Gallimaufry

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http://noir.bloomberg.com/apps/news?pid=20601085&sid=ajz0UJSUoRkU


Thatcher’s Cabinet Saw Need to Educate Public on Spending Cuts
By Chris Spillane

Oct. 29 (Bloomberg) -- Margaret Thatcher’s first Cabinet decided it needed a campaign to educate the British public about the “economic facts of life” to gain acceptance for spending cuts and pay restraint, according to documents released today.

“We have to dampen down the deeply entrenched expectations among the public at large that their money incomes increase each year and that there is an entitlement for pay in line with some concept of a going rate,” Industry Secretary Keith Joseph wrote in a briefing note to Thatcher in July 1979, less than three months after their Conservative Party was elected.

The document is among 200 pages of correspondence published by the National Archives in London. Thatcher came to power after the 1978-79 “winter of discontent,” in which public-sector labor unions staged widespread strikes to protest Labour Prime Minister James Callaghan’s attempt to cap pay.

Nine days ago, the current Conservative government under Prime Minister David Cameron announced details of cuts totaling 81 billion pounds ($129 billion) by 2015, the biggest since World War II, to slash the record budget deficit. A total of 490,000 public-sector jobs will be lost.

“The government are committed to a high quality of public services, but their provision must be in line with what the economy can afford,” a 1979 briefing note said. “Over- ambitious public spending plans can only damage the wealth- creating sector of the economy.”

‘Dangerous Consequences’
The Thatcher government’s strategy was split in two, according to the documents. Firstly, there would be a quick campaign to influence the current round of pay negotiations, convince businesses that the government would attack inflation and “bringing home to trade unionists and the wider public the dangerous consequences of higher pay unrelated to higher output,” according to a memo.

Secondly, a “long campaign” would aim to gradually educate the public “in facts of economic life and the relevance of government policies to the country’s recovery.”

“Never in the whole of British postwar economic history -- not even in the oil crisis of 1974 -- has the economic outlook been so utterly bleak,” said one 31 year-old government memo.

In the third quarter of 1979, the economy shrank by 2.4 percent. That contraction hasn’t been equaled since then, with the drop in gross domestic product for the first quarter of last year having been revised up to 2.3 percent. The decline heralded the beginning of a slump that would last through the first quarter of 1981.

Though many in government delivered sobering assessments of the economy and the future, a Treasury special adviser, Peter Cropper, proposed offering optimism to the public.

“There is no hint of the reforming crusade that some of us think we are launched on,” he wrote. “No hint of the end goal of it all -- joy, wealth, national power, two acres and a cow, a second car in every garage, interesting jobs, leisure, comfortable trains, Channel Tunnels, atomic power stations, gleaming new coal mines, everyone a bathroom, patios for all etc., etc.,”

 

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Dayum!! They are finding A HELLUVA LOT of petroleum offshore Brazil.

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http://noir.bloomberg.com/apps/news?pid=20601086&sid=aQ5uIKgEK2fo


Brazil’s Libra May Be Americas Top Find in 34 Years
By Peter Millard and Jessica Brice

Oct. 29 (Bloomberg) -- Brazil said an offshore oil field may hold as much as 16 billion barrels of oil, twice previous estimates, which would make it the biggest crude discovery in the Americas in more than three decades.

The government’s Libra field in the Santos Basin off the coast of southeastern Brazil may have 7.9 billion to 16 billion barrels of oil, said Haroldo Lima, the head of the national petroleum regulator known as the ANP, according to the agency’s press office. Magda Chambriard, a director at ANP, said yesterday the agency will make an announcement on the find today. The agency’s press office declined to provide details.

Oil reserves of 16 billion barrels would make Libra the biggest find in the Americas since Mexico discovered Cantarell in 1976 and twice as big as state-controlled Petroleo Brasileiro SA’s nearby Tupi. Deepwater fields in Brazil’s so-called pre- salt region have yielded the largest discoveries outside the Middle East in the past decade, said Julius Walker, an oil supply analyst at the Paris-based International Energy Agency.

“Nobody is making discoveries like these anywhere at the moment,” Walker said in a telephone interview today. It “makes deepwater Brazil the most exciting new area.”

Libra and Tupi, both in Brazil’s Santos Basin, are located in a region that runs 800 kilometers (500 miles) off the coast, holding oil deposits beneath a layer of salt resting as deep as 3,000 meters (9,800 feet) beneath the ocean surface and another 5,000 meters below the seabed.

Petrobras Share-Swap
The Libra estimate is based on a study by Gaffney, Cline & Associates, Lima said yesterday at an event in Rio de Janeiro in remarks confirmed by the ANP’s press office. The consulting company was previously hired by the ANP to assess the value of 5 billion barrels of deep-water reserves in nearby fields that the government sold to Petrobras in exchange for stock.

Rio de Janeiro-based Petrobras raised about $70 billion last month in the world’s biggest share sale to help fund its $224 billion, five-year investment plan, the oil industry’s largest. Petrobras on Sept. 1 said it agreed to pay $42.5 billion in new stock for the 5 billion barrels of undeveloped reserves, including 3.1 billion from the nearby Franco field.

Under oil regulations passed this year, Petrobras will be the operator of all new concessions granted in the pre-salt area. Petrobras Chief Executive Officer Jose Sergio Gabrielli declined to comment yesterday on possible Libra reserves.

Spain’s Repsol YPF SA also has stakes in deep-water blocks of the Santos Basin. OGX Petroleo & Gas Participacoes SA, the Brazilian oil company controlled by billionaire Eike Batista, is exploring shallow waters of the basin and not the pre-salt area...

 

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I am getting very tired of having other people send me a bill to pay for their dreams.

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http://noir.bloomberg.com/apps/news?pid=20601103&sid=aAgftDo4OqN4


Google’s Wind-Power Grid Would Benefit From Disputed U.S. Rule
By Jim Snyder

Oct. 29 (Bloomberg) -- A U.S. proposal that may improve prospects for a $5 billion undersea wind-power grid backed by Google Inc. is sparking a fight between utilities and companies developing renewable energy.

The regulation drafted by the Federal Energy Regulatory Commission is aimed at spreading costs for transporting alternative power. Utilities such as Southern Co. say that may be a bad deal for their customers. The head of the regulatory agency says it would help make wind and solar energy competitive with coal and natural gas.

“Ultimately we have to get transmission built to move those clean-energy resources to the people,” FERC Chairman Jon Wellinghoff said in a phone interview. Energy from the wind and sun must be transported from the waters of the Atlantic Ocean, the plains of the Dakotas and the deserts of the Southwest to cities and suburbs where the power is needed, he said.

FERC determines whether transmission pricing plans submitted by regional grid operators and utilities are “just and reasonable.” Its proposed rule would mandate that the plans “account for transmission needs driven by public-policy requirements” -- including standards calling for the use of more renewable energy -- alongside cost and reliability.

Atlantic Grid Development, the Google-backed company that this month proposed to build a grid connecting offshore wind turbines, and Iberdrola SA, a Spanish developer of wind power, are among supporters of the proposal.

Utilities led by Southern of Atlanta and Public Service Enterprise Group of Newark, New Jersey, say the rule may force their customers to pay for long, expensive power lines when better local options are available.

‘Socializing’ Costs
FERC’s rule may lead to “socializing” transmission costs, said Sue Sheridan, president and general counsel for the utility-sponsored Coalition for Fair Transmission Pricing in Washington.

“We stand for the cheapest renewable resources,” she said in an interview.

More than 200 companies, interest groups and policy makers responded to FERC’s proposal. The agency will issue a final rule next year, Wellinghoff said.

The Energy Department has estimated that 20 percent of the electricity consumed in the Eastern Interconnection, a power grid running from the foot of the Rocky Mountains in the west to the Atlantic coast in the east, may come from wind by 2024 if $65 billion to $93 billion of new power lines were built.

Renewable Standards
President Barack Obama has called for legislation requiring that 25 percent of U.S. power come from renewable-energy sources by 2025, a proposal that remains stalled in Congress along with efforts to cap carbon emissions linked to global warming. Twenty-nine states and the District of Columbia already have their own renewable-energy standards, according to the Database of State Incentives for Renewables and Efficiency funded by the U.S. Energy Department.

The offshore grid Google is developing with Trans-Elect Development Co., Good Energies Inc., and Tokyo-based Marubeni Corp. in the Atlantic Ocean from Virginia to New Jersey would deliver power to the PJM Interconnection, a market that includes 13 eastern states and the District of Columbia.

“If you can take the transmission costs and allocate them to a broader group of beneficiaries it reduces the costs and promotes the offshore-wind industry,” said Elias Farrah, an attorney in Washington with Dewey & LeBoeuf and counsel to the venture backed by Mountain View, California-based Google.

Such a project may improve reliability, enable customers in the Northeast to buy cheaper power from the South and encourage development of cleaner offshore wind generation, Wellinghoff said.

Putting in ‘Backbone’
“By putting in this backbone, you basically help to bolster support for the system,” he said.

Utilities that oppose FERC’s proposal want to keep competing power generators away from their local markets by blocking transmission development, according to Rob Gramlich, senior vice president for public policy at the American Wind Energy Association, a Washington-based trade group whose members include Iberdrola.

Unless costs are spread over a wider area than some grid planners now require, green resources will remain untapped, Melissa Seymour, U.S. director of regional markets and regulation for Iberdrola of Bilbao, Spain, said in a phone interview.

Midwest’s Grid
The conflicts are already playing out in central states. The Midwest’s grid operator originally ascribed the costs of a 240-mile (386-kilometer) power line from Brookings County, South Dakota, to Minneapolis and St. Paul, Minnesota, to only part of the grid it oversees.

That plan would have raised the price of energy from Iberdrola’s proposed wind farms by 25 percent above market prices, making it unlikely the company would find customers to pay for the power, according to Seymour. “We couldn’t fund it,” she said.

Planners have since submitted a proposal to FERC to spread costs over the 13-state market run by the Midwest agency, known as the Midwest Independent Transmission System Operator. The plan is under review.

Michigan accounts for 20 percent of the Midwestern market so its consumers would pay a fifth of the $16 billion in transmission projects planned in the region under the revised plan even though they would get little benefit from the projects, Steven Transeth, a former state utility regulator, said in a phone interview.

While Michigan has a renewable-energy mandate, only power generated within state borders counts toward the requirement.

“For Michigan, it’s going to make it harder for us to attract businesses and keep the ones we have,” Transeth said. “We need to keep energy affordable.”

 

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http://noir.bloomberg.com/apps/news?pid=20601110&sid=ab7HM_bX0kcw


Stanford-Roche Patent Fight Draws U.S. Supreme Court Review
By Greg Stohr

Nov. 1 (Bloomberg) -- The U.S. Supreme Court agreed to use a case involving Stanford University and Roche Holding AG to clarify the rules that govern rights to inventions developed using federal funds.

The justices today said they will hear an appeal from Stanford, which is seeking to revive its lawsuit against a Roche unit over patents covering ways to test how well AIDS treatments are working.

A federal appeals court said Roche couldn’t be sued because it was a co-owner of the patents under an agreement with a scientist who divided his time between Stanford and a company that later sold its line of business to Roche.

Stanford contends that a federal law known as the Bayh-Dole Act supersedes any agreement between company and the researcher, Mark Holodniy. That 1980 law set up a system to allocate patent rights among the government, investors and institutions that receive federal funds.

Holodniy was working to develop a test for HIV, the virus that causes AIDS, using polymerase chain reaction technology. That technique, called PCR, involves making billions of copies of DNA sequences from a small number of starting molecules.

When Holodniy began working as a fellow at Stanford in 1988, he signed an agreement saying he would assign his patent rights to the university.

