A $4.2bn question for Sino-Forest Corporation

Muddy Waters Research, a specialist in Chinese companies, on Thursday issued a blockbuster “strong sell” rating on Toronto-listed Sino-Forest Corporation, a self-described “commercial forest plantation operator in China”.

But this was no ordinary “sell” rating: Muddy Waters both initiated coverage on the forestry company, which listed in Canada via a reverse takeover in 1995, and accused it of a “stratospheric” fraud.

In response, the Toronto market authorities suspended trading in Sino-Forest stock — trading symbol TRE.TO — pending a clarification or two.

The Real Housewives of Wall Street - Taibbi

Most Americans know about that budget. What they don’t know is that there is another budget of roughly equal heft, traditionally maintained in complete secrecy. After the financial crash of 2008, it grew to monstrous dimensions, as the government attempted to unfreeze the credit markets by handing out trillions to banks and hedge funds. And thanks to a whole galaxy of obscure, acronym-laden bailout programs, it eventually rivaled the “official” budget in size — a huge roaring river of cash flowing out of the Federal Reserve to destinations neither chosen by the president nor reviewed by Congress, but instead handed out by fiat by unelected Fed officials using a seemingly nonsensical and apparently unknowable methodology.

Bankers Get Off Scot-Free in Industry Overhaul

Everything you needed to know about the long-awaited report of the U.K.’s Independent Commission on Banking was summed up in a few share prices yesterday.

Barclays Plc (BARC) and Royal Bank of Scotland Group Plc (RBS) surged after details on overhauling the finance industry were released.

Split up the banks? Shut them down? Make them move elsewhere? No. The commission came up with some irrelevant, complex and hard-to-enforce rules aimed at raising capital ratios and separating their retail from investment arms.

In effect, the banks got off scot-free. The British economy and the nation’s taxpayers will be the big losers.

U.S. Spy Agency Is Said to Investigate Nasdaq Hacker Attack

The National Security Agency, the top U.S. electronic intelligence service, has joined a probe of the October cyber attack on Nasdaq OMX Group Inc. (NDAQ) amid evidence the intrusion by hackers was more severe than first disclosed, according to people familiar with the investigation.

The involvement of the NSA, which uses some of the world’s most powerful computers for electronic surveillance and decryption, may help the initial investigators — Nasdaq and the FBI — determine more easily who attacked and what was taken. It may also show the attack endangered the security of the nation’s financial infrastructure.

“By bringing in the NSA, that means they think they’re either dealing with a state-sponsored attack or it’s an extraordinarily capable criminal organization,” said Joel Brenner, former head of U.S. counterintelligence in the Bush and Obama administrations, now at the Washington offices of the law firm Cooley LLP.

Greenspan squanders his final reserve of credibility

Thank you, internet: Henry Farrell and his commenters have all the snark so desperately required in response to Alan Greenspan’s ludicrous op-ed in the FT. And they’re not alone: as Alex Eichler notes, “everyone is laughing at Alan Greenspan today”. Greenspan could hardly have made himself look like more of an idiot if he’d tried, not only because the “notably rare exceptions” construction is so inherently snarkworthy, but also because it’s so boneheadedly stupid. Anything which normally makes money is a good idea if you ignore the times that it doesn’t work. (…)

The main problem with all of this is that it’s coming from someone who still, depressingly, is respected in certain policy circles — and who is using that credibility not to advance debate, but rather to lobby for his finance-sector clients. Last year, I thought that Greenspan had realized that he had been wrong in terms of regulatory policy, but not in terms of monetary policy. At this point, however, it seems that Greenspan is having second thoughts about his regulatory-policy apologies, and has reverted to his position of All Regulation Is Bad. I’m sure that’ll get him lots of cheers (and dollars from Wall Street. But it should be the final nail in his coffin when it comes to credibility. There have been many bad Fed chairmen. But Greenspan is out on his own as by far the worst former Fed chairman of all time.

