My beloved Internet Marketing blog CorporateRaiter took a mortal blow by way of being part of a joint account at bluehost where an old install of blog software on a dead account was creating 'server issues'.
It's pretty clear that I'm going to have to migrate out of that account to something more substantial or at least with a higher level of customer service for when things go wrong. But for now, I'll continue to use it as my testing ground and sandbox for proving out various concepts before going to market with them
Coolio.
Tuesday, April 30, 2013
Thursday, April 18, 2013
Undead Dogs Die in The Sun
As a reader reminded me, that's a line from I AM LEGEND...
That said, as an undead dog, and not wanting to die, I decided to move to where the sun don't shine. No, it's not up your bunghole, but that wouldn't be a terrible guess.
Yeah, I know, it's been 3 years since I posted anything to this blog, and one might think that it was because I don't love you, dear readers (both of you).
Alas, that is not the reason...some crazy wordpress plugin got awry and fubar'ed my server bringing my main sites to their knees....oh the humanity.
Since the blogging was always just a casual pass-time, more than anything meaningful or commercially viable, I back burnered it. That, plus I have no cotton picking idea how to get the viral fungus that has infected my bluehost server account.
So, here I am, three years later bringing my oldschool blogger blog back to life to share my thoughts with the world once again
From a place where the "sun don't shine"
That said, as an undead dog, and not wanting to die, I decided to move to where the sun don't shine. No, it's not up your bunghole, but that wouldn't be a terrible guess.
Yeah, I know, it's been 3 years since I posted anything to this blog, and one might think that it was because I don't love you, dear readers (both of you).
Alas, that is not the reason...some crazy wordpress plugin got awry and fubar'ed my server bringing my main sites to their knees....oh the humanity.
Since the blogging was always just a casual pass-time, more than anything meaningful or commercially viable, I back burnered it. That, plus I have no cotton picking idea how to get the viral fungus that has infected my bluehost server account.
So, here I am, three years later bringing my oldschool blogger blog back to life to share my thoughts with the world once again
From a place where the "sun don't shine"
Sunday, January 10, 2010
Holiday Season Comes to a Close
Hi everyone.
Today is Golden Lotus' birthday. January the 10th traditional marks the end of the holiday gift giving gauntlet for fubarrio, and I documented some of my struggles coming up with decent presents for everyone while so far away in my blog entry about family films and edited movies on my sister wordpress blog.
To be fair, there is still February the 14th to figure out, but we'll figure that out as it comes.
In other ground-shaking news we are leaving the comfy confines of punta carretas soon and will be relocating the entire family (including midori) sometime in the next 60 days.
The fact that I'm not real sure where we are going should be enough to give an ordinary person some degree of alarm, but I'm sorta over 'planning' things because things inevitably change.
Golden Lotus, Midori, and I will come to some conclusion in the next few weeks, if only to make sure that our Laborador is able to get on the plane with us and we will tell you more once I know more.
Take care, and happy holidays.
U.G.
Today is Golden Lotus' birthday. January the 10th traditional marks the end of the holiday gift giving gauntlet for fubarrio, and I documented some of my struggles coming up with decent presents for everyone while so far away in my blog entry about family films and edited movies on my sister wordpress blog.
To be fair, there is still February the 14th to figure out, but we'll figure that out as it comes.
In other ground-shaking news we are leaving the comfy confines of punta carretas soon and will be relocating the entire family (including midori) sometime in the next 60 days.
The fact that I'm not real sure where we are going should be enough to give an ordinary person some degree of alarm, but I'm sorta over 'planning' things because things inevitably change.
Golden Lotus, Midori, and I will come to some conclusion in the next few weeks, if only to make sure that our Laborador is able to get on the plane with us and we will tell you more once I know more.
Take care, and happy holidays.
U.G.
Saturday, October 31, 2009
Homes in Uruguay
Homes in Uruguay, South America
When we first arrived in Uruguay we decided that we wouldn't even *think* about buying a home until we'd lived in Montevideo for at least a year. After living in the capitol city for some time, I'm glad we made that decision. There are plenty of other options besides the default of settling in the largest city for the new emigre to consider.
It's different here. It's a completely different environment from what you've become accustomed to you in your hometown -- where ever you're from -- unless you hail from Buenos Aires :)
For the gringos reading this post in English, we can safely assume the majority of you weren't born in south america, or at a minimum that Montevideo, Uruguay is not your birthplace.
A brand new country can take some time to get used to -- kick it in the new digs for a minute and get a feel for your new hometown.
Obviously, finding shelter is pretty low on maslov's pyramid. You will be instictually driven to look for a home you will feel comfortable in when you land in Uruguay. This is when you should slow down and take a deep breath and answer a few questions if you haven't already.
Why your are relocating your household to Uruguay?
Do you plan to "snowbird" or hangout only in summer months?
Do you have a family? Or, do you just need a crash pad or hole in
the wall while you're traveling in South America?
Do you want to live fulltime with your family in Uruguay? If so, how big is your family? Do you need an attached yard for pets or kids with your dwelling? How many rooms and baths are necessary? (keep in mind many bigger homes and apartments in Uruguay come with separate service entrances, bedrooms and baths.
In what kind of dwelling will you live in Uruguay?
I list some of the choices available for expats choosing a home in Uruguay below along with some pros, cons, and a couple of 'got
Farms in Uruguay
Quite a few people I've met fantasize about moving to Uruguay with a dream of getting a big spread -- a farm or ranch land and to start homesteading. For most, it's something they've always wanted to do but couldn't afford to in their homeland.The "gentleman" farmer and gaucho rancher are attractive lifestyles to some...sprawling haciendas with a large country estate or stately manor is one reason people move to Uruguay.
For us, a ranch was out of the question. A farm or homestead just sounded like a bunch of work to me. Anything with that much real estate will demand a lot of maintenance -- probably necessitating hiring ranch hands or caseros to live on site and building separate living quarters, or a dormitory or flop house for them to sleep in.
While Uruguay's property taxes for agricultural land are lower than Uruguay's residential properties, I don't like any taxes! :)
Apartments
An apartments in Uruguay made a lot more sense for us -- although we initially wound up in a duplex, or flat. In the neighborhoods we were attracted to it was the least expensive way to find comfortable Uruguay real estate . Since we were unsure how we'd like it, we rented, of course.
For a home with a pricey address in Punta del Este, Colonia del Sacramento, or a more toney neighborhood in the capitol, a flat or apartment will probably be the most economical choice.
For those the plan to only occupy their Uruguay home part of the year, buying or renting an apartment will probably be the safest, most sensible solution for your South American household.
I don't recommend *buying* your home when you first land, but apartments are bought and sold in Uruguay. If you're not from a large city, this might seem strange.
Here, the owners of the individual uruguayan apartments are liable for joint costs with the rest of the building. This is similar to a homeowners association, co-op, or condominium. Keep this in mind when budgeting living expenses -- whether you buy or rent you home. The common fees as passed on directly to the tenants.
Houses in Uruguay
Uruguayan houses aren't constructed with the same materials and standards that many gringos will be used to. Quality of construction materials and amenities in the kitchens and baths can vary depending on where you home is. Homes in Colonia or Montevideo have small yards, with almost no surrounding property. Uruguay homes outside of the densely populated city neighborhoods have more land usually
Summer Homes and Cabins
Cabins and bungalows in Uruguay's resort areas will feel like heaven on earth -- half the year.
