Something big' transferred to Gaza Strip By Aaron Klein

JERUSALEM – Egypt and Israel have information a large quantity of weapons, including new and sophisticated firepower, was smuggled from Egypt into the Hamas-controlled Gaza Strip in the last two days, according to informed Middle East security officials.

Israeli security officials fear a growing state of anarchy exists along the Gaza-Egypt border, with Islamist groups there taking advantage of the chaos in Egypt amid mass protests threatening the regime of President Hosni Mubarak. Egyptian security forces have been focused largely on quelling the riots.

"Something big was brought into the Gaza Strip," said an informed security official.

The official said it was not known yet exactly what was transferred into Gaza, but he speculated it may have been a large quantity of antiaircraft missiles.

(Story continues below)

Today it was reported Israeli officials let Egypt move several hundred troops into the Sinai Peninsula for the first time since the countries signed a treaty three decades ago.

According to the 1979 peace treaty, Egypt had agreed to leave the area demilitarized.

The Sinai borders the Gaza Strip as well as Israel's southern border with Egypt.

Israeli officials say Israel agreed to allow the Egyptian army to move two battalions, or about 800 soldiers, into the Sharm el-Sheikh area on Sinai's southern tip, far from Israel.

Read more: 'Something big' transferred to Gaza Strip http://www.wnd.com/?pageId=257917#ixzz1CfXLikTJ

American Eulogy

At the outset of the last century America was still a vital, free, growing country on the rise. The song of the century began as a joyous ballad and ended as a funeral dirge. The creation of a Central Bank, which could create inflation on demand, and allowing politicians the ability to buy votes through pork spending, paid for with ever increasing taxation, have sucked the life out of the American Dream...The Federal Reserve has not been alone in killing the American Dream. Politicians since 1913 have done their part in suffocating the dream. The tax code consisted of 400 pages in 1913 and tax rates ranged from 1% to 7%. In less than a century politicians of both parties have carved out 70,000 pages of payoffs, entitlements, and bribes for their contributors and constituents. Tax rates now range from 10% to 35%. Those 70,000 pages of rules, regulations and tax breaks do not benefit the average middle class American. They benefit those who had the money and power to buy off a Congressman.The Federal Reserve and the US Tax Code bastardized the American Dream, created barriers to economic advancement, and supported the accumulation of wealth and power by a select few. The ruling elite have used their power and control over the media to convince the majority of Americans that the American Dream is about accumulating material possessions with debt. The American Dream no longer meant attaining the fullest measure of your capabilities, but living in the biggest McMansion, driving the nicest BMW, watching the biggest TV and wearing the latest fashions, all acquired with debt. America is dying.

Stuxnet returns to Bushehr reactor. Russia warns of nuclear explosion

iran's atomic energy chief Ali Akbar Salehi said on Jan. 29 that the Bushehr nuclear power plant would be connected to the national grid on April 9. He "forgot" about Tehran's promise to fully activate its first nuclear reactor Tuesday, Jan. 25. debkafile's intelligence and Moscow sources reveal that on that day, Iran's hand on the switch was held back at the last minute by Sergei Kiriyenko, chief of Rosatom (the Russian national nuclear energy commission which oversaw the reactor's construction. He came hurrying over to warn Tehran that Stuxnet was back and switching the reactor on could trigger a calamitous nuclear explosion that could cost a million Iranian lives and devastate neighboring populations. He complained to President Mahmoud Ahmadinejad that the Iranian nuclear and engineering staff were ignoring the presence of the malworm and must be stopped.

Kiriyenko told the Iranian president that the Russian engineers employed at the reactor notified Moscow that Stuxnet was again attacking the Bushehr systems after apparently taking a rest from its first onslaught last June. There was no telling which systems had been infected, because a key feature of the virus is that the systems' screens show they are working normally when in fact they have been fatally disarmed. Activating the reactor in these circumstances could cause an explosion far more powerful than the disaster at the Russian reactor at Chernobyl, Ukraine in April 1986, which released 400 times more radioactive material than the atomic bombing of Hiroshima.
The impression the Rosatom chief had gained from his staff at Bushehr was that the Iranian teams had been ordered to activate the reactor at any price to prove that the Islamic Republic had beaten Stuxnet. This concern overrode security. The consequences of ignoring this fearful hazard, said Kiriyenko, were unthinkable and would destroy the revolutionary Islamic regime in Tehran in their wake.
Kirienko began worrying when he heard the Iranian nuclear commission's spokesman Hamid Khadem-Qaemi claim on Jan. 17 that Bushehr had not been affected by Stuxnet.
Our Iranian sources report that, after seeing the Russian official off, Ahmadinejad ordered the reactor to stay shut down.

This week, Salehi, who is also Iran's foreign minister, hinted at the cause of the delay when he said: "The reactor has started its operation and the next step is to reach critical phase which will happen by the end of Bahman (February 20) in presence of Russians. We have said before that due to some tests, we may have to face delays but these delays are around a week or two." He added, "We aim at launching Bushehr nuclear reactor safely not to merely launch it."

In Jerusalem, Maj-Gen. Aviv Kohavi, the new head of IDF military intelligence - MI, who appeared before the Knesset Security and Foreign Affairs Committee for his first briefing on Jan. 25 said Bushehr could be quickly converted from producing electricity for civilian use to a military reactor and incorporated into Iran's weapons program.

The next day, Jan. 26, Moscow took the unusual step of demanding a NATO investigation into last year's computer attack on the Russian-built nuclear reactor in Iran.

Dmitry Rogozin, Russia's ambassador to the North Atlantic Treaty Organization, said: T"his virus, which is very toxic, very dangerous, could have very serious implications," he said, describing the virus's impact as being like "explosive mines".

"These 'mines' could lead to a new Chernobyl," he said.

A startling fact about Obama's State of the Union address

A long-standing colleague and reader sent this to me yesterday and it blew me away. Read on:

Obama’s State of the Union:

"Two years after the worst recession most of us have ever known, the stock market has come roaring back. Corporate profits are up. The economy is growing again."

Herbert Hoover, May 1st 1930, U.S. Chamber of Commerce Meeting:

"While the crash only took place six months ago, I am convinced we have now passed the worst and with continued unity of effort we shall rapidly recover."

Obama’s State of the Union:

"Thanks to the tax cuts we passed, Americans’ paychecks are a little bigger today. Every business can write off the full cost of the new investments they make this year. These steps, taken by Democrats and Republicans, will grow the economy and add to the more than one million private sector jobs created last year."

Herbert Hoover, October 22, 1932, campaign speech in Detroit:

"It can be demonstrated that the tide has turned and that the gigantic forces of depression are today in retreat. Our measures and policies have demonstrated their effectiveness. They have preserved the American people from certain chaos. They have preserved a final fortress of stability in the world."

Obama’s State of the Union:

"But now that the worst of the recession is over..."

Herbert Hoover, June 1930, to a delegation requesting a public works project:

"Gentlemen, you have come sixty days too late. The depression is over."

Obama’s State of the Union:

"The steps we’ve taken over the last two years may have broken the back of this recession…"

Herbert Hoover, State of the Union, December 6, 1932:

"The unprecedented emergency measures enacted and policies adopted undoubtedly saved the country from economic disaster…"

Hello Ben Bernanke

Stephanie writes ....

Hello Mish,

I don't know if you give advice, but I heard you on Coast-To-Coast and you seem to know what you are talking about. I am 65 years old, get $938 from Social Security, and this is all I live on every month.

I have a CD that is about $16,000 now and is providing $75 a month. In about a year that will stop because the interest has gone down so much. If you were me, what would you invest in?

