Withheld Ukraine Sequences Raise Pandemic Concerns

Withheld Ukraine Sequences Raise Pandemic Concerns
Recombinomics Commentary 02:30
November 7, 2009
Right now we know that many clinical specimens and viruses have been sent to one of the WHO collaborating centres for further study. We don't know the results of those studies, and it will probably take a couple of days for the full analysis of those viruses to be available. But in the meantime, what we do not have is any evidence of viruses there or anywhere else as showing any big mutations. I raise this point because I have seen in some media reports that there are reports that WHO or other groups are saying that there are mutations and I want to point out that these are rumours and factually, untrue.

The above comments from Keiji Kukuda offer some general comments on the Ukrainian H1N1 sequences at Mill Hill in London. He specifically says WHO doesn't see any "big" mutations in the samples being sequenced, which would refer to reassortment or Tamiflu resistance. However, the changes seen in Ukraine do not require "big" mutations. Small mutations, such as SNP can have profound effects for a virus like pandemic H1N1.

That virus normally circulates in swine, and has recently jumped to humans. It already has many characteristics with the 1918 pandemic strain. Both are swine H1N1 that jumped to humans. Such species jumpers can increase efficiencies with small changes. One good example is position 627 in the PB2 gene. That position comes in two forms. When there is glutamic acid (E) at that position, the PB2 enzyme copies the viral genetic material most efficiently at 41 C, the body temperature of a bird. However, if that position has a lysine (K), the enzyme is most active at 33 C, the temperature of a human nose in the winter. The swine H1N1 has an E, which may be why it goes well in lung, which is 37 C and closer to the optimal replication temperature of 41C. However, a single change that produced the most efficient replication at 37C would lead to even higher levels in the lungs, which could lead to frequent cytokine storms, like those in 1918, instead of the less frequent level seen in Ukraine.

However, the rapid spread of H1N1 in Ukraine (see map), coupled with the high frequency of hemorrhagic pneumonia raise concerns that a small change is leading to a more virulent virus. Similarly, the rapid spread of the virus could also be affected by a small change in another gene, such as HA, which controls entry of the virus to cells and influences tissue tropism.

Mill Hill has acknowledged that they have at least 15 H1N1 positive samples from Ukraine, which would identify a Ukranian specific change. The delay in the announcement of sequence results raises concerns that such changes have been detected, and such changes are undergoing further analysis.

The number of cases in Ukraine continues to expand. The number of patients with H1N1 symptoms is now approaching 1 million. Cases have been increasing at almost 200,000 per day, so it is likely that tomorrow's report will have over 1 million cases. This rapid spread increases concern that the 15 sequences at Mill Hill contain one or more of these small changes, which has led to a delay in the announcement of sequence results.

More detail on the sequences at Mill Hill is overdue. The rapid spread of H1N1 in Ukraine demands rapid sequence results. Continued delay will only increase concerns.

Real Unemployment 17.5%

New York Times
With the release of the jobs report on Friday, the broadest measure of unemployment and underemployment tracked by the Labor Department has reached its highest level in decades. If statistics went back so far, the measure would almost certainly be at its highest level since the Great Depression.

In all, more than one out of every six workers — 17.5 percent — were unemployed or underemployed in October. The previous recorded high was 17.1 percent, in December 1982.

This includes the officially unemployed, who have looked for work in the last four weeks. It also includes discouraged workers, who have looked in the past year, as well as millions of part-time workers who want to be working full time.

The official jobless rate — 10.2 percent in October, up from 9.8 percent in September — remains lower than the early 1980s peak of 10.8 percent.

The rate is highest today, sometimes 20 percent, in states that had big housing bubbles, like California and Arizona, or that have large manufacturing sectors, like Michigan, Ohio, Oregon, Rhode Island and South Carolina.

The new benchmark is a sign of just how much damage financial crises tend to inflict. A recent book by Carmen M. Reinhart and Kenneth S. Rogoff, two economists, found that over the last century the typical crisis had caused the jobless rate in the country where it occurred to rise for almost five years. By that standard, the jobless rate here would continue rising for two more years, through the end of 2011. More...

Orlando shooting suspect had recently filed bankruptcy

CNN reports
The suspect in Friday's shooting of six people in a downtown high-rise is a 40-year-old "man with economic woes that include a recent bankruptcy filing, federal records show.

In his filing last May for Chapter 7 bankruptcy, under which he sought to have his assets liquidated and his debts discharged, Jason S. Rodriguez listed his assets at $4,675 and his liabilities at $89,873.31.

His 2002 Nissan XTerra with 110,000 miles represented $4,000 of those assets. His personal property filing described the vehicle as having body damage on the right side, an air conditioner that did not work and a transmission that was slipping.

He said his monthly income as a "sandwich artist" at a Subway Restaurant in Orlando, where he had worked for nine months, was $890.67, and he listed his monthly expenses at $815.

A man who answered the phone at the restaurant referred a caller to company headquarters, where spokesman Kevin Kane confirmed that Rodriguez had worked for the company, but left six weeks ago. Kane said the company has a job title of "sandwich artist."

Before leaving Subway, Rodriguez's income had already taken a hit, dropping from $27,686 in 2007 to $13,936 in 2008.