A bungalow, summer cabin, beach hut or cottage will be like a palace in summer. A throw back to the beach communities in the US from the early 60's. Tourists will infuse your beach haven into what appears to be a real town as the Uruguayans, Brazilians and Argentinians make your new Uruguay hometown their stomping ground.
As the cold damp air replaces the long summer nights, your pleasant abode starts to feel like a
dank cave. You'll cling to your wood stove or hearth, as you sit fireside trying to shake a cold humid winter day. Cute little summer homes are comfortable living quarters in the summer, but typically don't have enough insulation to shelter you from the cold and damp during winter months.
A summer cottage in Uruguay will feel like a shanty in South America.
A few of these homes could be mansions, but many are not up to the standards you've become accustomed to in you home country.
Uruguay Homes Summary
It's natural for many when they land in Uruguay to decide on a home in Uruguay too quickly. You can wind up in in a bad area -- either loud, dirty, or even dangerous. As I wrote earlier it's also hard to gauge the true habitability of a place until you've lived there year around.
Real estate agents work differently here, and it's important to be very cautious when selecting an Uruguayan real estate agent. But, when navigating unfamiliar territory, it's can be wise to get advice from a local Uruguayan Realtor before settling into a permanent living arrangement.
Saturday, October 03, 2009
Capital Conservator Offshore Banking
For the last 2 1/2 years, I've been working in the 'salt-mines' of offshore entrepreneurism.
2 1/2 years ago, as a much more idealistic expat newb, I had the feeling that something very ugly was going to go down in the U.S.
I thought that I could kill two birds with one stone -- I could:
1.) improve what i thought was one of the big faults with Uruguay -- a lack of entrepreneurism & small growing young companies that could provide young people with financial opportunity, and
2.) give the 'little guy' a chance to protect himself & his family's wealth like the big guys do, by taking advantage of offshore asset protection schemes, which could legally diversify his assets out of what i viewed was a sinking ship -- the u.s.
Fortuitously, I met the founders of Capital Conservator, & was subsequently convinced to come on board & preach some offshore gospel to the eager flock.
As the CEO of capital conservator likes to say, we offer "an unique value proposition" (i suspect his grammar is proper but unique is always pronounced as if it starts with a vowel where this left coaster is from)...anyways, in a lot of ways, he is right...while the implementation of a new zealand finance company is by no means unique...nor is the use of a swiss trust company, offshore accounts with capital conservtor do offer something that i've been unable to find elsewhere:
A unified, simplified offshore account application procedure, that subsequently gives the client access to a bevy of offshore services & accounts, all the while protecting the privacy (i like to say anonymity) of the client.
The accounts really were engineered from the ground up to protect the privacy of the client first and foremost, but more on that in a later post.
2 1/2 years ago, as a much more idealistic expat newb, I had the feeling that something very ugly was going to go down in the U.S.
I thought that I could kill two birds with one stone -- I could:
1.) improve what i thought was one of the big faults with Uruguay -- a lack of entrepreneurism & small growing young companies that could provide young people with financial opportunity, and
2.) give the 'little guy' a chance to protect himself & his family's wealth like the big guys do, by taking advantage of offshore asset protection schemes, which could legally diversify his assets out of what i viewed was a sinking ship -- the u.s.
Fortuitously, I met the founders of Capital Conservator, & was subsequently convinced to come on board & preach some offshore gospel to the eager flock.
As the CEO of capital conservator likes to say, we offer "an unique value proposition" (i suspect his grammar is proper but unique is always pronounced as if it starts with a vowel where this left coaster is from)...anyways, in a lot of ways, he is right...while the implementation of a new zealand finance company is by no means unique...nor is the use of a swiss trust company, offshore accounts with capital conservtor do offer something that i've been unable to find elsewhere:
A unified, simplified offshore account application procedure, that subsequently gives the client access to a bevy of offshore services & accounts, all the while protecting the privacy (i like to say anonymity) of the client.
The accounts really were engineered from the ground up to protect the privacy of the client first and foremost, but more on that in a later post.
Thursday, August 27, 2009
Traduccion Chino
Uruguay is a big place for e-commuters.
The primary reason for this is, I guess, the utter lack of local jobs which are worth a damn, coupled with the fact that a lot of people find it a pleasant, agreeable place to live.
This got an added push a few years ago when it was a lot less expensive to live in Uruguay than many parts of the EU & north america. That momentum has carried over a bit as companies get more liberal about who they will let work online outside of the confines of a cubicle in the home office.
For my money, a north american salary in Uruguay is ideal because of the time zone setup.
During the winter it is one hour ahead of new york. In the summer it is a full three hours ahead.
Summer is a great time of the year to be able to come to the office at 11am & still have a 1 hour jump on people up north.
Recently, a friend of mine who is the wife of an Uruguayan diplomat decided she wanted to start an ebusiness, because it gives her the flexibility of working either here or in one of their duty stations when they travel.
She *just* got started with her website & service offering but it will basically be translation services from spanish to Chinese & back. Suprisingly, given the popularity of these two languages there aren't alot of offerings like this yet.
From my experience the south american business people and the chinese business people usually try to muddle through with some form or english, hand gestures, and patience.
Since she just setup her site, there isn't a lot to see there yet. I'm just gonna give her site a little bit of link love to make sure it gets indexed by the search engines. Once she starts to post on a regular basis & creates some material, the client conversion will be up to her :)
So without further adeu, traduccion chino is her site focused on traducir chino a esp y chino a esp. I have no idea if google expects to see a ` over the o or not. :) Good luck.
ciao,
ug
p.s. years ago, when i was trying to convince entrepreneurs to move here i looked into setting up an incubator of sorts. the conclusion that many shared with me was that the existing free trade zones which charge heavily for office space & are a better fit for large multinational companies looking to setup satellite offices, would fight me tooth & nail. since i didn't have the time/patience to fight the uy gov (the free trade zones are very well connected i heard), i decided against it.
The primary reason for this is, I guess, the utter lack of local jobs which are worth a damn, coupled with the fact that a lot of people find it a pleasant, agreeable place to live.
This got an added push a few years ago when it was a lot less expensive to live in Uruguay than many parts of the EU & north america. That momentum has carried over a bit as companies get more liberal about who they will let work online outside of the confines of a cubicle in the home office.
For my money, a north american salary in Uruguay is ideal because of the time zone setup.
During the winter it is one hour ahead of new york. In the summer it is a full three hours ahead.
Summer is a great time of the year to be able to come to the office at 11am & still have a 1 hour jump on people up north.
Recently, a friend of mine who is the wife of an Uruguayan diplomat decided she wanted to start an ebusiness, because it gives her the flexibility of working either here or in one of their duty stations when they travel.
She *just* got started with her website & service offering but it will basically be translation services from spanish to Chinese & back. Suprisingly, given the popularity of these two languages there aren't alot of offerings like this yet.
From my experience the south american business people and the chinese business people usually try to muddle through with some form or english, hand gestures, and patience.
Since she just setup her site, there isn't a lot to see there yet. I'm just gonna give her site a little bit of link love to make sure it gets indexed by the search engines. Once she starts to post on a regular basis & creates some material, the client conversion will be up to her :)
So without further adeu, traduccion chino is her site focused on traducir chino a esp y chino a esp. I have no idea if google expects to see a ` over the o or not. :) Good luck.
ciao,
ug
p.s. years ago, when i was trying to convince entrepreneurs to move here i looked into setting up an incubator of sorts. the conclusion that many shared with me was that the existing free trade zones which charge heavily for office space & are a better fit for large multinational companies looking to setup satellite offices, would fight me tooth & nail. since i didn't have the time/patience to fight the uy gov (the free trade zones are very well connected i heard), i decided against it.
