Credit Default Swaps Weapons of Financial Mass Destruction

The latest downward spiral in the global commodity and stock markets, coinciding with several high profile bank failures, is conjuring up fears of the calamities of the Great Depression of the 1930's. European and Asian stock markets are plunging as terror and panic hits Wall Street. The US Congress finally passed a massive $700 billion rescue package to unclog the credit markets, yet US stock markets have continued to plummet, shedding $1.5-trillion in value.

Hindsight is the best sight, but the chaos gripping the markets started with US Treasury's reckless decision to allow Lehman Brothers (LEH) to fail, which set-off an unstoppable chain reaction that unleashed a torrent of panic selling on global stock markets, and froze the European and US banking systems. LEH left its creditors holding $150 billion of near worthless bonds, and common and preferred shareholders were completely wiped out. “Until the day they put me in the ground I will wonder, why we were the only one that was not rescued,” former Lehman chief Larry Fuld told Congress.

However, there were also huge losses for companies who wrote credit protection on LEH's bonds over the past five-years. Those sellers of credit protection are now staring down the barrel of billions of dollars in claims, and are scrambling to raise money by selling anything they can get their hands on, including commodities and stocks. Warren Buffet has referred to these credit defaults swaps CDS's, as “weapons of financial mass destruction,” and the fuse on the time-bomb has been lit.

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Realty investors take equity route to offset tax burden

Though the realty sector has been hit by the general economic slowdown, smart property investors, who raked in the moolah when the going w
as good, made use of the equity markets to reduce the tax they paid on those gains.

According to tax consultants, people whose income is derived from other sources, say a salaried employee, can and have in the past offset derivatives losses against short-term capital gains made in property transactions to reduce tax incidence on the property gains.

Gains from property are deemed short-term if they are held for less than three years. Once a derivatives loss is offset against the gain, the balance short-term capital gain is clubbed with the salary income and taxed at the normal rate.

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Northern sued by college over loss

For 20 years, Chicago-based Northern Trust Corp. held the hand of the University of Washington, providing it the kind of steady, safe investment services that earned the bank its nickname "the Gray Lady of LaSalle Street."

But over the course of a few dramatic days in September, all that changed. The Wall Street financial disaster that took down such titans as Lehman Brothers Holdings Inc. and Washington Mutual Inc. also damaged Northern's relationship with the school, proving that even the most staid financial dealings have become vulnerable to the turmoil sweeping the country.

A suit filed in Seattle by UW describes the harrowing days following Lehman's collapse, when mounting losses in Northern's once-steady securities-lending business stunned the university and allegedly pushed Northern to seek the help of the Federal Reserve and U.S. Treasury Department. Those requests were rejected, the suit said.

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Sudan towards another Lebanon

Sudan is in practice a country without a national army. This situation came into the Sudanese political history when the Islamists’ of sheik Hassan El Turabi after staging their military coup d’état in June, 31st of 1989 which saw the Islamisation of everything in the country from the public service, militarisation of the youth as well as the heads of departments by sending them to the transformation jihad training camps, not even the university professors where spared.

The Sudanese national army was systematically restructured by eliminating all the top officers who were of different political background in the sense that the new devilish system was preparing themselves to plunge the whole country into the current Islam motivated political chaos.

All Sudanese military, police, public service were all turned upside down for the sake of establishing a system assumedly would retain the by then collapsing Arab Islamic political dominance in the face of the south Sudanese resistance led by SPLM/A.

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U.S. Treasury Steps Up Debt Sales to Reduce Shortages

The U.S. Treasury began selling an additional $40 billion of debt to meet demand for government securities in an effort to alleviate ``protracted shortages.''

The first two of four so-called reopenings of 10-year notes sold at higher yields than the outstanding securities were trading at before the auctions. In giving dealers one hour to prepare for the sales, the government was forced to offer concessions, meaning it lost $345 million in potential proceeds, according to an analysis by Credit Suisse Securities USA LLC.

Demand for the relative safety of government securities has surged this month as the seizure in credit markets around the world deepened. That has resulted in trades in the repurchase agreement, or repo, market going uncompleted. Such failures to deliver or receive Treasuries in the $7 trillion-a-day market for borrowing and lending securities have set a record.

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