Rodriguez estimated the value of his household goods -- a TV, microwave, bed, computer, dresser, two night stands, etc. -- at $500 and said his girlfriend owned the remaining household goods.

He faced an $11,085 claim of child support.

In addition, he was behind on his rent ($1,402.05), owed $450 to American Express, $110 to AT&T for his cell phone service and $343 to Florida Hospital Orlando for unspecified medical services, the document said.

Among his creditors were the Internal Revenue Service for unpaid 2005 and 2006 taxes totaling $2,415.

The largest debts were for student loans -- $8,500 to Wachovia, $28,912 to Sallie Mae.

Orlando lawyer Charlie Price represented Rodriguez in his case. "It's not that atypical from most everyone I see," he told CNN in a telephone interview. "That's how it is right now. He's a very typical client. Of people that are suffering through the economy right now, there's nothing extraordinary about him ... except that."

Price said he had had no contact with Rodriguez for several months, and added that his former client did not owe him money.

Documents reveal SEC complicity in Madoff Ponzi scheme

Image via Wikipedia

Andre Damon
Documents relating to the investigation of Bernard Madoff released last Friday by the Securities and Exchange Commission (SEC) highlight the complicity of the US regulatory agencies in one of the biggest financial frauds in history.

Madoff pleaded guilty on March to 11 felonies, for which he was sentenced to 150 years in jail. From the late 1980s or early 1990s, Madoff turned his well-connected investment firm into the largest pyramid scheme in history. When the fraud collapsed in December 2008, it wiped out $61 billion in investments. Prominent and wealthy investors, induced to invest with Madoff because of his stature as a major figure on Wall Street and his phenomenal record of providing healthy returns of 12 percent of more in good times and bad, lost millions.

Banks and hedge funds around the world lost hundreds of millions and even billions. University endowments, charities and other institutions that entrusted their money to Madoff or to hedge funds that invested in Madoff’s firm suffered massive losses. Numerous charities were forced to close. Thousands of retirees of modest means whose life savings were tied to Madoff’s operations lost everything.

The first chairman of the NASDAQ Stock Exchange and a member of the board of governors of the National Association of Securities Dealers, Madoff was something of a Wall Street legend. In 2000, he was appointed by then-SEC Chairman Arthur Levitt to a committee of academics, regulators and executives formed to advise the SEC on new stock market rules in response to the growth of electronic trading.

The documents released last week show that Madoff’s firm was investigated at least five times by the SEC, but that each time the commission failed to take rudimentary steps that would have revealed his Ponzi scheme. The SEC repeatedly gave Madoff’s firm a clean bill of health, which he used to reassure his clients that his operation was legitimate.

Had regulators made an even minimal effort, they would have found that Madoff made no trades with his clients’ money over a period of decades. Rather, in a classic Ponzi scheme, he used money from new investors to pay dividends to his previous clients.

SEC investigators relied solely on Madoff’s own records, and did not check either with Madoff’s counterparties or with Wall Street’s major clearing house, which kept records of his transactions, or lack thereof.

In one of the documents, a jailhouse interview between Madoff and David Kotz, inspector-general of the SEC, Madoff said that finding a Ponzi scheme of his type is “very easy if you want. You must do a third-party check. It’s absolutely a must.” He added, “It’s Accounting 101.”

Madoff told Kotz that after being interviewed by SEC investigators, he fully expected to be arrested within days, and was “amazed” when nothing happened.

The regulators merely went through the motions, despite suspicions about Madoff’s operation among professional investors and dealers. In 1999, Harry Markopolos, a securities industry executive, wrote to the SEC, saying, “Madoff Securities is the world’s largest Ponzi Scheme.” Markopolos repeatedly pressed the SEC to expose Madoff, but to no avail.

Internal records show that Madoff lied to the SEC about whether he gave investment advice to clients. Even though lying to investigators is a prosecutable offense, the SEC took no action. As one SEC investigator wrote in a 2006 e-mail, “I don’t think we should worry about Bernie finding out to whom we speak…. [W]e are not telling anybody that we have found anything improper (except for his lies to us, of course).”

These documents confirm that the SEC instigations were merely pro-forma operations that did not aim to find or prosecute any wrongdoing. “When potential investors expressed hesitation about investing with Madoff, he cited the prior SEC examinations to establish credibility and allay suspicions on investor doubts,” Kotz told the Senate Banking Committee two months ago.

During his interview with Kotz, Madoff said that Mary Shapiro, the current head of the SEC, is his “dear friend.” Madoff also said that he knew Arthur Levitt, head of the SEC from 1993 to 2001, “very well” and had lunched with him.

Madoff on a number of occasions prior to the collapse of his scam boasted of his influence in regulatory circles. He told Kotz that he “wrote good portions of the rules when it comes to trading.”

The entire episode is an example of the corruption that pervades Wall Street and the relations between major Wall Street players and the government. In his interview, Madoff admitted that he did not know how to properly record a credit default swap. He said he called a number of major banks, and none of them knew either. They had just been keeping their transactions off their official records. Madoff said that “today, lots of trades are done off the books because people don’t know what to do with them.”

Such practices are common and are protected by the government agencies that supposedly regulate the banks and financial institutions.

