Defaults on Insured Mortgages Rise 37%, Report Shows

Jan. 31 (Bloomberg) — Defaults on privately insured U.S. mortgages rose 37 percent in December from the same month a year earlier, an industry report today showed, as the U.S. housing slump deepened to the worst in a quarter century.The number of insured borrowers falling more than 60 days late on payments jumped to a record 64,384 last month from 46,921 in December 2006, according to the Washington-based Mortgage Insurance Companies of America. Defaults increased 5.5 percent from November, the prior high.

A surge in home foreclosures is sapping profit at lenders and the insurers that protect them from borrower defaults. Banks have written off $110 billion on securities linked to U.S. mortgages, and may have another $180 billion to go, according to Dresdner Kleinwort research. MGIC Investment Corp., the largest U.S. mortgage insurer, said fourth-quarter claims rose sevenfold to $1.3 billion.

“The stress continues to increase on the mortgage insurers,” David Havens, a credit analyst at UBS AG in Stamford, Connecticut said in an interview before the data were released. “It’s going to be a tumultuous year.”

Home prices in 20 U.S. metropolitan areas dropped for the 11th consecutive month in November, declining 7.7 percent from a year earlier, the most recent S&P/Case-Shiller home-price index showed. Lower values hurt the ability of borrowers to refinance or lenders to recoup costs in a foreclosure.

Foreclosure Rates

Foreclosure rates rose 75 percent in 2007 as a record number of adjustable-rate loans to borrowers with weak or limited credit histories reset at higher rates, RealtyTrac Inc. data show.

The Federal Reserve yesterday cut its benchmark interest rate by half a point to 3 percent, eight days after an emergency three-quarter point reduction, as the central bank responded to the housing and credit crisis with the fastest easing of monetary policy since 1990.

MGIC, based in Milwaukee, and its two largest rivals, PMI Group Inc. and Radian Group Inc. reported their first quarterly losses as publicly traded companies in the July-through- September period. MGIC lost about 70 percent of its market value in the past 12 months. Walnut Creek, California-based PMI plunged about 80 percent, and Philadelphia-based Radian, 85 percent.

Ratings Companies

Rating companies including Standard & Poor’s, Moody’s Investors Service and Fitch Ratings have lowered their claims- paying ability ratings for mortgage insurers or said they face possible downgrade. Lower ratings may force insurers to add to reserves for claims.

Even as losses mount, mortgage insurers’ sales are climbing as lenders require more borrowers to buy the coverage. The association’s members wrote 141,588 policies for homeowners last month, up 57 percent from a year earlier.

The trade group’s data are drawn from six of the seven biggest U.S. mortgage insurers, excluding only non-member Radian.

To contact the reporter on this story: Josh P. Hamilton in New York at jphamilton@bloomberg.net .

Bloomberg | Josh P. Hamilton | Thursday, January 31, 2008

The ‘war on terror’ licenses a new stupidity in geopolitics

The language loved by Bush and Musharraf has translated into a global disaster bringing death and misery to millions

Nothing and nobody can stop bombs going off. No citizen, no police force, no army, no government and no global military alliance can prevent a determined suicide bomber from blowing himself up. It will happen and innocent people will die as a result, horribly, as they do on the roads, from drugs and alcohol, or from natural disasters - again without responsible authority being able to stop it. Read more

Bill: “We Just Have to Slow Down Our Economy” to Fight Global Warming

Former President Bill Clinton was in Denver, Colorado, stumping for his wife yesterday.In a long, and interesting speech, he characterized what the U.S. and other industrialized nations need to do to combat global warming this way: “We just have to slow down our economy and cut back our greenhouse gas emissions ’cause we have to save the planet for our grandchildren.”

At a time that the nation is worried about a recession is that really the characterization his wife would want him making? “Slow down our economy”?

I don’t really think there’s much debate that, at least initially, a full commitment to reduce greenhouse gases would slow down the economy….So was this a moment of candor?

He went on to say that his the U.S. — and those countries that have committed to reducing greenhouse gases — could ultimately increase jobs and raise wages with a good energy plan..

So there was something of a contradiction there.

Or perhaps he mis-spoke.

Or perhaps this characterization was a description of what would happen if there isn’t a worldwide effort…I’m not quite certain.

You can watch that one clip HERE or you can watch the whole speech at the website of ABC News’ great Denver affiliate KMGH by clicking HERE.

It’s worth watching — he also pushed back against a 9/11 conspiracy theorist heckling him.