I lost $2,000 in the stock market a few years ago and the way it is now it is rather scary. I don't know what else to even consider and when I ask my banker he seems to be at a loss too.

Any help you could offer would be a blessing. Thank you for your consideration and kindness.

Stephanie - Somewhere, USA

Clobbered by the Fed

Hi Stephanie

You and many others are getting clobbered by the policies of the Fed. Not only did taxpayers bail out the banks at taxpayer expense, Bernanke and the Fed continues to do so.

By holding interest rates low, the Fed is hurting everyone on fixed income with savings in the bank or CDs. You get almost no interest on your savings, and that is robbing you and everyone else like you.

Bernanke is hoping people like you gamble and invest in risky assets. Indeed, he is doing everything he can to force people into taking more risk.

Don't do it. It is not a prudent thing to do.

The stock market is extremely overvalued here and could easily decline hard. Indeed, I think it will at some point.

Emergency Fund in Cash

My straight forward advice to everyone is to have an emergency fund of at least a year's worth of living expenses in the bank before they invest in stocks, bonds, gold or anything other than short-term CDs or treasuries.

It is obvious that Bernanke's concern is doing what is best for banks. He shows no concern about the damage he is causing elsewhere.

Bernanke is a Coward Hiding Behind Mathematical Formulas

I wish I could get Bernanke in a room with you and everyone in your position, and take questions from you.

Bernanke will not do that because he is a coward. He hides behind mathematical formulas, the same ones I might point out that told him housing was not in a bubble, there was no risk of recession, and that the unemployment rate would not top 8%.

He did not know what he was doing then, and he certainly does not understand the risks now.

Moreover, his "Quantitative Easing" policies have helped fuel speculation in commodities, especially food and gasoline. That speculation is contributing not only to rising prices in the US, but even more so globally.

To be fair, there are some severe weather problems in other parts of the world that affect growing conditions and thus food prices. In addition, there is massive credit expansion in China and India that puts upward pressure on food and energy.

However, there is also little doubt that Bernanke has fueled commodity speculation with his low interest rate policies and that too has pushed prices higher.

Believe it or not, Bernanke is worried that prices might fall. I suspect you would love to see prices fall, and so would everyone else in your situation.

Unfortunately, Bernanke intends to keep interest rates low until prices go up to his liking, and then when prices do start rising, interest you earn on your CD will not keep up with prices.

Bear in mind, that the Fed excludes food and energy from the prices they monitor. They desperately want housing prices to rise. However, the Fed can make money available, but it cannot control where that money goes.

Serial Bubble Blowing

The Fed's loose money policies fueled a housing bubble last time, now money is pouring into commodities, junk bonds, and leveraged buyouts (once again). This is bound to end badly once again.

Meanwhile, the unemployment rates is still 9.4% officially, and much higher unofficially.

Fed's Policy Is Theft

Stephanie, it's a little known fact that inflation benefits those with first access to money, such as the banks, the wealthy (via rising asset prices), and the government (think rising sales taxes and property taxes when prices go up).

Everyone else gets screwed. You are right in the middle of the pack of those most hurt by the serial bubble blowing policies of the Fed.

Viewed this way, Bernanke's policies are nothing but theft, robbing the poor, for the benefit of banks and the wealthy.

This is why I support Congressman Ron Paul's effort to end the Fed.

No Good Solutions for Those on Fixed Income

Your dilemma is 1-year treasuries yield a mere .23%.

Unfortunately, I have no good investment solutions for you, because there are none. You are not suited for stock market risks, and if there is any chance you will need to use your savings any time soon, you cannot afford to risk being in long-term CDs.

Arguably the best thing for you to do is find a bank that has 1% or higher rates on savings accounts.

Avoid Fees

There are some other common-sense things you can do. For example, it is critical for you to avoid all fees. If you have fees on your checking account now, find a place that does not have them. Bankrate can help on CD rates, savings rates, and checking account rates.

Invest in a Freezer

I do not know whether you have a home or an apartment, but if you have room, get a suitably-sized freezer and only buy meat on sale. The price of meat on sale is frequently 50% or less of meat not on sale.

Wrapped properly, many food items will last a year or longer. Use freezer paper for roasts and date every package. Packaged bacon also freezes well. I only buy bacon when it is 2 for 1. If you are nimble, learn to cut your own chicken. If not, buy the cuts you like on sale and freeze those.

Buy ground beef on sale and make patties the size you like and freeze those. Pork chops freeze well too. I use good quality plastic wrap doubled up. Costco has excellent quality wrap in a large spool that will last a very long time. Get all the air pockets out or you will get freezer burn.

Vacuum packaged cheese also stores well. It needs to be refrigerated and can be frozen, but does not have to be frozen.

Buy storable commodities such as spaghetti, pinto beans, brown rice, etc. on sale. Try not to buy anything unless it is on sale. Then buy large quantities.

Complain to the Fed

If I had an email or Fax number for Ben Bernanke or the Fed I would post it. Unfortunately all I have is a link to a contact form. You can use that form to Contact Ben Bernanke and give him a piece of your mind.

Change the button on the form to "Comment for Board Members" and blast away. It will not do any good because the Fed does not care about the plight of those on fixed income, but it might make you feel better.

I hope some of these ideas help. Best wishes.

Good luck to you Stephanie.

For everyone else ... This does not change my stance on deflation. I think round II of a major credit crunch is likely. All of the structural problems remain and the global economy is at least as unbalanced as before, possibly more so. On a credit basis (which is what matters to those not retired and struggling on fixed income), I expect the US to dip in and out of deflation over a number of years as did Japan.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Bank Bailouts Explained

http://www.youtube.com/watch?v=yipV_pK6HXw&feature=player_embedded

How To Destabilize A Region

First, you must sell allegedly "friendly" governments lots of weapons. You know, aircraft, missiles, guns, ammunition, that sort of stuff. It helps a lot if the governments have money, and it helps even more if you can convince them to peg their currencies in some way to yours, and they have something you want (think oil.)

Next, having accomplished the currency peg and sales of arms, you then allow your banks to engage in rampant speculation and fraud. You let them counterfeit your currency with impunity by issuing credit unbacked by anything (which spends exactly the same as does currency, and thus is an effective naked short upon it), so long as they bribe Congress sufficiently with "campaign contributions." This is all legal, of course, and where it isn't you change the law (such as through the CFMA) so it becomes legal.

Having done that, you let your Central Bank pontificate about how "rising stock prices" are good for the economy and "animal spirits." You intentionally fail to mention, however, that speculative price and value are not the same thing, and that said companies are drowning in debt to the point that you now need to pay $12 for $1 worth of actual underlying assets, after debt is subtracted. This, incidentally, is three times the level of speculative premium you had in 2007, just before the market blew up.

In order to support this speculative bubble (which your President is dumb enough to crow about in his "State of the Union" speech) you intentionally flood the market with "liquidity" (that's a fancy name for "cheap loans.") Speculators figure this game out immedaitely and start driving up the price of everything - not just stocks. Cotton quadruples in price. Wheat, corn, oats, copper, oil - all have a rocket strapped to their ass and lit.

Of course producers and processors of food and other items can only pass through those price increases or eat them. They can't eat them beyond their margin and remain in business, so this starts to leak into the real economy. The currency pegs mean that most of the inflationary pressure you're creating doesn't hit your nation, it's exported to others. That exactly how you like it, because you can claim "inflation expectations are well-anchored." Perhaps they are in your nation, but in other places they're extremely unanchored and are not only expectations, they're realized facts as the basic cost of life spirals up out of control.

This, in turn, provokes food riots in these less-well-endowed nations that you managed to dupe into participating in your outrageous scheme.

After all, there's only one thing worse than a hungry man.