In an op-ed piece published Tuesday, Washington Post columnist Richard Cohen sets out to whitewash the role of the government in the Madoff fraud by attributing the complicity of financial regulators to the incompetence of individual investigators. He writes: “It would be reassuring if the IG [inspector-general] discovered that some of the investigators were on the take or that Madoff had offered them Wall Street jobs when they grew up. But this was not the case. The investigators were honest—just blazingly incompetent.”

This is an example of damage control by the media, including liberal pundits such as Cohen. The attempt to reduce the government’s role in the Madoff fraud to the mistakes of low-level operatives is absurd.

The issue is not whether individual SEC investigators were directly bribed by Madoff. They were carrying out a long-established policy emanating from the highest echelons of the regulatory system, at the direction of both Republican and Democratic administrations and Congress, to shield major players on Wall Street from prosecution for dubious and outright illegal practices that are standard operating procedure within the financial establishment. Madoff’s fraud was only a particularly crude form of the type of financial speculation and swindling that plays a major role in generating huge profits by banks and finance houses and sustaining the eight-digit bonuses awarded to top executives and traders.

Investigators and regulatory officials who “play ball” with the likes of Madoff are routinely rewarded with jobs on Wall Street that make them overnight multimillionaires.

One example of the direct role of the government in running interference for Wall Street was documented last month in an episode of the PBS series “Frontline.” Entitled “The Warning,” the program dealt with the brief career of Brooksley Born as head of the Commodities Futures Trading Commission during the Clinton administration. Born was forced out by then-Federal Reserve Chairman Alan Greenspan and top Clinton financial officials Robert Rubin and Lawrence Summers when she pressed for regulation of the derivatives market.

In the documentary, sources around Born describe her first meeting with Greenspan, during which the Fed chairman was said to have announced that the two of them were destined to disagree, particularly on the need to make rules against fraud. He was reported to tell Born “you feel that there need to be rules against it and I feel that the market will sort it out.”

In December 2008, after Madoff turned himself in, the World Socialist Web Site wrote, “Madoff’s scam could not have been carried out without the complicity of the highest echelons of the financial elite and the government…. The role of the SEC epitomizes the transformation of government regulatory agencies into the facilitators of financial fraud on a colossal scale. Its job has become running interference for the skullduggery of brokerage houses, hedge funds and banks.

“The removal of any regulatory restraint on the operations of the banks and finance houses over the past three decades is itself an expression of the crisis and decay of American capitalism. The hallmark of this process is the growth of financial parasitism. It is the other side of the coin of the systematic dismantling of large sections of industry and the relentless attack on the jobs and wages of the working class. This assault, in tandem with the unfolding economic crisis, is entering a new and even more brutal stage.”

The presence of figures such as SEC head Mary Shapiro, National Economic Council Director Lawrence Summers and former New York Federal Reserve Bank President Timothy Geithner at the summit of the Obama administration’s financial and regulatory apparatus makes clear that the government’s role in shielding Wall Street remains intact.

Record 36 Million Americans on Food Stamps

Reuters reports the number of Americans receiving food stamp assistance soared above 36 million for the first time in August, the eighth month in a row that enrollment set a record, the U.S. Agriculture Department said on Wednesday.

USDA said 36.492 million people were receiving food stamps, also known as the Supplemental Nutrition Assistance Program. In July, enrollment stood at 35.851 million. At the current rate, an estimated one in eight Americans receive benefits.

The program, which helps poor people buy food, has seen enrollment jump by 4.707 million during 2009 amid a lingering economic downturn in the United States. Participation grew by 2 million people from May to August.

In the latest data, the average person received $132.99 in August, compared with $101.31 in August 2008.

Thousands of Tea Party activists descended on Washington

Allen, Shiner

Thousands of Tea Party activists descended on Washington Thursday to protest the trillion dollar health care bill and government spending, holding signs protesting Barack Obama’s agenda while aiming chants of “you work for us” at the Capitol building.

The gathering was organized by local Tea Party groups around the country, who are arriving in Washington this morning by the busload. Conservative leaders in Congress, led by Rep. Michele Bachmann (R-Minn.), have taken to the airwaves to encourage the activists to show up on the Capitol steps and demand meetings with members of Congress. The crowd grew to about 10,000 by noon – a significant gathering for a weekday but far less than the 9/12 protests earlier this fall. Bachmann has promised to lead some protesters to a press conference inside the Capitol to express their opposition to the health care bill in person to members of Congress.

Rep. Jean Schmidt (R-Ohio), actually invited the thousands of protesters to go into the House buildings to try to meet their member of Congress after the rally.

"I invite you, when the rally's over, to travel in those halls, look at the walls, find your (member) and walk in," she said. "Let them know how you feel about this bill."

Given the security of the Capitol complex, that might create a logistical nightmare, so it’s not clear how many of the protesters may actually enter House office buildings.

House Minority Leader John Boehner (R-Ohio) was a surprise guest speaker this afternoon, holding up a copy of the Constitution as he rallied the protesters. Rep. Pete Hoekstra (R-Mich.) demanded: “Madam Speaker, throw out this bill,” while some protesters chanted “burn the bill.”

Conservative leaders like Tony Perkins of the Family Research Council showed up, along with celebrity conservatives Jon Voight and John Ratzenberger have also joined the protesters.

