Friday, December 14, 2007

CPI Year Over Year Data for Raw Foods

This is the November CPI percentage increase year over year. Curiously, milk data is not available.


Since Nov 2006

Eggs Grade A

Orange juice



Chicken whole


Ground Beef



Apples Red Delicious1.29

Oranges Navel

Not available

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The November PPI in Year Over Year Percentage Increases

The November PPI was published yesterday. Below you will find the same list compiled with year over year percentage increases. Note farm products up 21%.

PPI Year over year for every month

As of Nov 2007JanFebMarAprMayJunJulAugSepOctNov

Crude petroleum (domestic production)-14.7-1.7-6.6-10.3-11.5-5.2-0.8-0.323.241.164.6


#2 diesel fuel-8.2-

Finished energy goods-

Fuels and related products and power-13.2-

Crude materials-9.57.813.311.711.215.513.07.011.425.622.2

Farm products8.322.926.727.030.024.624.218.121.720.021.0

Chemicals and allied products2.

Industrial electric power2.

All commodities-

Intermediate materials,supplies and components1.

Industrial Commodities-

Finished goods0.

Finished consumer foods2.

Iron and steel8.810.615.415.812.

Metals and metal products10.19.511.

General purpose machinery and equipment4.

Pulp, paper, and allied products3.

Aircraft engines and engine parts3.

Intermediate materials less food and energy3.

Industrial Commodities less fuels3.

Aircraft and aircraft equipment3.

Vitamins, nutrients & hematinic preps.

Construction machinery and equipment3.

Finished goods less food and energy1.

Materials and components for construction3.

Capital equipment2.

Transportation equipment1.


Aircraft parts and auxiliary equipment, nec0.

Motor vehicle parts2.

Natural gas-40.1-

Machinery and equipment3.

Steel mill products7.58.910.914.013.610.05.3-0.6-3.7-6.5-0.4

Lumber and wood products-11.3-12.0-11.3-11.0-12.5-7.9-4.3-2.9-3.6-2.0-2.5

Electrical machinery and equipment3.42.00.0-0.5-1.0-0.9-1.6-2.2-2.7-2.4-2.8

Electronic components and accessories4.80.5-4.3-5.4-6.8-6.3-8.2-9.5-10.5-10.1-11.7

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Friday, November 23, 2007

ABCP: Perimeter Financial Spats With Montreal Accord Banks

Last week Perimeter Financial announced plans to allow investors to start trading the $35B frown ABCP papers in Canada. Yesterday, its CEO lashed out at the banks that instituted a trading moratorium, calling them "self-serving and paternalistic." He says the Pan-Canadian Committee is looking after their own interests and ignoring everyone else (is he surprised?).

A day earlier, committee chair Purdy Crawford criticized Perimeter's bid to kick start the trading, calling it an attempt to exploit desperate, cash-strapped investors, he suggested their motivation was to "induce panic in the market in order to acquire ABCP at distressed prices."

The Montreal Accord approach has sparked controversy among small investors who bought the paper as a short-term investment and can't afford to keep it on their books. The Montreal Accord banks want to switch this paper into longer term notes. This was clearly never the intent of the investors.

Interestingly, Perimeter's major shareholders include National Bank Financial and pension giant Caisse de dépôt et placement du Québec, both key backers of the Montreal proposal. Perimeter's CEO says Perimeter's owners supports its bid to bring liquidity back to the ABCP market.

There does not seem to be any angels in this company. Shark-infested waters indeed.

Source FP.

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Monday, November 19, 2007

Detailed Fed Funds Injections Since 2006

Much is being said these days on financial entertainment TV and publications about the huge Fed injections. In particular, every Thursday we hear about some huge numbers that is now a new record. These "injections" are in the form of TOMOs and POMOs (temporary and permanent open market operations). Reality is that these numbers are nothing out of the ordinary - so far. The table below shows the total amount of funds actually added since 2006.

The table shows the amounts added for each month of 2007, the total for 2006, the total for 2007, the totals since Jan 2006, and since May 2007.

The total amount "injected" since Jan 2006 until today is $1B.
The total amount "injected" since 2007 until today is $7B.

Up to Nov 19 2007In $B USD

DateTotalTotalTotalNet Add


Jan 07 only1277.83176.00184.75-8.75

Feb 07 only1184.42193.75180.5013.25

Mar 07 only1282.64228.25240.25-12.00

Apr 07 only1066.00167.75149.5018.25

May 07 only1140.55167.00182.75-15.75

Jun 07 only1161.70177.75188.25-10.50

Jul 07 only1238.35185.00180.005.00

Aug 07 only1598.49209.00200.758.25

Sep 07 only1220.82236.50230.256.25

Oct 07 only1905.18268.75265.003.75

Nov 07 only1035.90190.00190.75-0.75

2006 only13239.472125.502131.50-6.00

Since Jan 200627351.364325.254324.251.00

Since Jan 200714111.892199.752192.757.00

Data is obtained from the Federal Reserve web site as well as from the "Slosh" report.

