Markets had a tantalizing flirtation with recovery until the news that a crumbling part of Buckingham Palace missed crowning Princess Anne. It appears that the Queen, and retinue, have run through one third of their financial reserves in the last ten years (23 million pounds down from 32 million pounds) because an annual allowance of 8 million pounds from the Treasury is insufficient (69 pence per citizen).
The stipend is up for renewal in 2010 by which time the till may run dry. A thought that troubles markets more than federally insured financial institutions re insuring trillions of dollars of risk with offshore hedge funds operated by fellows named Ivan from a bungalow in the Caymans.
More interesting is the Reserve Bank of India bent on tarnishing its image as the banker of refuge. Mark to expectation accounting has been accepted by the US for financial institutions to account for federal largess received. Simply, put a deal on the books, project what is to be earned for its duration provided the counterpart pays, discount the future cash flows for the next twenty years, and
book the income today.
India feels slighted in not having to engage in these accounting gymnastics, so the RBI has begun debate on permitting the use of Credit Default Swaps in the country. A good idea for the buyers of insurance in the event that an issuer of a bond defaults, but an exercise in black hole creation for the unregulated sellers of the insurance that will pocket premiums and advise claimants to take a long walk
off a short pier when the bell tolls, and who, presumably, are lobbying the RBI for the opportunity.
United Spirits is in the liquor business and airline business. Shawl Wallace owns 11%of US, and US owns 31% of SW. SW sold its 11% of US in the open market for $190 million, which means that US received $60 million, while retaining its SW stake. US had borrowed $620 million to buy Whyte & Mackay (scotch), has repaid $150 million, owes $470 million, and will use the $60 million toward the $470 million.
All of which is being funded by the Airport Authority of India and the oil marketing companies because the US airline (Kingfisher) owes both over $60 million which it pays through bounced checks.
AAI is to be congratulated for its expansion in the banking business
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