15c2-12

The SEC has a notice that requires issuers of municipal bonds to disclose "material" events.

The definition of "material" is left to the discretion of the issuer. Issuers have drawn down on bond insurance to meet principal and interest payments when property tax payments have been late.

Technically this "default" has not been considered "material" because the issuers view the draw on bond insurance as a temporary bridge loan. The issuers have repaid the insurers within 90 days but have not disclosed the use of insurance to investors through SEC filings.

The SEC has modified the disclosure language to require material event notices for "all unscheduled draws on credit enhancement facilities reflecting financial difficulties". The new disclosure requirement takes effect in December.

The modification is a distinction without a difference because the determination of "financial difficulties" is a bomb blast away from required disclosure.

Berkshire has written 90% less bond insurance year over year because the capital commitment does not justify the risk, unless it becomes clear that the federal government stands behind municipal debt.

Bullets in a Closed Economy

Foreign governments have lent $2.3 trillion to the US government, $831 billion to the US mortgage market through fannie mae and freddie mac.

The US Federal Reserve is in for $2.4 trillion, $1.2 trillion to the US mortgage market, the balance to the USG plus a $1 trillion dollar swap line for European Banks to harvest bad assets from the Baltic to the Adriatic.

The Federal Reserve Chairman is confused about whether the free money is working to rescue the US mortgage market.

The good news is that 15% of homes in the US are owned so $2.5 trillion of collateral is firmly accounted for.

The bad news is that the negative equity in US real estate markets range from $2-$4 trillion, borrowers owing more than the homes are worth. The mortgage relief program is negligible.

Where is the ammunition for the next round of the rescue?

Coal projects, $600 million US EX IM Guarantee, and the Defence Budget in India, $35 billion over four years?

Boule

'Human sperm gene 600 million years old' - Hindustan Times

The research has also revealed that Boule is the only gene known to be exclusively required for sperm production --from an insect to a mammal.

"This is the first clear evidence that suggests our ability to produce sperm is very ancient, probably originating at the dawn of animal evolution 600 million years ago. This finding suggests that all animal sperm production likely comes from a common prototype," lead scientist Prof Eugene Xu said.

Covering Shorts in a European Summer

In a universe of $11 trillion in securities lending, stocks loaned to short sellers (sold in the market with an obligation to replace with interest at a future date), the European bank stress tests have created $70 million in financing receipts for lending a basket of 53 months in the past year. The lending income is 8% of total revenue for lending European securities from a universe of less than 1% of the lendable securities. Listed ADRS of note include the Irish Banks plus Lloyds. Shorts will cover.

FT.com / Markets / Insight - Debt shuffling will be a self-defeating exercise

FT.com / Markets / Insight - Debt shuffling will be a self-defeating exercise: "Major economies have over the last decades transferred debt from companies to consumers and finally onto public balance sheets. A huge amount of securities and risk now is held by central banks and governments, which are not designed for such long-term ownership of these assets. There are now no more balance sheets that can be leveraged to support the current levels of debt. The effect of the EFSF is that stronger countries’ balance sheets are being contaminated by the bail-out. Like sharing dirty needles, the risk of infection for all has drastically increased."

India’s Clogged Rail Lines Stall Economic Progress - NYTimes.com

India’s Clogged Rail Lines Stall Economic Progress - NYTimes.com

Premium

Credulity was strained at the RBI upon examination of an investment by Japanese Tobacco in its Indian joint venture. The JV is equal with the Indian shareholder and the partners needed to induct Japanese investment to cover operating losses without disturbing the shareholder structure. The Japanese paid 298 for new shares (face value of 1 with a 297 premium) while the Indian partner bellied up to the bar buying the same amount of shares for 1 (face value without the premium), and that 1 was borrowed.

Balance Sheet Shell Games

FT Alphaville � Moody’s has a Monday morning downgrade for Ireland

Ratings agencies should invest in technical writers to decipher financial morse for the masses.

A contingent liability is polite recognition that a bad decision made will be worse than the financial reserve created, or, beware the balance sheet that goes boom in the night.

In Ireland's case the bad decisions made will be borne by the government at a cost of 15% of one years GDP which may go as high as 25%.

The crystallization of contingent liabilities from the banking system, as represented by a series of recapitalization measures and the need to create the National Asset Management Agency (NAMA), a government-created special purpose vehicle that is acquiring impaired loans from banks.

Moody’s expects Nama’s recapitalisation outlay to amount to almost €25bn, or 15.3 per cent of Ireland’s 2009 GDP. And while the agency is pretty convinced that the Irish government won’t swallow hefty permanent losses (for some reason it specifies 25 per cent of 2009 GDP)

Three G

Govt to verify land rights at Posco site

The Forest Land Rights Act prevents acquisition of land by the State if tribal families live on it or other traditional forest dweller (presumably not wildlife) was in possession for the past three generations or had made claims.

POSCO has $10 billion in the balance in its application for forest land conversion.

The environment?