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Sunday, November 18, 2007

'Liquidity Puts' Allowed Banks To Remove CDO Debt From Their Balance Sheets

A NYTimes article explains how big banks were selling "liquidity puts" in order to be able to sell their CDOs and take the debt out of their balance sheets.

In essence they were selling the loans and presumably the risk associated with them (passing the buck). However, they were also selling the puts, or the right to the buyer to sell them back to the big banks. The problem is, big banks took the debt out of their balance sheets and thus claimed huge profits. Doesn't this sound like an Enron-like scheme? Problem is... these things are now worthless.

If you never heard of "liquidity puts" you are in good (or bad?) company. Robert E. Rubin, chairman of Citigroup, had never heard of them until this summer.

NYTimes link:

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Thursday, November 15, 2007

$75B SIV Backup Plan Will Not Distinguish Between Assets

The agreement reached last week makes several changes that simplify earlier proposals. SIVs will no longer have to get the approval of at least 75 percent of their investors if they want to participate in the fund. In addition, the backup fund will not distinguish between assets it buys from each SIV, it will assign the same risk level to all their troubled securities.

In other words, the assets dumped there are all high risk and worthless, why would anyone bother putting anything of value in there? This allows the big banks to keep worthless investments off the balance sheets and still satisfy FASB 157.

The $75B SIV rescue plan.

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Sunday, November 11, 2007

U.S. $75B Bailout Plan to Go Ahead, a Machiavellian Scheme?

Bank of America, Citigroup Inc. and JPMorgan Chase & Co. reached an agreement Friday to go ahead with their $75B bailout/backup plan to allow illiquid ABCP-related investments to trade. Unlike the Canadian plan, which seemed designed to make the participating banks a good profit, the U.S. plan is suspected to have been designed to give some value to currently "unvaluable" investments. You see, FASB 157 comes into effect this November 15th, unless some powerful lobbyists succeed in delaying its implementation. FASB 157 forces financial institutions to value these level 3 investments.

Level 3 investments are typically worthless derivatives, CDOs, SIVs, etc, leveraged out of sub-prime mortgages. They are worth nil, or close to, but cannot be truly valued because nobody wants to buy them. By creating this $75B backup plan, the banks can trade these worthless instruments between them, but assigning them any value they want, so they don't have to report huge losses. So simple... and Machiavellian at the same time.

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Saturday, November 10, 2007

ABCP to Start Trading Wednesday - Watch Out Below

Perimeter Financial will defy the terms of the Montreal Accord and start trading $35-billion of frozen debt. As soon as trading starts new prices will be set and owners of the paper will likely be forced to write down the value of their papers at a discounted price. Small resource companies and wealthy individuals that have made these terrible investments by holding ABCP never signed on to the Montreal Accord. Perimeter is giving these parties an exit. Some of these investors will dump their ABCP and then sue the banks that sold it to them.

The Caisse would be forced to take a $1.8-billion writedown if trading is at say 85c on the dollar (quite a a high figure actually).

The trusts eligible for trading next Wednesday are the ones mentioned here in past months: Apollo Trust, Aurora Trust, Comet Trust, Gemini Trust, Planet Trust, Rocket Trust, Slate Trust, Ironstone Trust, MMAI Trust, Silverstone Trust, Structured Asset Trust, Structured Investment Trust III, Skeena Capital Trust, Aria Trust, Encore Trust, Newshore Canadian Trust, Opus Trust, Symphony Trust, Apsley Trust, Devonshire Trust, White Hall Trust and Selkirk Funding Trust.

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Monday, November 5, 2007

The Value of Merril's, Citi's, and UBS' Written-Off debt

What is the value on the dollar of the current CDOs that are being written off by some major banks such as Merril, Citi and UBS?

Merrill Lynch analysts calculate that mid-quality debt is now trading at 40 cents in the dollar. But Merrill Lynch itself has only written this type of debt down to 63 cents in the dollar, while UBS is still assuming this debt is worth 90 cents.

"Simple math would imply that UBS needs an additional $8bn write-down [on its $15.4bn holdings] if the ABX pricing is correct," Merrill says." Source: FT

40c/63c/90c on the dollar? That still seems too high, who would buy that stuff? And how much are the other banks holding or hiding?

It should not take too long to find out.

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Sunday, November 4, 2007

Altamira is No More

I have discussed the issues at Altamira here before on a couple of occasions. I was wondering when the lay-offs would start after a couple of their mutual funds were caught invested in illiquid ABCP vehicles. This week I received a letter from them in which they tell me that Altamira will be merged with the National Bank, ceasing to exist as an independent entity. You have to wonder really how deep the troubles with ABCP are in these banks. We know that the so-called bail-out plan is in deep trouble. I have also read and heard rumours (BNN) that BMO has somewhere between $20B and $40B in ABCP investments off the balance sheet that will soon have to come back into the balance sheet.