Research Collaboration
The following year Holodniy began making visits to Cetus Corp., which was collaborating with Stanford on the research. He signed an agreement giving that company rights to inventions stemming from his work there. Roche later bought Cetus’s PCR business.

Holodniy’s research, along with that of other Stanford employees, eventually led to three patents being issued to the university.

The university contends that, because the underlying research was funded in part by the federal government, the Bayh- Dole Act barred Holodniy from assigning his rights to Cetus.

The U.S. Court of Appeals for the Federal Circuit in Washington disagreed. The panel said that Holodniy’s agreement with Stanford was only a promise to assign his rights at a future date, meaning that the Cetus transfer took priority.

The case may pit universities and the federal government against companies. The Obama administration, the Massachusetts Institute of Technology and the Association of American Universities are all backing Stanford.

Roche, the world’s largest maker of cancer drugs, is based in Basel, Switzerland.

The case is Board of Trustees of the Leland Stanford Junior University v. Roche Molecular Systems, 09-1159.

 

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http://noir.bloomberg.com/apps/news?pid=20601110&sid=ate3HdpJB9So


Titanium Find in Paraguay May Be World’s Largest
By Elliot Blair Smith, Nathan Crooks and Wing-Gar Cheng

Nov. 4 (Bloomberg) -- The American explorer who discovered the world’s biggest copper deposit in Chile has staked a claim in Paraguay to what he says may be the largest titanium find.

David Lowell, 82, the president of closely held CIC Resources Inc., controls mineral rights to at least 185,000 hectares (457,000 acres), according to Paraguay’s sub-ministry of mining and energy. That is an area the size of London. The possible resources are 21 billion metric tons, Lowell said.

“Our deposit could control the world titanium market, a big enough piece of production that whoever operates it would dictate what the price is going to be,” Lowell said in an interview. “And the price, presumably, would be reduced by having higher-grade ore and large tonnage.”

The geologist is in Hong Kong this week presenting his discovery to investors at a conference on the global titanium market sponsored by TZ Minerals International, a Western Australia consulting firm that specializes in the mineral. The project could produce between 5 million and 10 million tons of titanium ore per year with a potential operating life of 100 years, he said today outside the conference.

Indicated and inferred resources are 5.3 billion tons at an ore grade of 7.8 percent, Lowell said. Ore concentrate is quoted at $90 to $110 a metric ton depending on the grade, according to Reg Adams, a titanium dioxide researcher at Artikol N.L. in London.

Save Costs
Chinese companies are among potential buyers Lowell said he is talking with. The nation’s manufacturing and construction industries are driving demand for ore that produces the white pigment found in paint, paper, plastic and even toothpaste as well as light-weight aerospace materials. Boeing Co.’s new 787 Dreamliner, which is slated to enter service this year, and the construction of industrial plants such as water-desalination facilities, also boost demand for the metal.

The mineral “has a high strength-to-weight ratio,” Lowell said. “If you could reduce the price sufficiently, you could build all commercial airliner bodies out of it and save fuel costs on long flights. The same goes for automobiles.” His company, CIC Resources, is based in Vancouver.

While the material is abundant in the earth’s crust, the 2008 financial crisis delayed new ore production, says Gary McMahill, a senior consultant at DuPont Titanium Technologies, the world’s largest manufacturer of titanium dioxide pigment. It is a unit of DuPont Co. in Wilmington, Delaware.

“Now what we’re seeing is a tightening of supply,” McMahill said in an interview.

Economies of Scale
Lowell’s claim is in the Alto Parana district in eastern Paraguay near the border with Brazil. The ore he says he has found is known as ilmenite, the type predominately used in China. Some of the world’s largest known deposits of ilmenite are in Mozambique, Madagascar and South Africa, according to Ben Coetzee, a TZMI consultant based in Durban, South Africa. Continental Africa accounts for half the world’s supply of the material, he said.

“If you find an ilmenite deposit that is rich enough and large enough, that would be interesting to us,” Victor Hugo, general manager for product and technical development at Australia’s Iluka Resources Ltd., said at the conference. Iluka is a Perth-based titanium miner and processor.

Mining ilmenite needs economies of scale because it’s a low-cost input in a range of products, said Trevor Arran, executive general manager for mineral sands and base metals at Exxaro Resources Ltd., a South African producer of titanium, zinc and coal.

The project would require a $500 million investment to get 5 million metric tons a year of ore, Lowell said.

Price Projection
Two of the world’s largest mining companies, Melbourne, Australia-based BHP Billiton Ltd. and London-based Rio Tinto Group, jointly operate the Richards Bay Minerals titanium dioxide mines in South Africa, among the world’s biggest. Rio Tinto also owns a titanium dioxide operation in Quebec.

Producers include Huntsman Corp., based in Salt Lake City, Kronos Worldwide Inc. in Dallas and National Titanium Dioxide Co., part of Saudi Arabia-based Cristal Global.

Asia-Pacific demand for pigment was expected to grow 30 percent to 2.16 million metric tons between 2008 and 2013, according to a TZMI estimate published earlier this year by Cristal Global.

Paraguay Legislation
In March 1981, Lowell unearthed the Escondida copper deposit, the world’s largest, in Chile’s Atacama Desert. It produced $6 billion of copper last year, according to majority owner BHP. Two Chinese companies paid a combined $1.5 billion for two copper discoveries he made earlier this decade in Peru and Ecuador.

In September, the lower house of Paraguay’s congress passed a law to strengthen mineral claims in a country that has no history of large-scale mining. Juan Antonio Denis, head of the mining and energy committee in the Chamber of Deputies, said in an interview that Lowell requested the legislation.

Lowell “told us we had to adjust our legislation to regional standards, and that’s what we set out to do,” Denis said. “We want David Lowell to come work in Paraguay.”

The legislation is now before the senate.

“There will be a time lag inevitably to get the mine constructed, at least three to five years,” said Adams at Artikol. “In a place like Paraguay, they may be into making infrastructure improvements as well.” He described Lowell’s discovery as “huge.”

 

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http://www.jpl.nasa.gov/images/earth/20100325/atlantic20100325-640.jpg

NASA Study Finds Atlantic 'Conveyor Belt' Not Slowing
http://www.jpl.nasa.gov/news/news.cfm?release=2010-101

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I'll bet you weren't aware of the extent of the trans-Atlantic trade in gasoline and diesel fuel— very few people are.

Importation of gasoline from Europe can have a surprisingly large effect on U.S. gasoline prices.


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http://noir.bloomberg.com/apps/news?pid=20601110&sid=a9k2sg5ZAxdc


Gasoline Exports to U.S. Sink on French Strikes
By Rachel Graham and Moming Zhou

Nov. 5 (Bloomberg) -- The profit from shipping gasoline to the U.S. from Europe slumped to a 20-month low in October as strikes in France caused domestic shortages, cutting exports.

U.S. gasoline cost 8.05 cents less than Europe’s on Oct. 19, the lowest level since February 2009, and is still down 9.5 percent from its average of 8.41 cents more than Europe’s in the past year. As the premium disappeared, the number of tankers chartered to ship the motor fuel to the U.S. Atlantic Coast from Europe dropped to 10 last month, from 28 in September, according to data compiled by Bloomberg and Clarkson Research Services Ltd., a unit of the world’s biggest shipbroker.

Strikes in France over plans to raise the pension and retirement age shut nine of 11 French refineries, leaving service stations without fuel and slashing stockpiles. The disruption cost oil-processors 230 million euros ($325 million), according to Union Francaise des Industries Petrolieres, a Paris-based industry group. Total SA, Europe’s biggest refiner, said it lost about 100 million euros.

“Europe is asking for more diesel and sending less gasoline as a result of the French strikes,” said Christophe Barret, a London-based oil analyst at Credit Agricole CIB, France’s third-largest bank. “French stocks have to be rebuilt.” The protests cut French gasoline exports by 100,000 barrels a day this month and last, he said.

Vessels carried 375,000 metric tons of gasoline to the U.S. in October, compared with 1.08 million tons in the previous month. The French protests also led to a 31 percent increase in diesel exports to Europe to meet shortfalls.

Falling Demand
“There’s not enough of a differential to encourage a lot of volume to the U.S.,” said Thomas Zwick, an analyst at shipping consultants Lorentzen & Stemoco AS in Oslo, referring to gasoline.

U.S. gasoline demand fell 0.8 percent last week, the second consecutive drop, MasterCard Inc., the second-biggest payments network company, said in its Nov. 2 SpendingPulse report. Motorists bought an average 9.03 million barrels a day in the week ended Oct. 29, it said. Consumption was the lowest in three weeks.

Inventories dropped 2.69 million barrels in the week ended Oct. 29 to 212.3 million, according to the U.S. Energy Department. That’s the lowest level since Nov. 20 last year, leaving supplies 6 percent above the five-year average.

“Some gasoline volumes from other parts of Europe were diverted to France, and that has been reflected in lower European exports to the United States during September and October,” the Energy Department said in its Nov. 3 “This Week in Petroleum” report.

Diesel Tankers
Diesel shipments from the U.S. to Europe jumped in October as premiums climbed to the highest level in almost 10 months. Traders and oil companies chartered at least 12 tankers for shipments from the U.S. Gulf Coast last month, up from eight in September, according to Clarkson. The vessels carried 456,000 tons, compared with 348,000 tons in September.

The premium, or arbitrage margin, on European diesel relative to the U.S. rose to 13.21 cents a gallon on Oct. 19, the highest level since Dec. 9, 2009, according to spot price data compiled by Bloomberg, up from an average 7.75 cents in October and 4.67 cents in September. It was 6.3 cents yesterday.

“The transatlantic diesel arbitrage was opened by both planned and unexpected refinery outages in Europe and was widened by the French refinery strikes,” said Filip Petersson, a Stockholm-based commodities strategist at SEB AB. “We expect the diesel arbitrage to stay open at least into early 2011.”

Heating Oil, Diesel
European refineries don’t produce enough distillate to meet demand in the region, where diesel-engine cars are commonplace. About 600,000 barrels a day, or 10 percent of its needs, was covered through imports last year, according to Jonathan Leitch, a London-based senior analyst at Wood Mackenzie Consultants Ltd. Russia was the biggest supplier, he said.

Heating oil and diesel stockpiles in France fell to 53.2 million barrels at the end of October, Barret said. That’s down from 63.7 million at the end of the previous month and below the average of 61.3 million barrels from 2003 to 2008, according to Credit Agricole estimates.

French inventories of heating oil and diesel fell below 53 million barrels at the end of last month, Credit Agricole reported on Nov. 1. They probably won’t return to the 2003-2008 average level of about 61.6 million barrels until the middle of next year, it said.

Distillate stockpiles in the U.S. fell for a sixth week on a drop in imports, declining 3.57 million barrels to 164.9 million, the Energy Department said. It was the biggest decline since the week ending April 3, 2009.

The shipping fixtures from Clarkson in London were for single-voyage bookings, and excluded long-term charters.

 

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In Nigeria, I don't think anything happens unless somebody's palm is greased. It may be the world's most corrupt country.

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http://noir.bloomberg.com/apps/news?pid=20602099&sid=aA07DT_xfIT4


Shell Bribes Among ‘Culture of Corruption,’ Panalpina Admits
By David Voreacos and Laurel Brubaker Calkins

Nov. 5 (Bloomberg) -- Bribes paid on behalf of Royal Dutch Shell Plc’s Nigerian unit came from “a culture of corruption” that Swiss freight forwarder Panalpina World Transport Holding Ltd. admitted in a U.S. court yesterday.

Panalpina, Shell and five oil services companies agreed to pay $236.5 million to settle probes by the U.S. Justice Department and Securities and Exchange Commission. Panalpina, which admitted to bribing government officials in hundreds of ways in seven nations, will pay $81.5 million. Shell will pay $48.1 million.