That's a man who used to be well-fed and now he's both hungry and ****ed, along with being unemployed.

When his belly growls loudly enough, he riots.

And so do his similarly-situated neighbors.

That's when you find out what the balance of power really looks like between government and the people. Even in a monstrously-repressive regime such as Egypt, the fact remains that when the people have had enough, the government is fooked.

We should send our entire banking and scamming apparatus - every one of the people responsible for the bubbles and asset-stripping over the previous 20 years and all the policy wonks who have allowed and even encouraged the currency pegs and similar intentional distortions - over to Cairo on a nice Air Force airplane and turn them over to the people.

Let them hold the trial and determine what justice might dictate. Put it on pay-per-view and have the proceeds go to paying down the national debt.

We won't, of course. We'll claim we're not responsible in any way. The bankers will have none of this adhere to them, including Bernanke. Congress will, for its part, duck the responsibility that it has, in that it has continually allowed the bad debt to be hidden with outrageous actions like demanding that FASB change mark-to-market, bailing out insolvent banks, bailing out Fannie and Freddie and allowing Bernanke to claim that he "would not monetize the debt" - while he was doing so, and then allow him to do so - in the open, naked, without so much as a peep or legislation (or a contempt of Congress charge) to stop him.

This unrest is likely to spread, because unrest means disruption of supply lines, which in turn means prices go even higher. The same problems that caused this load of crap to happen are being made worse by it, and yet there's not one peep in the mainstream media nor among Congress as to what actually caused all of this to occur, or any calls for those responsible to be forced to stop it.

There's an implicit warning in what's going on over in Egypt today, as if this spreads through the Middle East, and it very well may, and radical elements get their hands on all the nice weapons we sold these nations under the premise of being a "friend" to America, you might want to think about what happens if the Middle East oil conduits get shut down, and whether that might create some "interesting" dynamics HERE in the United States.

New Paulson fund seeks dollars in the desert

SAN FRANCISCO (MarketWatch) — John Paulson, head of hedge-fund giant Paulson & Co., turned bullish on the U.S. housing market in early 2010. Now he’s got a fund that’s betting on a rebound.

One of the firm’s latest projects has taken it into the Sonoran Desert in the American Southwest, in search of empty residential-development lots.

In November, the firm finished raising capital for the Paulson Real Estate Recovery Fund, gathering roughly $315 million in commitments from investors, according to two people familiar with the situation.
Bay Area luxury homes are hot sellers

Houses selling for more than $2 million spiked in 2010 in the San Francisco Bay Area, with the most pricey home sold in San Francisco for $15.5 million. Pui-Wing Tam talks with Stacey Delo.

The vehicle is a private-equity fund, rather than a hedge fund. This means Paulson makes capital calls to investors when opportunities arise. It also means investors are locked in for many years.

Paulson seeded the fund with some of his own money and brought in Michael Barr, a former real-estate, private-equity specialist at Lehman Brothers Holdings Inc. (PINK:LEHMQ) , to run it.

One of the fund’s main strategies is to buy undeveloped tracts of land that already have environmental and building permits. Roads, sewers and electricity may also be in place, but not homes, according to one of the people familiar with the fund.

If the real-estate market recovers enough for developers to start building more new houses, this may be the type of land they buy first. That’s because a lot of the costly, time-consuming preparation work already has been done, the person explained.

Such a recovery may take years to materialize, if at all. TrimTabs Investment Research warned Thursday that the housing market is unlikely to recover for five or six more years.


Reuters

A paved road is surrounded by weeds in an unfinished subdivision in Coolidge, Ariz.

In the meantime, the Paulson fund has the flexibility to hold onto land. That’s because investors in the fund are committed for multiple years and the land is purchased with no leverage, the person added.
Desert oasis

The fund already has put some money to work.

In August, Paulson agreed to pay $42.4 million for 8,277 unstarted lots and 22 model homes in Arizona, Colorado and Nevada from bankrupt home-builder Tousa Inc.

The biggest chunk of land in the portfolio is Red River, a development about 50 miles south of Phoenix in Pinal County, on the eastern side of the Sonoran Desert.

The 3,662-acre property bumps up against a massive car-testing track part owned by Nissan Motor Co. (TOKYO:JP:7201) (PINK:NSANY) and the Ak-Chin Native American community.

This should be one of the first properties to be developed in the area, because “home builders and commercial developers will first go where it is most economical to develop,” according to a presentation given by Paulson’s lawyer for the project to Pinal County’s Board of Supervisors in November.

Red River already has spent $12.1 million on water and sewer infrastructure, along with almost $1 million in fees for a subregional transportation study, the presentation said.

The presentation also said John Paulson is “motivated to develop” in the next five to seven years, while noting that the property is the largest single asset in the fund.
Pinal permits

One issue facing the Paulson fund is that environmental and building permits for this type of property may expire and need to be extended.

In this case, a contract between Pinal and Red River states that the county’s board of supervisors “shall not unreasonably deny” a request for a 10-year extension, according to the presentation, drawn up by lawyer Jordan Rose of the Rose Law Group.

The presentation then lists 16 reasons why an extension should be granted.

The final argument stresses how Paulson’s involvement may show other investors that Pinal County is an attractive place to put money to work. “The market watches and responds to John Paulson’s investment decisions,” the presentation said.

‘The market watches and responds to John Paulson’s investment decisions.’

Presentation by Paulson lawyer

If the Red River development agreements aren’t extended, it will send a message to investors that “Pinal County wants to make it more difficult, more expensive and less attractive to develop in the county,” according to the presentation.

If the extension is approved, it would send the opposite message. “When the market comes back, we want it to come to Pinal County,” it added.

In November, Pinal County staff recommended an extension of the development agreement be denied, according to Heather Murphy, director of communications and public affairs for Pinal County.

Part of the dispute centers on impact fees which the county charges for new developments. The fees are also charged when development agreements are extended, Murphy said.

The theory is that a rancher, for example, who’s been in an area for decades, shouldn’t have to pay for infrastructure improvements to accommodate a big new development built by someone else, she added.

There are plans to upgrade more than 100 miles of roads in the area over the next decade at a cost of $237 million, according to the presentation by Paulson attorney Rose.

Paulson may be required to pay nearly half of this, or $114 million. But that’s not legal because Arizona statue requires that there be a direct benefit from such fees to the payer, the attorney argued in the presentation.

Most of the roads that are due to be upgraded aren’t near the Red River development, the presentation noted, while estimating that $107.2 million of the impact fees would not directly benefit the property.

The Board of Supervisors has since met and there was a motion and a second in favor of Pinal County staff drafting the extension and bringing it back to the board for formal approval, Rose said.

“This is expected to occur in late February or March,” she wrote in an email to MarketWatch.

The board decided to wait until then, because the county attorney said officials should see the extension paperwork before they formally approve it, Rose commented. There are only three members on the board, “so if two out of three vote to approve, that seems like a good thing,”

$5 Billion Year

John Paulson personally made $5 billion last year, according to the Wall Street Journal, but there's a misconception out there that he earned it in compensation.

That would have been impossible.

In order to do that, Paulson's funds would have had to have made $25 billion last year, and kept the entire 20% the fund earned in profits to himself, paying none of his portfolio managers.

Paulson manages just over ~$30 billion, and he didn't double the size of his fund. But he did earn $5 billion.

So how'd he do it?

Investing in his own fund -- he put his own money in and it churned out $4 billion, according to the WSJ.

So $4 billion of it wasn't really compensation, it was capital gains income. Which is even better! But still an important distinction. He made $5 billion two different ways.