So, I am sure like many investors, I am looking for another place where to move all my mutual funds to. It is really sad because Altamira used to provide excellent service when it was a independent company. My past experiences with the National Bank have been less than stellar, I am certainly not looking forward to giving them my money. I also have accounts at Altamira Securities, which is nothing but trouble besides outrageous commissions and fees. I have lent them enough money with my 5-year market-linked GIC which has returned something like 0.5% yearly in 3 years! Fool me once, shame on you...

So, I am looking for a place where to move all my funds with both Altamira Investments and Altamira Securitities.

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Wednesday, October 24, 2007

Aastra Suing HSBC for Recommending ABCP

Aastra Technologies holds C$13.7 million of asset-backed commercial papers, out of which C$8.5 million is invested in Structured Investment Trust III and wasn't repaid when it became due on Oct. 10.
Aastra has commenced legal proceedings against its investment adviser, HSBC Securities and one of its employees, in the Ontario Superior Court of Justice seeking damages relating to "investment advice provided with respect to Aastra's purchase of the Structured Investment Trust III ABCP. "

This clears the way for other companies to sue their big bank advisors.

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Monday, October 15, 2007

Canadian Troubled ABCP Plan Gets 2 Months Extension

Globe and Mail has just reported that the $40B Canadian ABCP bailout plan (Montreal Accord) has just been given a 2 month extension beuase they could not agree on the terms.

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Banks to Make a a Profit on American ABCP Bailout Plan

The Canadian ABCP bailout plan will allow the banks to make a good profit out of the unlucky holders of ABCP. Would the american banks also be making a killing with this plan or are the just being nice and trying to save the market?

Marc Carpani, VP of Mulvihill Capital, stated today on BNN TV that, similarly, the US banks will likely indeed make a good profit out of this $100B plan. However, the Canadian plan is still in trouble (deadline was today October 15), perhaps because the banks are having trouble with their own greed. Will the american banks be better in sharing the profits?

The Wall Street Journal reports that the plan means that some banks will profit from the problems their industry helped create. They will be paid fees for providing the financial backstop to the fund. In addition, the broker-dealer arms of the banks would be paid to raise capital. Bank of America highlighted the opportunity to generate fees in discussions leading up to the final plans, people familiar with the matter said."

The other issue is that $100B is just a drop in the bucket versus the $485 trillion that are reported to exists in derivates out of these ABCP instruments.

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Saturday, October 13, 2007

An American ABCP Bailout Plan in The Works?

While the Canadian bailout plan is still in trouble with a deadline this weekend, the USA seems now to be planning its own bailout plan.

Citigroup and JPMorgan are leading a group of banks in talks with the U.S. Treasury about a plan to revive the ABCP market. Under one plan being considered by the banks, lenders would establish a fund of as much as $100 billion to buy assets from the SIVs (structured investment vehicles). Investors remain reluctant to acquire the paper. Setting up a fund would allow SIVs, which own $320 billion of assets, to avoid having to sell their holdings at deep discounts and further roil the credit markets.

The Canadian plan offers greatly benefits the banks, as opposed to the holders of the maligned paper, by swapping short term for long term paper. It remains to be seen who will be the real beneficiary of the American plan. Source: Bloomberg.

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Thursday, October 11, 2007

The Illusion of the DJIA - Updated

(Click on image to enlarge)

From January 2 2007 to today October 11 2007 the DJIA is nominally up 12% up. However this is only true for those investors inside the US. Investors in Europe who bought the DJIA have seen gains of only 5%. For investors in Canada and Brazil, the DJIA has dropped 5%. These investors have lost money. Similarly for investors using gold as currency, the DJIA has also dropped 5%.

The graph above shows the actual value of an investment in the DJIA in each currency, and gold.

Nominal DJIA (USD): 12.7%
For investors in Europe: +5.4%
For investors in Canada: -5.3%
For investors in Brazil: -5.4%
Using gold as currency: - 5.3%

The DJIA has nominally gone up only for investors in the US that are fully insulated from the rest of the world. To consider the actual real value, US investors should reduce this by the real rate of inflation (which should include items like food and energy).

Consider also the appreciation of gold in 2007. While the price of an ounce of gold has gone up by 18% in USD and by 11% in Euros in 2007, it has not appreciated at all for those investors in Canada and Brazil:

(Click on image to enlarge)

This can be attested by any investor in Canada who bought the GLD ETF, it has remained virtually unchanged in 2007 in Canadian dollars:

GLD in USD: +18.7%
GLD in Euros: +11.3%
GLD in CAD: 0.0%
GLD in Real: 0.0%

Adding a core rate of inflation of around 3% (and a real rate much higher) to this picture, investors with funds parked in the GLD ETF have actually lost money.

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Thursday, September 27, 2007

ABCP Bailout Plan in Trouble

The so called Montreal bailout is in even more trouble than earlier reported. Looks like in spite of taking advantage of the holders of ABCP (by swapping shirt term for very long term paper), the banks themselves cannot agree on how to proceed. According to the Financial Post they are having trouble reaching an agreement because they looking for their own interests. How surprising!