Prosecutors agreed to defer prosecution of five companies, including Panalpina and Shell. Panalpina said it paid at least $49 million in bribes to government officials in Angola, Azerbaijan, Brazil, Kazakhstan, Nigeria, Russia and Turkmenistan. The bribes from 2002 to 2007 let its clients avoid the customs process, pass off phony documents or smuggle contraband including medicines and explosives, Panalpina said.

“Prior to 2007 a culture of corruption within Panalpina emanated from senior level management in Switzerland who tolerated bribery as business as usual,” the company said in a 34-page statement filed in federal court in Houston. “Dozens of employees throughout the Panalpina organization were involved in various schemes to pay bribes to foreign officials.”

The company said Shell’s Nigerian employees “specifically requested Panalpina Nigeria to provide false invoices with line items to mask the nature of the bribes.” Shell wanted to “hide the nature of the payments to avoid suspicion if anyone audited the invoices,” Panalpina said.

Panalpina, based in Basel, Switzerland, dropped 4.1 percent to 123.2 francs ($128.63) yesterday, ending an eight-day rise.

Shell Bribes
Shell separately admitted paying $2 million to Nigerian subcontractors on its deepwater Bonga Project. Shell knew some money would go as bribes to Nigerian officials to circumvent the customs process and give the company “an improper advantage,” according to its admission in federal court in Houston.

Prosecutors charged Shell’s Nigerian subsidiary with conspiring to violate the anti-bribery and books and records provisions of the FCPA. The Justice Department will defer prosecution for three years as long as the company makes required reforms.

The SEC said Shell, based in The Hague, reaped about $14 million in profit as a result of the payments related to the Bonga Project.

Panalpina helped oil and gas industry customers move rigs, ships, workboats and other equipment in Nigeria. Its workers there had 160 different terms for bribes, like “evacuations” and “export formalities,” while its Kazakh workers called them “sunshine” and “black cash,” Panalpina said.

Throughout Government
The bribes in Nigeria were spread throughout the government for specific transactions, while some were weekly or monthly allowances to ensure “officials would provide preferential treatment to Panalpina and its customers,” the company said.

Knowledge of the bribes reached the directors, where a former chairman “actively resisted” an outside auditor’s proposal in 2001 to adopt a code of ethics with an anti-bribery provision, according to the statement.

The criminal probe of Panalpina, which had 15,000 workers in 80 countries, began in 2006, and the company’s cooperation after 2007 was “exemplary,” according to a Justice Department filing yesterday.

“Panalpina acknowledged and accepted responsibility for misconduct, investigated and identified the nature and extent of the misconduct,” and undertook a global remediation program, said a court filing by Panalpina and prosecutors.

New Management
The company replaced most of its top leaders, as well as U.S. managers implicated in improper conduct, ended its Nigerian business in 2007, and changed its operations in high-risk countries, according to the filing.

“The settlement of these claims marks the closing of an extremely burdensome chapter in Panalpina’s history and the end of a very demanding three-year effort to address and eliminate serious concerns,” Chief Executive Officer Monika Ribar said in a statement yesterday.

Prosecutors filed a two-count criminal charge accusing Panalpina World Transport of conspiracy to violate the Foreign Corrupt Practices Act and a violation of the law’s anti-bribery provisions. Panalpina U.S. will plead guilty to conspiracy to falsify books and records and to aiding and abetting those violations of the FCPA.

The company also settled a lawsuit with the SEC.

Bribed Shipments
In Nigeria, the company established Pancourier Inc., which used distinctive packaging to alert Nigerian customs officials to bribed shipments. As a result of bribes, the unit’s shipments sailed through customs without required paperwork or a pre- inspection process that “could take weeks to complete,” according to the SEC.

Bribes were paid to sidestep Angolan immigration laws, the SEC said. Angolan officials were bribed to fake employees’ exit and entrance documents, overlook visa inspections, and avoid deporting employees who overstayed visas, the agency said.

One scheme involved bribing Angolan military officers so customers could “use military cargo aircraft to transport their commercial goods,” according to the SEC.

The other companies that settled with the U.S. were Transocean Ltd., Tidewater Marine International Inc., Pride International Inc., GlobalSantaFe Corp. and Noble Corp. GlobalSantaFe merged with Transocean in 2007. Transocean is the world’s largest offshore drilling contractor. Tidewater is the world’s largest offshore energy support-services company.

Pride International will pay $56.1 million; Transocean will pay $20.6 million; Tidewater will pay $15.7 million; Noble will pay $8.1 million; and GlobalSantaFe will pay $5.9 million, authorities said.

The cases are SEC v. Noble Corp., 10-cv-4336; SEC v. Panalpina Inc., 10-cv-4334; SEC v. Pride International, 10-cv-4335, U.S. District Court, Southern District of Texas (Houston); and SEC v. Transocean Inc., 10-cv-1891, U.S. District Court for the District of Columbia (Washington).

 

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Lupus treatment under FDA review
By Lisa Richwine

WASHINGTON (Reuters) - Biotech company Human Genome Sciences Inc stands on the verge of blockbuster success with a new drug for a debilitating disease that has frustrated researchers for decades.

Benlysta is expected to become the first medicine approved for fighting the autoimmune disease lupus in a half-century. Positive study results last year sparked a flood of interest from investors and patients, and U.S. regulators now are weighing whether to grant marketing approval.

Wall Street expects the drug to get a green light later this year or early next year, particularly since current lupus therapies are limited and can produce serious side effects.

"Given the paucity of treatments out there for lupus right now, that's one big factor in favor of this drug," said Morningstar analyst Meera Venu, who predicts a 70 percent chance of approval.

The drug's annual sales may hit $2.2 billion globally in 2014, according to Thomson Reuters consensus forecasts. Some analysts predict peak sales as high as $3 billion to $4 billion a year, which Human Genome will split with partner GlaxoSmithKline. That would put the medicine in league with biotech's major successes and move Human Genome from an unprofitable company to an industry star.

First, Benlysta must pass scrutiny from regulators.

A preliminary Food and Drug Administration review is due for release next Friday ahead of a November 16 advisory panel meeting where outside experts will provide input. The FDA is due to deliver a final ruling by December 9.

Regulators will consider how well the drug helped patients with lupus, which causes the immune system to attack the body's own tissue and organs, leading to arthritis, kidney damage, chest pain, fatigue, skin rash and other problems.

In company-funded studies, more patients given Benlysta saw an improvement in symptoms compared with current standard care, which typically includes immunosuppressant drugs such as Roche's CellCept and steroids such as prednisone.

One of two positive studies showed 43 percent of patients given a high Benlysta dose with standard therapies felt relief and no disease worsening in various organs after one year of treatment. That compared with nearly 34 percent with a placebo and standard care.

Data made public so far offer a strong case for the drug, analysts say, although there is always a chance the FDA or the panel could focus on an unknown or little-noted issue.

Benlysta, known generically as belimumab, is given once a month by intravenous infusion.

The drug is designed to inhibit BLyS, a protein in the body that exists to keep B-cells functioning normally. B-cells make antibodies that prevent infection. In lupus patients, B-cells are overstimulated and make antibodies that attack the body.

The FDA may want the advisory panel's input on a small excess number of cancers reported in Benlysta patients or questions about how long treatment should last, they said.

A final FDA ruling could stretch beyond December as the agency may need more time to consider the panel's input, analysts said.

Approval is "almost certain by 2011, but the possibility of some administrative delay should not be ignored," Sanford Bernstein analyst Geoffrey Porges said in a research note.

Analysts expect the drug will cost between $15,000 and $30,000 per patient a year, a price tag in line with biotech medicines for other autoimmune diseases.

An estimated 5 million people worldwide have the disease, and many cannot find relief with current drugs or suffer harsh side effects such as severe bone loss from steroids.

Hopes for effective and safer alternatives were raised, and dashed, in recent years when several companies failed in attempts to develop new treatments.

"There is really a more-than-urgent need for safe, effective, tolerable treatments of lupus. We have had many failures in the past," said Sandra Raymond, president of the Lupus Foundation of America.

Positive findings for Benlysta have created a buzz among patients. Many are lining up to speak at the FDA's public meeting to urge approval.

One of them is Janice Fitzgibbon, a 54-year-old lupus patient who took part in the Benlysta trials. She has been treated with the drug for at least six months and possibly longer as she hasn't been told if she got Benlysta or a placebo during the study's original phase.

Before the trial, Fitzgibbon said she had episodes of crushing fatigue and other symptoms that sharply curtailed her life. After joining the study, "I went from half-dead to totally alive," she said.

Stories like these are generating excitement among patients. Still, Benlysta will not help for everyone and long-term side effects for a drug that could be taken for years remain unknown. The company plans initially to target about 200,000 U.S. patients with moderate to severe lupus.

"It's not going to work for every single person with lupus. We need an arsenal of medicines to treat this very diverse disease," Raymond said.


http://finance.yahoo.com/news/Human-Genome-pins-blockbuster-rb-7867494.html?x=0&.v=1

 

[trysail]

Goddamn! I know it's a long article but what an amazing story!


___________________________

http://noir.bloomberg.com/apps/news?pid=20601109&sid=aE3qSY67pEeQ&pos=15


Octogenarian Finding Most Copper With China as Biggest Customer
By Elliot Blair Smith

Nov. 5 (Bloomberg) -- In the snake-infested jungle of southeastern Ecuador, the American explorer David Lowell found himself sliding over a waterfall and heard his head bounce off a rock “like a melon being hit by a hammer,” he says.

Lowell was 72 and prospecting for copper that day in May 2000. He stepped into the slippery streambed for a vantage point free of vipers and vines. A broken rib and throbbing head diverted him to a nearby hamlet in search of help.

“There was one man in the village who was a combination chiropractor and mortician,” Lowell says. “We decided to just buy a little tin of liniment with the picture of a dragon on it.” The expedition carried on.

In the clear water of the stream, Lowell saw enough to help him find one of South America’s richest copper deposits. This May, a joint venture of Chinese state-owned companies paid $652 million to buy Lowell’s partner in the exploration, Vancouver- based Corriente Resources Inc. Lowell kept a stake there for himself, though local opposition has prevented mining.

In a career spanning six decades and 44 countries, Lowell has made 14 major discoveries, including the world’s largest copper deposit in Chile. He found treasures where others detected nothing worth mining. Lowell revolutionized exploration and unearthed metals that helped the U.S. build the world’s largest economy. He also made investors billions.

Titanium Discovery
Now, China is his biggest customer as it develops faster than any country in history. Chinese state-owned companies paid $1.5 billion for two of Lowell’s biggest prizes -- the riverbed of ore in Ecuador and a copper-filled mountain in Peru. The geologist is in Hong Kong this week telling potential investors about what he calls the world’s largest discovery of titanium, in eastern Paraguay. Lowell says he controls mineral rights there to at least 185,000 hectares (457,000 acres). That is an area the size of London. Titanium dioxide produces the white pigment found in paint, paper, plastic and light-weight aerospace metals used to build Boeing Co.’s new 787 Dreamliner.

China is shopping for mineral resources around the world. Its copper use is growing so quickly that by 2035 global demand for the metal may outstrip supply by 11 million tons, according to CRU, a London-based mining and metals consulting firm.

‘He’s a Legend’
That will keep Lowell’s services in demand. As a globetrotting explorer-turned businessman, he founded and sold two publicly traded companies. He has also survived grizzly bears in British Columbia, a helicopter crash in Peru, insurgents in the Philippines, and a murderous mule while distracted by a half-naked woman in the Dominican Republic.

“He’s a legend,” says Marcel de Groot, the chairman of Luna Gold Corp. in Vancouver, which retains Lowell as a consultant on a Brazilian mining project. “There’s a lot of people who have plumbing and copper because of him.”