Wednesday, August 26, 2009
Ireland is Targeting Crackdown of Offshore Banking Centers
It's pretty much everywhere isn't it?
I was just reading here:
The latest country to beef up its crackdown efforts on offshore tax avoidance is Ireland.
Iris Revenue Commissioners want the courts to compel Irish banks to identify customers with offshore accounts.
Revenue was already granted orders which made financial institutions give away the identity of their customers when money was moved to or from their own offshore subsidiaries.
They have to apply for new rulings in order to require banks to reveal identities of their clients with offshore account or those who wire funds to and from a number of offshore banking centers
This would reveal transfers with financial institutions that are not Irish owned.
The two primary jurisidictions being focused on by Revenue is Switzerland and Liechtenstein.
The rumour is that Revenue is pursuing a very broad order, targeting electronic, as well as paper transfers, which will include checks and drafts.
Earlier this month, Liechtenstein signed a Tax Information Exchange Agreement (TIEA) with Britain. Ireland also approached Liechtenstein regarding a TIEA and wants to have an agreement finished soon.
Ireland recently signed similar accords with the Isle of Man, Jersey, Guernsey, Gibraltar, Cayman Islands, Bermuda, Turks & Caicos Islands and Anguilla.
In addition, agreements are underway with St Kitts and Nevis, the British Virgin Islands, St Lucia, St Vincent and the Grenadines, the Bahamas, Antigua & Barbuda, and Montserrat, the Cook Islands and Samoa.
A qualified disclosure will let those with undeclared tax liabilities from trusts, foundations, establishments, trust enterprises or offshore companies declare before September 1 to benefit from more leniency.
I was just reading here:
The latest country to beef up its crackdown efforts on offshore tax avoidance is Ireland.
Iris Revenue Commissioners want the courts to compel Irish banks to identify customers with offshore accounts.
Revenue was already granted orders which made financial institutions give away the identity of their customers when money was moved to or from their own offshore subsidiaries.
They have to apply for new rulings in order to require banks to reveal identities of their clients with offshore account or those who wire funds to and from a number of offshore banking centers
This would reveal transfers with financial institutions that are not Irish owned.
The two primary jurisidictions being focused on by Revenue is Switzerland and Liechtenstein.
The rumour is that Revenue is pursuing a very broad order, targeting electronic, as well as paper transfers, which will include checks and drafts.
Earlier this month, Liechtenstein signed a Tax Information Exchange Agreement (TIEA) with Britain. Ireland also approached Liechtenstein regarding a TIEA and wants to have an agreement finished soon.
Ireland recently signed similar accords with the Isle of Man, Jersey, Guernsey, Gibraltar, Cayman Islands, Bermuda, Turks & Caicos Islands and Anguilla.
In addition, agreements are underway with St Kitts and Nevis, the British Virgin Islands, St Lucia, St Vincent and the Grenadines, the Bahamas, Antigua & Barbuda, and Montserrat, the Cook Islands and Samoa.
A qualified disclosure will let those with undeclared tax liabilities from trusts, foundations, establishments, trust enterprises or offshore companies declare before September 1 to benefit from more leniency.
Saturday, July 04, 2009
It's the Future...It's the Future....It's the Future...It's
Things are a happening pretty quickly down south.
As the chilly damp air descends on the denizens of Uruguay, something more dangerous (perhaps) than even the annual bout of environmental depression lurks.
The Others
While the "others" (namely Chile and Argentina) seem to be getting the worst of it so far, the flu by the name of the "other" white meat has started to extract a toll in good ole Uruguay.
Uruguay?
Well, Uruguay, my home country at the moment, nestles down between the dominating Argentina (to the west) and Brazil (to the north). It is a small country, with a small market, and finds itself routinely kicked around by its bigger neighbors in both trade negotiations and futbol matches.
Uruguay does however, have a strong social conscience --- born of fiscal excesses in the early part of last decade, and left in place, because franky nothing ever changes here, they have a relatively strong medical system, that will (if Argentina is an accurate indication of what's coming) will be tested dearly this winter.
The Swine Flu
Well, I've been beating around the bush for the better part of 8 paragraphs or so, and there -- i said it. This post is about the swine flu down here.
I know, i know, you're probably well past the saturation point if you live north of the equator. You already lived through it and can "tell the tale", right? Uh...not so fast. It hit really late in the flu season, and the first opportunity to watch it in action through a full winter has been the southern hemisphere.
In short, it's fortelling your future -- although that's not the only reason for the title of this post.
Situation on the Ground
This is moving very quickly (like the disease) and the numbers that are coming out of the various government agencies are a lesson (you'd rather not have) in infection rates. In subsequent days, Uruguay went from 150 or so infected and no deaths, to at least 10x the number of infected and 4 confirmed dead. Luckily, Uruguay, due in part by it's slow pace and lack of visitors this time of year is quite a ways behind Argentina.
Argentina Situation
Schools have been closed for nearly a month, and after a good month of underreporting the numbers, the media came out with the an estimate of 100k infected. 100k! I don't know, but nearly 50 are confirmed dead already. The estimate a week ago in argentina was 1500 infected.
What to do?
Well, apparently, one solution is to avoid contact with anyone :) Easier said than done in a city of 10MM (Montevideo is "only" 1.5MM). The other solutions, are to basically act like a thorasic surgeon everwhere you go and everything you do....masks, compulsive handwashing ('it's the future, it's the future, it's the future), staying away from people where possible -- much easier said than done where people kiss their grocers hello (and everyone else and their mother), hand sanitizing gel, never again touching for face for any reason, and all other manner of unrealistic disease avoidance strategies.
'gimme drugs, gimme drugs, gimme drugs'
...old welcome back kotter reference there. but, there is (some) help from pharmaceuticals -- namely relenza and better known tamiflu.
In Uruguay, by some miracle of God, (or governmental decree) tamiflu is available without prescription in farmacies. This is incredible, because you'll have a hard time getting anything stronger than aspirin without a script and things as simple as homeopathics and vitamins are very difficult to find, import, and procure without serious red tape and physicians being involved (often).
Of course, everyone and their mother is making a run on Tamiflu.
What really has some Uruguayos angry is that Argentina has been carrying out a roadblock on a bridge between Argentina and Uruguay for YEARS literally, under the 'excuse' of environmental contamination that might come when Uruguay opened a new paper mill on a shared river.
Anyone who knows anything, Argentina accusing Uruguay of environmentally damaging anything is laughable. It's like Oakland, CA condemning San Francisco because the criminal activity might spill over into Oakland.
Anyways, the "piqueteros" (picketers) who basically setup camp on teh bridge and don't allow anything to pass, decided (conveniently) to let argentinians come over to Uruguay to raid the Uruguayan drug stores for Tamiflu since it is available without prescription.
(not so) coincidentally, along with Montevideo, the regions bordering Argentina are where the first cases of swine flu are being reported.
I'll continue to keep you updated while holed up in my penthouse, in between feverishly washing my hands, peeing in empty milk bottles, growing hair and nails to legendary lengths and avoiding all contact with people.
"it's the future, it's the future....it's the future...it's the future...."
