Oil at $100 not our fault: OPEC

Fredrik Dahl
Reuters
Thursday, January 3, 2008

OPEC officials lined up to say the exporter group could do little to tame oil prices that hit $100 a barrel for the first time on Wednesday and world markets had enough crude oil.

The comments underline the view of the producer group that factors other than supply are driving oil's record run. Officials said there was no plan for an emergency OPEC meeting before a scheduled February 1 gathering.

"The problem is not shortage of supply," Hojjatollah Ghanimifard, international affairs director at the National Iranian Oil Company, told Reuters on Thursday. Iran is OPEC's second-largest producer after Saudi Arabia.

"I think the main problem is outside the oil market. Too much liquidity is available," Ghanimifard said. "A big part of it is in the paper market of crude oil."

Oil in New York hit $100 a barrel on Wednesday, the first trading day of the year, and analysts said the price could make further gains. Crude rallied almost 58 percent last year and is up from below $20 in early 2002.

OPEC, source of more than a third of the world's oil, decided to keep oil output steady at a December 5 meeting, rebuffing calls from consumer countries for more supply to rein in prices then trading around $90.

The Organization of the Petroleum Exporting Countries cannot tame the price rise because it is not a result of supply problems, Qatar's oil minister told Reuters on Wednesday.

"I don't think OPEC can do anything," Qatar's Abdullah al-Attiyah said. "If this was related to supply then we could move."

Full article here.

Funding sought for 50 flights dragging huge "Revolution" banner

Paul Joseph Watson
Prison Planet
Thursday, January 3, 2008

Ron Paul supporters are being urged to take the revolution to the air as funding is sought for a squadron of 50 flights to take to the skies before the end of January, dragging behind them gigantic 90 by 30 feet banners promoting the Congressman's presidential campaign.

The Genesis Communications Network is hoping to follow in the footsteps of the Ron Paul Blimp by attracting sponsors for flights over key demographic battlegrounds as the Republican primaries take shape over the next few months.

The first flight sets off today and will be cruising over Cedar Rapids, Iowa from 2pm CST onwards.

Approximately $465 is needed to keep each plane in the sky for an hour which can also be moved to other key markets at a cost of $200 per night.

Huge 90 by 30 foot banner that will trail behind the planes.

Each billboard costs $3,695 to make an the organizers are hoping to raise around $120,000 in total which would buy 300 flight hours.

Please visit http://www.ronpaulaircorps.com and pledge your support for this exciting new activist adventure!

This video details the great efforts of other activists in taking to the skies for the cause of freedom.

FBI to use digital billboard alerts

Mark Sweney
London Guardian
Thursday, January 3, 2008

The FBI is to use a nationwide network of digital billboards to flash "hot pursuit" alerts and "most wanted" bulletins to help catch criminals.

In a deal with Clear Channel Outdoor, the US law enforcement agency will use billboards to run messages about wanted criminals, crime in progress and "high security" alerts about homeland security.

The agreement, which follows a successful trial in Philadelphia that led to the swift arrest of three criminals, will primarily be used to run "most wanted messages" on more than 150 digital billboards in about 20 US cities.

Billboards will also be used to display "high security messages to relevant communities" and the FBI also plans to establish a "protocol" for high priority "hot pursuit" messages to run straight after crimes are committed.

"The success of our 'wanted' messages on Clear Channel's digital billboards in Philadelphia was an impressive testament to this new technology's effectiveness in aiding law enforcement," said Brett Hovington, community relations unit chief at the FBI.

He added that a key benefit of the billboards is that they allow a "degree of separation between the tipster and the authorities", helping the FBI to protect the sources of anonymous tip-offs.

Clear Channel has previously used its billboards for public safety purposes such as informing commuters in Minneapolis that there had been a bridge collapse within 15 minutes of the event occurring.

Global Property Bubbles to Implode in 2008

Global Property Bubbles to Implode in 2008

The Telegraph is reporting UK Landlords face office rent crisis.