Humans have been digging up the world’s oldest metal and using it in coins, cooking pots, pipes and roofs for 10,000 years. Today, copper provides the electrical nervous system for the cars, computers and microwaves that China cranks out for its own 1.3 billion people and the rest of the world.

Lowell’s influence is widening even as America’s industrial might has declined. U.S. copper production peaked at 48 percent of world supply in 1945, his freshman year at the University of Arizona in Tucson. It accounts for 8 percent today. American iron-ore extraction topped out in 1970, lead in 1973 and uranium in 1980. While the U.S. economy is still almost three times larger than China’s, Lowell says he worries that America’s reliance on finance and technology will stretch only so far.

‘Greatest Explorer’
“You also have to have the nuts and bolts -- and the copper and the iron, and the rare earths, and make copper wire and make television sets and make automobiles -- to be important in the world,” he said during an interview at his pomegranate- shaded 19th-century ranch in Arizona. Two English springer spaniels, Ginger and Spooky, lie at his feet. Plaques and certificates cover one wall. The American Mining Hall of Fame inducted him in 2002 and the Australian Journal of Mining named him “World’s Greatest Explorer” in 2004.

Lowell isn’t through at the age of 82. Surrounded by a collection of antique mining lanterns, including the carbide lamp that saved his life in 1949, he says he is leading explorations in five South American countries, including Paraguay. They are mostly armchair expeditions in a concession to age, after a lifetime of riding canyon trails.

Boot-Leather Muleskinner
“He’s one of the last, best, boot-leather and muleskinner geologists in the world,” says John Guilbert, 79, a retired University of Arizona professor of exploratory geology. Guilbert and Lowell developed a theory of minerals exploration that bears their names. Guilbert estimates that Lowell has found more copper than anyone who ever lived.

Lowell’s treasure-hunting began at age seven, during the Great Depression when Franklin Delano Roosevelt was president. Accompanied by his dog Rags, he hand-sorted silver samples in Arivaca, Arizona, for his father, Arthur Currier Lowell, a perennially cash-strapped, self-employed miner. The Lowells descended from a New England family that gave the country a Harvard University president and poets James, Amy and Robert.

Skinny, rebellious and indifferent in the classroom, Lowell says his mother Lavina considered him the least promising of her children. He was competing in rodeos and finishing high school when his older brother, a Marine officer, died in the Battle of Iwo Jima.

Calculus Do-Over
His undergraduate degree from the University of Arizona’s College of Mines hinged on scoring a B in a calculus course he was retaking. The teacher was a young woman. He recounts handing her an orchid with his final exam and explaining his predicament.

“I got the B,” he says. “I may have deserved it. I’m not totally sure of that.” Lowell later endowed a master’s degree program at his alma mater. In 1957, he earned a master’s in geology at Stanford University in Palo Alto, California.

On his first job as a mining engineer in 1949, at a silver and lead mine in Mexico, Lowell survived a near-disaster that set the tone for his career. A mile underground, the waning light from the flame in his carbide lamp signaled a life- threatening shortage of oxygen, he says. While clambering to safety on a ladder, Lowell temporarily lost consciousness and dropped the lucky lantern down a shaft, recovering it later.

Murderous Mule
In the early 1960s, Lowell was prospecting for copper on muleback in the Dominican Republic when he spied a half-naked woman washing clothes on a distant river bank.

“I thought, well, part of my mission is to be able to describe the flora and the fauna, so I’d better take a good look,” he says. The mule sensed his distraction and galloped toward a tree branch in line with the saddle. “I was able to throw my feet out of the stirrups and lay back on the saddle, and the limb just scraped across the front of me.”

Between close calls, Lowell was taking note of mineral- formation patterns in large, low-grade deposits known as porphyry copper. His observations would change the way prospectors read geological clues and lead to some of mining’s most spectacular finds. Lowell theorized that porphyry formations share a common geology that can be used to detect commercially productive copper deposits around the world.

Copper Prospecting Theory
Lowell’s insight drew from his understanding of how copper- containing rock formed 150 million years ago when dinosaurs walked the earth and the planet was undergoing violent change.

Copper and other minerals rose from the earth’s hot, high- pressure mantle on prehistoric molten waves of magma called plutons. A bubble of water, silica, copper and gold formed at the tip of each mass as it migrated toward the cooler surface. Materials with the highest melting points solidified first and farthest down, creating a floor for copper, gold and other minerals, which cooled and crystallized in layers.

Copper is deposited along with some of these minerals in concentric rings, or halos. They are gray in the center, white in the surrounding zone of quartz sericite and green in the outer zone, as Lowell explains the theory. The rings can extend for miles and tilt at any angle, making the clues hard to see and interpret.

Nyal Niemuth, chief mining engineer at the Arizona Department of Mines and Mineral Resources in Phoenix, likens the principle to the story of three blind men who discover an elephant by identifying its tail, ear and tusk.

Finding an Elephant
“It lets us see part of the elephant, and know where the rest of the elephant is,” Niemuth says.

Lowell applied this thinking while working as a consultant for Newmont Mining Corp. at its underground San Manuel copper mine in Arizona in 1965. He collected rock samples to support his idea that the recurring mineral halos, previously unrecognized, could be used to find copper.

Yet as Lowell roamed the mine, which was situated along a geologic fault, the pattern “didn’t make sense” unless the ore body had been turned on its side and severed by a violent realignment of the earth’s surface, he says. He surmised the deposit was part of a larger copper cylinder that had been sliced in two, leaving the rest to be found.

Newmont wasn’t interested in his idea, Lowell says. So he sold the proposition to a unit of the Texas oil company Quintana Petroleum Corp., founded by the late industrialist Hugh Roy Cullen. Lowell led the exploration in clear view of the San Manuel mine. He found the missing section, which Quintana’s chief named Kalamazoo, for the Glenn Miller swing tune, “I’ve Got a Gal in Kalamazoo.”

Kalamazoo Discovery
“He drilled 26 holes into that fault-displaced portion of the San Manuel ore body, and 25 of them were in ore,” says Guilbert, whom Lowell brought on as a consultant. “That’s unprecedented. And it’s because he knew from the shape and size of the San Manuel side what the shape and size of the Kalamazoo side would be.”

Quintana paid Lowell a finder’s fee of $120,000, his biggest payday yet, and sold Kalamazoo to Newmont in 1968. Its ultimate owner, now part of Melbourne, Australia-based BHP Billiton Ltd., shut the project down and dismantled the works three decades later amid falling copper prices.

Lowell and Guilbert went on to study 27 porphyry copper deposits around the world. In June 1970, they published their minerals-zoning theory in the journal Economic Geology.

Boots of Soldier
With the mind of a detective and the boots of a soldier, Lowell used the theory over and over again in ensuing years. The biggest strike came a decade later when Lowell put the idea to work while living in a tent and exploring Chile’s Atacama Desert. It is the driest place on earth. Some parts haven’t had a drop of rain in centuries. Movie makers use the sterile landscape to portray Mars. NASA has tested exploration equipment there.

This treasure hunt was for a partnership of companies later absorbed by San Ramon, California-based Chevron Corp. and BHP, the world’s largest mining company by market capitalization.

As Lowell’s team trudged across the desert gathering rock samples, he wasn’t seeing the usual surface clues consistent with his theory. He found traces of lead, zinc and molybdenum, which are signs of copper enrichment, but not the form of a yellowish stone called limonite that he was seeking.

Lowell theorized that moisture had risen from a water table deep in the earth and evaporated on the surface, leaving corrosive salt crystals that destroyed the mineral patterns he was accustomed to finding. Hand-dug pits showed those mineral rings existed just beneath the surface.

La Escondida
On March 14, 1981, drilling confirmed a mother lode of copper. Named Escondida, Spanish for “hidden,” it is the world’s biggest copper deposit. Two open pits cover an area almost four times the size of New York City’s Central Park and almost a third again as deep as the Empire State Building is tall. Escondida has yielded 16.6 million metric tons of copper over the past two decades, worth $138.2 billion at today’s price, based on data compiled by the Chilean Copper Commission. Sales last year totaled $7.1 billion, according to BHP.

During the exploration, Lowell feuded with geologist Siegfried Muessig, one of the project managers, both men say now. Muessig challenged Lowell’s decision to drill test holes in an area where five other companies had failed to find copper.

“Sig Muessig had decided that I was incompetent and the project was ill-advised,” Lowell says. In a 1998 interview for the University of California at Berkeley’s Bancroft Library, he said, “We were having louder and louder decibel arguments.”

After unpromising results from the first five holes, the sixth proved Lowell right. Yet the companies backing the search replaced Lowell as project manager, he says, under “the pressure of Sig Muessig.”

‘Difficult Guy’
“Dave is an excellent explorationist,” says Muessig, 88, now retired in Claremont, California. “But I’ve also told him he’s a very difficult guy.”

Lowell has rubbed other colleagues the same way. His independent streak clashed with Corriente’s management controls in Ecuador, says Ken Shannon, the company’s former chief executive officer.

“David is a lone-wolf operator, and I’m a collaborative kind of guy,” said Shannon, 56, in an interview. The men negotiated a split of Lowell’s discoveries, with Corriente retaining the deposits acquired in May by China’s Tongling Nonferrous Metals Group and China Railway Construction Corp. Lowell kept rights to a more remote 20,000 hectares.

Education of Entrepreneur
For finding Escondida and the adjacent Zaldivar copper field, Lowell was paid $4.5 million. It wasn’t until he met Catherine McLeod-Seltzer, a Canadian investment banker, at a cocktail party in Santiago, Chile, in 1992, that he began to leverage his mine-finding acumen into management control and even bigger cashouts.

McLeod-Seltzer, now 50, showed Lowell how to build publicly owned companies around his adventures rather than just taking consulting fees. In January 1993, she followed Lowell to Peru and formed Arequipa Resources Ltd. to sponsor and own his next project. That set up Lowell as chairman and a stockholder to profit from whatever he found.

While McLeod-Seltzer raised investor capital, he hunted for gold in Peru’s Cordillera Negra range. The mountains were occupied by Shining Path terrorists, and accessible only by foot or on horseback, at a time when political instability and state ownership of mining had scared off most prospectors.

Three days after Christmas 1995, Lowell says he received laboratory confirmation of a major gold find. The following July, as he mapped out the extent of the claim, Toronto-based Barrick Gold Corp. made a hostile takeover bid. Lowell says he drilled faster to expand the discovery and his company’s value.

A month later, Barrick raised its offer and bought Arequipa for $790 million, an almost 30-fold increase in the shares’ value from a year earlier. Lowell owned stock worth $63 million, according to published accounts at the time. The deposit held about 8 million ounces of gold, Barrick says. That would be worth $11.1 billion today.

Wedding Rings
As part of the deal, Barrick agreed to turn over Lowell’s original gold samples to McLeod-Seltzer. She used them to make wedding rings for herself and husband Tom.

After five decades of dodging snakes, bears and revolutionaries, Lowell says he went looking for a “swan song” by mining the records of undeveloped deposits. In his office in a converted barn, he pored over stacks of old technical reports. These were pre-1980 discoveries considered uneconomic to mine. They led him to a mountain in the Peruvian Andes known as Toromocho, Spanish for the bull without horns.

“The Toromocho discovery was built on a kind of a new slant to exploration,” Lowell says. “In this case, using a change in metallurgy as a way to possibly turn up a sleeper.” Advances in extraction and refining after 1980 had changed the economics for some old prospects.

Toromocho Discovery
In 2002, Lowell visited the peak, 15,000 feet (4,600 meters) above sea level. There had been small-scale mining on Toromocho for more than a century, but the deposit had lain dormant since General Juan Velasco Alvarado nationalized mining in 1973. Government geologists decided there wasn’t enough copper to dig.

