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Triple Crunch Log                                                                                                            

Systemic lying on mortgage-bonds will bring a new wave of horror down on the investment banks. So argues Felix Salmo for Reuters: “You thought the foreclosure mess was bad? You’re right about that. But it gets so much worse once you start adding in a whole bunch of parallel messes in the world of mortgage bonds. For instance, as Tracy Alloway says, mortgage-bond documentation generally says that if more than a minuscule proportion of notes in a mortgage pool weren’t properly transferred, then the trustee for the bondholders can force the investment bank who put the deal together to repurchase the mortgages. And it’s looking very much s though none of the notes were properly transferred. But that’s not even the biggest potential problem facing the investment banks who put these deals together. It also turns out that there’s a pretty strong case that they lied to the investors in many if not most of these deals. I mentioned this back in September, and I’ve been doing a bit more digging since then. And I’m increasingly convinced that the risk to investment banks isn’t only one of dodgy paperwork; there’s also a serious risk of massive lawsuits from the SEC or other prosecutors, as well as suits from individual mortgage investors. …..This is where things get positively evil. The investment banks didn’t mind buying up loans they knew were bad, because they considered themselves to be in the moving business rather than the storage business. They weren’t going to hold on to the loans: they were just going to package them up and sell them on to some buy-side sucker. In fact, the banks had an incentive to buy loans they knew were bad. Because when the loans proved to be bad, the banks could go back to the originator and get a discount on the amount of money they were paying for the pool. And the less money they paid for the pool, the more profit they could make when they turned it into mortgage bonds and sold it off to investors.”934

14.10.10. Analysts unimpressed by lifting of deepwater drilling ban, because conditions imposed mean time. FT: “Oil company stocks may have risen on the news that the Obama Administration was lifting the moratorium on deepwater drilling in the Gulf of Mexico, but analysts are not rushing to change their outlooks for these companies. The bottom line is that the decision does not mean it is business as usual for anyone operating in the Gulf of Mexico. The administration has imposed new regulations, including those requiring outside auditors to certify blowout preventers are in working order. The companies must file a more comprehensive cleanup plan than in the past, with enforceable obligations that ensure that containment resources are available. And chief executives must certify that they have complied with all the new regulations.  Beyond that, the authorities plan to inspect rigs to ensure compliance before permitting them to get back to work. The reality is that this will take time. The regulators were underfunded and undermanned before the disaster, and it is unlikely the extra funding granted last month to heighten oversight of offshore drilling - $25m - is going to drastically change things.”935

Google-power: the giant corporation is investing a “mission-critical need.” Guardian: “Energy is a mission-critical need for Google, so investing to help ensure a sustainable future supply of electricity is merely sound business sense. (Don't forget, it's not just data centres; it will have to have power for all those robot cars!) This seems to me comparable to hedging against future risk by buying currency contracts, or to investing in basic research, as IBM, Xerox and AT&T all used to do at one time. Is it more blue-sky for Google to seed windfarms than for IBM to have invented the scanning tunnelling microscope?”936

“Will green jobs eat all the brown jobs?” FT: The oil industry is worried about being able to attract talent in the face of competition from the green sector. “When I met Accenture this morning, they pointed out another element to this dilemma. In the UK, at least, oil rigs are about to be decommissioned. This will take considerable skill and expertise, not least because the rigs were never meant to be decommissioned. But where will that talent come from, if the whole industry is struggling to recruit?”937

Opec leaves production levels unchanged. FT: “Opec oil ministers have decided to keep their production quotas unchanged, declaring the world market remains “well supplied” and prices are at a satisfactory level.”938

GE sees “dramatic change” for industry including itself, as energy efficiency proliferates. FT: “General Electric, the company that was a pioneer of the electric light bulb, has warned that the industry is facing “dramatic change” that threatens the position of long-established market leaders as energy efficiency standards drive the adoption of new technologies. The traditional incandescent light bulb is set to be phased out in the US, starting in California at the beginning of 2011, following similar moves in the EU and Australia. Production of the more efficient compact fluorescent bulbs, which now fill the shelves in Europe, is heavily concentrated in China, which accounts for more than 90 per cent of global production. “The lighting industry is probably going to experience more change in the next five years than it has in the last 50,” Michael Petras, chief executive of GE Lighting, told the Financial Times. …. LEDs are expected to develop rapidly, and could make up 75 per cent of the market in 10 years, he said. The global lighting market is expected to expand at about 8 per cent a year to reach €80bn ($111bn) by 2015, according to Philips, GE’s European rival.”939

15.10.10. UK energy institute bosses say renewables policies must be improved, not undermined with cuts. Rob Gross of Imperial and Jim Watson of Sussex: “Investors are keen on clean technologies but nervous about political risks. There is no shortage of countries competing for clean investment with the UK. Britain enjoys an almost unique degree of political consensus on the need to tackle climate change. How ironic therefore that Britain's tax accounting rules might be allowed to consign effective policies to the dustbin, along the way making the UK a politically risky place to invest.”940

How electric cars could become a giant battery for renewable energy. Guardian: “By next year tens of thousands of Nissan LEAFs, Chevy Volts, and other electric vehicles will start rolling off assembly lines. The electricity generation and transportation sectors may seem like two disparate pieces of a puzzle, but in fact they may end up being intimately related. The connection comes in the form of the vehicle-to-grid concept, in which a large electric vehicle (EV) fleet — essentially a group of rechargeable batteries that spend most of their time sitting in driveways and garages — might be used to store excess power when demand is low and feed it back to the grid when demand is high. Utilities and electricity wholesalers would pay the EV owners for providing that power. … For V2G to work, though, the cars need to be able to communicate with system operators running the electrical grid — this can be accomplished with a simple Internet connection that could be built into the car's plug. That communication link and a power converter that lets electricity flow both in and out of the battery will allow an overtaxed electrical grid to draw power from a group of cars, and then charge them when there is plenty of electricity to go around. … Japanese carmakers, including Nissan and Mitsubishi, plan to start producing V2G-ready cars by mid-decade. Small pilot projects to test the idea are also underway

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