As the chilly damp air descends on the denizens of Uruguay, something more dangerous (perhaps) than even the annual bout of environmental depression lurks.
The Others
While the "others" (namely Chile and Argentina) seem to be getting the worst of it so far, the flu by the name of the "other" white meat has started to extract a toll in good ole Uruguay.
Uruguay?
Well, Uruguay, my home country at the moment, nestles down between the dominating Argentina (to the west) and Brazil (to the north). It is a small country, with a small market, and finds itself routinely kicked around by its bigger neighbors in both trade negotiations and futbol matches.
Uruguay does however, have a strong social conscience --- born of fiscal excesses in the early part of last decade, and left in place, because franky nothing ever changes here, they have a relatively strong medical system, that will (if Argentina is an accurate indication of what's coming) will be tested dearly this winter.
The Swine Flu
Well, I've been beating around the bush for the better part of 8 paragraphs or so, and there -- i said it. This post is about the swine flu down here.
I know, i know, you're probably well past the saturation point if you live north of the equator. You already lived through it and can "tell the tale", right? Uh...not so fast. It hit really late in the flu season, and the first opportunity to watch it in action through a full winter has been the southern hemisphere.
In short, it's fortelling your future -- although that's not the only reason for the title of this post.
Situation on the Ground
This is moving very quickly (like the disease) and the numbers that are coming out of the various government agencies are a lesson (you'd rather not have) in infection rates. In subsequent days, Uruguay went from 150 or so infected and no deaths, to at least 10x the number of infected and 4 confirmed dead. Luckily, Uruguay, due in part by it's slow pace and lack of visitors this time of year is quite a ways behind Argentina.
Argentina Situation
Schools have been closed for nearly a month, and after a good month of underreporting the numbers, the media came out with the an estimate of 100k infected. 100k! I don't know, but nearly 50 are confirmed dead already. The estimate a week ago in argentina was 1500 infected.
What to do?
Well, apparently, one solution is to avoid contact with anyone :) Easier said than done in a city of 10MM (Montevideo is "only" 1.5MM). The other solutions, are to basically act like a thorasic surgeon everwhere you go and everything you do....masks, compulsive handwashing ('it's the future, it's the future, it's the future), staying away from people where possible -- much easier said than done where people kiss their grocers hello (and everyone else and their mother), hand sanitizing gel, never again touching for face for any reason, and all other manner of unrealistic disease avoidance strategies.
'gimme drugs, gimme drugs, gimme drugs'
...old welcome back kotter reference there. but, there is (some) help from pharmaceuticals -- namely relenza and better known tamiflu.
In Uruguay, by some miracle of God, (or governmental decree) tamiflu is available without prescription in farmacies. This is incredible, because you'll have a hard time getting anything stronger than aspirin without a script and things as simple as homeopathics and vitamins are very difficult to find, import, and procure without serious red tape and physicians being involved (often).
Of course, everyone and their mother is making a run on Tamiflu.
What really has some Uruguayos angry is that Argentina has been carrying out a roadblock on a bridge between Argentina and Uruguay for YEARS literally, under the 'excuse' of environmental contamination that might come when Uruguay opened a new paper mill on a shared river.
Anyone who knows anything, Argentina accusing Uruguay of environmentally damaging anything is laughable. It's like Oakland, CA condemning San Francisco because the criminal activity might spill over into Oakland.
Anyways, the "piqueteros" (picketers) who basically setup camp on teh bridge and don't allow anything to pass, decided (conveniently) to let argentinians come over to Uruguay to raid the Uruguayan drug stores for Tamiflu since it is available without prescription.
(not so) coincidentally, along with Montevideo, the regions bordering Argentina are where the first cases of swine flu are being reported.
I'll continue to keep you updated while holed up in my penthouse, in between feverishly washing my hands, peeing in empty milk bottles, growing hair and nails to legendary lengths and avoiding all contact with people.
"it's the future, it's the future....it's the future...it's the future...."
Sunday, May 31, 2009
US Bond Market Tipping Point?
Ever since the market turmoil of the last several years started to get peoples' attention, bond watchers have been looking for a moment when things would go critical.
While the stock market is well understood public indicator of the health of the general economy, it's small potatoes. The bond market is no less than the US government's ability to fund its own operations. In addition, since traditionally the US gov's debt was considered "riskless" (except for inflation), other debts pay a premium to the US gov's borrowing rate.
What bond watchers have been waiting for is a point when Federal Reserve (and Treasury) would be faced with a "Sophie's Choice" moment. Do you want to fund the next bailout, or risk sending your borrowing costs so high that you risk the solvency of the US govt? It's going to come down to a choice between the US Dollar, The Bond Market, and the Stock Market.
The Banks
Since the Fed is owned and operated by and for the banks, obviously, they would like to save the banks. In order to do this, the Fed is trying (at least) a few things.
1.) Increase the banks profitability.
2.) Stop the erosion in their assets.
3.) Increase private investment to short up their balance sheets.
Although I believe that their have been huge funnels of funds into the futures market in order to prop up the equity markets, it is only conjecture based on what I've seen in price/volume action there -- and subject of many a tin-foil hat forum. So, I will just say, the recent rise in equities has made it possible for many of the banks to do secondary offerings of stock to raise billions.
To stop the erosion of assets and increase profitability, the Fed decided it would (artificially) hold down long term interest rates. That would make mortgages and refinancings cheaper and more abundant (fees) and (hopefully) stem the decline in US Real Estate (loans against which most of their asset base is comprised of).
In order to push the market out of its natural range, they announced a program where they would buy 10 year notes in the open market, pushing the price up, and the yield down on these instruments. The Fed deemed this activity "quantitative easing".
While the announcement of this plan, immediately pushed 10 year note yields to around 2.5%, as traders have predicted, consistently buying a security above the market will ensure that you shortly become the entire market.
Fearing inflation, holders of longer term bonds have been moving their money to us gov debt with shorter maturities. Basically, they don't want to lock in a historically low rate if the Fed is able to stoke inflation again.
On Wednesday there was an epic "dislocation" in the rates of 10 year paper and a subsequent (and related) move in mortgage bonds. Banks and mortgage brokers were updated multiple times throughout the day as rates moved up almost a full percentage point in some cases.
While a move on a 30 year fixed rate mortgage from 4.5 to 5.5 sounds trivial, it was enough to make a lot of refinancings financially unviable, and make some contemplated offers for purchase impossible. While some lucky people had locked their rate earlier, lots hadn't, as the believe was, the almighty fed would hold rates down.
The Bond Market or the Dollar?
For the remainder of the week, the Fed had a decision to make: let long term rates continue northward (to their natural price), or intravene and risk stoking inflation and killing the dollar.
With more big auctions this week (the US Treasury trying to raise more money for its operation), the decision was made to throw the US Dollar under the bus. The dollar was down between 1 and 2 percent against most major currencies as the long end of the curve was bought down once again in an attempt to stem the tide.
Since I penned this short article -> US Dollar Double Top, where I basically called a double top in the value of the us dollar, the dollar index has moved from 90 to 80. On Friday it went through the psychologically important 80 level like a hot knife through butter.
What About the Stock Market?
Now that most of the banks have gotten their secondary stock offerings out of the way, I think we are at a dangerous time for the stock market.
If the value of the US Dollar starts to threaten it's earlier multiyear lows (in the low 70's) and/or the supply in the US bond market starts to outstrip demand again, look for the Fed to drain the swamp again and scare money back into US Gov debt as they did last fall.