Voight invoked Rev. Jeremiah Wright in his speech, saying “the lies and deception are blatant... Maybe it was the 20 years of sub-conscious programming by Rev Wright to damn America."

They arrived as early as 8:30 a.m., by bus, car and plane — from Bluffton, S.C., Des Moines and Dorris, Calif. — to rally with conservative lawmakers and possibly roam the halls of Congress. Dozens of Republican lawmakers gathered shortly after noon to offer a prayer, say the Pledge of Allegiance and rally the crowd.

"Can you hear us now!" the protesters chanted from the foot of the Capitol, as they awaited the arrival of their heroine — Bachmann. The crowd also chanted “we want Michele!”

"She's very brave," said Nancy Holmberg of Dorris.

"Palin/Bachmann 2012," came a shout from the crowd. The crowd is also chanting Speaker Nancy Pelosi's name and demanding that she come address them on the steps of the Capitol.

Another hero of the movement, Rep. Virginia Foxx (R-N.C.), has been autographing tea bags for the crowd and is wearing a jacket covered in pins and stickers reading “Yes! Freedom!”

Pelosi obviously wasn’t going to address the crowd, and her spokesman said Democrats were busy trying to pass a bill while Republicans played the role of obstructionists.

“While the Party of No holds a rally to once again say no, our health insurance reform bill was endorsed by the AARP and the AMA, and on the House floor, we are debating bipartisan legislation to create jobs by extending unemployment benefits and extend the first-time homebuyer tax credit,” Pelosi spokesman Brendan Daly said. “We are continuing with our job or passing legislation that will help the American people.”

Speaking on conservative talker Laura Ingraham’s radio show this morning, Bachmann encouraged people listening to show up on the West Front steps, but she said they should show up with “cameras” instead of “pitchforks.”

In an unrelated incident, nine activists were arrested in the Hart building, and they are being processed at police headquarters, but Roll Call is reporting that these were protesters from the opposite end of the political spectrum – Code Pink. All the buildings in the Capitol complex remain open for now. (The original version of this story incorrectly reported which protesters were arrested).

The protesters, who are occupying the patch of grass only a few yards from where Barack Obama took the oath of office on Jan. 20, have also chanted “you work for us!” Many are holding signs that echo their distrust of Obama and their belief that he is pursuing socialist policies.

One sign read: "Obama takes his orders from the Rothchilds," a reference to theories of Jewish world dominance centered around the prominent Jewish family of Rothschilds.

Last night, Bachmann reasserted a claim that Pelosi was considering tightening security in preparation for the activists, which she warned "would be a huge mistake." There has been an increased police presence around the Capitol Thursday morning, and a Capitol Police officer told POLITICO that protesters are allowed to march on the West front lawn of the Capitol, but are not allowed onto the steps of the building.

Mary Beth Bishop of Monument, Colo., spent $500 on a plane ticket to lodge her complaints about the growth of government.

"We need to show up and uphold the Constitution," she said. "It wasn't written on toilet paper."

Police patrolled the gates and stone walls keeping the crowd in but there was little sign of trouble.

Rep. Steve King (R-Iowa) shook hands at a wall line like a presidential contender.

"This is too great," he said.

Daniel Libit and Martin Kady II contributed to this story.

Cases of infected patients in Ukraine double to just under ½ million in two days

Reported Cases in Ukraine Double in Two Days
Recombinomics Commentary 14:34
November 4, 2009

478,456 Influenza/ARI

24,003 Hospitalized

60 Ventilators

81 Deaths

The above numbers are from the latest update from Ukraine. The number of infected patients has almost doubled to just under ½ million, compared to the report two days ago (see map). Hospitalized patients also have spiked higher, to 24K from 15K. ICU cases are not listed, but 60 on ventilators are. However, most (37) of those on ventilators are Chernivisti Oblast, but Lviv, which has the most fatalities and cases, has none, suggesting the data is incomplete or there are significant shortages of ventilators. The number of dead has risen to 81, but media reports describe additional fatalities, include those in the Kiev Oblast.

The explosion of cases again raises concerns that the number of fatalities is significantly higher than the 81 listed. Media reports have described an equal number of pneumonia fatalities which were not considered flu related. The basis of these exclusions remains unclear. Similarly, anecdotal reports suggest the number of fatalities is markedly higher than the 81 in the table.

The rapid rise in reported infections, hospitalizations, and deaths in the past few days raise concerns that the virus is transmitting very efficiently. Spikes in cases have been reported throughout the northern hemisphere, but the spike in fatalities and the frequency in hemorrhagic cases in Ukraine have raised concerns.

Earlier media reports suggest that an update by WHO might be issued today and include preliminary analysis of samples sent to Mill Hill in London.

Daily updates on the rapidly evolving situation in Ukraine, including sequence analysis, would be useful.
Media Links

Recombinomics Presentations

Recombinomics Publications

Recombinomics Paper at Nature Precedings

Bank of Ireland Wants Another Bailout

Image via Wikipedia

And people DO nothing...

The BBC reports that the Bank of Ireland has announced losses of almost 1bn euros (£895m) for the six months to the end of September.