“Everybody knows that global warming is real,” Mr. Clinton said, giving a shout-out to Al Gore’s Nobel Peace Prize, “but we cannot solve it alone.”

“And maybe America, and Europe, and Japan, and Canada — the rich counties — would say, ‘OK, we just have to slow down our economy and cut back our greenhouse gas emissions ’cause we have to save the planet for our grandchildren.’ We could do that.

“But if we did that, you know as well as I do, China and India and Indonesia and Vietnam and Mexico and Brazil and the Ukraine, and all the other countries will never agree to stay poor to save the planet for our grandchildren. The only way we can do this is if we get back in the world’s fight against global warming and prove it is good economics that we will create more jobs to build a sustainable economy that saves the planet for our children and grandchildren. It is the only way it will work.

“And guess what? The only places in the world today in rich countries where you have rising wages and declining inequality are places that have generated more jobs than rich countries because they made a commitment we didn’t. They got serious about a clean, efficient, green, independent energy future… If you want that in America, if you want the millions of jobs that will come from it, if you would like to see a new energy trust fund to finance solar energy and wind energy and biomass and responsible bio-fuels and electric hybrid plug-in vehicles that will soon get 100 miles a gallon, if you want every facility in this country to be made maximally energy efficient that will create millions and millions and millions of jobs, vote for her. She’ll give it to you. She’s got the right energy plan.”

In other Bubba News, Sen. Hillary Clinton, D-NY, told the spectacular Kate Snow yesterday that this is her campaign, not Bill’s, and told Nightline anchor Cynthia McFadden last night that she can control him.

(Which begs the question — does she want to slow down the economy?)

– jpt

ABC News | Thursday, January 31, 2008

FOREX-Dollar falls broadly as Fed slashes interest rates

NEW YORK, Jan 30 (Reuters) - The dollar sank to a fresh two-month low against a basket of major currencies on Wednesday after the Federal Reserve cut benchmark U.S. interest rates by a half percentage point and warned that more would likely be needed to support the faltering economy.The move comes just eight days after the U.S. central bank unexpectedly cut its benchmark lending rate by three quarters of a point to boost an economy battered by a deep housing slump and a persistent credit crisis.

“The language in the (Fed’s) statement was fairly strong, suggesting the Fed is still worried with the possibility of further deterioration in the U.S. economy,” said Mark Meadows, analyst at Tempus Consulting in Washington, D.C.

The cumulative 1.25 percentage point reduction brings rates to 3 percent, a full percentage point below euro-zone rates and among the lowest in the developed world.

Dealers reacted by pushing the New York Board of Trade’s U.S. dollar index, which measures the greenback against a basket of six major currencies, to a two-month low .DXY. The euro surged 0.8 percent to $1.4906 , not far from its all-time high around $1.4967, according to Reuters data, before easing to $1.4881.

The dollar fell 0.1 percent against the yen to 106.90 .

The Fed cuts also encouraged investors to move back into high-yield, high-risk trades. Both the Australian and New Zealand dollars rose more than 1 percent against the greenback, while the U.S. currency fell 1 percent against the Canadian dollar .

Sterling lunged higher by more than a cent after the Fed move, up 0.2 percent to $1.9945 .

Traders said the market was watching to see whether the euro could build on its momentum to rise above $1.50, though some said it might take more tough talk from the European Central Bank on inflation.

Unlike the Fed, the ECB has held interest rates at 4 percent throughout a credit crisis that began in mid-2007, and policymakers have continued to focus on inflation risks.

STRIKING A BALANCE

Some economists have also worried about the inflationary impact of the Fed’s aggressive easing campaign, especially given the dollar’s weakness in recent months.

“This move is really designed to help financial markets even if it allows inflation pressures to pick up later on down the line,” said Amo Sahota, president and head of global research at HiFX in San Francisco.

In fact, some analysts said the Fed’s aggressive action now puts it ahead of the curve, adding the dollar may rebound if the U.S. economy starts to gain traction and avoids falling into recession.

“Let’s face it, they were behind the curve before and now they are trying to get to where they think they should be,” said Ken Landon, G10 currency strategist at J.P. Morgan in New York. “At some point, the market is going to wake up and realize this is good for the U.S. economy.”

Indeed, recent economic data has been mixed. While housing reports continue to highlight trouble in that sector, a report on Wednesday showing the U.S. private sector added 130,000 jobs this month helped dispel some of the gloom.

That bodes well for the government’s nonfarm payrolls report on Friday, expected to show a 63,000-job gain.

Some investors said such data suggests the Fed may have gone too far.

