle to survive the crisis.

But Axel Weber, of the European Central Bank, insisted in a news conference in Washington: "There is no problem for the euro."

The Greek budget deficit swelled last year to 13.6pc, according to newly-updated figures from Eurostat, which have been revised up sharply following apparent efforts by the previous government to disguise the scale of borrowing. The scale of the deficit, alongside concerns that the government will struggle to raise taxes and bring the public finances back to balance, sparked an exodus of cash from the country.

Under the terms of a deal hammered out by euro members and IMF officials earlier this month, Europe will lend the country around €30bn, with a further €15bn provided by the IMF.

----However, there are concerns that despite the unprecedented scale of the loan, it will not be sufficient to do little more than buy the country time, allowing it to finance its state only for another few months. The full details of the loan will not be laid out in the next few weeks, as IMF and euro area officials hammer out an economic plan for the country, which is likely to involve further severe cuts in public spending. The German Chancellor Angela Merkel, who has had to contend with a constitutional challenge to a prospective bail-out, said the aid would be accompanied by "very strict conditions".

George Papaconstantinou, the Greek Finance Minister, who on Friday had private talks with Mr Strauss-Kahn, said that the first chunk of the money should arrive with the Greek government by May 19.
http://www.telegraph.co.uk/finance/financetopics/financialcrisis/7625267/Greece-seeks-aid-from-EU-and-IMF.html

In great vampire squid news, an ever more desperate UK Prime Minister tested out his latest policy of bankster bashing yesterday, although I doubt he will be around long enough to put it into effect. In any hung Parliament outcome, a Lib Dem-Lab pact is the likely outcome, with neither party wanting the man who saved the world to continue as Prime Minister. In yet another bizarre outcome of a hung Parliament, the Lib Dems would get to pick which Labour Prime Minister they would work with. Still the thought that “God’s workers” would be working for the UK taxpayers has its attractions, until you realise that in our unreformed system of out of control derivatives gambling banksterism, the great Squids would merely pay it off by fleecing some other mark.

It's possible, you can never know, that the universe exists only for me. If so, it's sure going well for me, I must admit.

Bill Gates.

April 24, 2010
We’ll demand millions if Goldman is guilty, says Brown
Gordon Brown has turned up the heat on Goldman Sachs, warning the investment bank that it faced paying millions of pounds of compensation to British taxpayers if it was shown to have committed fraud.

Speaking from the campaign trail in Coventry yesterday, the Prime Minister said: “If what happened at Goldman Sachs and in any other bank is proven to be wrong, then hundreds of millions of dollars in compensation should be paid to British banks — and because we are the biggest shareholder in many of them, to the British taxpayer.”

Mr Brown’s attack came after the Financial Services Authority opened a “formal enforcement investigation” on Tuesday into Goldman Sachs International, the bank’s London-based business.
The FSA inquiry was sparked by the US Securities and Exchange Commission, which stunned the market last Friday by accusing Goldman and one of its vice-presidents, Fabrice Tourre, of fraudulently selling a complex investment based on sub-prime loans to clients in a deal that lost $1 billion.

The FSA is understood to have opened its investigation because Goldman’s mortgage derivatives unit, the division at the centre of the SEC’s allegations, was based in Goldman Sachs International. The British regulator may also be investigating because the controversial deal was marketed in Europe. Goldman Sachs denies all charges.

Mr Brown, who has already accused Goldman of “moral bankruptcy”, made clear yesterday that attacking the banks would remain a key theme in the run-up to the general election.
http://business.timesonline.co.uk/tol/business/industry_sectors/banking_and_finance/article7106437.ece

We end for the weekend with Bloomberg on irony.

It may be that your sole purpose in life is simply to serve as a warning to others.

Anon.

AIG May Be on the Hook in Lawsuits Against Goldman Sachs Board
April 24 (Bloomberg) -- American International Group Inc. may be required to pay to defend lawsuits against Goldman Sachs Group Inc.’s top executives, including Chairman and Chief Executive Officer Lloyd Blankfein, under directors and officers insurance policies held by the company.

AIG, which was rescued from collapse by the U.S. government, sold so-called Side A directors and officers’ coverage to New York-based Goldman Sachs, according to a person with knowledge of the policy. Goldman Sachs was sued last week by the U.S. Securities and Exchange Commission, which claimed it misled investors about collateralized debt obligations tied to subprime mortgages in 2007.

“If it were a derivative suit against Goldman, defense costs would be covered, and I’d prefer not to be a primary on the policy,” said John Degnan, vice chairman and chief operating officer of AIG competitor Chubb Corp., while answering a question about Goldman Sachs on an April 22 earnings call.

Goldman Sachs’s board and top management were sued by investors in two separate cases. The investors, Morton Spiegel and Robert Rosinek, said in complaints filed April 22 in New York State Supreme Court in Manhattan that Goldman Sachs officers and directors breached their duty to the company by permitting it to enter into a series of collateralized debt obligations tied to subprime mortgages.

Derivative Suit

One of those CDOs is the subject of a lawsuit against the New York-based firm by the SEC.
According to the derivative complaints, Blankfein and the other defendants failed to exercise oversight of the deals, exposing Goldman Sachs to billions of dollars in possible liability and damage to its reputation.

“As a result of the individual defendants’ unlawful course of conduct and breaches of fiduciary duties, Goldman Sachs has sustained substantial economic losses, and has had its reputation in the business community and financial markets irreparably tarnished,” the investors said in the complaints.

Mark Herr, an AIG spokesman, didn’t immediately return a call seeking comment yesterday. On April 20, he declined to comment on the Goldman Sachs policy. Goldman Sachs spokesman Ed Canaday declined to comment. The firm has said it will fight the SEC case.
http://www.bloomberg.com/apps/news?pid=20601087&sid=a4JAmLazpCVg&pos=3

Don’t you just love banksterism. If Goldie’s top goons get charged by UK taxpayers owners of the UK banks likely to sue for being defrauded, American taxpayers, owners of AIG, insurer of Goldman Sachs legal defence, have to pay out. And it all happened while most of the SEC was busy watching porn movies or marrying into the infamous Madoff family. You couldn’t make this sort of thing up.

Life is full of misery, loneliness, and suffering - and it's all over much too soon.

Woody Allen.

UK General Election polls. The hung Parliament Approaches.
http://www.ukpollingreport.co.uk/blog/

Odds Checker. UK General Election Betting Odds.
http://www.oddschecker.com/specials/politics-and-election/next-uk-general-election/most-seats


More on Monday. Have a great London Marathon spring weekend.
GI.