The bank has said that the total value of loans that it thinks might not be repaid will be 6.9bn euros (£6.1bn) for the period to April 2011. It has warned the Irish government that it may require another infusion of taxpayers' capital.

The bank has 44 branches in Northern Ireland and runs a financial services joint venture with the UK Post Office. It said the past six months had been "difficult" and gave a very cautious appraisal of future economic prospects, saying there were "some indications of a slow-down in the pace of economic decline in the UK and to some extent in Ireland."

The bank's UK division posted a operating profit of £163m but that became a £203m loss when impaired loan charges were taken into account. The bank said it remained committed to the UK market and will continue its partnership with the Post Office.

Uncertainties

In September, Ireland's Minister for Finance Brian Lenihan said around 16bn euros worth of Bank of Ireland loans would be transferred into Nama, the country's "bad bank" which is intended to remove toxic property loans from lenders' balance sheets.

However the bank said on Wednesday that significant uncertainties exist surrounding the specific amount of loans being transferred, when they will be transferred and the price that will be paid for those loans.

In a rescue plan for its economy, the Irish government has already pumped seven billion euros into its top two lenders, with Allied Irish Bank and Bank of Ireland each getting 3.5bn euros in state cash.

Ireland's banking sector has been badly hit by the international financial turmoil, the collapse of a domestic property bubble and a deep recession in the former "Celtic Tiger" economy.

Every family in Britain is now facing a tax liability of £4,350 to prop up Britain’s banking system

Image via Wikipedia

Robert Winnett

The Chancellor confirmed that the Government would pump an extra £25.5 billion into Royal Bank of Scotland, and declared that it was the only way to keep the business alive.

Taxpayers have poured a total of £53.5 billion into RBS, including the £20 billion part-nationalisation last year and another £8 billion that was set aside as insurance against further trouble in the future.

In total, the Government has put £74 billion of taxpayers’ money into the banks, including RBS, Lloyds and HBOS, since the start of the financial crisis last year.

The Conservatives claimed the latest bail-out equated to an extra tax liability of £2,000 for every one of the 17 million families in the country. This comes on top of the £2,350 to which every household is already exposed as a result of previous attempts to prop up the financial system.

It is likely that the new bail-out will have to be funded by government borrowing, which could only be repaid through swingeing cuts to public services or substantial tax rises over the coming years. However, despite consumers picking up the bill for yet more billions for the banks, experts said that the money would still not be enough to get them to increase lending to struggling home owners and businesses.

The bail-out of RBS, which was driven to the brink of collapse in 2008 after a series of reckless investments, now ranks as the biggest in the world.

It means the Government owns 84 per cent of what was, at the peak of the finance bubble, the largest bank in the world.

In total, the British Government’s exposure to RBS now stands at more than £250 billion, because in addition to supplying funds to keep it afloat, the Government has also underwritten many of its so-called toxic assets.

The Chancellor announced the move on Tuesday as part of a package that included a further investment of £5.7 billion for Lloyds Banking Group. More...

Zale Reports $190 Million Loss

CK Staff -- JCK Online, 10/30/2009 9:54:40 AM

Zale Corporation reported they incurred a net loss of $189.5 million for the fiscal year ended July 31st, compared to a net loss from continuing operations of $6.5 million in fiscal year 2008.

Revenues were $1.78 billion in 2009 compared to $2.14 billion for 2008, a decrease of 16.8%.

Zale also reported a fourth quarter net loss of $89.8 million, compared to a loss of $10.0 million in the fourth quarter in 2008. Revenues in the fourth quarter were $357.1 million, a decline of 21.7% compared to $456.2 million in last year's fourth quarter.

Gold Fever Is Heating Up

Money Week

Not surprisingly, given the dollar's weakness, commodity action has been very positive. Two weeks ago we said that, on the CRB exceeding 271, commodities would become a buy opportunity. As you can see from the latest chart, that occurred. This is a signal of considerable importance and suggests that a long term commodity bull market is now secure. If that turns out to be true, it may be implying an even steeper collapse of the dollar.

The crude oil chart also featured in the previous issue. Here we said that a break above $74 would signal a buy - it has happened. We have, accordingly, invested 7.5% in the Investec Global Energy Fund. This fund, which is positioned in high quality energy equities, should benefit considerably from a higher oil price. It is thought that globally the oil majors are valued based upon oil at $55 pb, in our view a long term outlook which is too conservative.

We also noted the buy signal for the CRB index, and acquired a 7.5% position in a grain ETF, which is invested approximately 29% in corn, 44% in soybean and 26% in wheat. We still hold the natural gas ETF which was purchased on 11 September; it is now ahead by 11.25%. We expect prices to be volatile but there should be a sharp recovery next year driven by considerable cuts in drilling activity.

Our longstanding gold positions are set to deliver very significantly over the next year or so. A weak dollar will add considerable impetus to the gold price, as will the policy of money creation and devaluation pursued by many of the major economies of the world. The investment case for gold as the ultimate currency is very comprehensible:

• Deflation and inflation both bullish for gold.
• Gold is the only currency whose production is going down not up.
• Negative real rates are bullish for gold.
• Potential increased investor and central bank buying as a store of value in order to diversify US dollar exposure.

