Off the Wires

Phosphate: Morocco's White Gold

November 9th, 2010 | Source: Business Week

Phosphate is used in everything from fertilizer to rechargeable batteries. And Morocco's King Mohammed VI has cornered the market

In May 2009 a petite brunette from Paris wearing black heels scrambled up a pile of mine tailings on the outskirts of the Moroccan town of Khouribga. From up there, Béatrice Montagnier, a hotel specialist with the hospitality consulting firm Horwath, took in the view: parched plains scoured by bulldozers; an old warehouse baking in the sun; a jumble of two-story concrete block homes with a rectangular minaret beyond them. She spun around 360 degrees snapping photos with her pink cell phone and imagining the future: a planned 800-acre resort project that would attract visitors from around the world. How many hotel rooms would they need? she wondered. Should it be three stars or four? And where would the museum be going? There was one issue—project funding—about which Montagnier had no questions. The estimated $1 billion needed to build the resort would come from the ground beneath her feet.

Miners have been working in Khouribga for almost a century, but only now is the area poised to become central to the global economy. Back in the 1920s pioneers started tunneling through the earth here, digging through layers of sediment formed under an ancient sea, looking for phosphate-rich rock and occasionally plucking out the tooth of a 30-million-year-old shark. The phosphate extracted from the rock, used in fertilizer, detergent, food additives, and more recently lithium-ion batteries, sold for decades in its raw state for less than $40 per metric ton. Those days are gone. It's currently trading at about $130.

This is good news for King Mohammed VI, 47, who owns more than half the world's phosphate reserves. James Prokopanko, chief executive officer of Plymouth (Minn.)-based fertilizer giant Mosaic has called Morocco the Saudi Arabia of phosphate, with all that implies about the King's power to influence prices and economies. Mohammed's strategy, by most accounts, is to drive the commodity's price higher yet—which means the cost of making everything from corn syrup to iPads will be going up as well.

Credit Card Debt and Number of Accounts Continue to Fall

November 8th, 2010 | Source: Low Cards.com

A new report released today from the Federal Reserve of New York shows that the number of open credit card accounts continued to decline during the third quarter of this year.

The number of open credit card accounts has dropped 24% from its peak in the second quarter of 2008.

The Quarterly Report on Debt and Credit shows that approximately 217 million
accounts were closed during the four quarters that ended September 30.

Meanwhile, only 158 million new accounts were opened during this same time. In addition, the Federal Reserve's new monthly report on consumer borrowing shows that revolving credit--the majority of which is credit card debt--dropped for a record 25th consecutive month, falling by an annual rate of $8.3 billion, or 12.1%.

While these numbers appear ominous for the credit card industry, there are some positive signs for issuers.

* The decline in open credit card accounts was much smaller during the third
quarter of the year. The total number of open credit card accounts dropped
from 381 million to 378 million.

* The number of new credit account inquiries increased for the second
quarter in a row, indicating that consumer demand is increasing for credit
cards and more people are submitting credit card applications. According to
the New York Times, there were 160.8 million inquiries in the six months
through the end of September, up from 149.7 million in the six months
through June 30. Even with the improvement, this is the lowest number of
credit inquiries for any 12-month period since the Fed began counting the
numbers in 2000.

* Total household delinquency rates may also show signs of recovery. Total
household delinquency rates declined for the second consecutive quarter. As
of September 30, 11.1% of outstanding debt was in some stage of delinquency.
This is down from 11.4% on June 30, and 11.6% a year ago. Approximately
$1.3 trillion of consumer debt is currently delinquent, down 8.2% from a
year ago. About $928 billion is seriously delinquent (at least 90 days late or
"severely derogatory"), down 4.6% from a year ago.

"Over the past two years, credit card issuers and cardholders have both
aggressively reduced credit card debt. Issuers have lowered limits and
closed accounts, while cardholders have reduced their usage, paid down
their balances or defaulted on the account. These changes have restored
a bit of stability to credit card lending. It remains to be seen if this stability
leads to wise growth in credit card borrowing and lending," says Bill Hardekopf,
CEO of LowCards.com and author of The Credit Card Guidebook.