On May 14, 2003, Lowell paid the government $2 million for an option on the property after an auction held at his request. Lowell says he was the only bidder. The government had failed to attract any buyers at least twice before, according to Peru’s Ministry of Energy and Mines.

From a bar in Lima where he was celebrating, Lowell phoned McLeod-Seltzer in the Canadian hospital where she was recovering from the birth of her first son. She named him Graham Jeffrey Lowell Seltzer in Lowell’s honor.

Then she set up Peru Copper Inc. to take ownership of the claim and raised $12 million through a private placement to fund test drilling. In September 2004, the company generated C$48.2 million in an initial public offering.

Old Assay Books
While working the claim, Lowell found a pile of old assay books in an abandoned installation left behind more than a quarter-century before. His reinterpretation of the records and new drilling led him to conclude there was seven times more copper in the mountain than the government had known.

He sold Peru Copper in August 2007 to Beijing-based Aluminum Corp. of China for $810 million. The selling price was four times the shares’ IPO value three years earlier. Toromocho will generate about $1.5 billion in payments to local and regional governments over the 30-year life of the mine, according to Chinalco’s environmental impact assessment. Lowell’s shares were worth about $78.7 million, according to Securities and Exchange Commission filings.

Unfinished in Ecuador
Prospecting has earned Lowell more than $150 million for himself and Edith, his wife of 62 years, based on interviews and securities filings. He says he has given most of it away, including his endowment of the Lowell Program in Economic Geology at the University of Arizona.

Lowell’s work in Ecuador isn’t finished. His 20,000-hectare claim there is potentially rich but hard to reach, he says. The national government shut down development in the region after protests in November 2006 organized by the Shuar Federation, an ethnic grass-roots group, he says.

Although the government lifted the ban in March 2009 as Corriente’s talks with the Chinese companies intensified, provincial Governor Salvador Quishpe continues to lead resistance. He will refuse to negotiate with foreign investors, he said in an interview.

Lowell hasn’t written off the project, though he may yet do so, he says. He isn’t through prospecting.

“If your primary purpose in life was finding sunken Spanish galleons full of gold and treasure, what would you do?” Lowell says. “I’m a professional treasure hunter.”

 

[trysail]

Well, whaddya know! Maybe the lynch mob was wrong.


____________________________
http://noir.bloomberg.com/apps/news?pid=20601207&sid=aaXXl4Q1NKpo


Spill Panel Found No Evidence BP Put Cost Over Safety
By Jim Efstathiou Jr. and Joe Carroll

Nov. 8 (Bloomberg) -- The presidential panel investigating the BP Plc oil spill in the Gulf of Mexico has found no evidence so far that employees made decisions to put profit ahead of safety, Chief Counsel Fred Bartlit said today.

Environmental groups and lawmakers have said BP cut corners to reduce costs as the company prepared to complete the doomed well 40 miles (64 kilometers) off the Louisiana coast and relocate the Deepwater Horizon drilling rig leased from Transocean Ltd. to another project. The U.S. House in July passed legislation that would bar BP from future offshore drilling leases based on the company’s U.S. safety record.

“We have not seen a single instance where a human being made a conscious decision to favor dollars to safety,” Bartlit said today at a hearing of the National Commission on the BP Deepwater Horizon Oil Spill in Washington. “We have not found a situation where we can say a man had a choice between safety and dollars and put his money on dollars. We haven’t seen it.”

The panel is releasing preliminary findings on causes of the April spill today. Last month, the commission said cement recommended by Halliburton Co., the world’s second-largest oilfield-services provider, to seal the well was unstable and may have contributed to the largest U.S. offshore oil spill.

London-based BP faulted its own engineers for the fatal drilling-rig blast in an internal investigation of the April 20 explosion, and said contractors Transocean and Halliburton share the blame. Bartlit said the commission agrees with “about 90 percent” of BP’s findings.

Bly Report
BP’s report was compiled by a team of investigators who reported to Mark Bly, the company’s chief of safety, who is scheduled to appear before the commission later today. Bartlit said the choice of well design didn’t contribute to the blowout, a finding that corroborates BP’s internal inquiry...

*****​

NOVEMBER 8, 2010
Oil Spill Panel Says Money Didn't Trump Safety
By SIOBHAN HUGHES

WASHINGTON—The chief counsel of President Barack Obama's commission investigating the causes of the BP PLC oil spill said that so far he hasn't uncovered evidence that anyone put money ahead of safety.

"To date we have not seen a single instance where a human being made a conscious decision to favor dollars over safety," Fred Bartlit, the chief counsel for the National Commission on the BP Deepwater Horizon Oil Spill and Offshore Drilling, said during his first public presentation on the causes of the spill...

*****​

http://online.wsj.com/article/SB10001424052748703514904575602350069015436.html?mod=googlenews_wsj

 

[trysail]

http://www.npr.org/blogs/health/2010/11/08/131162526/pricey-new-blood-thinner-could-be-a-deal

By Richard Harris

When is an $8-a-day drug a bargain compared with one that costs just a dollar?

Could be when the cheaper drug requires lots of testing and fiddling with the dose to make sure there's enough of it in the bloodstream enough to prevent clots but not so much as to hurt a patient — and the higher-priced drug doesn't.

That's the thinking about a just-approved drug called dabigatran (brand name Pradaxa) to prevent blood clots and strokes –- the first new stroke-prevention drug in two decades.


Dabigatran will compete with warfarin (Coumadin and other brands) for the prevention of clots.

It's a huge market. More than two million Americans have a heart condition called atrial fibrillation that puts them at high risk of arterial blood clots, the cause of most strokes. More than 100,000 strokes a year are caused by a-fib.

Warfarin costs about $1 a day for the medication alone. And the price of dabigatran at the pharmacy will be about eight times higher. But a Stanford research team (which has no financial ties to Boehringer Ingelheim, maker of dabigatran) figures the new drug is actually a better deal. Their analysis was published recently in the Annals of Internal Medicine.

When the Stanford group took the costs of blood tests and physician monitoring into account, they found that the cost of prescribing dabigatran doesn't look so high compared to putting a patient on warfarin.

One way they looked at it is through the lens of quality-adjusted life years, or QALYs. That's how much additional good-quality life a particular therapy buys, and at what cost.

Dr. Mintu Turakhia says the Stanford group found that dabigatran, at the US price of about $7.90 a day, costs around $12,000 for each additional year of good-quality life.

That's "very, very low," Turakhia says. He points out that the usual line in the sand that separated good and poor value is $50,000 for each additional year of good-quality life. (That's roughly the cost of kidney dialysis, which Medicare and other insurers consider acceptable.)

But, perhaps inevitably, there is a tradeoff. While dabigatran prevents strokes as well as warfarin, and it's less likely to cause a hemorrhage, it poses a somewhat higher risk of heart attacks

 

[trysail]

http://noir.bloomberg.com/apps/news?pid=20601124&sid=aZ2a4VaqBKCw


Electronic Cigarettes’ Nicotine Vapor Stokes U.S. FDA
By Molly Peterson

Nov. 2 (Bloomberg) -- Electronic cigarettes are pitting regulators against anti-smoking forces on whether to allow sales now to speed efforts to help smokers quit or ban them until they are proven safe and effective.

Proponents of the battery-powered devices that produce a nicotine vapor instead of tobacco smoke urge the Food and Drug Administration to consider them a tool for smokers seeking a tobacco-free alternative. The American Lung Association wants sales suspended unless proven in clinical drug trials.

“The tobacco-control community is kind of split” on e- cigarettes, Kenneth Warner, dean of the University of Michigan School of Public Health, said in an interview. “Some people are convinced that anything that has any kind of nicotine or tobacco in it must be subject to the FDA’s review and approval. Others think it’s almost certainly less harmful than cigarettes.”

The FDA is appealing a U.S. District Court ruling that the agency lacks authority to regulate the devices as drugs because they are recreational, not therapeutic. Potential users spend $1.2 billion on smoking-cessation products and $80 billion on cigarettes a year, according to the U.S. Centers for Disease Control and Prevention. The FDA said e-cigarettes may work with smokers the way methadone clinics wean heroin addicts by giving them a less harmful form of an addictive substance.

Most e-cigarettes deliver a flavored, nicotine-filled vapor -- and are sold with starter kits containing atomizers, batteries and cartridges. They are available online starting at about $40. The agency said it has blocked imports of more than 800 e-cigarette shipments since 2008, most from China.

Promoter Heigl
“While nicotine seems to be the primary ingredient in the cartridges, it is simply unknown how many other chemicals are present and in what amounts,” Siobhan DeLancey, an agency spokeswoman, said by e-mail. A 2009 FDA analysis found some nicotine levels exceeded amounts specified in labels, she said.

E-cigarette demand is getting a boost from celebrity users like actress Katherine Heigl as well as Internet availability. Heigl puffed on one during an appearance in September on CBS’s “Late Show,” telling host David Letterman the cigarette wasn’t harmful.

SmokeStik International Inc., the producer of Heigl’s e- cigarette, posted a statement after the appearance saying the company doesn’t make health or safety claims, adding to similar disclaimers already on its website and packages. The FDA can regulate as drugs cigarette alternatives that carry therapeutic claims, according to the court ruling.

FDA Warnings
The U.S. e-cigarette market consists of several dozen closely held companies including Toronto-based SmokeStik, which hasn’t received FDA warnings and doesn’t market products as smoking-cessation devices.

FDA officials warned five companies in September they were making improper health claims. Las Vegas-based E-Cig Technology Inc. violated agency rules by saying on its website that e- cigarettes can “help you reduce or quit smoking habits,” the agency said in a letter in September.

Warning letters were sent to Gamucci America, a unit of Smokey Bayou Inc. in Jacksonville, Florida; Ruyan America Inc. in Minneapolis; Johnson Creek Enterprises LLC in Johnson Creek, Wisconsin; and E-CigaretteDirect LLC in Parker, Colorado.

Ruyan America hasn’t sold products containing nicotine in the U.S. since May 2009, the company’s president, Bill Bartkowski, said Sept. 9 in an interview. E-Cig Technology, Johnson Creek and E-CigaretteDirect didn’t respond to e-mails sent through websites, while Smokey Bayou didn’t reply to a voicemail left at a listed phone number.

Competing With Patches
E-cigarettes need the same FDA drug review as nicotine gum, patches and other approved cessation aids, said Howard Marsh, chief medical officer of GlaxoSmithKline Plc’s consumer health- care division.

Glaxo’s Nicorette was the top-selling brand-name drug for nicotine replacement in the year through June, with $144.6 million in sales, or 12 percent of the smoking-cessation market, based on data from IMS Health Inc., a research firm in Norwalk, Connecticut.

“You’ve got to be fair to consumers,” Marsh said in an interview. “They need the reassurance that these products have undergone the same degree of rigor in terms of demonstrating safety and efficacy.”

Smokers seeking to quit need alternatives to FDA-approved nicotine replacement therapies such as gum and patches, which have a “95 percent failure rate,” Bill Godshall, founder and executive director of Smokefree Pennsylvania, said Oct. 27 at an FDA workshop.

Almost 500,000 smokers have switched to e-cigarettes in the three years they have been available in the U.S., he said.

Approval Costs
Godshall agrees with a ruling in January by U.S. District Court Judge Richard Leon that the FDA should regulate the devices under a 2009 tobacco law which doesn’t require safety and efficacy trials for cigarettes. The FDA won a delay of Leon’s decision in February while awaiting a ruling from the U.S. Court of Appeals in Washington.

E-cigarettes may save 5.3 million people who would otherwise die from smoking-related illnesses in the next 20 years, said Joel Nitzkin, former chairman of the Green Cove Springs, Florida-based American Association of Public Health Physicians tobacco control task force.