How Germany can avoid a two-speed Europe - Soros

The arrangements imposed by Germany protect the banking system by treating the currently outstanding sovereign debt as sacrosanct; they also put all the burden of adjustment on the debtor countries. These arrangements are reminiscent of the international banking crisis of 1982, when the international financial institutions lent the debtor countries enough money to service their debts until the banks could build up sufficient reserves to exchange their bad debts for Brady bonds in 1989. That caused a “lost decade” for Latin America. Indeed, the current arrangements penalise the debtor countries even more than in the 1980s because they will have to pay hefty risk premiums after 2013.

There is something inconsistent in bailing out the banking system once again and then bailing in the holders of sovereign debt after 2013 by introducing collective action clauses. As a result, the European Union will suffer something worse than a lost decade; it will endure a chronic divergence in which the surplus countries forge ahead and the deficit countries are dragged down by the burden of their accumulated debt. The competitiveness requirements will be imposed on an uneven playing field, putting the deficit countries into an untenable position. Even Spain, which entered the euro crisis with a lower debt ratio than Germany, could be dragged down.

Fed Up

Bored by the proceedings at the Republican National Convention in St. Paul one day in 2008, I decided to try to gather some color down the road in Minneapolis, where Ron Paul and fellow dissident conservatives and libertarians were holding a counter-convention at the Target Center. At one point a speaker thundered that Barack Obama and John McCain “both have a lot to learn about Austrian business-cycle theory.” The crowd went delirious with cheers, and soon chants of “end the Fed” echoed throughout the arena.

It was funny at the time. A bunch of cranks talking about their crank monetary theories and espousing a crank prescription.

Today, Paul is the chairman of the House Subcommittee on Monetary Policy.

And though the House GOP presumably won’t be pressing the full Paul agenda of eliminating the Federal Reserve System and returning the United States to the gold standard, his ascension to the job isn’t a pure coincidence, either. House Republicans don’t assign chairmanships by strict seniority, and in the past, GOP leaders had kept Paul away from too prominent a role in monetary matters. Now he’s getting a seat at the table and Paulite views that see the Fed as pursuing dangerously inflationary policies are moving toward the mainstream.

Just Imagine Big Tokyo Quake, 23 Years Later: Michael Lewis

But in the imagined scenario, the Japanese stock market rose in anticipation of a massive stimulus and a glorious economic future. Just now it is collapsing, spectacularly.

There’s a reason for the difference: The market has a lot less faith now than it did in 1988 in Japan’s economic future. The single biggest financial question to arise from the imagined scenario was: Just how screwed will the U.S. be when Japan asks for its money back? It now has been joined by another: just how screwed will Japan be when it reveals that it not only wants but needs its money back?

That is what leaps out at you from the comparison of the real catastrophe with the imagined one: how different the context has become. Back in 1988, it was hard to imagine Japan working from anything but a position of strength: high savings rates, massive trade surpluses, a booming economy and stock market. There was no question then that Japan would bounce back. Today, Japan feels almost doomed.

Michael Sabia se fait voler des documents confidentiels

Le président de la Caisse de dépôt et placement du Québec, Michael Sabia, s’est fait voler des documents confidentiels portant sur des plans d’action en investissement de la Caisse, jeudi dernier à Westmount, a appris La Presse.

Sa mallette et une bonne partie de son contenu ont été retrouvés le lendemain, mais un téléphone contenant des courriels confidentiels est toujours introuvable.

Le vol a été commis entre 19h55 et 20h25 dans le stationnement d’une épicerie de l’avenue Greene, à Westmount. Michael Sabia y avait garé sa voiture en revenant du bureau pour aller faire quelques achats.

Will Ireland Threaten to Default?

The creators of the European Union knew that the end game was the dissolution of nation states. But the inability to work out a process for achieving the intended aim meant the architects left troublesome issues unresolved, with the idea that inevitable crises would force resolution.

But what they failed to anticipate is that the costs of these crises would be visited on the inhabitants of particular nation states, and that would lead them to rebel against the “inevitable” integration. As long as democratic mechanisms are intact in enough of the countries being pressed to wear the austerity hairshirt, revolt is indeed possible. Economists argue that the cost for any nation to exit the eurozone is prohibitive. But how does that stack up with a “rescue” program that virtually guarantees continued economic contraction and depopulation for Ireland?. Faced with two unattractive alternatives, the desire for self-determination and for punishment of coercive European technocrats may make supposedly irrational moves seem compelling.