The remaining about $1 billion in profits came from compensation. The largest hedge fund in Mr. Paulson's $36 billion investment portfolio, Advantage Plus, grew 17% last year, while another big one rose 11%, according to the WSJ. Paulson's gold denominated fund was up about 37% in 2010, according to an investor. (It was up 33.6% in December.)

His fund gained on shorts on Euro banks, profits from an investment Citi, and of course a lot came from gold.

So he earned about $1 billion from the 2 and 20% fees hedge funds managers take out of the fund, and $4 billion from investing in his own fund. $1 billion in compensation. $4 billion in personal investment gains.

Paulson also has another bet on housing, and he suggests you buy a house (or 3) right now.

Click here to see what John Paulson was invested in as of last quarter >


Read more: http://www.businessinsider.com/john-paulson-5-billion-2011-1#ixzz1CLDEtmnS

Google Releases Preview Version Of Honeycomb SDK,

Android’s answer to the iPad — a software release called Honeycomb — is coming soon. Multiple tablet devices like the Motorola Xoom are on the way, and we’re probably going to see dozens of them by the end of the year. But while the OS is nearly done and Google’s apps are looking great, third party developers still have to optimize their applications for these much bigger screens. Today, Google is allowing developers to do just that: it’s released the preview version of the Android 3.0 SDK.

This is going to give us our closest look at Android 3.0, which has been demoed before, but never very throughly. Many of the new features are spelled out on the Platform Highlights page, which we’re still combing through. Here are some of the main highlights:
Persistent Action Bar

The platform provides each application with its own instance of the Action Bar at the top of the screen, which the application can use to give the user quick access to contextual options, widgets, status, navigation, and more. The application can also customize the display theme of its Action Bar instance.

The Action Bar lets developers expose more features of their applications to users in a familiar location, while also unifying the experience of using an application that spans multiple Activities or states.

Activity fragments, for greater control of content and design flexibility

Starting with Android 3.0, developers can break the Activities of their applications into subcomponents called Fragments, then combine them in a variety of ways to create a richer, more interactive experience. For example, an application can use a set of Fragments to create a true multipane UI, with the user being able to interact with each pane independently. Fragments can be added, removed, replaced, and animated inside an Activity dynamically, and they are modular and reusable across multiple Activities. Because they are modular, Fragments also offer an efficient way for developers to write applications that can run properly on both larger screen as well as smaller screen devices.

Wage Inflation Rampant In China

Several days ago we highlighted that wage inflation in China spreading after Shanghai announced it would hike minimum salaries by 10%. Today, through Global Times we learn that this is just the beginning. Or the continuation rather: it seems that 30 provinces had already hiked minimum wages in 2010: "By the end of 2010, 30 provincial-level regions had raised the standard for the minimum wage, with an average increase of 22.8 percent year-on-year., Yin Chengji, spokesman for the Ministry of Human Resources and Social Security (MHRSS), said Tuesday. According to him, 29 provinces have issued the guideline for the minimum wages, and the benchmark line grew about 2 percent. In Shanghai, the local minimum wage was the highest nationwide, totaling 1,120 yuan ($170.2) per month." And 2011 will be even worse: " Also, according to a China Business News (CBN) report Tuesday, in 2011, many areas would continue to raise the standard. A Xinhua News Agency report Wednesday revealed that northern Chinese city of Tianjin is considering raising the minimum working wage by 16 percent this year amid rising inflationary pressure and labor shortages." We are confident America's workers will be delighted to know that Bernanke's massively destructive monetary policies are finally resulting in higher salaries... In China. But wait: this also means US consumer purchasing power is about collapse as since very soon all imported Made in China trinkets are about to get far more expensive as already razor thin margined China producers scramble to raise costs to their primary export market.

As Bankers Kill Off Mark-To-Market For Good, Former FDIC Chairman Gloats

By now everyone is aware that following tremendous pressure by the banker lobby, which knows too well the Ponzi jig will be immediately up if Quantitative Easing's TBTF Madoffs are forced to disclose the true value of their worthless assets (yes, true value comes from asset cash flow generation, not from diluting money), the FASB decided to stop its push for a return to MTM(mark to market). From the WSJ: "Accounting rule makers, bowing to an intense lobbying campaign, took a key step Tuesday to reverse a controversial proposal that would have required banks to use market prices rather than cost in order to value the loans they hold on their balance sheets." Transparency? moron would propose that in an economy that is so obviously healthy and surging. After all, the only way to validate a surging stock market, er, economic recovery, is through bullshit numbers pulled out of the ass. That way they can pretend to tell us the truth, we can pretend to believe them, and everyone will frontrun the Fed who pretends not to be buying stocks. And it would have been great if it ended there. Alas no. Following the announcement, none other than Bill Isaac, current Chairman of LECG, but far more importantly, former Chairman of the FDIC under Ronald Reagan decided to send out a gloating email to his entire address book explaining what a moral victory it is to kill the MTM monster that is the sole reason for the near collapse of capitalism in 2008, and how truly wonderful it is for everyone to live in perpetual lack of knowledge of what the true value of any company's assets really is. Unfortunately, this just goes to show what the existing, extremely bribed, leaders of the nation's most vital organizations really think.

And before we present Isaac's note, here is some more on how the banker lobby scored one more over the US peasantry, from the WSJ:

The Financial Accounting Standards Board preliminary vote would allow banks to continue valuing many of their loans at amortized cost, an adjusted version of their original cost, as they do now. That backtracks on an FASB proposal last May to expand fair value to bank loans. The reversal is a victory for the banking industry, which says it would have hurt lending and unfairly reduce banks' book value. Supporters of the FASB fair-value proposal say it would have improved transparency and unmasked potential weakness at banks.

The FASB indicated the overwhelmingly negative reaction to its proposal from companies and investors played a large role in prompting the board to change its mind. The board received more than 2,800 comment letters on its fair-value proposal, most of them opposed to the move.

FASB changed direction on how to value loans because of "strong signals from the board's constituents," FASB Chairman Leslie Seidman said during a webcast Tuesday. She also noted that some loans—including those that banks trade actively instead of retaining in order to collect the payments on them—will have to be valued at market prices.

And the reason for why opacity rules:

At some large banks, their loans' fair value is billions of dollars less than their carrying amount.

That would dramatically reduce their shareholder equity—or assets minus liabilities—if the loans had to be carried at fair value.

Investors have said fair-value information is important to them even if they don't think it should be the criteria for valuing loans on the balance sheet, FASB members said.

Simply said, if everyone knew the truth, everyone would be insolvent.

And here is William Isaac's letter, which blames Mark To Market for the near end of capitalism. Conveniently his email is also provided.

Mark-to-market accounting -- a failed policy that was terminated by the Roosevelt Administration in 1938 because it was inhibiting bank lending -- was revived by the Securities and Exchange Commission and the Financial Accounting Standards Board in the 1990s over strong objections from the Fed, FDIC and Treasury.

The MTM policy senselessly destroyed some $500 billion of capital in our financial system when the markets collapsed in 2008. This destroyed some $4 trillion of bank lending capacity and was a major contributor to the financial panic and ensuing economic collapse.

The FASB, almost inexplicably, proposed last year to EXPAND mark-to-market accounting to cover all bank loans. This would have essentially shut down lending except for short-term lending to businesses with impeccable credit ratings.

See the press release below. The FASB is apparently abandoning its plan to expand mark-to-market accounting. This is an important first step improving US accounting as it relates to financial institutions.