"Simply put, the source said, the only way for the logjam to end is for the federal government to step in and take control. If that doesn't happen, the consequences for the Canadian economy could be dire", a senior executive lose to the negotiations said.

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Tuesday, September 25, 2007

200 Baffinland Iron Mines Workers Almost Without Winter Supplies Because of ABCP

Baffinland Iron Mines Corp. almost missed its window to ship provisions to 200 workers in the Arctic before winter arrives. The company ran out of money to pay for food, fuel and drilling equipment due to its unpaid ABCP. Without the money, the company had to arrange an emergency line of credit before shipping lanes froze over.

The company had $43.8 million frozen invested in commercial paper with Coventree and others.

Source Bloomberg.

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Friday, September 21, 2007

On The Collapse of CDOs and ABCPs

According to Satyajit Das, a leading expert in credit derivatives and risk management, up to 53% of the global $2.2. trillion commercial paper is now asset-backed, with about 50% of that in mortgages. Earlier this year, the total value of these derivatives of these was about $485 trillion (with a "T"). To keep things in perspective, the total world GDP is about $65 trillion. How is this possible? What will happen when the value of the original housing that was used as collateral drops?

While many years ago banks used to have sufficient funds to cover the loans they made, such as for mortgages, today, banks repackage these loans, as well as credit lines, credit-card balances, and whatever else they "own", as CDOs, collaterized debt obligations. Banks then sell these loans, and the proceeds can then be used as collateral to buy more loans or sell more mortgages.

Pension funds, hedge funds, and Insurance companies bought these CDOs, so that they could generate higher rates if return. These are global entities from all over the world; they borrowed money at ridiculously low rates in Japan and the US (when rates were at 1%) . So, those american subprime loans, who were sold to people who could not afford to buy houses in the first place, ended up in every corner of the planet.

Therefore, in essence borrowed funds bought more borrowed funds. To those tech-oriented, this is like a positive feedback system, one that is self-powered and keeps increasing. A brilliant scheme, where 1 dollar of real stuff is the actual collateral for about $20 or $30 of loans, but what happens when the original mortgage borrowers start to default on their loans? The entire scheme starts to unravel.

Mr. Das is the author of a number of works on derivatives and risk management, and maintains a blog.

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Tuesday, September 18, 2007

Coventree Slashing Workforce By 30%

There it is, Coventree is cutting 30% of its workforce. The company has an estimated $16B of ABCP outstanding. The company is also closing its Denver office and reducing lease space in Toronto.

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Thursday, September 13, 2007

Has the DJIA Really Risen 7% in 2007?

Click on the picture to enlarge.

The Dow Jones Industrial Average has risen from 12,474.52 on Jan 3 2007, to 13,424.88 today, September 13, 2007. That is a nominal gain of 7.62%. However, this gain is only valid if you live in the US, and even so, if you don't take inflation into consideration.

If we take into consideration the Canadian dollar exchange rate, for example, the Canadian investor that bought the index in January has lost 3.81% this year. This is because the CAD has appreciated 11.9% this year versus its American counterpart.

European investors would have done better with a gain of 2.86%. Investors tied to the poor Brazilian currency, which used to be the joke of the world's currencies, would have lost 3.42%! The Real has appreciated 11.4% this year alone (and quite a bit more last year).

Finally, measured against gold, the DJIA fairs the worst. In January 2007, the DJIA would have bought 200.3 shares of the gold ETF GLD. Today, the DJIA only buys 191.6 shares. That is a drop of 4.4%.

Has the DJIA really risen this year? How many liters of milk would it have bought back in January? How many cobs of corn? How many liters of gasoline?

DJIAin CADin EuroIn RealIn GLD




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Tougher Rules on ABCP Rating

Dominion Bond Rating Service, the agency that gave top ratings to issuers of ABCP in Canada, announced that issuers of ABCP will now be required to have "global-style liquidity", meaning the providers have to support the papers in case of ugly market events. This was the original reason that the Canadian ABCP market totally shut down, because bankers which were required to provide emergency support in the case of a "market disruption" did not. The term "disruption" had never been defined, therefore the banks jumped out of the deal and $35B went unpaid. Until yesterday, DBRS was still maintaining its old position that the previous terms and conditions were sufficient, when clearly they were not.


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Wednesday, September 12, 2007

Record Wheat Prices Force Italians to Boycott Spaghetti

Aginflation: wheat prices have just reached multi-year record levels.

And the unthinkable happens: tomorrow, September 13, Italians will boycott pastas, no spaghetti, fettucine, farfalle or rigatoni in Italy, as the country goes on its first-ever pasta strike.

"Angry Italians are downing their forks in response to a 30 per cent price rise in the nation's favourite food, along with steep rises in the price of coffee, mozzarella, bread, biscuits and schoolbooks."

A coffee strike is also planned.