Link to the Federal Reserve's Quarterly Report on Debt and Credit
http://data.newyorkfed.org/research/national_economy/householdcredit/DistrictReport_Q32010.pdf
Link to the Federal Reserve's Monthly Consumer Credit Report:
http://www.federalreserve.gov/releases/g19/current/

LowCards.com ( http://www.lowcards.com ) simplifies the confusion of
shopping for credit cards. It is a free, independent website that helps
consumers easily compare credit cards in a variety of categories such as
lowest rates, rewards, rebates, balance transfers and lowest introductory
rates. It also gives an unbiased ranking and review for each card. The
LowCards.com Complete Credit Card Index

( http://www.lowcards.com/CreditCardIndex.aspx ) is the most objective
and comprehensive resource on the Internet which allows consumers to compare
rates for over 1000 credit cards offered in this country. Created by Hampton
& Associates, the company has been analyzing the credit card industry and
supplying objective websites on various consumer expenses for ten years.
For more information, contact Bill Hardekopf at 1-800-388-1910 or
billh@LowCards.com

Sugar soars to 30-year high as supply fears grow

November 8th, 2010 | Source: FT.com

The price of sugar has jumped to a 30-year high as the Brazilian harvest has tailed off sharply, hardening expectations of a shortage.

Traders believe that prices could soar over the coming months as the market faces a supply shortfall driven by smaller-than-forecast crops in important growing countries from Brazil to Russia and western Europe.

At the same time, inventories are at their lowest levels in decades. “All buyers we see are buying on a hand-to-mouth basis,” said Peter de Klerk of Czarnikow, the London sugar merchant.

That has pushed prices up sharply, with raw sugar futures in New York soaring 135 per cent from a low of 13 cents in May.

On Tuesday ICE March sugar rose 4 per cent to a peak of 30.64 cents a pound, surpassing the level reached in February and rising to their highest point since 1980, when prices jumped to nearly 45 cents.

The dramatic rise in sugar prices is causing headaches for policymakers. While sugar is widely available in the west and its price is rarely considered, it is an essential source of cheap calories in emerging economies, where surging sugar prices are driving food inflation.

For the full story please go to:

http://www.ft.com/cms/s/0/43cfbb7a-e6b2-11df-99b3-00144feab49a.html#ixzz14htsVANt

Climate scientists plan campaign against global warming skeptics

November 8th, 2010 | Source: LA Times

The American Geophysical Union plans to announce that 700 researchers have agreed to speak out on the issue. Other scientists plan a pushback against congressional conservatives who have vowed to kill regulations on greenhouse gas emissions.

Faced with rising political attacks, hundreds of climate scientists are joining a broad campaign to push back against congressional conservatives who have threatened prominent researchers with investigations and vowed to kill regulations to rein in man-made greenhouse gas emissions.

The still-evolving efforts reveal a shift among climate scientists, many of whom have traditionally stayed out of politics and avoided the news media. Many now say they are willing to go toe-to-toe with their critics, some of whom gained new power after the Republicans won control of the House in Tuesday's election.

On Monday, the American Geophysical Union, the country's largest association of climate scientists, plans to announce that 700 climate scientists have agreed to speak out as experts on questions about global warming and the role of man-made air pollution.

Putbacks could cost top banks $43 billion

November 5th, 2010 | Source: FierceFinance.com

We've seen a wide range of estimates when it comes to the ultimate costs to banks of potential mortgage putbacks. On the high side: in a stressed environment, the costs of putbacks from GSEs, non-agency mortgage bond investors and holders of second liens and home-equity lines could hit as high as $120 billion over several years, according JPMorgan. The actual costs will likely end up a lot lower.

Standard & Poor's has released a new loss estimate of $43 million for the top six banks between now and 2012. Of that amount, the credit rater reckons banks have reserved for about $12.4 billion, which leaves about $31 billion of possible losses for Bank of America, JPMorgan Chase, Wells Fargo, Citigroup, U.S. Bancorp and PNC. Note that this analysis leaves out Ally. Bank of America and JPMorgan Chase are the most exposed.

This is not seen as a balance sheet issue, however, but could be a significant income statement issue. Capital raises will not be necessitated. Also, for the most part, the firm sees putbacks as a warranty and misrepresentation issue.

Robo-signing and other documentary problems are seen as a separate concern that will not likely result in putbacks. But these problems may cause a delay in the foreclosure process that could result in higher losses when the home is finally sold.

For more:
- here's an item from Housing Wire

Pontiac, 84, Dies of Indifference

October 30th, 2010 | Source: NYT.com

The last new Pontiac for sale on the lot at Lee Pontiac GMC in Fort Walton Beach, Fla., is a 2009 Pontiac Solstice coupe hardtop. More Photos

Pontiac, the brand that invented the muscle car under its flamboyant engineer John Z. DeLorean, helped Burt Reynolds elude Sheriff Justice in “Smokey and the Bandit” and taught baby boomers to salivate over horsepower, but produced mostly forgettable cars for their children, will endure a lonely death on Sunday after about 40 million in sales.

It was 84 years old. The cause of death was in dispute. Fans said Pontiac’s wounds were self-inflicted, while General Motors blamed a terminal illness contracted during last year’s bankruptcy. Pontiac built its last car nearly a year ago, but the official end was set for Oct. 31, when G.M.’s agreements with Pontiac dealers expire.