Wheat Futures At 29 Month High

Dow Jones reports that wheat futures just hit a 29-month highs on "strong global demand." Per the newswire, Algeria bought 800,000 tons of milling wheat, with traders estimating the nation's purchases for January at about 1.8M. Turkey and Jordan bought wheat last week after rising food prices helped fuel unrest in Tunisia. "They're saying, 'Boy we've got to eat. We don't know where wheat is going to be in a month,' says PFG Best. CBOT March wheat ends up 18 1/4c at $8.56 1/2 a bushel, while KCBT March climbs 22 1/2c to $9.40 and MGE March jumps 21c to $9.77. The chart below shows the UBS Bloomberg constant maturity Wheat index which confirms the vicious loop of what surging prices and geopolitical instability means to wheat prices. The higher the prices, the greater the scramble by developing (and soon developed) countries to acquire as much wheat as possible and hoard it, hoping to avoid Tunisia's fate, which of course will lead to even greater price surges. And all of this ignores the impact of the Goblin in Chief, whose money printing fetish has earned him, in our books, the adjective 'genocidal'. Once China figures out what is going on, and rice prices finally explode as we fully expect they will, the world will figure out just why...The only silver lining - soon farming will be the most profitable profession in the world. And as bankers only go where the money is, Bernanke's strategy may in fact lead to the first net natural outflow of bankers from Wall Street in history.

Wal-Mart Fined In China For Deceptive Price Practices To Mask Inflation

First, Wal Mart's primary gimmick for masking inflation was confined to using smaller packages sold at the same price. Now, it has devolved to outright fraud and misrepresentation. Top global discount stores Wal-Mart and Carrefour have both been fined in China for "misleading pricing at some of their stores in the nation, as the government works to rein in rising prices for consumer goods." Presumably outright lies (and being caught) are the last bastion before even such ultra low price point retailers are finally forced to hike their prices. Bloomberg explains further: "Authorities in cities including Shanghai, Chongqing, and Kunming discovered incidents at local Wal-Mart and Carrefour outlets that included labeling on products with prices that didn’t match what shoppers were charged at payment, exaggeration of discounts and labeling that led to confusion about how much a product cost. The stores may be fined five times the revenue they earned using such methods, the National Development and Reform Commission said today on its website." Our only advice on this news: get a channel checker for rice prices in China...

More from Bloomberg:

China, home to 150 million people living on less than $1 a day, has cracked down on price manipulation, ordered authorities to ensure the supply of foodstuffs and frozen contract coal prices to curb inflation that gained the fastest in more than two years in November before moderating last month. The NDRC in November fined units of PetroChina Co. and China Petroleum & Chemical Corp. for selling diesel above state-set prices.

Jiang Wei, a Beijing-based media relations official for Wal-Mart, said she couldn’t immediately comment on the fine. Carrefour China spokesman Chen Bo didn’t answer calls to his mobile phon

Avoiding the Traditional Path of University Education

http://www.zerohedge.com/article/why-avoiding-traditional-path-university-education-will-help-yes-help-your-children-survive-

Financial Crisis

Financial Crisis Inquiry Commission Slams Greenspan, Bernanke, Geithner, Paulson, Summers, SEC, Rating Agencies and Big Banks for Causing Crisis

The Financial Crisis Inquiry Commission is releasing its report Thursday.

The New York Times has a preview of the report, which shows that the Commission will slam the right people for causing the financial crisis.

Barry Ritholtz gives a good summary of the Times' article:

The many causal factors highlighted in the FCIC report:

• Alan Greenspan’s malfeasance — his refusal to perform his regulatory duties because he did not believe in them — allowed the credit bubble to expand, driving housing prices to dangerously unsustainable levels; Greenspan’s advocacy for financial deregulation was a “pivotal failure to stem the flow of toxic mortgages” and “the prime example” of government negligence;

• Ben S. Bernanke failed to foresee the crisis;

• The Bush administration’s “inconsistent response” — saving Bear, but allowing Lehman to crater — “added to the uncertainty and panic in the financial markets.”

• Bush Treasury secretary Henry M. Paulson Jr. wrongly predicted in 2007 that subprime meltdown would be contained.

• The Clinton White House, including then Treasury Secretary Lawrence Summers, made a crucial error in “shielding over-the-counter derivatives from regulation [CFMA]. This was “a key turning point in the march toward the financial crisis.”

• Then NY Fed President, now Treasury secretary Timothy F. Geithner failed to “clamp down on excesses by Citigroup in the lead-up to the crisis;” Further, a month before Lehman’s collapse, Geithner was still in the dark about Lehman’s derivative exposure;

• Low interest rates brought about by the Fed after the 2001 recession “created increased risks” but were not chiefly to blame, according to the FCIC (I place some more weight on Ultra-low rates than they do);

• The financial sector spent $2.7 billion on lobbying from 1999 to 2008, while individuals and committees affiliated with the industry made more than $1 billion in campaign contributions. The impact of which an incestuous relationship between bankers and regulators, Congress and bankers, and classic regulatory capture by the industry.

• The credit-rating agencies “cogs in the wheel of financial destruction.”

• The Securities and Exchange Commission allowed the 5 biggest banks to ramp up their leverage, hold insufficient capital, and engage in risky practices.

• Leverage at the nation’s five largest investment banks was wildly excessive: They kept only $1 in capital to cover losses for about every $40 in assets;

• The Office of the Comptroller of the Currency along with the Office of Thrift Supervision, “federally pre-empted” (blocked) state regulators from reining in lending abuses;

• The report documents “questionable practices by mortgage lenders and careless betting by banks;”

• The report portrays the “bumbling incompetence among corporate chieftains” as to the risk and operations of their own firms:

-Citigroup executives admitting that they paid little attention to the risks associated with mortgage securities.
-AIG executives were blind to its $79 billion exposure to credit default swaps;
-Merrill Lynch top managers were surprised when mortgage investments suddenly resulted in billions of dollars in losses;

I certainly agree with all of these points.

It should be noted that leading banking analyst Chris Whalen - who I greatly respect - agrees with FCIC Commissioner Peter Wallison (co-director of the American Enterprise Institute's program on financial policy studies) that Freddie and Fannie were a leading cause for the crisis. This is the minority view of the FCIC.

Many people - including me - have criticized the FCIC for seeming to sidestep the massive fraud which was a core cause of the crisis. However, the Commission has indicated that it will make criminal referrals. We'll have to wait and see if the referrals are for big or small fish.

Marc Faber Compares Obama To A Prostitute

Earlier, Marc Faber appeared on Bloomberg TV, in what may go down in history as his most scandalous interview ever. When asked, in advance of the SOTU address, what he thinks of the president, Faber, who appears to have had enough with all the bullshit, propaganda, and lies, replies: "I think he's done a horrible job and I think that will continue, I think he is a dishonest person, and nothing has changed... Some politicians are more honest than others. I don't think that I have a very high regard for politicians, I have a high regard for businessmen and for people who work, and not for people who abuse the system continuously. And in comparison to other politicians, I think he came in on a platform as a president that would want to change the government in Washington, and actually he's made it worse... We foreigners, we just laugh at someone like Mr. Obama. I was very critical of Mr. Bush, but at least he had one line and he stuck to that line, and at least he set out to do a thing and he was relatively straight on the thing that he did. He may have been wrong, but at least he didn't change his mind continuously, and didn't prostitute himself." If nothing else, how many other people do you know who will compare, in front of a live Bloomberg audience, the president of the formerly greatest country in the world to a whore?

NLRB Moves to Humiliate Employers, Give Unions Access to Employees & Property

Every movement that seeks to enslave a country, every dictatorship or potential dictatorship, needs some minority group as a scapegoat which it can blame for the nation’s troubles and use as a justification of its own demands for dictatorial powers. In Soviet Russia, the scapegoat was the bourgeoisie; in Nazi Germany, it was the Jewish people; in America, it is the businessmen. — Ayn Rand, Capitalism, The Unknown Ideal.