Unless e-cigarette companies can prove the gadgets are safe, “people should not use them because we don’t know what they are,” said Paul Billings, vice president of national policy and advocacy at the American Lung Association in Washington.

For Elaine Keller, an e-cigarette user and vice president of the nonprofit Consumer Advocates for Smoke-Free Alternatives Association, the potential for risk is worth the benefit.

“Maybe it’s not 100 percent safe, but it certainly is safer,” she said.

 

[trysail]

It's the 35th anniversary of "The Wreck of The Edmund Fitzgerald":

http://cdn.wn.com/pd/f0/a9/46d620280c0e23052ebc091b7e8a_grande.jpg​

http://en.wikipedia.org/wiki/The_Wreck_of_the_Edmund_Fitzgerald
http://en.wikipedia.org/wiki/Edmund_Fitzgerald

 

[trysail]

The morons got fleeced. Guess who pays for it? It's the same old story— the politicians hire incompetents as a form of patronage while Wall Street shears the sheep.

________________________________

http://noir.bloomberg.com/apps/news?pid=20601109&sid=a5OZb5VE98ac&pos=10


Wall Street Takes $4 Billion From Taxpayers as Swaps Backfire
By Michael McDonald

Nov. 10 (Bloomberg) -- The subprime mortgage crisis isn’t the only calamity Wall Street created that’s upending the finances of U.S. states and cities.

For more than a decade, banks and insurance companies convinced governments and nonprofits that financial engineering would lower interest rates on bonds sold for public projects such as roads, bridges and schools. That failed promise has cost more than $4 billion, according to data compiled by Bloomberg, as hundreds of borrowers from the Bay Area Toll Authority in Oakland, California, to Cornell University in Ithaca, New York, quietly paid Wall Street to end agreements since 2008.

California’s water resources department this year spent $305 million unwinding interest-rate bets that backfired, handing over the money to banks led by New York-based Morgan Stanley. North Carolina paid $59.8 million in August, enough to cover the annual salaries of about 1,400 full-time state employees. Reading, Pennsylvania, which sought protection in the state’s fiscally distressed communities program, got caught on the wrong end of the deals, costing it $21 million, equal to more than a year’s worth of real-estate taxes.

“It was brilliant, and it all blew up on me,” said Brian Mayhew, chief financial officer of the Bay Area Toll Authority, the state agency that gave Ambac Financial Group Inc., the New York-based bond insurer that filed for bankruptcy this week, $105 million to end $1.1 billion of interest-rate agreements. The payments equal more than two months of revenue on seven bridges the authority oversees around San Francisco.

Budget Deficits
The termination payments to Wall Street firms come at the worst possible time. The longest recession since the Great Depression left states facing budget gaps of $72 billion next fiscal year, according to the National Conference of State Legislatures. U.S. cities saw their general fund revenue fall the most since at least 1986 in the budget year that ended June 30, according to the National League of Cities.

Wall Street banks and insurers peddled financial derivatives known as interest-rate swaps to governments and nonprofits that bet they could lower the cost of borrowing. There were as much as $500 billion of the deals done in the $2.8 trillion municipal bond market before the credit crisis, according to a report by Randall Dodd, a senior researcher on the Financial Crisis Inquiry Commission, published by the International Monetary Fund in June.

$4 Billion
Borrowers from New York to California are now paying to get out of agreements. Altogether, they have made more than $4 billion of termination payments to firms including New York- based Citigroup Inc., New York-based JPMorgan Chase & Co. and Charlotte, North Carolina-based Bank of America Corp. since the beginning of 2008, according to a review of hundreds of bond documents and credit-rating reports by Bloomberg News.

In contrast to the subprime crisis, few taxpayers know anything about the cost of untangling municipal swaps. The only disclosure of payments to Wall Street often is buried in documents borrowers have to give investors when they sell bonds.

In many cases, firms getting payments aren’t explicitly identified and government officials often don’t call attention to payments made to cancel contracts. Many of the telephone calls and e-mails from Bloomberg News to dozens of government and nonprofit officials over the last eight months seeking comment on derivative transactions went unanswered.

‘No Reason’
“Money that should be invested in students, classrooms and fixing infrastructure in Pennsylvania is instead lining the pockets of Wall Street,” Jack Wagner, the state’s auditor general, said in a statement in April after calling on lawmakers to ban swaps. “State and local governments must stop gambling with public money,” he said.

In an interest-rate swap, two parties exchange payments on an agreed-upon amount of principal. Most of the swaps Wall Street sold in the municipal market required borrowers to issue long-term securities with interest rates that changed every week or month. The borrowers would then exchange payments, leaving them paying a fixed-rate to a bank or insurance company and receiving a variable rate in return. Sometimes borrowers got lump sums for entering agreements.

The swaps were popular because governments and nonprofits could pay a rate that was lower than what they would otherwise face had they sold conventional fixed-rate securities. The agreements backfired after the credit crisis broke out. While borrowers had to continue selling adjustable-rate securities under the deals, the payments made by Wall Street plunged and no longer were enough to cover the municipalities’ own debt costs.

1990s Design
Banks and insurance companies such as New York-based American International Group Inc. started designing municipal swaps in the 1990s as derivatives trading on Wall Street soared. Derivatives are agreements whose value is derived from stocks, bonds, loans, currencies and commodities, or linked to specific events such as changes in interest rates or the weather. They were blamed in part for causing the global financial panic.

The financial manipulation was a boon for Wall Street. While banks got paid to underwrite municipal bonds for public projects, they were able to generate additional fees if the borrower used a swap with the transactions. Because the contracts were unregulated and privately negotiated, the profits that Wall Street booked were never disclosed.

“The basic idea from the bank’s perspective is just to do a swap because that’s where the money is,” said Andrew Kalotay, head of the debt-management advisory firm Andrew Kalotay Associates Inc. in New York. “Look at all the fees they get.”

Jefferson County
In Alabama, $5.8 billion of swaps Jefferson County used in a sewer-system financing in 2002 and 2003 produced $120.2 million in fees for banks, as much as $100 million more than it should have based on prevailing rates, according to James White, an adviser hired by the U.S. Securities and Exchange Commission. The derivatives, which pushed the home of the city of Birmingham to the brink of bankruptcy, led to a $722 million settlement with JPMorgan in November 2009 after an SEC probe and the conviction of a county commissioner who steered business to bankers in exchange for bribes.

The New Jersey agency that makes college-student loans and grants paid tens of millions of dollars when it canceled derivative agreements with banks led by UBS AG and Citigroup in January.

The deals by the Higher Education Student Assistance Authority date back to April 2001, when the agency was getting ready to sell $190 million of fixed-rate bonds. Paul Wozniak, a UBS investment banker, told a meeting of the authority’s board in Trenton it could borrow more cheaply by using swaps rather than selling conventional tax-exempt bonds, according to minutes and a copy of his presentation obtained by Bloomberg News after a request to state officials.

Cost Covered
All the authority had to do to get the deal from UBS was to sell auction-rate securities, he said. The Zurich-based bank would help cover the cost of that adjustable-rate debt in exchange for annual fixed-rate payments from the authority, he said. The fixed rate was 4.65 percent, about a half percentage point less than the 5.18 percent the state would pay if it sold conventional bonds, he said.

The disadvantages were few, Wozniak told board members. The swap was a contract, so it would have to be footnoted in the authority’s financial statements, he said. The state would have to count on getting periodic payments from UBS over the deal’s life, he said.

“They found the swap agreements extremely complicated,” New Jersey’s former Inspector General Mary Jane Cooper said in a report in May after auditing the authority and interviewing board members who listened to Wozniak’s pitch.

No Help
“The explanations were not particularly helpful,” she said. In the end, they relied on recommendations made to them by management, according to the report.

The 18-member board, which consisted of college administrators and New Jersey government officials and students, approved about $1 billion of the deals over the next five years. The authority started exiting the contracts in January, making $49 million in termination payments, including $23 million to UBS and $17 million to Citigroup.

“Government operates with a very short-term mentality,” said Matt Fabian, a senior analyst at Municipal Market Advisors in Westport, Connecticut. “There isn’t much upside to look long term. They are looking for near-term savings on things.”

AnnMarie Bouse, a spokeswoman for the authority, referred to Cooper’s report, which included written responses from management.

Board-Member Action
“A board member’s decision to rely on the recommendation of management where the underlying transaction remains unclear is a reflection on that particular board member, not necessarily an authority deficiency,” Michael Angulo, the authority’s executive director, wrote in the report.

Wozniak, who is chairman of Las Vegas-based education lender College Loan Corp. and left UBS in 2008, said he doesn’t recall the meeting. “You wouldn’t have done it if you wouldn’t have thought it would save you money,” he said in a telephone interview.

Douglas Morris, a UBS spokesman in New York, wouldn’t comment, nor would Alexander Samuelson, a Citigroup spokesman.

New York Governor George Pataki was seeking ways to close an $11 billion budget deficit in 2003 when he embraced Wall Street’s alchemy. The former governor included a provision in his spending plan that authorized all state agencies to use swaps, resulting in a total of $5.9 billion of the deals with firms such as Goldman Sachs Group Inc., based in New York.

Evaporated Savings
The state sold floating-rate securities to refinance existing fixed-rate bonds and then locked in lower fixed rates on the new debt using swaps. Before the credit crisis, officials said they had generated $203 million of savings. Since the crisis, unwinding the swap contracts has cost $247 million, according to the state budget office.

Pataki didn’t return telephone calls and e-mails to his office at the New York-based law firm Chadbourne & Parke LLP seeking comment. Erik Kriss, a spokesman for the state’s budget department, said the “swap portfolio will continue to show modest savings,” in part because state officials are refinancing existing debt with lower fixed rates.

New York was among about 40 states that passed laws, often at Wall Street’s urging, permitting municipal derivatives before the credit crisis, according to Dodd’s research for the IMF. Tennessee passed rules in 2001 that required borrowers to attend a swap school.

Morgan Keegan Classes
Memphis-based Morgan Keegan Inc., a division of Birmingham, Alabama-based Regions Financial Corp., was selected to teach the classes. The firm sold many of the $12.7 billion of the deals subsequently done by more than 40 counties, municipalities, districts and authorities, according to Justin Wilson, the state comptroller.

“There’s just no reason these entities should be playing with this stuff,” said Christopher Whalen, managing director at the Torrance, California-based research firm Institutional Risk Analytics. “They don’t have the capacity to evaluate these instruments. They are totally lost.”

Just as banks loosened mortgage underwriting standards as part of the effort to create more subprime-linked securities, Wall Street targeted some of the riskiest credits in the municipal market with its swaps pitch. Nonprofit and government- run health-care providers, which pay higher tax-exempt interest rates because they have among the lowest bond ratings, accounted for 40 percent of the derivative deals, Standard & Poor’s found in a study in 2007.

Lucrative Business
The business was so lucrative that banks and insurers were able to write teaser checks to lure borrowers into swaps. The arrangements were akin to Goldman Sachs giving Greece $1 billion in off-balance-sheet funding in 2002 through a currency swap, helping the nation mask budget gaps to meet a European Union debt target.

“Tinkering with debt was something that you could hide behind,” said Jeffrey Waltman, a city councilor in Reading. The city got upfront payments totaling $7.6 million from Wachovia Corp. in 2005 and 2006 for contracts it later terminated.

“Maybe it didn’t mean so much of a tax increase, or maybe it didn’t mean laying off people,” said Waltman. “It was what appeared at the moment to be a painless effort.”

Ferris Morrison, a spokeswoman with San Francisco-based Wells Fargo & Co., which acquired Wachovia in December 2008, didn’t respond to a request for comment.