Although I think risk assets (like us stocks in general) are overvalued right now, if the dollar continues to fall, they could go higher as a hedge against inflationary pressures....if/when we reach 72 on the dollar index, it will be another sophie's choice moment, and unless there is a really good reason to prop the stock market I believe it will be thrown under the bus again.
Short, Medium, Long Term?
There are some credible arguments that say:
short term -- everything is sunshine and strawberries,
medium term -- everything is going to hell in a handbasket
longer term -- people in search of less and less risk continue to move towards shorter and shorter maturities...with the eventual arrival at federal reserve notes themselves (bank of sealy).
go cool,
UruguayGuy
p.s. if this happens, we could see some real "funny" business since the size of the bond market dwarfs the number of actual federal reserve notes (paper currency) in circulation.....some deep thinkers even think that paradoxically, frn's could become "priceless" and be driven out of circulation (?!!?!) :) well, not sure how we would combat the counterfeiting at that point, but it's an interesting hypothesis.
While the stock market is well understood public indicator of the health of the general economy, it's small potatoes. The bond market is no less than the US government's ability to fund its own operations. In addition, since traditionally the US gov's debt was considered "riskless" (except for inflation), other debts pay a premium to the US gov's borrowing rate.
What bond watchers have been waiting for is a point when Federal Reserve (and Treasury) would be faced with a "Sophie's Choice" moment. Do you want to fund the next bailout, or risk sending your borrowing costs so high that you risk the solvency of the US govt? It's going to come down to a choice between the US Dollar, The Bond Market, and the Stock Market.
The Banks
Since the Fed is owned and operated by and for the banks, obviously, they would like to save the banks. In order to do this, the Fed is trying (at least) a few things.
1.) Increase the banks profitability.
2.) Stop the erosion in their assets.
3.) Increase private investment to short up their balance sheets.
Although I believe that their have been huge funnels of funds into the futures market in order to prop up the equity markets, it is only conjecture based on what I've seen in price/volume action there -- and subject of many a tin-foil hat forum. So, I will just say, the recent rise in equities has made it possible for many of the banks to do secondary offerings of stock to raise billions.
To stop the erosion of assets and increase profitability, the Fed decided it would (artificially) hold down long term interest rates. That would make mortgages and refinancings cheaper and more abundant (fees) and (hopefully) stem the decline in US Real Estate (loans against which most of their asset base is comprised of).
In order to push the market out of its natural range, they announced a program where they would buy 10 year notes in the open market, pushing the price up, and the yield down on these instruments. The Fed deemed this activity "quantitative easing".
While the announcement of this plan, immediately pushed 10 year note yields to around 2.5%, as traders have predicted, consistently buying a security above the market will ensure that you shortly become the entire market.
Fearing inflation, holders of longer term bonds have been moving their money to us gov debt with shorter maturities. Basically, they don't want to lock in a historically low rate if the Fed is able to stoke inflation again.
On Wednesday there was an epic "dislocation" in the rates of 10 year paper and a subsequent (and related) move in mortgage bonds. Banks and mortgage brokers were updated multiple times throughout the day as rates moved up almost a full percentage point in some cases.
While a move on a 30 year fixed rate mortgage from 4.5 to 5.5 sounds trivial, it was enough to make a lot of refinancings financially unviable, and make some contemplated offers for purchase impossible. While some lucky people had locked their rate earlier, lots hadn't, as the believe was, the almighty fed would hold rates down.
The Bond Market or the Dollar?
For the remainder of the week, the Fed had a decision to make: let long term rates continue northward (to their natural price), or intravene and risk stoking inflation and killing the dollar.
With more big auctions this week (the US Treasury trying to raise more money for its operation), the decision was made to throw the US Dollar under the bus. The dollar was down between 1 and 2 percent against most major currencies as the long end of the curve was bought down once again in an attempt to stem the tide.
Since I penned this short article -> US Dollar Double Top, where I basically called a double top in the value of the us dollar, the dollar index has moved from 90 to 80. On Friday it went through the psychologically important 80 level like a hot knife through butter.
What About the Stock Market?
Now that most of the banks have gotten their secondary stock offerings out of the way, I think we are at a dangerous time for the stock market.
If the value of the US Dollar starts to threaten it's earlier multiyear lows (in the low 70's) and/or the supply in the US bond market starts to outstrip demand again, look for the Fed to drain the swamp again and scare money back into US Gov debt as they did last fall.
Although I think risk assets (like us stocks in general) are overvalued right now, if the dollar continues to fall, they could go higher as a hedge against inflationary pressures....if/when we reach 72 on the dollar index, it will be another sophie's choice moment, and unless there is a really good reason to prop the stock market I believe it will be thrown under the bus again.
Short, Medium, Long Term?
There are some credible arguments that say:
short term -- everything is sunshine and strawberries,
medium term -- everything is going to hell in a handbasket
longer term -- people in search of less and less risk continue to move towards shorter and shorter maturities...with the eventual arrival at federal reserve notes themselves (bank of sealy).
go cool,
UruguayGuy
p.s. if this happens, we could see some real "funny" business since the size of the bond market dwarfs the number of actual federal reserve notes (paper currency) in circulation.....some deep thinkers even think that paradoxically, frn's could become "priceless" and be driven out of circulation (?!!?!) :) well, not sure how we would combat the counterfeiting at that point, but it's an interesting hypothesis.
Wednesday, May 13, 2009
I am short the U.S. Markets Again
...as of monday...
it's not a trade i would recommend following necessarily since there is very little technical confirmation....i'm just betting on inflation (or recovery) driving the markets much higher from here.
so far, i've noticed a lot of market strength into "bad news"...that's also not a great sign for shorts.
i'm hoping the overhead resistance holds us at or under 1000 through this spring/summer and fall brings a reckoning again....maybe i'll get lucky earlier with all the equity raises/dilution in the financials.
good luck
ug
it's not a trade i would recommend following necessarily since there is very little technical confirmation....i'm just betting on inflation (or recovery) driving the markets much higher from here.
so far, i've noticed a lot of market strength into "bad news"...that's also not a great sign for shorts.
i'm hoping the overhead resistance holds us at or under 1000 through this spring/summer and fall brings a reckoning again....maybe i'll get lucky earlier with all the equity raises/dilution in the financials.
good luck
ug
Monday, April 27, 2009
The Black Swan Didn't Taste Like Chicken....
...it tasted like pork.
too early to tell how it's going to go down though.
more later.
ug
too early to tell how it's going to go down though.
more later.
ug
Monday, April 20, 2009
April 19th Cycle Ends
Martin Armstrong is predicting the 19th as a turn date for the economy.
Be careful out there.
Be careful out there.
Wednesday, April 01, 2009
Uruguay Travel
While the summer months make up the bulk of the tourist season, Uruguay has some important periods for domestic travel as well.
Probably the biggest of those is coming up in a couple of weeks and centers around semana santa -- or holy week. While Uruguayans aren't especially "holy", hey, it's an excuse to go on vacation, right? And, basically, any excuse to go on vacation is a good one as far as the Uruguayans are concerned.
Travel and tourism in Uruguay is important to the local economy, and Uruguay has the equivalent of a Tourism Secretary. Tourism bureau president Luis Borsari said that along with domestic travel by Uruguayans, foreign visitors and tourist travel this semana santa looks to be strong again despite the economic difficulties being felt this year in most countries.