Here’s the scene:

Imagine yourself a small business owner with 50 employees or so. You’ve just spent the last two years of the Great Recession barely keeping your head above water, taking on some debt to keep your business viable. You’ve made a promise to yourself not to lay any of your employees off, but you also haven’t been able to give any raises, you’ve had to take away dental benefits, and everyone’s health care costs are going up this year because of ObamaCare.

At last, though, things are starting to look up a little and you finally have enough business to hire a couple of new employees. After a fairly extensive search, you find a couple of candidates who seem like good fits. They’ve been unemployed for a while and seem really grateful that you’ve given them a job. It turns out, they’re pretty knowledgeable on running equipment and seem to get along really well with your other employees.

Well, a few months go by and one Friday afternoon, just before you’re to head home for the weekend, you get a fax from the National Labor Relations Board. The fax states that “unfair labor practice” charges have been filed against you and your company. Among other charges are those alleging that you fired a pro-union employee, interrogated employees, solicited grievances, made promises of benefits, and threatened to close…all illegal acts.

You contact your attorney and, through an inquiry to the NRLB, he finds out the basis of the charges, you learn that a union has targeted your company. Your attorney then advises you that you should probably settle the charges because they are pretty damning. How so? you ask.

Well, he tells you, it seems that, during your employee meeting a few weeks ago when you had promised that you were restoring the company’s dental plan later in the year, one of the new guys had asked you how you feel about a union, you said jokingly and off the cuff, “I’ll close my doors before I ever go union.” That was bad enough, your lawyer tells you, but then you allegedly asked the question, “Why? Do you want a union?” On top of that, he tells you, you fired a pro-union employee (never mind that you didn’t know that the guy was pro-union).

While you don’t remember all of the details of that meeting, the lawyer’s account (which he got from the NLRB) sounds pretty accurate. Now, your lawyer tells you, you can fight the charges which may cost you $50,000 to $100,000 and you’ll still probably lose, or you can settle the charges.

Here’s what the NLRB wants:

• You must give the union a list of all of your employees’ names and addresses so the union can contact them at home
• You must let the union post information on your bulletin boards
• You must allow the union to come into your company and meet with your employees
• You must offer full reinstatement to the pro-union employee, with backpay (even though he was fired for damaging a customer’s order—purposefully you suspect)
• Lastly, you must stand in front of your employees and read out loud the posting of the settlement with the NLRB

If you don’t settle the charges, your lawyer tells you, the NLRB is prepared to go to federal court to get an injunction ordering you to comply.

Oh, and by the way, your attorney tells you, that pro-union employee (one of the new hires you had hired a few months back) appears to be a union salt—whose sole purpose was to get hired in order to unionize your company.

If this sounds implausible, it shouldn’t. It is precisely the machinery that the union-controlled National Labor Relations Board set into place…last month.

The Politics of Posters

Last month, three days before Christmas, the union-controlled National Labor Relations Board issued a controversial proposal to require all private-sector employers to post notices in the workplace advising employees about their rights to unionize. While the proposed rule would not take effect until after the 60-day public comment period closes on February 22nd, it has garnered much-earned ire and commentary throughout the employer community. However, while there has been much attention on the bright and shiny NLRB poster proposal, the NLRB’s Acting General Counsel, Lafe Solomon has been quietly slipping a garotte around the necks of the nation’s employers.

The NLRB’s Sleight of Hand

On December 20th, two days before the NLRB issued its poster proposal, Acting General Counsel* Solomon issued a Memorandum to all NLRB regional offices entitled Effective Remedies in Organizing Campaigns. As an instructional memorandum to the NLRB regions on the handling of certain types of cases, there is no need for public comment, hearings or the like. It has already taken effect.

Ostensibly, Solomon’s memo is to provide guidance to the NLRB regional offices when dealing with employer misconduct during unionization campaigns. Solomon’s memo details different levels of employer misconduct during union campaigns, from asking questions (interrogation) and making changes to working conditions, to firing pro-union workers, then gives several types of “remedies” for the regional offices of the NLRB to pursue.

This is not to excuse true employer misconduct in the four percent of cases where it actually occurs. However, knowing that it costs a union nothing to file unfair labor practice (ULP) charges and, as it happens routinely today, given the current bias of the NLRB, businesses should expect a sharp up-tick in the filing of ULP charges (whether frivolous or not).

It should also be noted that the National Labor Relations Board does not use the same standards that courts use when deciding guilt or innocence. In fact, it’s been said that the NLRB process is often a ‘trial by ambush’ and ‘guilty until proven innocent beyond a shadow of a doubt’ is the standard for employers at the NLRB. In addition, given that unions often deploy deceptive tactics (including paid and unpaid union “salts” to unionize companies from within), combined with the current NLRB being under the control of union bosses, it is easy to predict that employers will found be guilty of unfair labor practices when, in fact, they may be entirely innocent. This make Lafe Solomon’s so-called “remedies” all the more troublesome.

The Public Flogging Remedy

On page 6 of his remedies, Lafe Solomon calls for employers that have been found guilty by the NLRB to publicly read NLRB notices to assembled groups of employees:

Notice-reading remedies generally require that a responsible management official read the notice to assembled employees or, at the respondent’s option, have a Board Agent read the notice in the presence of a responsible management official.

[snip]

Furthermore, where a high ranking manager personally committed some of the violations, hearing that manager read the notice, or seeing him present while it is read, will “dispel the atmosphere of intimidation he created” and best assure employees that their rights will be respected.

On page 8, Solomon instructs the NLRB regions to order employers to give unions access to their bulletin boards, as well as to turn over names and addresses of employees to the union.

Where an employer unlawfully interferes with communications between employees, or between employees and a union, the impact of that interference requires a remedy that will ensure free and open communication. Allowing union access to the employer’s bulletin boards and providing the union with the names and addresses of employees will restore employee/union communication and assist the employees in hearing the union’s message without fear of retaliation. These access remedies assure the employees that they can learn about unionization and can contact union representatives in an atmosphere free of the restraint or coercion generated by an employer’s violations.

[snip]

An order requiring an employer to permit access to its bulletin boards will broaden the opportunity for employee/union communication. Union access to bulletin boards permits employees to see, at the workplace, that open displays of union information are acceptable, and will better thaw the chilling impact of the violations than the bare recitation of rights in a standard notice posting.

Giving the Unions Employees’ Names & Addresses

On page 9 of Solomon’s instructions, the NLRB regions are instructed to require that employers turn over the names and addresses of employees.

“To neutralize the effect of the Respondent’s face-to-face restraint and coercion, it is necessary that the employees have ready access to union organizers and other officials who can explain to them the Union’s point of view with respect to organizational activities.” The names-and-addresses remedy “attempts to level a playing field that has been tilted against the employees’ organizational rights” by the employer’s unfair labor practices and enables the union to contact all the employees outside the work environment free from management’s watchful eye.

Open the Doors, Let the Organizers Come In

On page 10, Solomon goes for the jugular, instructing regions when it is appropriate to order an employer to allow union organizers on to company property to address employees.

If a Region determines that an employer’s unfair labor practices have had such a severe impact on employee/union communication that bulletin board access and names and addresses are insufficient to permit a fair election, it should submit the case to the Division of Advice with a recommendation as to why additional remedies are warranted, including: granting a union access to nonwork areas during employees’ nonwork time; giving a union notice of, and equal time and facilities for the union to respond to, any address made by the company regarding the issue of representation; and affording the union the right to deliver a speech to employees at an appropriate time prior to any Board election.

You can read Acting General Counsel Lafe Solomon’s entire Memorandum here.