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Just 50 Cool Yachts Are Needed to Reduce Global Carbon Emissions

China builds the equivalent of a new 1,000 megawatt coal plant every 5 days, and India every 2 weeks. Stopping these activities, as well as reducing the developed world's carbon emissions may be a little unrealistic.

In contrast to the futility of turning the world into a carbon-lean machine, Professor Stephen Salter of the University of New Edinburgh has come up with the "cool yachts". These are wind-powered yachts that throw salt from the ocean into areas with low level stratocumulus clouds. Brightening these clouds with sea salt to increase their reflectivity by a mere 3% will be enough to counteract the global warming caused by increased CO2 emissions. All it takes is 50 of these machines to navigate the globe. Each would cost about $500M. Prof. Salter’s boats would be powered entirely by wind but with conventional sails replaced by Flettner rotors — vertical cylinders that rotate as the wind passes over them.

Environmentalists are opposed to the plan because it would keep us from changing our ways and reducing our carbon emissions. The machines promise to save the world for a pittance without making us pay the price for our ways. I say let Prof. Salter's salting machine test his technology.

Prof. Salter is one of the finest engineers" Scotland has ever produced, according to Alex Salmond, Scotland's Firth Minister. He is an authority on energy matters and renewable energy. The UK Environment ministry says that the public may not like the yachts, when it may actually fear that they like them too much.

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Tuesday, September 11, 2007

Aginflation, Food and Agriculture Inflation

Aginflation: China's inflation rate rose to 6.5 per cent in August - the highest in 11 years - driven in part by a 49 per cent surge in the price of pork and meat from the same month a year ago. This inflation has many significant implications, but concentrating on food items only the Financial Post today has a full page chart on food inflation, more or less as follows. The article does mention India and China's populations eating better too as one of the causes.

Oil Price: +157% since 2002
Corn Price: +134% since 2005.
Barley: +51% since 2006
Wheat: +83% since 2006
Soybean: +50% since 2006
Canola: +32% since 2006
Cattle Price +12.5% (cattle displaced to scrublands)
Crop receipts: +25.6% (grain growers' revenue)
Tortillas: +400%
Brewers' Barley: +100% (German beer: +40%)
Piranhas attacks: 40,000 head of Argentinean cattle have died this year alone from bites and starvation (moved to bad lands)
Tractors: Farmers use their fat earnings to buy tractors (see Deer & Co. share price, 200% since 2004.
Mexicans take to the streets to fight tortilla prices
Drinkers protest: Germans are angry about beer prices.

If people go hungry, that is scary. By the way, in China, the PPT is not the Plunge Protection Team, but the "Pork Protection Team".

Here is my Yahoo food portfolio:


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Red Corp CEO Blasts ABCP Process. A Matter of Leadership.

Terry Chandler, CEO of RedCorp Ventures, which has over $100M tied in illiquid ABCP, blasted securities regulators for "allowing the widely traded securities market to implode" and then failing to oversee a proposed restructuring (bailout) by group of large financial institutions which are only "serving their own interests". Well, he got it right about the institutions serving their own interests (by swapping short term debt for long term debt) - and this "bailout" is not a done deal and may still be in trouble - but, Mr Chandler, why did your company invest in ABCP? What does does tell the shareholders about the quality of management?

Mr. Chandler also says "I don't see any leadership coming from this group". Yes, it's a matter of leadership Mr. Chandler.

(From National Post, September 11 print edition).

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Monday, September 10, 2007

$140B in commercial paper due by the end of next week

Looks like the next 10 days will be quite interesting - and critical. Bloomberg reports that $140 billion of commercial paper in Europe need to be refinanced by the end of next week. This may push up yield premiums on corporate bonds and will cause wider corporate spreads. Central banks may have to pump many billions of dollars again into the market. The price of gold can only go one way.

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Thursday, September 6, 2007

Holders of the"Bailed-Out" ABCP Could Lose 50%

The Financial Post reported that the majority (about two thirds) of the $35B of non-bank ABCP in Canada is backed by risky bets on credit default rates that are very far underwater. The losses could be 50C on the dollar (quote from ED Devlin from PIMCO). He says the situation is worse in Canada than in the US. The issuers were leveraged so losses are amplified. They are "leveraged up 10 times and then leveraged again".

The so-called Montreal bailout is in doubt because of this levegage, but it seesm the banks involved in the bailout were the ones who would benefit, by forcing the holders of very short term debt to swap it for long term debt. May be not.

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Thursday, August 30, 2007

Altamira Releases Updated Financial Statements, Plenty of ABCP.

Altamira has released its June 30 2007 financial statements. A quick search reveals some astonishing finds. For example, the Precision European RSP Index Fund had 37%.

The Precision U.S. RSP Index fund had 44.91% of its assets in commercial paper (including Comet, Planet, Aurora, Apsley, Silverstone, etc.). THe web site (today August 30) mentions the fund's objective as:

"The Fund is ideal for the investor who is looking to match the returns of the S&P 500 Index (in $US returns) with a hedge against currency fluctuations and who is willing to endure an above average degree of volatility."