“Everyone knows that it takes a while for 75 basis points to get through the economy, and by cutting 50 now, I just think they’re not leaving much room in the future,” said David Greenwald, partner at Scalene Capital in Newport Beach, California. There are 100 basis points in a percentage point. (Additional reporting by Vivianne Rodrigues, Gertrude Chavez-Dreyfuss and Kevin Plumberg; Editing by James Dalgleish)

Reuters | Steven C. Johnson | Wednesday, January 30, 2008

Russia Today | NH Vote Fraud

U.S. slump spreading around the globe, IMF warns

OTTAWA — Financial turbulence is carrying the U.S. slump to the rest of the world, and now the global economy is in the midst of a serious slowdown, the International Monetary Fund said yesterday.

“It will be very hard for even the most effective countercyclical policy to keep any country from having some slowdown in these circumstances,” said the IMF’s chief economist, Simon Johnson.

“No one is exempt from a global slowdown. That is why you call it ‘global.’ ”

He was updating the IMF’s world economic outlook, which now forecasts global growth of 4.1 per cent this year, after 4.9 per cent for 2007. The forecast is gloomier than three months ago, when the IMF projected global growth of about 4.4 per cent, mainly because the United States is slowing rapidly, and faltering in Europe and Japan.

“The projections for the advanced economies have been reduced significantly,” the IMF said.

To drive home its point, the IMF predicted that between the fourth quarter of 2007 and the fourth quarter of 2008, the American economy would expand by just 0.8 per cent, down from 2.6 per cent during the same period a year earlier.

Many economists have sought solace in the strength of emerging markets, but even they won’t escape unscathed, the IMF said. As a group, they grew 7.8 per cent in 2007, but will slow down to 6.9 per cent in 2008.

Still, China is expected to remain strong. Growth will decelerate, but from 11.5 per cent in 2007 to 10 per cent in 2008. And that is enough to make sure commodity prices remain buoyant and supportive of reasonable growth in Canada this year, said Stephen Poloz, chief economist at Export Development Canada.

The updates issued yesterday did not go into great detail, giving forecasts only for economic regions. The reports did not mention Canada specifically, but the global and U.S. forecasts would be consistent with Canadian growth of about 2 per cent this year, or less, economists said.

“What we’re seeing is the feedback of financial instability into the economy,” said Richard Kelly, senior economist at Toronto-Dominion Bank.

Indeed, the IMF warned that if the subprime crisis continues to deepen, things could get a lot worse, both in the United States and in Western Europe.

“A possibly deeper economic downturn in the United States or elsewhere could also serve to widen the crisis beyond the subprime sector, as credit deteriorates more broadly,” the IMF said in an update on global financial stability.

The report warned that tight credit conditions will persist, since market players are now worried about far more than structured products wrapped up in subprime loans. Investors are also concerned about the balance sheets of financial institutions and worsening economic conditions, the IMF pointed out. However, the IMF also said it was somewhat comforted by the fact that some banks were raising capital, including from sovereign wealth funds, to bolster their weakened balanced sheets.

The key for countries trying to mitigate the damage is policy, the IMF stressed. Regulators and auditors have to help rebuild confidence among banks. And central banks need to work together more to make sure the liquidity requirements of money markets are met.

“Central banks could usefully review the effectiveness of their tools to reduce market stress - and whether they work globally,” the IMF said.

The Bank of Canada joined the U.S. Federal Reserve, the European Central Bank and Switzerland’s central bank in injecting liquidity into term money markets in December, to smooth out markets over year-end. But that kind of co-operation has been rare, and is far from institutionalized.

*****

World gross domestic product growth

Annual percentage

	2007	2008	2008
	estimate	projection	change
World output	4.90%	4.10%	- 0.3%
Advanced economies	2.60%	1.80%	- 0.4%
United States	2.20%	1.50%	- 0.4%
Euro area	2.60%	1.60%	- 0.5%
Japan	1.90%	1.50%	- 0.2%
Other advanced economies	3.80%	2.80%	- 0.2%
Emerging markets	7.80%	6.90%	- 0.2%
Africa	6.00%	7.00%	- 0.2%
China	11.40%	10.00%	-
Middle East	6.00%	5.90%	- 0.1%

SOURCE: INTERNATIONAL MONETARY FUND AND WORLD ECONOMIC OUTLOOK

Globe and Mail | Heather Scoffield | Wednesday, Janaury 30, 2008

Biggs’s Tips for Rich: Expect War, Study Blitz, Mind Markets

Barton Biggs has some offbeat advice for the rich: Insure yourself against war and disaster by buying a remote farm or ranch and stocking it with “seed, fertilizer, canned food, wine, medicine, clothes, etc.”The “etc.” must mean guns.