Bookings and reservations for lodging and rooms looks strong. Borsari feels that this year will be similar to last year where a healthy number of foreign tourists came to Uruguay, however, their overall spending per visitor was down.
The Uruguay Tourism Chamber president further added that domestic tourism is on the rise. And, many locals tend to use the week of semana santa to investigate the interior of the country. Travel around the more traditional tourism hotspots of Punta del Este and Colonia del Sacremento is the focus of more foreigners, and Uruguay travel from foreign tourists is likely be be strongest between Monday and Thursday of the Holy Week Holiday.
Probably the biggest of those is coming up in a couple of weeks and centers around semana santa -- or holy week. While Uruguayans aren't especially "holy", hey, it's an excuse to go on vacation, right? And, basically, any excuse to go on vacation is a good one as far as the Uruguayans are concerned.
Travel and tourism in Uruguay is important to the local economy, and Uruguay has the equivalent of a Tourism Secretary. Tourism bureau president Luis Borsari said that along with domestic travel by Uruguayans, foreign visitors and tourist travel this semana santa looks to be strong again despite the economic difficulties being felt this year in most countries.
Bookings and reservations for lodging and rooms looks strong. Borsari feels that this year will be similar to last year where a healthy number of foreign tourists came to Uruguay, however, their overall spending per visitor was down.
The Uruguay Tourism Chamber president further added that domestic tourism is on the rise. And, many locals tend to use the week of semana santa to investigate the interior of the country. Travel around the more traditional tourism hotspots of Punta del Este and Colonia del Sacremento is the focus of more foreigners, and Uruguay travel from foreign tourists is likely be be strongest between Monday and Thursday of the Holy Week Holiday.
Tuesday, March 31, 2009
Dylan Ratigan Interview
This maybe dated, but i missed it the first go around. Flat the best interview I've heard on the "global economic crisis", and what probably got him in trouble with those spin doctors and the paid mouthpiece factory that cnbc has become.
http://radio.goldseek.com/GSRplayer03.28.09.php
ug
http://radio.goldseek.com/GSRplayer03.28.09.php
ug
Sunday, March 15, 2009
Thursday, February 26, 2009
I think people are starting to figure it out....
Get a load of this video.
What's amazing to me is that this guy is actually smoking. After about 3 minutes into his rant I felt like I was back in the Marines and he was gonna pick up a 1/2 empty coke can to spit his tobacco into.
What's amazing to me is that this guy is actually smoking. After about 3 minutes into his rant I felt like I was back in the Marines and he was gonna pick up a 1/2 empty coke can to spit his tobacco into.
Monday, February 23, 2009
Our Arrows will Block out the Sun!
I'm fond of using the title of this post when exorting them to ever greater feats of internet marketing -- hey, what kind of marketer would i be if i couldn't even sell my own troops on hyperbole! :)
But, lately I've been talking about another kind of overwhelming force in the money markets. The specter of "government guaranteed" money is rising to such great quantities as to effectively crowd most other forms of debt out of the financial markets.
What do I mean by this?
Well, in the first phase of the "crisis" people were worried about getting a return OF capital. The answer (of course, said the financial cognescenti) was to just guarantee it. What? Apparently, nearly everything.
Well, the knock on effect of this is that coupled with a global deflationary collapse, funding needs for govts rising everywhere, and more and more crap getting "government guarantees" that anything withOUT a govt guarantee is more and more expensive to fund. During the "freeze" this fall it got nearly ridiculous with wireless carriers reportedly paying more than 25% for short term corporate borrowings (fortune 500 companies NOT involved in banking).
Well, clearly, govt guarantees on money are a "bubble". And, it will work really well, until it doesn't. What's the solution to things costing too much to fund without a govt guarantee? Why of course, guarantee that too!
Credit card debt, school debt, commercial real estate, commercial paper, etc etc etc etc. Of course, when it does break now, we can be assured of having all many of commerce grind to an immediate halt. No problem though, almost all food and energy is locally grown/produced and consumed right? What? You say those things are delivered to customers at the end of long international supply chains that depend on shipping and the free flow of commerce and credit to ensure payments for delivery of goods???? ooops. nevermind.
To wit, here is a story about the chinese wising up to the game. I blogged about this a couple of years ago, saying that anyone investing in mortgage products for hundredths of a point over treasuries was an IDIOT given the risk they were assuming. hey, if they really weren't assuming any more risk were they really idiots? (assuming a govt guarantee to backstop all losses). and, on the other hand, if the govt guarantees fannie/freddie can they really sell the treasuries they'll need to to continue to run the govt? me thinks not.
----------
Feb. 20 (Bloomberg) -- Asian investors won’t buy debt and mortgage-backed securities from Fannie Mae and Freddie Mac until they carry explicit U.S. guarantees, similar to those given on bonds issued by Bank of America Corp. or Citigroup Inc.
The risks are too great without a pledge that the U.S. will repay the debt no matter what, according to Hideo Shimomura, chief fund investor in Tokyo for Mitsubishi UFJ Asset Management Co., and other bondholders and analysts in Japan, China and South Korea interviewed by Bloomberg. Overseas resistance may hamper U.S. efforts to hold down home-loan rates and shore up the nation’s largest mortgage-finance companies.
Even after President Barack Obama vowed on Feb. 18 to sink as much as $400 billion of capital into Fannie Mae and Freddie Mac, double the original commitment, “there is still a concern that there is no guarantee” from the government, said Shimomura, who oversees $4 billion in non-yen bonds for the arm of Japan’s largest bank.
“Looking at the risk, they’re not so attractive,” he said. “We need a guarantee before we’ll buy.”
Foreign investors sold $170 billion of agency debt and securities in the second half of 2008, the largest amount since the Treasury began tracking sales in 1977, according to the most recent data. Asians, the biggest non-U.S. block of owners in the category, unloaded $70 billion worth from July through December, after scooping up $55 billion in the second quarter and being net buyers during much of the last decade.
Lack of Confidence
The sell-off and calls for a guarantee reflect a continuing lack of confidence among foreign investors five months after the U.S. seized control of Fannie Mae and Freddie Mac. The takeovers followed the biggest surge in mortgage defaults in three decades.
Without restoring foreign demand, Federal Reserve Chairman Ben S. Bernanke will find it more difficult to cut rates on housing loans, which depend on the ability of the finance companies to attract investors for their securities at the lowest possible yield. Fannie and Freddie sell debt to fund their purchases of mortgage assets and also guarantee home-loan bonds sold by lenders.
The Fed, which promised to buy as much as $100 billion of Fannie Mae, Freddie Mac and Federal Home Loan Bank corporate debt, may need to spend more, according to Margaret Kerins, an agency-debt strategist at RBS Greenwich Capital in Greenwich, Connecticut.
Buying Programs
The central bank last month indicated that it may increase this buying program as well as a second $500 billion one for mortgage-bond purchases. The Treasury has bought $94.2 billion worth of mortgage bonds under its own continuing program.
“You’d be back to the situation that prompted them to act” if the purchases of Fannie and Freddie debt were discontinued before foreign investors return, Kerins said. The agency-debt market has recently improved as the “crowding out effect” from sales of government-guaranteed bank debt has proven less than expected, something that may lessen the need for government buying, she added.
The Fed’s buying program resulted in a yield of 2.06 percent on Fannie Mae notes maturing May 2012 at the close of trading Feb. 18 -- 0.15 percentage point less than government-guaranteed Bank of America bonds maturing a month later and 0.12 percentage point less than similar Goldman Sachs Group Inc. debt, according to RBS Greenwich data.