The Precision European RSP Index fund's objectives were: "The Fund seeks long-term growth of capital by tracking the performance of the FTSE Eurotop 100 Index*." This fund had 38.05% of its assets in commercial paper, including Zeus, Planet Trust, Silverstone, Ironstone and others.

The Altamira Precision International RSP Index Fund had 44.91% of its holdings in commercial paper, see contents below.

Comet Trust4.40%, due July 3, 2007 3,000,000

Skeena Trust4.40%, due July 3, 2007 2,500,000

Symphony Trust4.49%, due July 3, 2007 3,000,000

Zeus Receivable Trust4.38%, due July 4, 2007 4,000,000

Planet Trust4.37%, due July 5, 2007 700,000

4.50%, due July 6, 2007 3,000,000

Opus Trust4.50%, due July 6, 2007 3,000,000

Structured Investment Trust4.50%, due July 6, 2007 3,100,000

Sound Trust4.37%, due July 9, 2007 5,000,000

Silverstone Trust4.39%, due July 12, 2007 3,000,000

White Hall Trust4.39%, due July 12, 2007 3,000,000

Apsley Trust4.50%, due July 26, 2007 3,000,000

Encore Trust4.67%, due September 19, 2007 3,000,000

Aurora Trust4.68%, due September 19, 2007 3,600,000

Great North Trust4.68%, due September 19, 2007 3,000,000

Ironstone Trust4.68%, due September 19, 2007 3,000,000

Opus Trust4.68%, due September 19, 2007 600,000

Comet Trust4.72%, due September 24, 2007 2,000,000

Opus Trust4.63%, due September 27, 2007 3,000,000

Depfa Bank4.64%, due September 28, 2007 2,500,000


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Sunday, August 26, 2007

Inflation Rates Since 1929

Here are the annual inflation rates since 1929, measured from July to July. Also, the equivalent multiplication factor is shown. For example, something that cost $1 in 1929, would cost $12 today, inflation-adjusted.

Annual inflation in % (July base)Multiplication factor since 1929Since 1929 using annual average rate
















































































Some facts from the above:

  • using July rates (July 1929 to July 2007) the inflation was 1,103%, or 12.03X (for an annual rate of 3.24%)
  • using average annual rates from 1929 to 2007 the inflation was 1,082%, or 11.82X
  • if the price of an ounce of gold was $28 in 1929, today it would be inflation-adjusted to approx. $336.
  • gold's peak was $850 in 1980. Since 1980 the inflation rate was approx. 240% (2.5X), inflation corrected price would be $2,140
  • from 1929 to today the price of gold has appreciated from $28 to $660, that is 2,157% (22.5X), for an annual rate of 4.07%.

Of course, these are nominal published rates, which are not considered by many to be real rates (they exclude energy and food) and who knows what the rates represented 50 years ago (different baskets).

If we add extra percentage points to each annual inflation rate, the inflation since 1929 would be:

  • Extra 1%/y: 2,454% (25.5X) (gold at $714)
  • Extra 2%/y: 5,281% (53.8X) (gold at $1,506)
  • Extra 3%/y: 11,160% (112.6X) (gold at $3,152)

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Updated List of Funds With Asset-Backed Commercial Papers (ABCP)











Metcalf and Mansfield

Apsley Trust

National Bank of Canada (agent)

Ironstone Trust


Silverstone TrustGlobal DIGIT II

MMAI-I Trust


Structured Investment Trust III

Aria Trust

Devonshire Trust

Foundation Trust

Opus Trust

Selkirk Funding Trust

Skeena Capital Trust

Structured Asset Trust

Symphony Trust

Whitehall Trust

Newshore Canadian Trust

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Saturday, August 25, 2007

The Troubles at Altamira

After the National Bank announced it was bailing out Altamira of its troubled papers, I asked Altamira to disclose which funds under its portfolio contained asset-backed commercial papers. Since I am a client, I am worried, and I also wish to know the names of the managers of those funds. This was Altamira's response:

"We cannot disclose to you which Altamira Funds held asset-backed commercial paper. We can only confirm for you that National Bank has acquired all of the asset-backed commercial paper in Altamira Funds. Unit holders of the funds will no longer have any exposure to the current ABCP market".

So, clients had to find this information out the hard way. You can find out which ones were these funds in an older post here.

Since I have withdrawn all my funds that are not CDIC (insured) with them and most likely many others have as well, you have to wonder when the layoffs at Altamira will begin.

I also wonder about the National Bank.

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National Bank Ironstone Trust Fails to Pay ABPC to the Sun-Times

We shall soon see what happens when a newspaper does not get its money back. Sun-Times reports that the National Bank's of Canada's Ironstone Trust failed to honour $25M that were due August 21 plus $3M yesterday. Coventree's Capital Planer also failed to pay back $3M.