Since gold exceeded $1,000/oz the price has been extremely resilient with no meaningful pullback. Although there has been some large profit taking, there is plenty of demand on any weakness. In September, the Russian Central Bank added 400,000 ounces to their gold reserves; they now total 19 million ounces. This year to date they have bought a huge 2.3 million ounces.

Cheng Siwei said that China is incrementally diversifying out of dollars and gold is one of their choices. China is the world's largest producer of gold, but holds only 1,054 tonnes of gold reserves, amounting to less than 2% of total foreign reserves. Extraordinarily, the Chinese government has also been advertising gold on Chinese television, encouraging citizens to acquire it.

Good old "gold fever" is heating up. There is a huge market in scrap gold with advertisements everywhere and Harrods is now selling it.

Over the next few months we would expect the commodity sector to deliver significant returns, led by gold bullion.

India, China, Russia, EU Central Banks Buying Gold

Washington's Blog

India's central bank is buying 200 metric tons of gold from the IMF.

China, Russia and some EU central banks have also expressed interest in buying gold from the IMF or elsewhere. Therefore, Bloomberg's article of today saying that "Central Banks Will Become Net Buyers of Gold, WGC CEO Says" is not controversial.

Given that the IMF has only authorized the sale of 403.3 metric tons of gold at this time, the IMFs sales won't drive gold prices down. Indeed, the other 203.3 metric tons should go pretty quickly, and there will almost certainly be left over demand from the world's central banks. Remember, China itself previously considered purchasing the entire 403.3 metric tons.

Now Goldman Wants Your Home and Could Care Less if You're Homeless

Greg Gordon|McClatchy
When California wildfires ruined their jewelry business, Tony Becker and his wife fell months behind on their mortgage payments and experienced firsthand the perils of subprime mortgages.

The couple wound up in a desperate, six-year fight to keep their modest, 1,500-square-foot San Jose home, a struggle that pushed them into bankruptcy.

The lender with whom they sparred, however, wasn't the one that had written their loans. It was an obscure subsidiary of Wall Street colossus Goldman Sachs Group.

Goldman spent years buying hundreds of thousands of subprime mortgages, many of them from some of the more unsavory lenders in the business, and packaging them into high-yield bonds. Now that the bottom has fallen out of that market, Goldman finds itself in a different role: as the big banker that takes homes away from folks such as the Beckers.

The couple alleges that Goldman declined for three years to confirm their suspicions that it had bought their mortgages from a subprime lender, even after they wrote to Goldman's then-Chief Executive Henry Paulson — later U.S. Treasury secretary — in 2003.

Unable to identify a lender, the couple could neither capitalize on a mortgage hardship provision that would allow them to defer some payments, nor on a state law enabling them to offset their debt against separate, investment-related claims against Goldman.

In July, the Beckers won a David-and-Goliath struggle when Goldman subsidiary MTGLQ Investors dropped its bid to seize their house. By then, the college-educated couple had been reduced to shopping for canned goods at flea markets and selling used ceramic glass.

Theirs is an infrequent happy ending among the hundreds of cases in which subsidiaries of Goldman, better known for sending top officers such as Paulson to serve in top Washington posts, have sought to contain bondholder losses by foreclosing on properties and evicting delinquent borrowers.

Goldman spokesman Michael DuVally declined to comment on individual cases or on the firm's new role in bankruptcy courts.

Joining other Wall Street firms that bought millions of subprime mortgages, Goldman companies have gone to courts from California to Florida seeking approval to foreclose on the homes of middle- and lower-income Americans who couldn't keep up with their loans' soaring monthly payments.

Some borrowers were speculators or homebuyers who exaggerated their incomes on loan applications, thinking they'd always have an escape hatch because housing prices would keep rising. Others, however, were victims of fast-talking mortgage brokers who didn't explain that the loans' interest rates could rise to as high as 15 percent. Many borrowers who defaulted on their mortgages may never qualify for a home loan again.

In court encounters, Goldman and other Wall Street firms have faced the impact of their own wheeling and dealing. Many of the families being put on the street never would've gotten their big mortgages if investment banks hadn't provided a seemingly insatiable secondary market for millions of loans to marginally qualified buyers.

Subprime borrowers were supposed to provide a safe income stream for investors who bought mostly high-grade, triple-A-rated bonds from Goldman and bigger subprime players, such as now-defunct Lehman Brothers and Merrill Lynch.

Now, millions of these borrowers have defaulted on mortgage payments, contributing to a historic slump in home prices and depressing the bonds' value. Half the homes in some California neighborhoods have been subject to foreclosures or short sales, in which a home is sold for less than the mortgage balance, and either the seller or the lender takes a loss.

Earlier this year in Los Angeles, the Wall Street giant took possession of the home of Gladys Aguirre, a housecleaner who's married to a construction worker. Together, the couple listed monthly earnings of $7,480, including $3,480 from a job she'd held for two months.

Aguirre originally took a $444,000 subprime mortgage on Sept. 1, 2005, from Argent Mortgage Co., a subsidiary of big subprime lender Ameriquest Mortgage Co., which shut down in 2007. The adjustable interest rate sent her monthly payments zooming to $3,800 from $2,479, and Aguirre couldn't keep pace on that loan or a $119,000 second mortgage. She filed for bankruptcy protection.