Now, if the above weren’t bad enough, Lafe Solomon issued another memorandum on January 12th calling for the use of “Default Language” in the settlement of ULP cases.

The “Default Language,” which the NLRB is now, according to Atlanta-based labor attorney Mark Keenan, utiliizing in NLRB settlements nationwide is as follows:

The Charged Party/Respondent agrees that in case of non-compliance with any of the terms of this Settlement Agreement by the Charged Party/Respondent, and after 14 days notice from the Regional Director of the National Labor Relations Board of such non-compliance without remedy by the Charged Party/Respondent, the Regional Director will [issue/reissue] the [complaint/ compliance specification] previously issued on [date] in the instant case(s). Thereafter, the General Counsel may file a motion for summary judgment with the Board on the allegations of the [complaint/compliance specification]. The Charged Party/Respondent understands and agrees that the allegations of the aforementioned [complaint/compliance specification] will be deemed admitted and its Answer to such [complaint/compliance specification] will be considered withdrawn. The only issue that may be raised before the Board is whether the Charged Party/Respondent defaulted on the terms of this Settlement Agreement. The Board may then, without necessity of trial or any other proceeding, find all allegations of the [complaint/ compliance specification] to be true and make findings of fact and conclusions of law consistent with those allegations adverse to the Charged Party/Respondent, on all issues raised by the pleadings. The Board may then issue an order providing a full remedy for the violations found as is customary to remedy such violations. The parties further agree that the U.S. Court of Appeals Judgment may be entered enforcing the Board order ex parte.

Last week, President Obama issued an Executive Order to review regulations that could be hampering job growth. Unfortunately, the union-controlled National Labor Relations Board is likely to escape such review. As a result, it is only a matter of time before employers begin to realize that the President’s pro-business rhetoric doesn’t match the job-killing, anti-business deeds being committed by his pro-union National Labor Relations Board.

_________________

* The General Counsel, appointed by the President to a 4-year term with Senate consent, is independent from the Board and is responsible for the investigation and prosecution of unfair labor practice cases and for the general supervision of the NLRB field offices in the processing of cases. On January 5th, President Obama nominated Acting General Counsel Solomon to the position of General Counsel for a full, four-year term. His nomination awaits Senate confirmation.

_________________

“I bring reason to your ears, and, in language as plain as ABC, hold up truth to your eyes.” Thomas Paine, December 23, 1776

Music Industry Braces for the Unthinkable

PARIS — After another year of plunging music sales, record company executives are starting to contemplate the unthinkable: The digital music business, held out as the future of the industry, may already be as big as it is going to get.

The International Federation of the Phonographic Industry, a trade group based in London, said last week that sales of music in digital form had risen only 6 percent worldwide in 2010, even as the overall music market had shrunk 8 percent or 9 percent, extending a decade-long decline.

In each of the past two years, the rate of increase in digital revenue has approximately halved. If that trend continues, digital sales could top out at less than $5 billion this year, about a third of the overall music market but many billions of dollars short of the amount needed to replace long-gone sales of compact discs.

“Music’s first digital decade is behind us and what do we have?” said Mark Mulligan, an analyst at Forrester Research. “Not a lot of progress.”

“We are at one of the most worrying stages yet for the industry,” he continued. “As things stand now, digital music has failed.”

Music executives disagree, saying there is hope, as long as they can come to grips with piracy, which according to the industry federation accounts for the vast majority of music distributed online.

Stronger measures to crack down on unauthorized copying are taking effect in a number of countries, executives note, and even as the authorities wield a heavier stick, the complementary carrots are appearing, too, in the form of innovative digital services.

“The challenging environment continues, but we have some grounds for optimism,” said Frances Moore, chief executive of the music federation.

Ms. Moore said the recent introduction of tough anti-piracy laws in South Korea and France, which authorize cutting off the Internet connection of repeat offenders, showed that stricter enforcement could persuade listeners to seek out legal alternatives to unauthorized file-sharing services.

In South Korea, where the music business has long been blighted by piracy, digital music sales rose 14 percent in the first half of last year, after the new law went into effect in 2009, the federation said. The first account suspensions occurred in the autumn, and the group said the publicity surrounding the crackdown should help convert more consumers.

Max Hole, chief operating officer of Universal Music Group International, said his company, the biggest of the four major record companies, was so encouraged by the signs of a turnaround in South Korea that it had decided to start investing in the development of new music acts again, after suspending operations in South Korea several years ago.

France has also implemented a so-called graduated response system. In the French system, cutting Internet access is preceded by several warnings. While the authorities say they have sent out hundreds of thousands of e-mails to suspected copyright cheats, nobody’s connection has yet been cut.

Record company executives said they were also encouraged by recent legal action in the United States to cripple the file-sharing service LimeWire, as well as by the progress in the U.S. Senate of a bill to give law enforcement officials more power to shut down file-sharing services.

In Europe, the industry has notched legal victories against other sites accused of abetting piracy, including The Pirate Bay and Mininova.

Industry executives say they are encouraged by the development of new digital services, particularly those that embrace the principles of cloud computing. These services can provide unlimited amounts of music to listeners on demand, through a variety of devices, from mobile phones to televisions.

“The television is a great opportunity,” said Thomas Hesse, head of the digital business at Sony Music Entertainment. “We haven’t innovated in the living room for many years.”

Around the world, 10 million people have already signed up for subscription-based online services from Spotify, Rdio and Deezer, some of which have attracted additional millions of users with free, advertising-supported services. Many executives hope the growth of offerings like these can reduce the industry’s dependence on sales of individual tracks through digital stores like Apple iTunes, a model that has attracted little interest from young music fans, particularly outside the United States.

Yet some services that were hailed as potential iTunes challengers when they were introduced are fading from the scene. Nokia, the mobile phone manufacturer, said this month that it was sharply scaling back a service that gives buyers of certain phones free, unlimited music downloads. Sky, the British pay-television and broadband provider, recently canceled a subscription music service.

Music executives say Internet service providers hold the key to solving the piracy problems and helping the music companies recoup lost revenue. For the most part, providers have balked at taking stronger action against file-sharing, saying they do not want to snoop on their customers.

But one provider in Ireland, Eircom, recently started instituting its own version of a graduated response system. Customers who illegally download music face a “graduated response” similar to the one in France, but they can avoid the threat of disconnection by using a new music service from Eircom that offers free, unlimited streaming.

Mr. Mulligan said tougher enforcement would succeed only if music companies and other rights holders, including collecting agencies that represent artists and composers, embraced digital services that met the needs and interests of consumers, particularly teenagers and young adults.

Rights holders have grown more flexible as industry sales have collapsed, but they remain reluctant to license their music to some services. For example, Spotify, a popular streaming service in Europe, has yet to sign the record company deals it needs to open a U.S. site. Meanwhile, Internet companies like YouTube have sometimes struggled to reach agreements to show music videos in Europe.

The industry has also balked at the unlimited MP3 format, which comes with no copy restrictions, allowing people to share music with friends or provide soundtracks for their own videos, or post songs to social networking sites.

With growth in digital revenue slowing nearly to a standstill, analysts say, it is no surprise that talk of mergers and buyouts is again swirling around some of the Big Four music companies — Universal, Sony, Warner Music Group and EMI. Warner, for example, is said to have hired bankers to explore a sale of the company or a purchase of EMI.

“What has been keeping labels afloat has been the digital story,” said Mr. Mulligan, of Forrester Research. “If, all of a sudden, what they have been telling the market is the future turns out to be a failure, that radically changes the conversation.”

Solar Energy Madness in Europe

In an effort to spur solar energy in France, Germany, Spain and other European countries, bureaucratic dunces decided to pay as much as 10 times market rates for those supplying energy to the power grid.