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Friday, August 24, 2007

Yet More Companies Holding ABCP

And the number keeps growing. The number of companies that bought these funds is probably too high to keep track of, likely in the hundreds or thousands. My intention here is mainly to keep track of the miners and small cap energy companies. For this I have been contacting the companies in whcih I own shares. Many have responded, but some have not. This will be published next week, hopefully in a better format. Here are some new names:

Acceleware Corp.: approximately $1.45 million of its $7.2 million in cash and cash equivalents is invested in Coventree's SIT.
Air Canada: $37-million
Dundee Bank of Canada: up to $400-million
Nav Canada: $368-million (GTAA?)
Ontario Teachers' Pension Plan board: $60-million
Petrolifera Petroleum Ltd.: $20-million of Series A notes issued by MMAI-I Trust and $11.4-million of Series A Notes issued by Apsley Trust, due and payable Aug. 15, but were not repaid.
Professionals' Fund Group: unspecified amount
Société générale de financement: $137-million
The Westaim Corp.: $19.7-million
Western Canadian Coal Corp.: $5-million issued through HSBC, with $3 million in Selkirk Trust ABCP and a $2 million Symphony Trust ABCP. The $3 million Selkirk Trust ABCP matured on August 21, 2007 and remains outstanding. The $2 million Symphony Trust ABCP matures in September 2007.

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Goldman Sachs Gold Activity

Goldman Sachs has added 3,265 long gold positions at the Tocom. In effect what they are doing is closing some of their short positions. I believe their short positions where in the mid 25,000 a few months ago, now the total is only about 11,000. I will keep tracking these figures daily.

Open Interest: Goldman Sachs Japan Co., Ltd. long: 11865, short: 507
Trading Volume:Goldman Sachs Japan Co. Ltd, short: 81, long: 3265

Numbers are for standard future contracts of 1Kg to buy or sell gold on a future date and for the specified price.

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Ontario Grounded Due to ABCPs

The Ontario government announced today they have over 700M tied up in ABCPs, while the GTAA (Greater Toronto Airport Authority) has 249M of its free cash tied up.

Both the province and the airport claim no ill effects and are expected to keep operating though, at least in the short term :-)

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More Companies Come Out Of The ABCP Closet

The list keeps growing:

Goldfarb Corp:
announced Friday it has asset-backed commercial papers with a total value of more than $17 million that have matured but not been repaid.

West Energy Ltd.: has $29.97 million of its $31.20 million in cash and investments in asset-back commercial papers that have matured but not been repaid

Canaccord Capital Inc.: 32 million in exposure to the Canadian asset-backed commercial paper markets was $32 million out of its total cash position of about $345 million, or about nine per cent.

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Thursday, August 23, 2007

List of Companies That Invested in Funds With ABCPs

Here is the latest known list of miners and other companies that have funds tied up to asset-backed commercial papers. This information is obtained from public sources and is certainly very partial.

Baffinland Iron Mines Corp: in July and August invested a total of $43.8-million of its $45.9-million in cash with three separate trusts sponsored by Coventree.

Barrick Gold Corp. : US$65-million or less than 3% of US$2.6-billion in cash.

Cameco: of its $332-million investment portfolio about $120-million was invested in asset-backed commercial paper. In the Canadian market they have $13-million in asset-backed commercial paper including $7.5-million in the Apsley Trust, managed by Metcalf and Mansfield and $5.5-million in Planet Trust, managed under Coventree Capital.

First Quantum Minerals Ltd.: reported Monday investing $10.5-million (U.S.) in short-term notes with three trusts managed under Coventree Capital Group Inc.

Goldcorp Inc. : $14-million or less than 3% of its $600-million in cash.

Ivanhoe Mines: $66.5-million of holdings in Canadian asset-backed commercial paper, representing about 34% of its total cash position of about $200-million. Of that, $13.8-million is held with funds sponsored by Coventree Capital

Miramar Mining Corp.: about $37-million of its $135-million in cash was invested in Canadian asset-backed commercial paper including 14 notes administered by non-bank financial institutions. One of these notes with a principal amount of $2-million, sponsored by Nereus Financial Inc., was not paid on its Aug. 17 maturity date and remains outstanding.

Northern Orion Resources: about $14-million (U.S.), or 5.8 per cent, of its approximately $240-million in cash and cash equivalents is invested in a Canadian asset-backed commercial paper fund.

New Gold Inc. : holds about $152-million in notes with Coventree

RedCorp Ventures: $102.2 million entangled in the liquidity problems of Coventree Inc

Russel Metals Inc.: $11 million in Coventree asset-backed commercial paper, or short-term loans, came due Thursday.

Silver Standard Resources Inc.: has some $57-million of its $197-million in cash and silver bullion holdings is invested in the troubled paper. Of this, $43.8-million is in Coventree-sponsored funds, of which $14-million that came due August 22 and had not yet been repaid.

Southern Arc Minerals Inc.: invested about $1.4-million of its $2.25 million in cash is in Coventree-sponsored funds last month, and that repayment of these notes had been overdue since Aug. 17.