Should be Higher

FIIs return to Street in style, inflow nears Rs 40K-cr-mark-Market News-Stocks-Markets-The Economic Times

The rough equivalence is that $1 billion in foreign equity buying or selling delivers a 1.5% price change in the index.

Last week foreign buying was $1.5 billion while the index rose only .7% or 1/4 the expected 3%.

Domestic sellers are lurking

No demat accounts for Hindu gods-ET Cetera-News By Industry-News-The Economic Times

The Bombay High Court believes that dealing in shares required skills which could not be expected of Hindu deities. In the grand scheme the ruling probably raises more questions than it answers.

It appears that in accordance with Hindu traditions it was customary for rulers to bestow property on deities. The Supreme Court has ruled that only Deities of registered trusts can hold property.

The NDSL is not clear what the approach would be in the event of alleged fraud in the DEMAT of a Deity, and declined to open the accounts.

The court, for the time being, agreed

No demat accounts for Hindu gods-ET Cetera-News By Industry-News-The Economic Times

Kingfisher got IDBI Bank loan despite poor rating-Finance-Banking/Finance-News By Industry-News-The Economic Times

Kingfisher got IDBI Bank loan despite poor rating-Finance-Banking/Finance-News By Industry-News-The Economic Times

Coal in the Hills

http://www.huffingtonpost.com/michelle-chan/us-taxpayer-funded-bank-u_b_648174.html

Sponsored by India-based Reliance Power, the mine and refinery (called the "Sasan project," named after a nearby village in the state of Madhya Pradesh) would emit more than 26 million tons of carbon dioxide per year -- more than all the direct emissions from Exim Bank's 2009 projects combined. Many additional co-pollutants would also be produced, including lead, arsenic, mercury, smog-causing nitrogen oxide, and acid-rain forming sulfur dioxide.

Three weeks ago, the Exim Bank's board rightly voted to reject this project due to the environmental damage it would cause. But Wisconsin-based Bucyrus, a company that will benefit from the deal, retaliated with a media offensive and major bout of political lobbying. Bucyrus claimed that it would not be able to sell its equipment to the project if Exim failed to provide the project with U.S.-taxpayer-backed loan guarantees. The timing was exquisite. Coincidently, President Obama visited Racine, Wisconsin, for a pre-scheduled town hall meeting the week after the Exim board's vote. If the president wanted to avoid an embarrassing scene, he'd have to strike a deal and backtrack on the Exim decision. Literally hours before Air Force One was scheduled to land in Wisconsin, Exim Bank invited Reliance Energy to resubmit its application.

According to Wisconsin Governor Jim Doyle, President Obama's involvement was "absolutely critical" in producing the Bank's flip flop. But the president wasn't the only one involved; Bucyrus CEO Tim Sullivan gave props to Doyle as well as Senators Herb Kohl and Russ Feingold and Representatives Gwen Moore, Paul Ryan and Jim Sensenbrenner for pressuring Exim to change its mind.

China Property Market Beginning Collapse That May Hit Banks, Rogoff Says - Bloomberg

China Property Market Beginning Collapse That May Hit Banks, Rogoff Says - Bloomberg

Bank Capital

China’s five largest state-controlled banks have announced plans to raise as much as $54.5 billion of capital by selling bonds and shares after they extended record loans last year to support a government-led stimulus plan.

Agricultural Bank of China Ltd., which is in the midst of a $20.1 billion initial public offering in Shanghai and Hong Kong, told investors yesterday that real-estate loans are among the biggest risks facing the industry.

Weaker growth in China, as well as decisions by developed countries to tighten fiscal policy, may slow the global economic recovery, which Rogoff said is unlikely to slide into a so- called double-dip recession.

Rich nations will reduce their primary budget deficits, excluding interest payments, by 1.6 percentage points next year, the most since the Organization for Economic Cooperation and Development began keeping records in 1970, according to JPMorgan Chase & Co. economists. The budget squeeze will lop 0.9 percentage point off growth in 2011.

US Exim guarantees loan for Reliance's Sasan project

US Exim guarantees loan for Reliance's Sasan project

Responding to green commitment from Reliance Anil Ambani group, the US Exim bank today gave a preliminary approval for $600 million in loan guarantees to the supplier to Rs 20,000 crore power project at Sasan in Madhya Pradesh.

The proposed estimated Rs 2,800 crore loan guarantee will support the sale and export by US firm Bucyrus International. The approval would result in saving about a 1000 jobs in the US. Jobs are believed to have been behind Exim Bank's reversal of earlier decision of rejecting the arrangement.

Prudent Borrower

12 july 2010

The Chinese produce 70% of global sex toys. Half the demand is from the US and 30% from Europe. Product prices ranges from pennies to $100. Revenue for the first 5 months of the year has crossed a $1 billion.

Presuming healthy margins, over 50%, $2 billion in revenue, and a disposition to lend money to its largest customer, Chinese sex toy savings could account for at least $500 million a year in US government bond buying.