Aguirre's Los Angeles lawyer, Eber Bayona, declined to discuss her case, but said that subprime loans amounted to "setting up the person for failure" because interest rate adjustments hit borrowers with "shock payments."

For example, he said, loan agents promised applicants that they could buy a $600,000 house for payments of $1,200 a month, and the buyers "never read the fine print ... (and) didn't know their interest would increase and that eventually they would lose their house and their money."

In San Fernando, Calif., Dina Alfero-Pacheo qualified for two mortgages totaling nearly $500,000, with monthly payments starting at $2,004. By 2007, the payments had grown to $3,761. In a bankruptcy filing early this year, Alfero-Pacheo said she was a bartender earning $3,800 a month. Goldman bought her first mortgage from Argent and recently got title to the house, which had sunk in value to $280,000 from more than $500,000.

In Orlando, Fla., Adela Mendez seems to be someone who would've known the risks when she took a $164,000 mortgage from Argent on her home in 2005 and a $75,000 second mortgage a year later. In a bankruptcy filing this year, she listed her occupation as a loan specialist for Washington Mutual, a leading subprime lender that collapsed last year.

Not only did Mendez fall 11 months behind on her mortgage payments, but her home's value also plummeted to $100,000. Goldman Sachs Mortgage, which bought the Argent loan, took the house — and at least a 50 percent loss.

Alfero-Pacheo and Mendez, whose cases are detailed in court records, couldn't be reached to comment.

The Beckers charged that in their case, Goldman engaged in years of obfuscation and resistance.

"In bankruptcy court, they tried to portray us as incompetent or deadbeats,'' said Celia Fabos-Becker, blinking back tears as she sat with her husband in their living room, with boxes of mortgage-related documents surrounding them.

The couple thought they'd made a safe bet in 2000 when they opened a retail jewelry business in two San Diego County areas populated mainly by military personnel.

The wars in Afghanistan and Iraq, however, brought big military call-ups, sapping their market. After a wildfire ravaged much of the area in 2002, the Beckers refinanced their house to generate some $70,000 in cash to prop up their two stores. They wound up with an adjustable-rate, subprime loan from WMC Mortgage Corp., an arm of General Electric's GE Money unit, and a 10.75 percent second mortgage with the same lender.

A second wildfire in 2003 all but killed their business and left the couple reeling financially as interest-rate adjustments pushed the mortgage payments higher.

"We'd gotten to the point where I was cutting my own hair. I was cutting his on occasion," Fabos-Becker said.

"And trolling the Goodwills," Tony Becker said.

Tony Becker, an engineer, took short-term contract jobs amid the technology bust. Celia Fabos-Becker, meanwhile, found a provision in the mortgages that allowed the borrower to push payments to the end of the loan term in the event of a disaster such as the two fires.

When she wrote to Paulson, however, lawyers for Goldman denied that it owned the Beckers' mortgages. So did Germany's Deutsche Bank, a trustee that was holding thousands of subprime mortgages Goldman had converted to bonds.

To stall foreclosure, the Beckers wound up negotiating "forbearance agreements" with Ocwen Loan Servicing, a Florida company, that required the couple to pay several thousand dollars under the threat that their house would be auctioned off in a week or a month, Fabos-Becker said. Their monthly payments rose to nearly $3,300 from $2,650.

The couple already had taken Goldman and Morgan Stanley, another Wall Street firm, to arbitration over their $325,000 in stock market losses, accusing the investment banks of misleading investors about public offerings.

On the same day in June 2006, Goldman sued to end the arbitration, and Ocwen filed papers seeking to foreclose on the Beckers' home.

In desperation, the couple filed for bankruptcy protection. With no money to hire an attorney, they acted as their own lawyers.

As the months dragged on, Fabos-Becker finally found a filing with the Securities and Exchange Commission confirming that Goldman had bought the mortgages. Then, when a lawyer for MTGLQ showed up at a June 2007 court hearing on the stock battle, U.S. District Judge William Alsup of the Northern District of California demanded to know the firm's relationship to Goldman, telling the attorney that he hates "spin."

The lawyer acknowledged that MTGLQ was a Goldman affiliate.

That was an understatement. MTGLQ, a limited partnership, is a wholly owned subsidiary of Goldman that's housed at the company's headquarters at 85 Broad Street in New York, public records show.

In July, after U.S. Bankruptcy Judge Roger Efremsky of the Northern District of California threatened to impose "significant sanctions" if the firm failed to complete a promised settlement with the Beckers, Goldman dropped its claims for $626,000, far more than the couple's original $356,000 in mortgages and $70,000 in missed payments. The firm gave the Beckers a new, 30-year mortgage at 5 percent interest.

That lowered their monthly payment to $1,900, less than half the maximum $4,000 a month their subprime loans could've demanded.

Fabos-Becker, 60, said that the trauma has left her hair "a lot grayer." Much of the stress would have been alleviated, she said, if a law required lenders to identify themselves, especially to borrowers facing hardships.

"I take solace," Tony Becker said, "in knowing that I was up against the worst possible opponent — the biggest, strongest investment bank in the world."