Superior Mining International Corp.: on July 20, it invested about $1-million of its total cash holdings of $1.15-million in notes issued by a Coventree-sponsored fund on HSBC's advice. The notes matured Aug. 17, but had not been paid off.

Non miners:

Canada Energy Partners Inc.: $1.7-million of its $2-million in cash into Coventree funds, and these, too, have been overdue since last Friday.

Dundee Bank of Canada: owns up to $400-million of now-unsaleable commercial paper.
The bank said it will get rid of all of its asset-backed commercial paper, except for that sponsored by major banks, by passing it up to its parent, DundeeWealth Inc., or to Dundee Corp., the public holding company through which Mr. Goodman controls his financial services and real estate empire.

Jura Energy Corp. : $14.9-million of its $31.5-million cash with Coventree.

Transat: $154.5-million of its cash is invested in 10 different ABCP trusts, “certain of which” are managed by troubled Coventree Capital Group Inc. ,

The Goldfarb Corp. : $17.1-million or about 55% of $31-million in cash

Nav Canada: has $368-million. About three-quarters of its cash is in non-bank ABCP.


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Altamira Exposure To Asset-Backed Trusts

As per the December 2006 financial statements, available at, the following Altamira funds contain one or more of the infamous Coventree or Metcalf and Mansfield's Aspley trusts, percentages and $ amounts shown as well:

Altamira Short Term Canadian Income Fund:

Commercial Paper (4.66%)
Storm King Funding Canada
4.36%, due January 23, 2007 200,000 199,214 199,214
Gemini Trust
4.47%, due March 7, 2007 1,000,000

Altamira Precision European RSP Index Fund:

Commercial Paper (38.55%)
S.A.T Trust
4.50%, due January 8, 2007 200,000
Storm King Funding Canada
4.36%, due January 23, 2007 700,000
Symphony Trust
4.47%, due February 6, 2007 1,000,000
Aurora Trust
4.47%, due February 8, 2007 800,000
4.47%, due February 22, 2007 1,000,000
Encore Trust
4.47%, due March 12, 2007 1,000,000

Altamira Precision International RSP Index Fund:

This one contains both Coventree and Metcalf and Mansfield funds.

Commercial Paper (57.99%)
Great North Trust
4.48%, due January 8, 2007 3,000,000
Aurora Trust
4.46%, due January 19, 2007 3,000,000
Devonshire Trust
4.46%, due January 19, 2007 5,300,000
Apsley Trust
4.46 %,due January 22,2007 3,000,000
Opus Trust
4.46%, due January 22, 2007 3,000,000
Storm King Funding Canada
4.36%, due January 23, 2007 900,000
Aria Trust
4.49%, due January 31, 2007 5,000,000
Encore Trust
4.47%, due February 6, 2007 3,000,000
Rocket Trust
4.47%, due February 6, 2007 3,000,000
4.47%, due February 6, 2007 3,000,000
Sitka Trust
4.47%, due February 6, 2007 2,500,000
Symphony Trust
4.47%, due February 6, 2007 3,000,000
Gemini Trust
4.47%, due February 7, 2007 3,000,000
Symphony Trust
4.47%, due February 7, 2007 3,000,000
Aurora Trust
4.47%, due February 8, 2007 3,200,000
Macro Trust
4.36%, due February 14, 2007 3,800,000
Smart Trust
4.36%, due February 14, 2007 3,000,000
Aria Trust
4.47%, due February 21, 2007 3,000,000
4.47%, due February 22, 2007 3,000,000
Encore Trust
4.47%, due March 12, 2007 2,000,000

Altamira Precision U.S. RSP Index Fund:

This one also contains both Coventree and Metcalf and Mansfield funds.

Commercial Paper (52.06%)
Great Nor
4.48%, due January 8, 2007 5,000,000
Aurora Trust
4.46%, due January 19, 2007 3,000,000
Apsley Trust
4.46%, due January 22, 2007 3,000,000
Opus Trust
4.46%, due January 22, 2007 3,000,000
Storm King Funding Canada
4.36%, due January 23, 2007 2,000,000
Encore Trust
4.47%, due February 6, 2007 3,000,000
Rocket Trust
4.47%, due February 6, 2007 3,000,000
4.47%, due February 6, 2007 2,300,000
Sitka Trust
4.47%, due February 6, 2007 2,500,000
Symphony Trust
4.47%, due February 6, 2007 2,500,000
Gemini Trust
4.47%, due February 7, 2007 3,000,000
Symphony Trust
4.47%, due February 7, 2007 2,000,000
Aurora Trust
4.47%, due February 8, 2007 3,000,000
Macro Trust
4.36%, due February 14, 2007 3,200,000
Smart Trust
4.36%, due February 14, 2007 3,000,000
Aria Trust
4.47%, due February 21, 2007 3,000,000
4.47%, due February 22, 2007 3,000,000
Encore Trust
4.47%, due March 12, 2007 2,300,000

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List of Coventree's Asset-Backed Trusts

These are the Coventree funds or trusts that contain asset-backed securities:


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