One of the UK's leading commercial property agents has warned that office rents may tumble next year, dealing a second devastating blow to landlords who have already seen the value of their portfolios plummet in recent months.

DTZ is predicting a 15pc-20pc fall in office demand in 2008 as banks and other financial institutions reduce their overheads, which will almost inevitably lead to a softening of rents and the increase in incentives such as rent-free periods.

DTZ's report added that the current financial crisis is symptomatic of a much wider problem than the US sub-prime market.

A spokesman said: "Sub-prime is a red herring. It was simply the most stretched segment of an over-stretched debt market. As such, it has to be seen as a catalyst rather than the cause of the recent turmoil."

My Comment: DTZ has this correct. Yet we still hear (at least in the US) how all of this is related to subprime. Alt-A and Pay Option ARMs are going to be at least as big if not a bigger problem than subprime.

The concern over rental growth in the commercial property market comes against a backdrop of a falling number of deals in the sale and purchase of commercial property.

Research from property agent Jones Lang LaSalle (JLL) reveals that the volume of transactions across the UK commercial property market dropped 25pc in 2007 to £48bn as investors fled the sector. Falling prices and reduced availability of debt restricted the flow of deals, especially larger ones, across the second half of the year.

My Comment: Commercial Real Estate Transactions Plunge in the US as well. A plunge in transaction preceded the bursting of the housing bubble in the US. Expect the same scenario to play out in the Commercial Real Estate bubble.

JLL director of capital markets Andrew Hynard said: " I think the first quarter of 2008 will be pretty slow, and we will see the pick-up in quarter two. However, the fall in capital values is likely to keep the overall value of transactions lower in 2008 than 2007."

My Comment: JLL is an amazing optimist. The US, UK, and EU all likely headed for what Shiller calls a Japanese Style Recession.

A Real Estate Bubble in Spain



Click Here To Play Video

Spanish property dreams seem to be reaching for the sky. The new skyline of the Spanish capital Madrid features 250 meter high office buildings - a symbol of the country's economic boom.

But as the city grows higher it is also becoming too expensive for many residents. Rocio Ramos and her partner bought themselves an apartment outside the city and now they are struggling to keep up with rising interest rates. At the same time, prices are stagnating after the years of building boom. On the coast many of the newly built appartments are empty. Ute Brucker took a look at developments in Madrid and Valencia.

The above property cost 200,000 Euros ($292,000+-) for 65 square meters (about 700 square feet) in a building constructed in the 1970's. That is a bubble folks.

Property Bubbles Are Everywhere You Look

Florida has been ground zero of bubble popping but California, Arizona, and Nevada are catching up. Internationally, there are enormous bubble in Spain, the UK, Canada (especially Vancouver and Toronto), and China.

Credit expansion in the UK and EU was just as rampant as the US. Global property bubbles were the result. Here is an interesting chart from HousePriceCrash.Co.UK



The dotted line is an alternate trendline that I drew. The ramifications should be obvious.

Global property bubbles are poised to implode in 2008.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

The US sub-prime crisis in graphics

The US sub-prime mortgage crisis has lead to plunging property prices, a slowdown in the US economy, and billions in losses by banks. It stems from a fundamental change in the way mortgages are funded.
bbc

THE NEW MODEL OF MORTGAGE LENDING

How it went wrong

Traditionally, banks have financed their mortgage lending through the deposits they receive from their customers. This has limited the amount of mortgage lending they could do.

In recent years, banks have moved to a new model where they sell on the mortgages to the bond markets. This has made it much easier to fund additional borrowing,

But it has also led to abuses as banks no longer have the incentive to check carefully the mortgages they issue.

THE RISE OF THE MORTGAGE BOND MARKET

In the past five years, the private sector has dramatically expanded its role in the mortgage bond market, which had previously been dominated by government-sponsored agencies like Freddie Mac.