Auto Sales Plunge

September Auto Sales Plunge in Aftermath of Cash for Clunkers; SAAR at 9.2M units, LDV Sales Down 41% from August, Hybrid Sales Down 48%

Green Car Congress

Reported hybrid sales by month. Click to enlar

In the aftermath of the summer sales boom fueled by the US Cash for Clunkers program, September 2009 light duty vehicles sales dropped back to pre-incentive lows. With 745,997 cars and light duty trucks sold in September, according to Autodata, sales were down 22.7% year-on-year, and off 41% from August. The Seasonally Adjusted Sales Rate (SAAR) in September dropped back down to 9.22 million units, from 14.09 million units in August.

Reported sales of hybrids in September dropped 4.1% year-on-year to 19,977 units. (Reported sales do not include sales of the Mercedes S400 hybrid, which went onsale in the US late in August.) Compared to August results (38,701 units), however, hybrid sales dropped 48.4%. New vehicle market share for reported hybrid sales in September dropped back down to 2.7% from a high of 3.6% in July.

Hybrid new vehicle market share by month. Click to enlarge.

September 2009 had 25 sales days compared to 24 days for September 2008. All comparisons in this post are based on actual volume, not adjusted day sales rate.

Toyota. Toyota Motor Sales (TMS) reported September sales of 126,015 vehicles, a decrease of 12.6% by volume from last September. TMS posted September sales of 14,585 hybrid vehicles, down 5.3% from September 2008.

The Prius posted September sales of 10,984 units, up 1% from September 2008, but down 42% from August 2009. Camry Hybrid posted 872 units in September, down 68.7% year-on-year, and Highlander Hybrid posted 269 units, down 70.8% year-on-year.

September 2009 SAAR. Data: Autodata. Click to enlarge.

The Lexus Rx hybrid posted 1,168 units, up 57% year-on-year; the GS hybrid posted 38 units, up 31% year-on-year; and the LS 600h posted 12 units, down 74.5%. The new HS250 posted 1,242 units.

Ford. In September, Ford reported a 6% drop in sales year-on-year. Ford estimates it gained over 2 points of market share versus last year in September and the third quarter.

Ford sold 2,138 hybrids in September, up 116% year-on-year. Sales of the Escape/Milan hybrid were down 11.3% year-on-year to 878 units, but the Fusion and Milan hybrids accounted for 1,260 units.

Honda. American Honda Motor Co., Inc., posted total September vehicle sales of 77,229, a decline of 20% year-on-year.

Honda hybrid sales dropped 6% year-on-year to 1,898 units. Sales of the Civic Hybrid plunged 92.5% to 152 units, but the new Honda Insight posted 1,746 units.

General Motors. General Motors dealers in the United States delivered 155,679 light duty vehicles in September, down 45% year-on-year. GM retail sales were down 46% while fleet sales declined 43%.

A total of 1,011 GM hybrid vehicles were delivered in the month, down 48.3% from September 2008.

Nissan. Nissan North America, Inc. (NNA) reported September 2009 sales of 55,393 units versus 59,565 units last year, a decrease of 7%.

Sales of the Altima Hybrid dropped 26.6% year-on-year to 345 units.

Important News on Audit the Fed

Posted by Matt Hawes on 10/31/09 1:43 PM

In this Audit the Fed update, Dr. Paul explains what is happening with HR 1207 in the Monetary Policy Subcommittee, describes his plan to protect 1207 in the full Financial Services Committee, and provides ideas on actions we can take to keep Audit the Fed from being watered down.

http://www.youtube.com/watch?v=bPgzPxPwEV8

The thirteen Democrats on the House Financial Services Committee mentioned by Dr. Paul are:

Rep. John Adler, NJ (202) 225-4765 web contact: http://forms.house.gov/adler/webforms/issue_subscribe.htm
Rep. Travis Childers, MS (202) 225-4306 web contact: https://forms.house.gov/childers/webforms/contact.htm
Rep. Steve Driehaus, OH (202) 225-2216 web contact: https://forms.house.gov/driehaus/webforms/issue_subscribe.htm
Rep. Alan Grayson, FL (202) 225-2176 web contact: https://forms.house.gov/grayson/contact-form.shtml
Rep. Rubén Hinojosa, TX (202) 225-2531 web contact: http://hinojosa.house.gov/contact/office-locations.shtml
Rep. Suzanne Kosmas, FL Toll Free: 1-877-956-7627 web contact: https://forms.house.gov/kosmas/webforms/contact.html
Rep. Dan Maffei, NY (202) 225-3701 web contact: https://forms.house.gov/maffei/contact-form.shtml
Rep. Brad Miller, NC (202) 225-3032 web contact: http://bradmiller.house.gov/index.cfm?sectionid=17&sectiontree=9,17
Rep. Walt Minnick, ID (202) 225-6611 web contact: https://minnickforms.house.gov/contact-form.shtml
Rep. Ed Perlmutter, CO (202)-225-2645 web contact: http://perlmutter.house.gov/IMA/issue_subscribe.htm
Rep. David Scott, GA (202) 225-2939 web contact: http://davidscott.house.gov/Contact/
Rep. Brad Sherman, CA (202) 225-5911 web contact: http://bradsherman.house.gov/contact/
Rep. Jackie Speier, CA (202) 225-3531 web contact: http://speier.house.gov/index.cfm?sectionid=159&sectiontree=54,159