Muddling through will not work this time

What has been happening is that forward-looking investors see through this scheme, and correctly assess the risk of a future default, also for existing bonds. They know that once a country defaults, old and new bonds will be treated alike. They are also bearish on neighbouring country bonds. Spain is solvent, of course, but an implosion of Portugal plus a further likely decline in Spanish house prices pose risks. Spain may thus need temporary access to the ESM at some point, at which all Spanish bondholders would automatically become junior. Those investors will then no longer own a traditional government bond, but a mid-ranking tranche of a complex debt product – one that was downgraded by a large rating agency last week. So if you are a Spanish bondholder, and you hear the news from Brussels that the ESM is now agreed, and big enough to accommodate Spain, you have reason to be very afraid.

But your likely loss may not be necessarily someone else’s gain. This is the real irony of it all. Policymakers in Germany or France are just as unlikely to push for a managed default in 2013 as they are now. After the collapse of Lehman Brothers they rightly refused to take the risk of a systemic meltdown for which they would be blamed. But if they are scared of a default now, they will be in 2013. At that point, the politicians will say to themselves: let’s do what we do best, and muddle through again. They will make another loan with excessively high interest rates, and demand another austerity plan – one that stands as little chance of success as the present ones.

This game will continue until the debtor country’s economy collapses under its debt burden, at which point the inevitable default will be very messy. If you are lucky, you are no longer in office by then, and you can blame your successor for the mess.

Total German triumph as EU minnows subjugated

These conditions are capitulation by three vulnerable states on core policies, and partial loss of sovereignty for the rest of the eurozone.

For Greece, the terms are a fire-sale of €50bn (£43.2bn) of national assets within four years, a tenfold increase from the original €5bn that premier George Papandreou thought he signed up to a year ago.

When the IMF first mooted this sum last month he told the inspectors not to “meddle in the internal matters of the country.“

State holdings in Hellenic Post, Hellenic Railways, Athens Public Gas, the Pireaus port authority, Athens airport, Thessaloniki water, and ATEbank, to name a few, will not fetch more €15bn. What next?

In return, Chancellor Angela Merkel has agreed to cut the penal interest rate on the EU share of Greece’s €110bn loan package by 100 basis points (still penal), and stretch the maturity to 7.5 years.

This does not restore solvency. Greece’s debt spiral is too far advanced. The debt load will approach 150pc of GDP this year, and debt service costs are 14.4pc of tax revenue.

Meanwhile, austerity is biting harder. The jobless number jumped almost a full point to 14.8pc in January. Youth unemployment hit 39pc.

For Portugal, the condition is more hairshirt retrenchment, a fiscal squeeze of 5.3pc in one year. Pensions, welfare, and health will be cut, following wage cuts already under way. “A descent into Hell,” said the Bloco de Ezquerda.

(Source : nakedcapitalism.com)

The banks' opposition to TMX and the Alpha factor

For starters, while TD has been an active supporter of Alpha, CIBC has not. In fact, since Richard Nesbitt, the former head of TMX, took over as head of CIBC’s securities operations, by all accounts CIBC has taken little interest in Alpha other than routing a lot of trading there. (Which, ironically, has led to CIBC being Alpha’s largest shareholder as the ownership group is structured so that those who trade the most on Alpha earn extra shares in the company.) National and Scotia have also been more or less just along for the ride on Alpha, as opposed to vigorous supporters.

The big push behind Alpha has come from TD, but also from Royal Bank of Canada. And RBC is on the record supporting the TMX merger, with CEO Gord Nixon worrying that if the deal doesn’t go through TMX will indeed wither. Another Alpha owner, Canaccord Financial, was asked to sign on to the opposition to the TMX deal but is said to have said no thanks. And a third, Bank of Montreal, is advising TMX and has made no public statement on the merger, but given its decision to work for TMX, it’s not hard to guess where BMO stands.

So three owners of Alpha are for the deal, or at least keeping quiet, while four are against it. Hardly evidence of a concerted move to support Alpha at TMX’s expense.