Yield Spreads
Yield gaps between Fannie Mae’s 10-year debt and Treasuries have narrowed from the record of 1.75 percentage point set in November, after countries worldwide announced plans to back bank bonds and offer buyers more federal guarantees. At 0.64 percentage point, it is now 0.27 percentage point above what the spread averaged in 2006, according to data compiled by Bloomberg.
The average 30-year fixed mortgage rate fell to a record low of 4.96 percent last month from 6.47 percent in the last week of October, according to Freddie Mac surveys. It rose to 5.04 percent during the week ended yesterday.
Fannie Mae, based in Washington, and Freddie Mac, in McLean, Virginia, have about $1.7 trillion of corporate debt outstanding and $3.7 trillion of their guaranteed mortgage-backed securities held by other investors. The two mortgage companies finance almost half of the $12 trillion of residential loans outstanding.
The government-run conservatorship won’t end until the mortgage market recovers and the companies regain profitability, Federal Housing Finance Agency Director James Lockhart said yesterday on Bloomberg Television. He took charge of Fannie and Freddie last September and describes the companies’ U.S. backing as “effective,” though not “explicit.”
‘Full-Faith’ Guarantee
That’s not enough for foreign investors these days, said Laurie Goodman, a senior managing director at Austin, Texas-based Amherst Securities Group LP. Goodman was a former head of fixed- income research at UBS AG.
“Overseas investors are looking for the full-faith-and- credit clarification,” Goodman said. Such a pledge would essentially about double the U.S.’s debt, potentially boosting the country’s own borrowing costs.
“The U.S. government is worried about the agency market, and market participants feel the same way,” said Kei Katayama, head of the foreign fixed-income group in Tokyo at Daiwa SB Investments Ltd., who oversees $1.6 billion of non-yen bonds for the arm of Japan’s second-biggest brokerage.
Katayama sold all of his agency debt on Sept. 16, the day after Lehman Brothers Holdings Inc. filed the biggest bankruptcy ever, taking it as a sign to get out of riskier assets, he said.
Difficult to Sell
The bonds also have been difficult to sell after credit markets froze last year, according to Jaemin Cheong, who trades U.S. securities in Seoul at Industrial Bank of Korea, South Korea’s biggest lender to small and mid-size companies. He said he won’t touch them.
Sellers in the fourth quarter included Caribbean-based investors, often hedge funds, which dumped a net $35.8 billion of the agency debt and securities after buying $15.7 billion in September. China sold $10.4 billion in the period after unloading $8 billion in September, while South Korea got rid of $10.5 billion.
“China’s demand for U.S. agency bonds will gradually decrease because China has drawn lessons from the credit crisis and learned to invest smarter,” said Yi Xianrong, a researcher at the Beijing-based financial research institute of the Chinese Academy of Social Sciences, which advises the government. “We will try to stay away from these types of bonds.”
Freddie Mac Treasurer
Freddie Mac Treasurer Peter Federico connects the sales to certain institutions and doesn’t think it is part of “a broader liquidation,” although “it kind of felt like that for a couple of weeks or months later in the year.
“There are a couple of institutions who continue to sell agency debt,” he said in a Feb. 18 telephone interview. “I think their reasoning for doing that is not related to their comfort with our credit. It’s their own monetary-management and currency-related issues. Apart from those institutions, I don’t believe there is a lot of demand to sell going forward.”
Federico spoke after the company completed a record $10 billion, three-year note sale at yields of 2.24 percent, or 0.02 percent more than JPMorgan Chase & Co. offered in a sale of government-guaranteed, three-year debt of the same size.
Asian investors bought 12 percent of this week’s sale, and North American investors purchased 72 percent, according to the company.
More U.S. Buyers
The U.S. share was high in comparison to recent years, “but it’s very consistent with what we’ve seen over the last six months, where the U.S. domestic investor who probably understands the conservatorship status better than foreign investors has really been supporting the market in a big way,” said Drew Ertman, head of financial-institutions debt coverage at Morgan Stanley, one of the underwriters.
Amy Bonitatibus, a Fannie Mae spokeswoman, declined to comment.
Sales of agency debt and securities may be more closely tied to the availability of better returns in corporate bonds than a lack of faith among investors, according to Andrew Harding, chief investment officer for fixed income at Allegiant Asset Management in Cleveland. Those include bank debt with explicit U.S. guarantees offering higher yields, he said.
“I don’t think the credit quality or housing market has precluded people from buying agency debt right now,” said Harding, who helps manage $20 billion for Allegiant. “There are just more attractive alternatives.”
Fukoku Mutual Life Insurance Co. spent last year trimming “risky assets,” and it sold all agency holdings in the third quarter, said Satoshi Okumoto, general manager at the company in Tokyo, which has $63.5 billion in assets.
“It’s not really the same credit” as government debt, Okumoto said. “It’s one step below.”
But, lately I've been talking about another kind of overwhelming force in the money markets. The specter of "government guaranteed" money is rising to such great quantities as to effectively crowd most other forms of debt out of the financial markets.
What do I mean by this?
Well, in the first phase of the "crisis" people were worried about getting a return OF capital. The answer (of course, said the financial cognescenti) was to just guarantee it. What? Apparently, nearly everything.
Well, the knock on effect of this is that coupled with a global deflationary collapse, funding needs for govts rising everywhere, and more and more crap getting "government guarantees" that anything withOUT a govt guarantee is more and more expensive to fund. During the "freeze" this fall it got nearly ridiculous with wireless carriers reportedly paying more than 25% for short term corporate borrowings (fortune 500 companies NOT involved in banking).
Well, clearly, govt guarantees on money are a "bubble". And, it will work really well, until it doesn't. What's the solution to things costing too much to fund without a govt guarantee? Why of course, guarantee that too!
Credit card debt, school debt, commercial real estate, commercial paper, etc etc etc etc. Of course, when it does break now, we can be assured of having all many of commerce grind to an immediate halt. No problem though, almost all food and energy is locally grown/produced and consumed right? What? You say those things are delivered to customers at the end of long international supply chains that depend on shipping and the free flow of commerce and credit to ensure payments for delivery of goods???? ooops. nevermind.
To wit, here is a story about the chinese wising up to the game. I blogged about this a couple of years ago, saying that anyone investing in mortgage products for hundredths of a point over treasuries was an IDIOT given the risk they were assuming. hey, if they really weren't assuming any more risk were they really idiots? (assuming a govt guarantee to backstop all losses). and, on the other hand, if the govt guarantees fannie/freddie can they really sell the treasuries they'll need to to continue to run the govt? me thinks not.
----------
Feb. 20 (Bloomberg) -- Asian investors won’t buy debt and mortgage-backed securities from Fannie Mae and Freddie Mac until they carry explicit U.S. guarantees, similar to those given on bonds issued by Bank of America Corp. or Citigroup Inc.
The risks are too great without a pledge that the U.S. will repay the debt no matter what, according to Hideo Shimomura, chief fund investor in Tokyo for Mitsubishi UFJ Asset Management Co., and other bondholders and analysts in Japan, China and South Korea interviewed by Bloomberg. Overseas resistance may hamper U.S. efforts to hold down home-loan rates and shore up the nation’s largest mortgage-finance companies.