“They were C.P.R.-ing a corpse for a long time,” said Larry Kummer, a retired graphic artist who has owned more than two dozen Pontiacs and runs the Web site PontiacRegistry.com.

The G.M. brand that was advertised for “driving excitement,” Pontiac brought Americans the Bonneville, GTO, Firebird and other venerable nameplates. Sportier than a Chevrolet but less uppity than an Oldsmobile or Buick, the best Pontiacs, recognizable by their split grille and red arrowhead emblem in the middle, were stylish yet affordable cars with big, macho engines.

Its biggest triumph was the GTO, developed by Mr. DeLorean, the brand’s rebellious chief engineer, in violation of a G.M. policy dictating the maximum size of a car’s engine. The GTO was a hit, and the age of the muscle car had begun.

“When the muscle-car era was in its heyday, Pontiac was king,” said Frederick Perrine, a dealer in Cranbury, N.J., whose family sold Pontiacs since the brand’s founding. “It put us through school. We were the house on the block that had the swimming pool growing up.”

Ed Dieffenbach, a retired police officer, recalls admiring Pontiacs in magazines as a boy but he never bought one. But with the brand nearing death, he drove more than 1,100 miles round trip last week from his home near Miami to the Lee Pontiac GMC dealership in Florida’s panhandle to trade in his Chevrolet Silverado truck for one of the last new Solstice two-seater coupes available anywhere in the country.

“I always wanted a hot rod, but never got around to it, so this is it,” Mr. Dieffenbach, 62, said after getting his new car home. “My wife sat in it last night and said, ‘Oh my Lord, wow.’ ”

For most of the 1960s, Pontiac ranked third in sales behind Chevy and Ford — a position now held by Toyota.

Reefer Sadness for Pot Farmers

October 30th, 2010 | Source: Business Week

In Northern California's Humboldt County, small marijuana growers find the legalization of their business could be the worst thing that ever happened to them

To reach Jason's farm you drive south out of the small town of Arcata, in Humboldt County, Calif., and plunge into the forest that gave the region its "Emerald Triangle" nickname. After passing through hilly ranch country and a stretch on a dusty dirt road, a wooden house peeks out of the fruit trees on 150 acres of land, completely off the electrical grid. Jason is in the kitchen, stuffing cannabis leaves into a juicer.

"Everyone around here is involved in some way," says Jason, a professional marijuana grower. What he means is that a large percentage of people in town, and every other town for miles, is either directly or indirectly subsidized by dope, from the young parents cultivating a few seedlings in the backyard to the owner of the sushi restaurant where seemingly unemployed people eat dinner, always paying in cash.

"I think we're in the middle of a boom time," says Jason, clomping over to a leather sofa with his juice. He's in his late 30s and wearing camouflage pants with a small knife clipped to his belt, heavy-duty work boots, and just enough chin scruff to keep him from looking groomed. Despite its rustic accommodations—personal business is conducted in an outhouse down the path—the house bears many signifiers of high household cash flow: gleaming new appliances, lots of products made by Steve Jobs, a Droid satellite phone. He got into the pot business almost by accident. After several years drifting hippie-style through California, Jason fell in love with the pastoral lifestyle and realized that he had to earn money to sustain it, so he became a businessman.

Yuan more pun

October 29th, 2010 | Source: The Economist

OUR last post from the house style guide admonished writers about the use of clichés in titles.

So I note with chagrin that The Economist's series of awful puns in stories about the Chinese currency has reached epic proportions:

A yuan-sided argument
Yuan small step
Yuan up, yuan down
Tell me what you yuan, what you really, really yuan
It's yuan or the other
Yuan step from the edge
Yuan-way bet
Yuan for the money

Should we stop, or should we take what is by now a house joke as far as it can go?

And if the latter, can anyone suggest any yuan-based headlines we haven't used yet?

Foreclosures spawn new attitude to ownership

October 24th, 2010 | Source: FT.com

Jeff Horton has a job, two cars and money in the bank. Yet, he stopped paying his mortgage a year ago. With shoddy documentation by mortgage lenders now delaying, Jeff thinks he will continue living for free for at least another six months, and probably longer.

The 33-year-old IT specialist is keen to put an end to his disastrous home purchase that will likely leave his bank with a loss of at least $100,000. Until the bank actually makes him leave, he will keep living in the Orlando house, and pocket the $2,200 he used to pay on his monthly mortgage. “I’m not stupid,” he says. “I will live for free until the bank takes over the house.”

