Cesarnc's market talk, gossips, rumours & fun

Fortunately for me, I stopped going to Star Bucks a few years back when I was living in LA. Damn Expensive back then, imagine what it is now.

Auction-Bond Flops Stick Student-Loan Investors With 0% Rates

By Michael B. Marois and Jeremy R. Cooke

April 25 (Bloomberg) -- More than $9 billion of auction- rate bonds sold by student-loan agencies in states from Pennsylvania to Utah have trapped investors in debt that's not paying interest.

Rates on Pennsylvania Higher Education Assistance Agency bonds backed by student loans were set at 0 percent April 4 after auctions to determine interest costs attracted too few bidders. The same occurred on more than 10 percent of the $86 billion of student-loan debt, as failures triggered provisions in bond documents that limit the interest agencies must pay, according to data compiled by Bloomberg.

The collapse of the auction-rate market drove interest costs paid by states, hospitals and student-lending agencies as high as 20 percent, and froze investors in securities they couldn't sell. Now, holders of student-loan debt are stuck with bonds paying less than the 0.76 percent rate on the one-month Treasury bill.

``It's hard to explain, to conceptualize or even understand how someone can borrow money and not pay you interest,'' said Mike Saunders, who manages $1 billion in taxable student-loan bonds for Acton, Massachusetts-based Roundstone Advisors.

The bonds pay nothing because of a formula designed to ensure that borrowers don't pay more interest on their debt than they receive from their student-loan clients. The mechanism kicked in as rates climbed above 10 percent since February, when dealers stopped buying securities that went unsold at auctions.

``The investor loves you when he sees the 10 percent coupon, but how do you explain to him that it's gone from 10 percent to zero?'' Saunders said.

Dropping Down
A Utah State Board of Regents bond with interest that changes every 35 days jumped to 16.58 percent on March 5, up from 3.8 percent in January. The same bond's interest then dropped to 0 percent on April 9, when the provision took effect.

Rates on $97 million of bonds sold by the Pennsylvania lending agency more than doubled to 9.85 percent on March 7 before falling to 0 percent this month.

The formula typically is based on a 12-month average of benchmark money-market yields, which have fallen as the Federal Reserve slashed its target rate for overnight loans between banks to 2.25 percent from 5.25 percent in September.

Auction-rate bonds are long-term securities with interest rates determined through bidding run by dealers every seven, 28 or 35 days. When there aren't enough buyers, the auction fails and the rate resets to a level proscribed when the obligations were initially sold.

Dealers Retreat
The $330 billion auction-rate market unraveled in February after investors shunned the debt and dealers that had routinely stepped in as buyers of last resort stopped supporting the securities under the weight of subprime-related losses.

More than 60 percent of the thousands of auctions conducted each week have failed since Feb. 13, data compiled by Bloomberg show.

The collapse left public student-loan issuers unable to raise additional capital in the market. No new municipal bonds backed by student loans, including auction-rate debt, were sold in the first quarter, the first time that happened in almost 40 years, according to Thomson Reuters.

``We need bonds that are out there for 30 to 40 years,'' said Jamie Wolfe, chief financial officer of NorthStar Education Finance Inc., a nonprofit organization in St. Paul, Minnesota, that provides student loans to medical students. ``That's what these auction bonds do for us.''

Halting Loans
Without access to funds, NorthStar stopped processing applications this month for federally backed loans, joining dozens of state agencies, private firms and nonprofit groups that have curbed lending to students.

NorthStar bundled $800 million, or 20 percent, of its loans into auction-rate debt sold to investors since 2002. One $30 million issue of NorthStar bonds reset at 0 percent on March 5 from 6.9 percent in January.

``I'm dealing with people who have tax payments and payroll to meet with what they thought were liquid funds,'' Wolfe said of NorthStar's investors.
JPMorgan Chase & Co. this week said it will buy as much as $1.1 billion in auction-rate notes from three student-loan trusts, providing limited relief to some investors.

Municipalities, hospitals and universities are refinancing at least $54 billion of auction debt by June 2, according to a compilation of disclosure notices by Bloomberg.

To contact the reporter on this story: Michael B. Marois in Sacramento at [color=#0000ff][email protected][/color]; Jeremy R. Cooke in New York at [color=#0000ff][email protected][/color].
Last Updated: April 25, 2008 00:01 EDT

But damn it taste sooooo good. Over 8 francs for a venti (large) here in Swiss land, the real way to enjoy starbucks is to buy their beans and make it yourself. We all know they have the best beans in the world plus I think it averages to .20 cents per cup when you gind and brew yourself.

http://www.whoateallthepies.tv/jafsfsafafaas.gif

I'm with you, this is BS!

On my side, I triple the coffee consumption during crisis

Party in the USA

Dollar Hits 1-Month High Against Major Currencies
The dollar rose and was more than four cents away from record lows against the euro set earlier in the week, boosted by improved sentiment on the U.S. economy.
-CNBC

C'mon, since when "1-month high" is any good for the dollar?

I guess it is better than nothing (it should keep the ECB happy for the next few days).

HIP-HOP....HORAAY.....OHHH.....HAAAAAYYYYYY....OOOOOOHH......

LET HAPPY HOUR BEGIN!!!!!!

HOLLA

HOLLA

it's ok to boost a bit the dollar during spring... so that the end of civilization doesn't end this summer... this would give us one summer more to enjoy life... but prepare yourself for next august. :

Globalization’s Aftershocks

What's the collapse of the Eastern bloc got to do with America's credit crisis? Author Loretta Napoleoni explains.


Temma Ehrenfeld
Newsweek Web Exclusive
Updated: 1:23 PM ET Apr 23, 2008

What does the collapse of communism have to do with the credit crunch?