They specialised in new types of mortgages, such as sub-prime lending to borrowers with poor credit histories and weak documentation of income, who were shunned by the "prime" lenders like Freddie Mac.

They also included "jumbo" mortgages for properties over Freddie Mac's $417,000 (£202,000) mortgage limit.

The business proved extremely profitable for the banks, which earned a fee for each mortgage they sold on. They urged mortgage brokers to sell more and more of these mortgages.

Now the mortgage bond market is worth $6 trillion, and is the largest single part of the whole $27 trillion US bond market, bigger even than Treasury bonds.

HOW SUB-PRIME LENDING AFFECTED ONE CITY

THE SUB-PRIME CRISIS IN CLEVELAND

	Sub-prime lending		Black areas
	Foreclosures (repossessions)		Deutsche Bank properties

For many years, Cleveland was the sub-prime capital of America.

It was a poor, working class city, hit hard by the decline of manufacturing and sharply divided along racial lines.

Mortgage brokers focused their efforts by selling sub-prime mortgages in working class black areas where many people had achieved home ownership.

They told them that they could get cash by refinancing their homes, but often neglected to properly explain that the new sub-prime mortgages would "reset" after 2 years at double the interest rate.

The result was a wave of repossessions that blighted neighbourhoods across the city and the inner suburbs.

By late 2007, one in ten homes in Cleveland had been repossessed and Deutsche Bank Trust, acting on behalf of bondholders, was the largest property owner in the city.

THE CRISIS GOES NATIONWIDE

Sub-prime lending had spread from inner-city areas right across America by 2005.

By then, one in five mortgages were sub-prime, and they were particularly popular among recent immigrants trying to buy a home for the first time in the "hot" housing markets of Southern California, Arizona, Nevada, and the suburbs of Washington, DC and New York City.

House prices were high, and it was difficult to become an owner-occupier without moving to the very edge of the metropolitan area.

But these mortgages had a much higher rate of repossession than conventional mortgages because they were "balloon" mortgages.

The payments were fixed for two years, and then became variable and much higher.

Consequently, a wave of repossessions is likely to sweep America as many of these mortgages reset to higher rates in the next two years.

And it is likely that as many as two million families will be evicted from their homes as their cases make their way through the courts.

The Bush administration is pushing the industry to renegotiate rather than repossess where possible, but mortgage companies are being overwhelmed by a tidal wave of cases.

THE HOUSING PRICE CRASH

The wave of repossessions is having a dramatic effect on house prices, reversing the housing boom of the last few years and causing the first national decline in house prices since the 1930s.

There is a glut of four million unsold homes that is depressing prices, as builders have also been forced to lower prices to get rid of unsold properties.

And house prices, which are currently declining at an annual rate of 4.5%, are expected to fall by at least 10% by next year - and more in areas like California and Florida which had the biggest boom.

HOUSING AND THE ECONOMY

The property crash is also affecting the broader economy, with the building industry expected to cut its output by half, with the loss of between one and two million jobs.

Many smaller builders will go out of business, and the larger firms are all suffering huge losses.

The building industry makes up 15% of the US economy, but a slowdown in the property market also hits many other industries, for instance makers of durable goods, such as washing machines, and DIY stores, such as Home Depot.

Economists expect the US economy to slow in the last three months of 2007 to an annual rate of 1% to 1.5%, compared with growth of 3.9% now.

But no one is sure how long the slowdown will last. Many US consumers have spent beyond their current income by borrowing on credit, and the fall in the value of their homes may make them reluctant to continue this pattern in the future.

CREDIT CRUNCH

One reason the economic slowdown could get worse is that banks and other lenders are cutting back on how much credit they will make available.

They are rejecting more people who apply for credit cards, insisting on bigger deposits for house purchase, and looking more closely at applications for personal loans.

The mortgage market has been particularly badly affected, with individuals finding it very difficult to get non-traditional mortgages, both sub-prime and "jumbo" (over the limit guaranteed by government-sponsored agencies).