Shasta Gaughen, an anthropologist living in California, stopped paying her mortgage in February. She has no idea when her home will actually be taken over. “I have been able to save significantly,” she says. “Every penny that was supposed to go to my mortgage went into savings, around $1,200 a month.”

Both Mr. Horton and Ms Gaughen are the types of people banks like to lend to. They made payments on time, they have jobs. However, the plunge in US house prices – which has been particularly severe in California and Florida – left both of them with mortgages worth much more than their homes. Not having put any of their own money into the homes – 100 per cent financing was a common feature of the housing bubble – they decided to walk away from their mortgages.

A particular worry is whether the tales of shoddy documentation completed by so-called “robo-signers” at mortgage lenders and growing foreclosure delays will affect people’s behaviour. It could for three reasons.

First, a longer gap between stopping payments and being evicted from the property allows people to build up a nest-egg. In many states, homeowners do not owe the bank anything more than the keys to their home if they default on a mortgage.

Second, a slowdown in foreclosures creates an ever-growing backlog of unsold homes, which will at some point be sold, pushing house prices lower. If people think home prices will not recover, they are more likely to throw in the towel.

Third, it further damages the reputation of the banks who made the mortgages, and this could make borrowers more unwilling to pay. “More bad news and uncertainty creates more anger against the banks and frustration with the system,” says Chris Mayer, Professor at Columbia Business School. “That’s not helpful.”

Indeed, Jeff tried to get his bank to reduce his monthly mortgage payments so that he could rent out the property. The bank was inflexible. When he read about million-dollar bonus payments to bank executives last year, he decided to stop making payments. “The bonuses were the last straw,” he says.

Jon Maddux, who runs YouWalkAway.com, which advises people on the foreclosure process, says calls about foreclosures have increased recently. “The banks are cutting corners in the foreclosure process and in some cases breaking the law and that sends the message to homeowners that, if the banks are not honoring their promises, why should the homeowners?” he says.

See: http://www.youwalkaway.com/

State Street Releases Vision Report on Trends in Sustainable Investing

October 21st, 2010 | Source: MarketWatch.com

The Report leverages New Research Examining Momentum behind Investors' Increased Interest in ESG Issues

State Street Corporationone of the world's leading providers of financial services to institutional investors, today released a new Vision Focus report on sustainable investing. Entitled "Sustainable Investing: Positioning for Long-Term Success," the report leverages new research by State Street Global Advisors (SSgA), the investment management business of State Street, to examine the growing impact of environmental, social and governance (ESG) concerns on the investment decisions of institutional investors.

World population growth, climate change and a range of other catalysts are transforming sustainability into "a material issue for companies and investors alike," the report states.

"With global business and investing moving toward a more sustainable model, institutional investors need to position themselves for a future that may look dramatically different from the past," said Chris McKnett, vice president of ESG investing at SSgA. "By taking steps to align themselves with this trend now, institutional investors may be better positioned to achieve long-term goals."

Once viewed as a marginal investing "fad," ESG investing is gaining momentum as global macro-trends increasingly point to a "sustainability crisis" taking place around the world, the report states. "Many investors have called for more opportunities to incorporate ESG factors into their portfolios, prompting investment managers to enhance their product and service offerings."

The report is a bridge to research findings outlined in a new SSgA study, scheduled to be released later this year. The 2010 study is an update to research conducted by SSgA in 2008. While the 2008 study suggested a growing importance for ESG-related investment considerations, the new study goes a step further by examining ESG in bear market periods, and found that, in general, high-scoring ESG companies suffered less during the 2008-2009 downturn.

In addition, the new research found that the magnitude of protection enjoyed by companies with strong ESG practices increased at the same time as the largest market declines occurred.

According to the Vision report, the global financial crisis contributed to greater awareness of ESG issues by spotlighting the need for "more stringent corporate governance and disclosure requirements to help protect the interests of investors."

"The new emphasis on sustainability is changing the rules of the institutional investment world," continued McKnett. "As ESG factors are increasingly mandated by investors, those companies with favorable ESG ratings are likely to become the preferred holdings."

The Vision report reviews the development of ESG investing from the early focus on exclusionary screening of companies whose products or services were deemed inconsistent with an investor's values, to today's more proactive approach of incorporating ESG factors into the investment decision-making process. With more in-depth analysis of ESG data and ratings, the report states, "Today's sustainable investor is intent on identifying companies expected to outperform over the long term based on their practices of embracing the concept of sustainability in the operation and management of their enterprises."

State Street's Vision Series addresses key trends and developments impacting the financial services industry. Previous reports have focused on pensions, exchange traded funds, asset allocation and sovereign wealth funds. To download a copy of this Vision Focus report or others in State Street's Vision series of in-depth reports, please visitwww.statestreet.com/vision.