According to Italian economist Loretta Napoleoni, author of the best-selling book "Terror Inc: Tracing the Money Behind Global Terrorism," the fall of the Berlin wall set off a global economic transformation that led directly to the turmoil on Wall Street and will ultimately require a new era of regulation.

Napoleoni, a senior partner at G Risk, a London-based risk agency, argues that the crisis won't end until the excesses of globalization—which include growing criminal markets in sex slaves and counterfeit drugs—are brought under control. Napoleoni spoke to NEWSWEEK's Temma Ehrenfeld about the credit crisis, its aftermath and the author's new book, "Rogue Economics: Capitalism's New Reality" (Seven Stories. $24.95). Excerpts:

NEWSWEEK: What exactly is "rogue economics"?

Loretta Napoleoni: It's an umbrella term for black markets and criminal markets but also gray areas that aren't regulated. It occurs in periods of political upheaval when the economy moves faster than political sentiment and [at a rate which makes] politicians and governments lose control. The credit crisis is an example. Carlyle Capital borrowed $33 for every dollar it held in assets. Bear Stearns, its largest lender, went down when Carlyle Capital became insolvent. Nobody broke any laws because there was no legislation to limit debt exposure. But the consequences of their behavior negatively affected thousands of employees and depositors. Regulation would have prevented that … Right now, China can sell counterfeit products in the United States; they just alter the logo a little bit. You can buy anything on the Internet. It's a vehicle for prostitution, pornography, child pornography.
Those are all examples of rogue economics.

You're critical of globalization. Why?

Globalization has helped rogue economics spread. In the 1970s, you knew where products came from; it was a smaller world. For example, now when you order fish in a restaurant, you don't know where it came from. Seventy percent of the fish we eat is black market, fished in violation of international laws. Our ignorance makes us unwilling partners in crime. Rogue economics is turning the global market into our worst nightmare.

You begin your book with the fall of the Berlin wall and the spread of democracy. How did these events lead to today's economic turbulence?

One example is the sex trade. After the collapse of communism, women from the former Soviet bloc were desperate. Unemployment went from virtually zero to 80 percent after the wall fell. So the women became prostitutes or sex slaves in the West. Also, the supply of labor in the West doubled as people came from the East. That led to a deflationary situation around the world in which interest rates fell and banks became more aggressive, looking for more and higher returns. Investment banks were hardly regulated; nearly everything was allowed.

So you'd like to see more regulation of American investment banks. Do you anticipate that will happen?

Yes, but you need global finance behind you. The bloodbath isn't big enough yet. Next in line are the British banks that went aggressively [into the] U.S. market. They're less capitalized than U.S. banks.

Do you expect to see a failure of a global British bank?
It's likely. And we won't be able to save it. We've already had the failure of a British bank, Northern Rock, which the British government nationalized in order to save it and prevent panic among depositors.

What might happen if a global bank fails? A 1929-like depression?

In 1929, no one realized what to do. This time, I'd expect four to five years of zero growth for the United States and the European community. The world's economy will move East. For example, after 9/11, fear of pipeline disruptions sent oil prices up from $18 a barrel to $100 and there's been an accumulation of money in the sovereign funds of Kuwait, Saudi Arabia … and Chile. They're keeping that money outside the balance of payments. It's true the Arabs invested in Merrill Lynch and the Chinese bought a share of Blackstone. But a lot of that money is in gold, and they will increasingly be investing among themselves, or in China, not in the West. They may as well wait until Wall Street reaches bottom.

So how will the West climb out of the rough period?

The West will have to rebuild and clean up the criminal economy that is contaminating everything else. It will have to regulate. Take Liechtenstein: it has been operating like an offshore bank providing shelter for tax evaders. Now Germany, Great Britain and the United States are all going after tax evaders [that may have used Liechtenstein as a haven]. Germany had to pay an informant to get information, but the cost was small compared to the money it will bring in.

How does rogue economics affect us as individuals?

It transforms all of us into the unwilling partners of rogue entrepreneurs, a disturbing thought. But the way forward is to become conscious of the new reality. As consumers and as voters we can say no to rogue economics and demand regulation. Globalization is a great thing, but it needs a legal framework in which to blossom.


URL: http://www.newsweek.com/id/133379

Hey, at least the high wasn't the first of the month.

Answer: Charging $24.95 for nonsense.

I bet this one will be a constant on Fridays from now on

First shots

Nice lil private island right next to the hotel I'm in. Said the owner use to come on Fridays with the helo. Yeah, poverty SUCKS
http://i2.photobucket.com/albums/y28/cesarnc/ilha2.jpg

My hotel and the jacuzzi by the pool
http://i2.photobucket.com/albums/y28/cesarnc/ilha4.jpg

$120 a barrel on the move
http://i2.photobucket.com/albums/y28/cesarnc/ilha3.jpg

Hot Hot Hot!
http://i2.photobucket.com/albums/y28/cesarnc/ilha1.jpg
I mean, the sand...

you should have hijacked the tanker, you could own that island then!!! aren't there any women at your hotel??? enjoy your vaca, i really need one. i missed 100 trades this week. i am kicking myself about it. i do have a question about this last week and a half: i know that the market is volitile, but i have noticed that my signals are getting a little more cyclic, not bouncing up and down at random like jumping beans. does that mean we are settleing back down to technicals, or are all of the traders back on their meds and a little calmer??? or am i seeing things???

Must be where Helicopter Ben is going to hid with his gold after the US$ dollar is worth less than the Zimbabwean dollar?

AND YOU KNOW THIS MAN!!!!!


HOLLA

Totally crappy week for me, we need a sense of reality to return to the market. I'll be watching the Fed and their 25bp cut for direction.