“A few rounds over the approaching brigands’ heads would probably be a compelling persuader that there are easier farms to pillage,” he writes in his new book, “Wealth, War and Wisdom.”

Biggs is no paranoid survivalist. He was chief global strategist at Morgan Stanley before leaving in 2003 to form hedge fund Traxis Partners. He doesn’t lock and load until the last page of this smart look at how World War II warped share prices, gutted wealth and remains a warning to investors. His message: Listen to markets, learn from history and prepare for the worst.

“Wealth, War and Wisdom” fills a void. Library shelves are packed with volumes on World War II. The history of stock markets also has been ably recorded, notably in Robert Sobel’s “The Big Board.” Yet how many books track the intersection of the two?

The “wisdom” in the alliterative title refers to the spooky way markets can foreshadow the future. Biggs became fascinated with this phenomenon after discovering by chance that equity markets sensed major turning points in the war.

The British stock market bottomed out in late June 1940 and started rising again before the truly grim days of the Battle of Britain in July to October, when the Germans were splintering London with bombs and preparing to invade the U.K.

`Epic Bottom’

The Dow Jones Industrial Average plumbed “an epic bottom” in late April and early May of 1942, then began climbing well before the U.S. victory in the Battle of Midway in June turned the tide against the Japanese.

Berlin shares “peaked at the high-water mark of the German attack on Russia just before the advance German patrols actually saw the spires of Moscow in early December of 1941.”

“Those were the three great momentum changes of World War II — although at the time, no one except the stock markets recognized them as such.”

Biggs isn’t suggesting that Mr. Market is infallible: He can get “panicky and crazy in the heat of the moment,” he says. Over the long haul, though, markets display what James Surowiecki calls “the wisdom of crowds.”

Like giant voting machines, they aggregate the judgments of individuals acting independently into a collective assessment. Biggs stress-tests this theory against events that shook nations from the Depression through the Korean War, which he calls “the last battle of World War II.”

Refresher Course

Biggs has read widely and thought deeply. He has a pleasing conversational style, an eye for memorable anecdotes and a weakness for Winston Churchill’s quips. His book works as a brisk refresher course.

What really packs a wallop, though, is his combination of military history, market action, maps and charts. It’s one thing to say that the London market scraped bottom before the Battle of Britain. It’s another to show it.

In May and June 1940, some 338,000 British and French troops had been evacuated from Dunkirk by a flotilla of fishing boats, tugs, barges, yachts and river steamers. The French and Belgian armies had collapsed; the Dutch had surrendered. Britain stood alone, as bombs shattered London and the Nazis prepared to invade. Yet stocks rallied.

Mankind endures “an episode of great wealth destruction” at least once every century, Biggs reminds us. So the wealthy should prepare to ride out a disaster, be it a tsunami, a market meltdown or Islamic terrorists with a dirty bomb.

The rich get complacent, assuming they will have time “to extricate themselves and their wealth” when trouble comes, Biggs says. The rich are mistaken, as the Holocaust proves.

“Events move much faster than anyone expects,” he says, “and the barbarians are on top of you before you can escape.”

“Wealth, War and Wisdom” is from Wiley (358 pages, $29.95, 15.99 pounds).

Bloomberg | James Pressley | Wednesday, January 30, 2008

State spying that would make the Stasi proud

When it was passed into law, the Regulation of Investigatory Powers Act (2000) sounded a pretty innocuous piece of legislation. But in truth it represented a significant victory for the busybody state over our ancient liberties.Labour claimed it was responding to demands from civil liberties campaigners for more control over state snooping.

But it soon became clear that the legislation which Jack Straw, then Home Secretary, was introducing would have the opposite effect, massively expanding the ability of the public sector to pry into our private lives.

The Act, which has been quietly amended several times (each time handing more powers to the public sector), now gives an unprecedented range of state agencies the right to listen to our phone conversations, tap our emails and open our post.

In the last nine months of 2006, 960 new applications for the right to peer into the private lives of Britons were made every day.

It is a level of Government surveillance that would make even the Stasi, the former East German secret police renowned as the world’s most effective intelligence agency, proud.

There are three different types of surveillance. The first, interception of communications - listening in while people are on the phone, or watching what we do on the internet - is the most difficult to justify.