Other Victims
Reading taxpayers weren’t Pennsylvania’s only swap victims. The school district in Butler, 32 miles (51 kilometers) north of Pittsburgh, got a $730,000 check in 2003 from JPMorgan. It cost officials $5.3 million two years ago to exit the contract, enough to hire 100 new teachers for a school year. In a lawsuit it filed against its adviser and JPMorgan, the district said the bank booked an $890,000 fee from the transaction, which it called excessive.

A New York court last year dismissed the complaint and others alleging securities fraud, ruling that interest-rate swaps were privately negotiated contracts and not securities.

Borrowers in the municipal market primarily sold two types of adjustable-rate debt to do swaps. Auction-rate securities were bonds maturing typically in about 40 years that paid investors a rate that changed every 7, 28 or 35 days at bidding run by banks. Variable-rate demand bonds were similar except they were also often secured by an agreement from a bank to buy the debt if no investors did when rates were periodically reset.

Market Collapse
The $330 billion auction-rate securities market, which dates back to the 1980s, collapsed in February 2008. Investors stopped buying the bonds because much of the debt was backed by bond insurers that were about to lose their AAA ratings after expanding into mortgage-related derivatives. When banks that ran the bidding started permitting auctions to fail, rates paid by borrowers to bondholders were reset in some cases as high as 20 percent.

While auction rates soared, the periodic payments that banks made to borrowers as part of the swaps plunged because they were linked to benchmarks such as U.S. Federal Reserve lending rates, which were slashed to almost zero percent to combat the financial panic.

“That’s the black swan,” said Robert Fuller, a municipal financial adviser at Capital Markets Management LLC in Hopewell, New Jersey. “The things you can’t imagine kill you.”

Hospital Debt
The University of California had to unwind derivatives it used with debt sold for its medical centers, which form the third-biggest U.S. public hospital system. In April 2008, it sold $322 million of fixed-rate bonds to refinance auction-rate securities and pay $6.8 million to JPMorgan, Goldman Sachs and Merrill Lynch & Co., later acquired by Bank of America, to terminate swaps, according to bond documents. The exit fee was enough to cover the annual tuition of 200 students in its public-health program.

The pace of swap cancellations in the municipal market accelerated after Lehman Brothers Holdings Inc. filed for bankruptcy in September 2008. The filing triggered the termination of all the New York-based bank’s derivative contracts, including hundreds with tax-exempt borrowers.

While the market for variable-rate demand bonds didn’t collapse, the cost of the debt increased as banks lifted the fees they charge to serve as buyers of last resort. California’s State Department of Water Resources refinanced almost $4 billion of the securities this year and terminated swaps as its so- called liquidity agreements with banks expired. The agency began borrowing the money in 2002 to buy electricity to help alleviate the state’s energy shortage.

‘Something More Stable’
“They wanted to get out of this variable rate,” said Joe DeAnda, a spokesman for state Treasurer Bill Lockyer, whose office oversaw the water resource department’s refinancing. “They wanted to move into something more stable.”

Municipal borrowers have refinanced or retired about $135 billion of $525 billion of variable-rate demand bonds since 2008, according to a report in September from Christopher Mauro, head of municipal-market strategy at RBC Capital Markets in New York. There is another $101 billion of the securities backed by banks under contracts that expire next year, he said.

In addition to getting termination payments, Wall Street is finding a way to profit from the meltdown by underwriting bonds that borrowers sell as they unravel their swaps. Morgan Stanley, JPMorgan and Bank of America were among firms that got termination money from California’s water resources department this year at the same time they were paid to help the agency sell bonds, according to offering documents.

Halt to Sales
Mary Claire Delaney, a Morgan Stanley spokeswoman, declined to comment, as did Danielle Robinson from Bank of America and JPMorgan’s Justin Perras. JPMorgan in September 2008 said it would stop selling interest-rate swaps to government borrowers.

Even Ivy League universities were caught in the market’s demise. Harvard University paid $497.6 million in December 2008 to end $1.1 billion of interest-rate swaps with JPMorgan and Goldman Sachs, and separately agreed to end another $764 million of the agreements at a cost of $425 million. JPMorgan was the lead banker when the university in Cambridge, Massachusetts, sold bonds whose proceeds were used to make the termination payments.

Future Flexibility
Cornell, one of the eight private colleges and universities in the Ivy League, paid $22.8 million in May to get out of deals with Wall Street firms. The exit fee would cover the annual tuition for 500 students at the university. Unwinding the derivatives gave the university “greater future flexibility” because it was able to replace 50 percent of its variable-rate debt with fixed rates, Joanne DeStefano, chief financial officer, said in an e-mail.

Many borrowers are unwinding swaps because they want to refinance variable-rate debt with municipal fixed rates at historic lows. The savings can offset the cost of termination fees, said Peter Shapiro, managing director of Swap Financial Group in South Orange, New Jersey. The financial engineering also generated savings before the crisis, he said.

Shapiro, 58, the former head of Essex County, New Jersey, who ran for governor as the Democratic nominee in 1985, formed his municipal-swap company in 1997 and may be the biggest industry adviser, with more than 100 government and nonprofit clients, according to his website. There are no formal rankings because the business is all privately negotiated.

Orderly Market
“The swap relied upon an orderly functioning variable-rate market,” said Shapiro, who has advised borrowers such as the California Housing Finance Agency, which has more than $4 billion of the derivatives. “There hasn’t been an orderly functioning variable-rate market for two-and-a-half years.”

Some public officials are trying to prevent a repeat of the swaps meltdown. Tennessee’s comptroller last year tried to ban municipal derivatives outright before pushing through rules that place limits on who can use them. In Pennsylvania, Wagner, the state’s auditor general, last year asked lawmakers to adopt rules to outlaw financial fiddling after investigating school- district deals.

The board of the Delaware River Port Authority voted to ban using swaps last December after losing more than $60 million on the contracts. Pennsylvania’s auditor general is on the board of the authority, which operates four toll bridges and a commuter rail line between Philadelphia and southern New Jersey.

Houston, which still has two swaps linked to about $900 million of its bonds, says it’s done with the derivatives after the promised savings disappeared.

“If you have to create a flow chart to explain how a transaction works,” Annise Parker, the Texas city’s mayor, said in a September interview at Bloomberg’s New York headquarters, “that’s a problem even for a city the size of Houston.”

 

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From 8.25 renminbi per $1.00 to 6.6385 renmimbi per $1.00 represents depreciation of 19.5% in five years:

http://chart.finance.yahoo.com/z?s=USDCNY%3dX&t=5y&q=l&l=off&z=l&p=s&a=v&p=s&lang=en-US&region=US

​

If someone paid you with something that declined in value by nearly 20%, you probably wouldn't be particularly happy about it.

 

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http://en.wikipedia.org/wiki/B._F._Skinner

... One of Skinner's experiments examined the formation of superstition in one of his favorite experimental animals, the pigeon. Skinner placed a series of hungry pigeons in a cage attached to an automatic mechanism that delivered food to the pigeon "at regular intervals with no reference whatsoever to the bird's behavior." He discovered that the pigeons associated the delivery of the food with whatever chance actions they had been performing as it was delivered, and that they subsequently continued to perform these same actions.

One bird was conditioned to turn counter-clockwise about the cage, making two or three turns between reinforcements. Another repeatedly thrust its head into one of the upper corners of the cage. A third developed a 'tossing' response, as if placing its head beneath an invisible bar and lifting it repeatedly. Two birds developed a pendulum motion of the head and body, in which the head was extended forward and swung from right to left with a sharp movement followed by a somewhat slower return. Skinner suggested that the pigeons behaved as if they were influencing the automatic mechanism with their "rituals" and that this experiment shed light on human behavior:

The experiment might be said to demonstrate a sort of superstition. The bird behaves as if there were a causal relation between its behavior and the presentation of food, although such a relation is lacking. There are many analogies in human behavior...

 

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http://noir.bloomberg.com/apps/news?pid=20601087&sid=agFwwAFrfZz4&pos=4


Fair-Value Fight in Finance Making Volcker Rue FASB Dissonance
By Yalman Onaran

Nov. 22 (Bloomberg) -- A dispute between U.S. and international accounting groups about how to value financial instruments is threatening to derail efforts to converge global standards, affecting how trillions of dollars of assets are marked on bank balance sheets.

The debate pits the U.S. Financial Accounting Standards Board, which wants to expand the use of fair-value accounting to all financial assets, including loans and deposits, against the London-based International Accounting Standards Board, which opposes such a wide usage. The outcome also will determine how much capital banks have to hold to meet new rules.

FASB’s proposal, announced in May, could cause 26 of the largest U.S. banks to write down the value of about $4 trillion of loans on their books by as much as $138 billion, estimated Jason Goldberg, an analyst at Barclays Plc. Lenders, regulators and some investors have taken IASB’s side, leaving the U.S. standard-setter isolated in its battle.

“Treatment of financial instruments has been the sticking point, and there’s a lot of political pressure on all sides on that,” said Paul A. Volcker, a former chairman of the Federal Reserve who first introduced the idea of accounting convergence as head of the group that oversees IASB. “When you have global corporations operating around the world, and analysts looking at them from around the world, you want one accounting standard.”

Harmonizing Systems
Harmonizing the two systems would enable investors and regulators to better compare lenders on both sides of the Atlantic. Differences over fair-value accounting, which requires companies to mark assets to market value, can skew calculations of banks’ risk-weighted assets and equity, the numerator and denominator of the capital-ratio equation agreed to by the Basel Committee on Banking Supervision in September, regulators and analysts say. A U.S. bank and a European bank with identical loans could end up with different capital ratios.

Members of the two accounting bodies have held monthly, sometimes weekly meetings since 2006, when they agreed to work toward convergence. Most disagreements, including those about the netting of derivatives and rules governing what companies have to consolidate on their balance sheets, are close to being resolved, according to people with knowledge of the discussions.

While the rules affect all publicly traded companies that use Generally Accepted Accounting Principles known as U.S. GAAP, the valuing of financial instruments affects banks the most.

“The biggest concern for U.S. banks is the proposed use of fair value in accounting,” said Michael Gullette, a vice president at the Washington-based American Bankers Association, the industry’s largest lobbying group. “For banks, once you remove the financial instruments, there are hardly any other hurdles to accounting convergence.”

FASB Revision
FASB’s planned revision, which the board estimates will be implemented in 2013, would force lenders to mark deposits and loans to market values as they already do for traded securities. Not all changes in the values of assets and liabilities would affect net income, since some fair-value adjustments can be recorded in what’s called “other comprehensive income,” a balance-sheet item added or deducted from equity.

IASB guidelines, which are scheduled to go into effect in 2013, allow companies and banks to keep financial assets on their books at their original value as long as they’re held for the long term. The international accounting body published its revised rules on financial instruments a year ago and made some adjustments this year.

Middle Ground
While the international board says it has no plans to re- open discussion of fair-value accounting -- some countries have already started following the new guideline -- the two organizations might move toward a middle ground, according to three people with knowledge of the matter. Two of the people said FASB is considering a revision that would allow loans held to maturity to be kept on banks’ books at their original price.

Neal E. McGarity, a spokesman for FASB, said “due process would result in the best accounting standards.”

Even if there isn’t convergence, the U.S. Securities and Exchange Commission may approve the use of IASB’s International Financial Reporting Standards, known as IFRS.

The SEC has said it will decide by the end of next year whether to allow U.S. firms to follow international standards for financial reporting. The decision will depend, in part, on whether the agency is satisfied with the independence of IASB, which is funded by voluntary contributions from the 122 countries that use its standards. FASB is financed by mandatory fees collected from all public companies in the U.S.

SEC Evaluation
“Governance and funding of IASB are crucial factors in whether we adopt IFRS,” said James Kroeker, SEC’s chief accountant, in an Oct. 28 speech in New York. “We have an independent accounting body in the U.S., but can the IASB stay independent as well?”