Even after President Barack Obama vowed on Feb. 18 to sink as much as $400 billion of capital into Fannie Mae and Freddie Mac, double the original commitment, “there is still a concern that there is no guarantee” from the government, said Shimomura, who oversees $4 billion in non-yen bonds for the arm of Japan’s largest bank.
“Looking at the risk, they’re not so attractive,” he said. “We need a guarantee before we’ll buy.”
Foreign investors sold $170 billion of agency debt and securities in the second half of 2008, the largest amount since the Treasury began tracking sales in 1977, according to the most recent data. Asians, the biggest non-U.S. block of owners in the category, unloaded $70 billion worth from July through December, after scooping up $55 billion in the second quarter and being net buyers during much of the last decade.
Lack of Confidence
The sell-off and calls for a guarantee reflect a continuing lack of confidence among foreign investors five months after the U.S. seized control of Fannie Mae and Freddie Mac. The takeovers followed the biggest surge in mortgage defaults in three decades.
Without restoring foreign demand, Federal Reserve Chairman Ben S. Bernanke will find it more difficult to cut rates on housing loans, which depend on the ability of the finance companies to attract investors for their securities at the lowest possible yield. Fannie and Freddie sell debt to fund their purchases of mortgage assets and also guarantee home-loan bonds sold by lenders.
The Fed, which promised to buy as much as $100 billion of Fannie Mae, Freddie Mac and Federal Home Loan Bank corporate debt, may need to spend more, according to Margaret Kerins, an agency-debt strategist at RBS Greenwich Capital in Greenwich, Connecticut.
Buying Programs
The central bank last month indicated that it may increase this buying program as well as a second $500 billion one for mortgage-bond purchases. The Treasury has bought $94.2 billion worth of mortgage bonds under its own continuing program.
“You’d be back to the situation that prompted them to act” if the purchases of Fannie and Freddie debt were discontinued before foreign investors return, Kerins said. The agency-debt market has recently improved as the “crowding out effect” from sales of government-guaranteed bank debt has proven less than expected, something that may lessen the need for government buying, she added.
The Fed’s buying program resulted in a yield of 2.06 percent on Fannie Mae notes maturing May 2012 at the close of trading Feb. 18 -- 0.15 percentage point less than government-guaranteed Bank of America bonds maturing a month later and 0.12 percentage point less than similar Goldman Sachs Group Inc. debt, according to RBS Greenwich data.
Yield Spreads
Yield gaps between Fannie Mae’s 10-year debt and Treasuries have narrowed from the record of 1.75 percentage point set in November, after countries worldwide announced plans to back bank bonds and offer buyers more federal guarantees. At 0.64 percentage point, it is now 0.27 percentage point above what the spread averaged in 2006, according to data compiled by Bloomberg.
The average 30-year fixed mortgage rate fell to a record low of 4.96 percent last month from 6.47 percent in the last week of October, according to Freddie Mac surveys. It rose to 5.04 percent during the week ended yesterday.
Fannie Mae, based in Washington, and Freddie Mac, in McLean, Virginia, have about $1.7 trillion of corporate debt outstanding and $3.7 trillion of their guaranteed mortgage-backed securities held by other investors. The two mortgage companies finance almost half of the $12 trillion of residential loans outstanding.
The government-run conservatorship won’t end until the mortgage market recovers and the companies regain profitability, Federal Housing Finance Agency Director James Lockhart said yesterday on Bloomberg Television. He took charge of Fannie and Freddie last September and describes the companies’ U.S. backing as “effective,” though not “explicit.”
‘Full-Faith’ Guarantee
That’s not enough for foreign investors these days, said Laurie Goodman, a senior managing director at Austin, Texas-based Amherst Securities Group LP. Goodman was a former head of fixed- income research at UBS AG.
“Overseas investors are looking for the full-faith-and- credit clarification,” Goodman said. Such a pledge would essentially about double the U.S.’s debt, potentially boosting the country’s own borrowing costs.
“The U.S. government is worried about the agency market, and market participants feel the same way,” said Kei Katayama, head of the foreign fixed-income group in Tokyo at Daiwa SB Investments Ltd., who oversees $1.6 billion of non-yen bonds for the arm of Japan’s second-biggest brokerage.
Katayama sold all of his agency debt on Sept. 16, the day after Lehman Brothers Holdings Inc. filed the biggest bankruptcy ever, taking it as a sign to get out of riskier assets, he said.
Difficult to Sell
The bonds also have been difficult to sell after credit markets froze last year, according to Jaemin Cheong, who trades U.S. securities in Seoul at Industrial Bank of Korea, South Korea’s biggest lender to small and mid-size companies. He said he won’t touch them.
Sellers in the fourth quarter included Caribbean-based investors, often hedge funds, which dumped a net $35.8 billion of the agency debt and securities after buying $15.7 billion in September. China sold $10.4 billion in the period after unloading $8 billion in September, while South Korea got rid of $10.5 billion.
“China’s demand for U.S. agency bonds will gradually decrease because China has drawn lessons from the credit crisis and learned to invest smarter,” said Yi Xianrong, a researcher at the Beijing-based financial research institute of the Chinese Academy of Social Sciences, which advises the government. “We will try to stay away from these types of bonds.”
Freddie Mac Treasurer
Freddie Mac Treasurer Peter Federico connects the sales to certain institutions and doesn’t think it is part of “a broader liquidation,” although “it kind of felt like that for a couple of weeks or months later in the year.
“There are a couple of institutions who continue to sell agency debt,” he said in a Feb. 18 telephone interview. “I think their reasoning for doing that is not related to their comfort with our credit. It’s their own monetary-management and currency-related issues. Apart from those institutions, I don’t believe there is a lot of demand to sell going forward.”
Federico spoke after the company completed a record $10 billion, three-year note sale at yields of 2.24 percent, or 0.02 percent more than JPMorgan Chase & Co. offered in a sale of government-guaranteed, three-year debt of the same size.
Asian investors bought 12 percent of this week’s sale, and North American investors purchased 72 percent, according to the company.
More U.S. Buyers
The U.S. share was high in comparison to recent years, “but it’s very consistent with what we’ve seen over the last six months, where the U.S. domestic investor who probably understands the conservatorship status better than foreign investors has really been supporting the market in a big way,” said Drew Ertman, head of financial-institutions debt coverage at Morgan Stanley, one of the underwriters.
Amy Bonitatibus, a Fannie Mae spokeswoman, declined to comment.
Sales of agency debt and securities may be more closely tied to the availability of better returns in corporate bonds than a lack of faith among investors, according to Andrew Harding, chief investment officer for fixed income at Allegiant Asset Management in Cleveland. Those include bank debt with explicit U.S. guarantees offering higher yields, he said.
“I don’t think the credit quality or housing market has precluded people from buying agency debt right now,” said Harding, who helps manage $20 billion for Allegiant. “There are just more attractive alternatives.”
Fukoku Mutual Life Insurance Co. spent last year trimming “risky assets,” and it sold all agency holdings in the third quarter, said Satoshi Okumoto, general manager at the company in Tokyo, which has $63.5 billion in assets.
“It’s not really the same credit” as government debt, Okumoto said. “It’s one step below.”
Tuesday, February 17, 2009
Money Never Sleep, Bud Fox
....it just rolls over and dies...
love, LOVE, this scene. one of my favorite all time classics due to the "dated" cell phone :)
love, LOVE, this scene. one of my favorite all time classics due to the "dated" cell phone :)
Saturday, February 14, 2009
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