The banks have been forced to do this by the drying up of the wholesale bond markets and by the effect of the crisis on their own balance sheets.

BANK LOSSES

The banking industry is facing huge losses as a result of the sub-prime crisis.

Already banks have announced $60bn worth of losses as many of the mortgage bonds backed by sub-prime mortgages have fallen in value.

The losses could be much greater, as many banks have concealed their holdings of sub-prime mortgages in exotic, off-balance sheet instruments such as "structured investment vehicles" or SIVs.

Although the banks say they do not own these SIVs, and therefore are not liable for their losses, they may be forced to cover any bad debts that they accrue.

BOND MARKET COLLAPSE

Also suffering huge losses are the bondholders, such as pension funds, who bought sub-prime mortgage bonds.

These have fallen sharply in value in the last few months, and are now worth between 20% and 40% of their original value for most asset classes, even those considered safe by the ratings agencies.

If the banks are forced to reveal their losses based on current prices, they will be even bigger.

It is estimated that ultimately losses suffered by financial institutions could be between $220bn and $450bn, as the $1 trillion in sub-prime mortgage bonds is revalued.

Ex-Secret Service Man: Bhutto Killing A "Professional Job"

Government explanation loses all credibility as Musharraf looks for Britain, US to bail him out

Paul Joseph Watson
Prison Planet
Wednesday, January 2, 2007

Former Secret Service Assistant Director Bill Pickle tells CNN that the killing of Benazir Bhutto was a "professional job" as the credibility of the initial government explanation for her death dwindles into an outright farce.

With the official government explanation for Bhutto's death (that she died after hitting her head on a sunroof) now completely discredited after footage emerged clearly showing a gunman firing at her before the explosion, Pakistan's President Pervez Musharraf has been forced to bring in London's Scotland Yard to whitewash the ugly aftermath.

The military dictator was no doubt impressed by the Metropolitan Police's execution of innocent Brazilian electrician Jean Charles de Menezes, as well as their disgraceful success in avoiding any reprisals for his murder.

Musharraf is so dependent on his British and American handlers to bail him out of this mess that he is even prepared to hand over control of his nuclear arsenal to them, according to a report in the UK Herald.

"US special forces snatch squads are on standby to seize or disable Pakistan's nuclear arsenal in the event of a collapse of government authority or the outbreak of civil war following the assassination of Benazir Bhutto," reported the newspaper.

"The troops, augmented by volunteer scientists from America's Nuclear Emergency Search Team organisation, are under orders to take control of an estimated 60 warheads dispersed around six to 10 high-security Pakistani military bases."

US launches criminal probe of CIA tapes

By Randall Mikkelsen

WASHINGTON, Jan 2 (Reuters) - The U.S. Justice Department said on Wednesday it had launched a criminal investigation into the CIA's destruction of videotapes depicting the harsh interrogation of terrorism suspects.

"There is a basis for initiating a criminal investigation of this matter, and I have taken steps to begin that investigation," Attorney General Michael Mukasey said in a statement issued by the department.

The CIA last month disclosed that it had destroyed in 2005 hundreds of hours of tapes from the interrogations of two al Qaeda suspects, prompting an outcry from Democrats, human rights activists and some legal experts.

The interrogations, which took place in 2002, were believed to have included a form of simulated drowning known as waterboarding, condemned internationally as torture.

President George W. Bush has said the United States does not torture but has declined to be specific about interrogation methods.

The Justice Department and the CIA's inspector general last month launched an initial inquiry into the tapes. Congress is also investigating the tapes' destruction.

The CIA said it would "cooperate fully with this investigation, as it has with others into this matter."

But the agency's inspector general, John Helgerson, said he would step aside from the full investigation.

Helgerson said the inspector general's office had reviewed the tapes "some years ago" as part of a review into agency interrogations and that he had helped prepare a report on the issue, so it would be inappropriate to be involved in the probe.

Mukasey said he had asked a federal prosector from Connecticut, John Durham, to lead the probe.