But the grounds for interception are so wide as to allow most requests to be approved. As well as the more predictable excuse of “national security”, they include “safeguarding the economic well-being of the UK”. The police, the security services and Customs can all use this technique but they need authorisation from the Home Secretary herself or, in urgent cases, get temporary permission from one of her senior officials.

The second type is surveillance - old-fashioned spying. The list of possible justifications for this is absurdly long - including “to prevent and detect crime or prevent disorder, public safety, public health, to assess or collect any tax, duty, levy or other charge payable to a government department”. Just about any of us could be under surveillance using one of this list.

Most worryingly, a long list of government agencies - including 474 councils - can put us under the spotlight. Senior officials in each one can simply give the go-ahead and apply for a rubber stamp to be given later by the Interception Commissioner.

This Commissioner, former judge Sir Paul Kennedy, with a team of five inspectors, is supposed to check to make sure that all the bugging and spying waived through by the Home Secretary or others has been justified.

His report this week identifies more than 1,000 cases over nine months where he found that the rules had been broken.

The third type of surveillance is the most common - access to communications data.

This includes discovering the identities of who we phone and which internet sites we visit. This information is even easier for public authorities to obtain with relatively junior officials able to authorise it.

Later, as in the case of surveillance, justification for needing this information is considered by overworked bureaucrats accountable to the Interception Commissioner.

But by the time his staff gets round to looking at the paperwork, the trading standards officers down at the town hall, for example, may have been peering at your phone and internet records for more than a year.

There is a tribunal to which you can complain, but since virtually no one under surveillance will know they are being watched, the tribunal isn’t busy and has virtually never found in favour of a complainant.

How did the Government get away with this? Well, the Lords did make a fuss at the time. Tory peer Lord Northesk said it “sanctioned mass domestic surveillance measures”.

The Government appeared to be forced into a climbdown. The Regulation of Investigatory Powers Act (RIPA) initially only covered the nine most crucial law enforcement agencies (police, the taxman, the intelligence agencies etc).

But this merely delayed the stealthy march of Big Brother. In 2004, the number of groups with the right to poke in our lives expanded to 792; the laws to allow this had been slipped quietly through the Commons by David Blunkett.

As usual, Whitehall got its way by waiting for the fuss to die down. Incidentally, the only group with an exemption from being bugged are MPs themselves.

But the Act didn’t merely extend the rights of bureaucrats to check on us, it also forced the larger internet service providers to build into their systems the technological capability to cater for all this snooping.

In practice, the result was that “black boxes” were installed in all main ISPs, copying all the information available to them straight to the security services. Then, when MI5 or the police obtain an authorisation for surveillance, they merely tap into the black box. In return, the internet companies have been able to recoup some of their costs from the taxpayer.

While writing this article, I made several phone calls and looked at a number of sources on the internet. If anyone in Whitehall can think of a plausible reason why this article threatens the economic security of Britain, or any of the myriad excuses detailed above, they will be able this morning to see who I spoke to and where I went on the net, to conduct my research. Surely, that can’t be right?

Daily Mail | EDWARD HEATHCOAT AMORY | Wednesday, Janaury 30, 2008

Words of Wisdom

GATA’s advertisement in The Wall Street Journal

This advertisement, sponsored by GATA and costing $264,426.26, is scheduled to appear in The Wall Street Journal on Thursday, January 31, 2008.

Complete documentation of the statements cited in the advertisement can be found as follows:

Paragraph 2, statement by J. Virgil Mattingly, general counsel for the Federal Reserve:

http://www.federalreserve.gov/fomc/transcripts/1995/950201Meeting.pdf

Paragraph 3, statement by Federal Reserve Chairman Alan Greenspan:

http://www.federalreserve.gov/boarddocs/testimony/1998/19980724.htm

Paragraph 4, motion by Barrick Gold Corp.:

http://www.lemetropolecafe.com/img2003/memoformotiontodis.pdf

Paragraph 5, statement by William S. White of the Bank for International Settlements:

http://www.gata.org/node/4279

Paragraph 6, U.S. Treasury Department international reserve position reports:

http://www.gata.org/node/5637

Paragraph 7, Sprott Asset Management report:

http://www.sprott.com/pdf/pressrelease/press_release_not_free_not_fair.p…

Paragraph 7, Cheuvreux report:

http://www.gata.org/files/CheuvreuxGoldReport.pdf

Paragraph 7, Citigroup report:

http://www.gata.org/files/CitigroupGoldReport092107.pdf

Paragraph 7, Redburn Partners report:

http://www.gata.org/files/RedburnPartnersGoldReport_11-12-2007.pdf

View ad as PDF

GATA | Wednesday, January 30, 2008

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