James Kaiser, a partner at accounting firm PricewaterhouseCoopers LLP who follows the convergence talks for the firm, said it’s “very possible” the SEC would give U.S. companies the option of using international rules.

“The G-20 has made it clear it wants a single standard,” Kaiser said.

Leaders of the Group of 20 nations reiterated their call for a “single set of improved high quality global accounting standards” at a summit in Seoul this month and urged the two groups to complete their convergence talks next year.

ABA Letter
In an August letter to FASB opposing the proposed expansion of fair-value accounting, the American Bankers Association said the latest financial crisis showed that market values for some assets became unreliable, exacerbating losses for banks.

“This appears to fly directly in the face of the desires of virtually all constituents of financial statements: knowledgeable users of bank financial statements -- including investors -- who do not want it, banking managers who do not use it to manage their businesses, and regulators who believe it is dangerous,” the group wrote.

The five U.S. banking regulators sent a joint letter to FASB in September voicing opposition as well.

“We are concerned about the potential implications of the proposal for financial intermediation and stability and, therefore, we oppose the proposed requirement to report substantially all of a financial institution’s financial instruments at fair value,” the Fed, the Federal Deposit Insurance Corp. and three other regulators said.

Volcker’s View
Volcker who was Fed chairman in the 1980s and now advises U.S. President Barack Obama, said he favors IASB’s approach on valuing financial instruments.

“You can’t have everything at fair value,” Volcker, 83, said. “I’m not in favor of fair valuing bank loans because we don’t know their fair value anyway. It’s not consistent with the basic business model of commercial banks.”

FASB, whose origins as an organization that sets accounting standards for U.S. companies date back to 1930, has been susceptible to political pressure. After congressional hearings last year at which the board’s chairman, Robert Herz, was grilled about how fair-value accounting harmed banks, FASB relaxed its rules to allow lenders to keep some losses on the declining value of assets off their income statements.

Herz announced his retirement as chairman of FASB in August after eight years. Board member Leslie Seidman is acting chairman of the Norwalk, Connecticut-based organization.

Pushing for Convergence
In a similar episode, a few months earlier, IASB bowed to European Union demands to relax its fair-value rules, letting banks move some assets to a different part of the balance sheet so they wouldn’t have to be marked to market values.

“I’m concerned about both bodies’ independence,” said Jeff Mahoney, general counsel for the Council of Institutional Investors in Washington and a member of a FASB advisory board. “I criticized FASB when it changed the fair-value standard last year, rushing through hearings on the matter. But at least they had a process. The IASB did it without a due process, without giving stakeholders a chance to object.”

IASB Chairman David Tweedie, 66, who has been pushing for convergence, said on Oct. 28 in New York that his group hasn’t bowed to multiple efforts by the EU to influence its decisions.

“We don’t listen to Europe,” Tweedie said. “We don’t want Europe to run us.”

IASB was set up in 1973 as a part-time committee to come up with an international accounting system. The board is modeled after its U.S. counterpart, which helped establish it. The committee became a full-time organization in 2001. Its 15 members include four from the U.S. SEC Chairman Mary Schapiro sits on the group’s monitoring board, which carries out the equivalent of SEC’s oversight role for FASB.

GAAP, IFRS
The EU required public companies in member countries to adopt international accounting standards by 2005. Until 2008, European firms that had shares listed in the U.S. had to reconcile their IFRS accounting with U.S. GAAP. Deutsche Bank AG, Germany’s largest lender, used to have a balance sheet under the U.S. regime half the size of what it reported under IFRS.

Bank regulators have created their own accounting rules in some areas to avoid confusion. Last year the Basel committee came up with its own definition of how to net derivatives contracts while calculating the leverage ratio to avoid different ways of counting assets. The ratio, which takes into account all assets without any adjustments for risk, caps how much banks can borrow.

Now U.S. regulators have to decide whether to use the existing U.S. leverage ratio -- 5 percent of assets calculated according to U.S. GAAP -- or the new Basel ratio of 3 percent, which counts assets its own way.

‘You’re Nuts’
In a June survey of institutional investors carried out by PwC, a majority of respondents said they favored original cost accounting for loans held for the long term, backing the IASB model. A September survey of investors by CFA Institute, an international association of financial analysts, found the opposite: 71 percent of its 1,100 participants said they favor fair-value accounting for loans.

Goldman Sachs Group Inc., the most profitable U.S. securities firm, has said that banks hide losses on loans used to generate investment-banking fees. In a Sept. 1 letter to FASB, Goldman Sachs described how banks lend at below-market rates to win equity and debt-underwriting deals, a practice known as “lend to play.” Goldman Sachs executives have argued that the firm’s practice of marking assets to market value helped it prepare for the credit contraction earlier than rivals.

For Volcker, the setbacks and sticking points are overshadowed by how far the convergence of standards has come.

“If you asked this question in the U.S. 15 years ago, the standard answer would be: ‘You’re nuts -- the U.S. has the best accounting standards, and everybody should follow ours,’” Volcker said. “Today that’s not a credible answer. Unfortunately, some accountants still think that way. It’s pride and history.”

 

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I didn't write this so I cannot and will not swear to its complete accuracy. Unfortunately, I don't know who did write it so I'm not able to credit them or gauge their reliability. The piece came in "over the transom" via an email from a person who is reasonably credible.


The Triumph of Hype Over Rationality

We have no axe to grind in the investment battle that is General Motors and certainly we've no keen insight into the company itself except to believe that Ford really does have a better idea when it comes to marketing, production, styling et al than does GM. But that is a debate for another time and we wish not to take it up here. What we do wish to take up is GM's reliance upon what we see as utter and complete idiocy regarding its "electric car," the VOLT.

Let us consider what GM itself says about the VOLT: GM touts the fact that the Volt shall have a 40 mile range when battery powered. 40 miles! Really?!! That's it?! We had to ask ourselves if we were reading the information correctly, but we were. Powered by batteries, the Volt will only go 40 miles. That is not sufficient to take us from our offices on the south side of the James River to Virginia Beach, something that the people of southern Virginia have to do every day... or nearly every day. Worse Popular Mechanics says that GM is over-estimating this number; their studies show that the Volt can only go 33 miles on a single charge. Too, we are told it shall take 10-12 hours of charging to return the batteries to a full charge. In other words, a one half hour trip will require 20-24 times as much time to recharge as it will to actually take the trip.

And then let us consider the notion of what is powering this car that the "Greens" so enthusiastically embrace: It is powered by electricity, of which 80+% here in the US is still fired by coal, which the "Greens" find anathema. Oh, and then let us consider the fact that in order to spur sales, the Federal government is giving buyers a 50% tax credit to buy a charger, and is doing so at a time when budget cuts are the order of the day. In other words, albeit a very small percentage of the trillions at risk, the government is expanding the deficit when in should be contracting it.

Then let's consider GM's finances, which from our perspective are a packet of lies extending to the horizon. It was bad enough that GM told the world that it was paying its debt obligation in full and ahead of time when in fact it was simply taking money from one pile given to it by the Federal government and putting it in another. Ponzi had nothing on GM and Washington. But now we find that GM paid back $6.7 billion in other advances from Washington by tapping TARP money. This is worse than "borrowing from Peter to pay Paul." This is borrowing form Paul to pay Paul, with Paul's full acquiescence.

We've no dog in this hunt other than as a taxpayer. We stand in awe of the idiocy of the Greens who embrace the Volt enthusiastically, blissfully unaware that they will be driving electricity demands higher and thus coal usage higher too, and that as taxpayers we will be susidizing this idiocy for years into the future. But above all, we stand in awe of anybody who would buy a supposed "electric" car that can only go 33 miles before needing to be recharged. Oh, yes, we know that the car can run on gasoline for quite some while, but take a look at the trunk of the car and see how small the gas tank is when all of the space in the trunk and much of the space that would otherwise by used for a gasoline tank are taken up by batteries! We stand in awe of the gullibility of the American car buyer and the GM stock buyer too. Ford has a better idea; don't do what GM does; do the opposite.

 

[trysail]

Every generation has well-meaning, starry-eyed, utopian dreamers who are certain that all the world's problems can be solved by government. For reasons that elude me, they somehow cannot seem to comprehend that a government-centric society inevitably devolves to permutations of totalitarianism, facism and authoritarianism.

The urge to save humanity is almost always a false front for the urge to rule.
-H. L. Mencken

 

[trysail]

Former Vice President Al Gore has admitted that his “support for corn-based ethanol in the United States was “not a good policy”, weeks before tax credits are up for renewal.”

Gore was the tie-breaking vote in the Senate mandating the use of ethanol in 1994.

From Reuters:

“It is not a good policy to have these massive subsidies for (U.S.) first generation ethanol,” said Gore, speaking at a green energy business conference in Athens sponsored by Marfin Popular Bank.

“First generation ethanol I think was a mistake. The energy conversion ratios are at best very small.

“It’s hard once such a programme is put in place to deal with the lobbies that keep it going.”​

He continues (admitting more of the obvious):

“One of the reasons I made that mistake is that I paid particular attention to the farmers in my home state of Tennessee, and I had a certain fondness for the farmers in the state of Iowa because I was about to run for president.”​

However, don’t make the mistake that he has had an epiphany on climate change:

Gore supported so-called second generation technologies which do not compete with food, for example cellulosic technologies which use chemicals or enzymes to extract sugar from fibre for example in wood, waste or grass.

“I do think second and third generation that don’t compete with food prices will play an increasing role, certainly with aviation fuels.”

Gore added did that he did not expect a U.S. clean energy or climate bill for “at least two years” following the mid-term elections which saw Republicans increase their support.

​

 

[trysail]

“Why should I make my data available to you when your only objective is to find something wrong with it?”​

-Phil Jones, Ph.D.
Professor, University of East Anglia
Climate Research Unit​

 

[trysail]

U.S. Surrenders E-Mails On Gulf Oil Leak Estimates
by The Associated Press
http://www.npr.org/2010/11/24/131580149/u-s-surrenders-e-mails-on-gulf-oil-leak-estimates

The latest results, by and large, are consistent with early results, produced by an early version of the Calculator and announced in a NOAA press release of August 4, 2010...


The plume also contained gas of many bubble sizes. For this incident, a large amount gas bubbles dissolved and may never have made it to the surface. Gas bubbles move faster than oil bubbles if they are the same size. Because of this, gases can separate from the main plume and start going in a slightly different direction (Chen and Yapa, 2004). Gases when released in deep-water, also have the potential to be converted into hydrates. Methane has a level of hydrate dissociation generally around 550 m of water depth as shown in Figure 5. This is not a fixed value. It depends on parameters like water temperature and gas type (Spaulding et al, 2000). Natural gas can get converted to hydrates at a much higher level. Therefore, gases can get converted into hydrates as they travel up. Hydrates are still buoyant with specific gravities of around 0.92 to 0.96. As hydrates travel towards the water surface they can get reconverted back into gas when they reach the lower pressure in the shallower regions (Leifer, 2010). Where the oil to gas ratio is sufficiently high, rather than an oily bubble, the aggregate is better described as a droplet with internal bubble. He concludes this effect could be very significant. For a primarily gas bubble (i.e., very low oil to gas ratio), in contrast, the effect of surface flow around the bubble pushing surface materials towards the downstream hemisphere could minimize any oil effect. This blowout occurred at far greater pressure than has been studied in the Deep Spill study (Johansen et al. 2000), or the lab (Masutani and Adams (2000), at depths where hydrate formation is far more rapid (Rehder et al. 2009). The oil budget calculator does not keep track of the gas bubbles, hydrates or dissolved gases.

http://www.restorethegulf.gov/sites...ts/pdf/OilBudgetCalc_Full_HQ-Print_111110.pdf