In response, farmers in France have started building "barns" that serve no other purpose than a place to put solar panels. Supermarkets put solar panels on their roofs and unused sections of parking lots.

It has been a boom to solar panel makers (China), but it is costing costing the French power company Electricite de France SA more than a billion euros ($1.3 billion) a year to meet government mandated pledges to accept solar energy from those supplying the grid.

At the end of 2010, EDF received 3,000 applications a day to connect panels to the grid. In 2008, the number of applications was 7,100 for the entire year.

The results should have been easy to predict in advance, but you can never explain anything to economic illiterates interfering in the free markets hoping to make things better. They never do.

Please consider EDF’s Solar ‘Time Bomb’ Will Tick On After France Pops Bubble

France’s solar power boom that’s led to farmers building unneeded barns just to cover them in panels is costing Electricite de France SA more than a billion euros ($1.3 billion) a year as it meets state pledges to pay above-market prices for renewable energy.

The cost is siphoning off funds from EDF as it plans to spend 35 billion euros to extend the life of France’s aging nuclear plants.

The tax shortfall will widen this year and last until 2017 even as the government moves to cool the solar rush, said Aurel BGC analyst Louis Boujard.

EDF shares have dropped 20 percent over the past year, compared with a 3.7 percent decline in Europe’s Stoxx 600 Utilities Index. The Paris-based company had net debt of $57 billion euros at the end of June, according to a company filing.

Elsewhere in Europe, governments have stepped in to contain spiraling growth in solar generation.

The Czech Senate introduced a temporary tax on solar producers in December, and Spain limited the hours during which existing solar parks can earn premium rates. Germany almost doubled the surcharge consumers have to pay in renewable-energy subsidies starting this year.

To end what it has called a “speculative bubble,” France on Dec. 10 imposed a three-month freeze on solar projects to devise rules that could include caps on development and lowering the so-called feed-in tariffs that pay the higher rate for renewable power. The tariffs were cut twice in 2010.

The French cuts haven’t slowed demand for new solar projects. EDF received 3,000 applications a day to connect panels to the grid at the end of last year, compared with about 7,100 connections in all of 2008, according to the government and EDF. France could reach its 2020 target of 5,400 megawatts of solar generating capacity by the end of 2011 if all proposed projects are completed.

France’s energy regulator estimates EDF will pay an average of 546 euros a megawatt-hour for solar power in 2011. That’s almost 10 times estimated spot market power prices of 55 euros, and the highest among renewable energy sources.

The promise of rich returns spurred suburban supermarkets to put photovoltaic panels in parking lots and farmers to install units on empty, purpose-built barns, according to a French parliamentary report.

Politicians Never See It Coming

“We just didn’t see it coming,” French lawmaker Francois-Michel Gonnot said of the boom. “What’s in the pipeline this year is unimaginable. Farmers were being told they could put panels on hangars and get rid of their cows.”

Chocolate Prices Set To Surge Monday

When a week ago we observed the Onionesque reality of life in the Ivory Coast, where deposed president Gbagbo is threatening to wipe out bondholders of $2.3 billion in debt (Corporate Ticker: NUTZ) unless he becomes formally recognized, we made the following bold prediction: "we are sure that Blythe Masters and her team were recently in Yamoussoukro discussing the most effective way to corner the cocoa market (paper Cocoa ETF?), thus getting the price of the sweet powder up by a few trillion percent (in exchange for a nice 25% of all upside going to Jamie Dimon's firm of course)." Sure enough, when it comes to our track record of macabre predictions we continue to be near 100%. The FT has just reported that Alassane Ouattara, Laurent Gbagbo's opponent in the presidential election (and the man formally acknowledged by the UN as the country's president) has just imposed a one-month export ban of cocoa, ostensibly in an attempt to oust Laurent Gbagbo. In other words, the international community has to choose: bond recoveries or chocolate. That said, we are certain that it is none other than noted commodity market cornering expert JPM that can claim league table advisory credit for what according to the FT will be a 10% jump in the price of cocoa on opening Monday. The immediate retaliation by Gbagbo will most certainly be to force a technical default on the country's bonds which are already in their grace period, and start a localized mini liquidity (and solvency) crisis in Africa... As if the developed world did not have enough of those as is. And in the meantime, we sense a great disturbance in the inflationary Force, as if millions of fatty voices suddenly cried out in terror, and were suddenly silenced. Prepare for the next round of food inflation worldwide.

From the FT:

Cocoa is the main source of income for the government of Ivory Coast and any stoppage in exports would cut the funding Mr Gbagbo relies on to pay loyal civil servants and the military. Diplomats believe he needs about $150m a month.

Any reduction in supply is likely to push the price of the commodity used in chocolate towards a 33-year high because Ivory Coast accounts for about 40 per cent of global cocoa exports. The cocoa market closed on Friday at a 6-month high of £2,114 per tonne and traders fear prices could jump as high as 10 per cent on opening on Monday.

Alassane Ouattara, acknowledged by the UN as the victor in the recent disputed presidential election, sent a letter to leading cocoa exporters on Sunday ordering them to stop overseas shipments from Monday 24 until February 23.

“I am informing you to stop immediately all the exports of cocoa and coffee,” the letter, signed by Jeannot Ahoussou Kouadio, an ally of Mr Ouattara, says. “All operators which contravene this instructions would be exposed to national and international sanctions,” the letter, dated January 22, adds.

“Therefore, the registry of cocoa and coffee exports … is suspended,” the letter says. The Financial Times has obtained a copy of the letter, which was received by several top cocoa and coffee exporters in Abidjan, the commercial capital of Ivory Coast.

The decision to press for a cocoa blockade, comes as the European Union has tightened its own sanctions regime on Ivory Coast. Regional efforts to resolve the post election impasse in Ivory Coast continue to founder, however, leaving the country teetering on the verge of a new civil war.

West African states have warned they will use “legitimate force” to oust Laurent Gbagbo, who maintains control of the country’s army, if he continues to refuse to honour the UN-certified results of last November’s polls, which gave victory to Mr Ouattara.

Guess what this means for food producer margins? Nothing good:

Cocoa traders have taken the letter seriously and warned that exports could stop on Monday. “This is very serious; we have few options,” said the head of a leading trading house.

The world’s largest cocoa traders, including Cargill, Archer Daniels Midland, Barry Callebaut, Olam and Armajaro, were planning an emergency conference call on Sunday evening with the Federation of Cocoa Commerce, the industry body, to discuss the situation, said one person with knowledge of the conversations.

The FCC and the European Cocoa Association will co-ordinate the traders’ efforts on Monday. They were planning to send a letter to Mr Ouattara’s parallel government asking for some clarifications.

The letter imposing the export embargo allows the traders to continue buying cocoa in the local market, but traders warned that, without exports, the domestic warehouses at the port cities of Abidjan and San Pedro will soon fill.

All in all, another week of commodity fireworks is set to be unleashed. For those who took Standard Chartered's advice to "buy the West African dip" our condolences: "Standard Bank sees “significant upside potential” if a resolution to the dispute can be found, which may make the country’s debt sub-Saharan Africa’s best-performing international sovereign notes this year." For everyone else who took our tongue in cheek advice and bought the Cocoa non-commercial futures on the ICE, at 43,664 at last check, congratulations.

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Iranian warships coming to Mediterranean and Red Seas

Israel

Iranian naval exercise

Less than 24 hours after the breakdown of its nuclear dialogue with the six world powers in Istanbul, Iran announced plans Sunday, Jan. 23, to senda fleet of warships, including a home-made destroyer, on operational and intelligence-gathering missions to the Red Sea and on to the Mediterranean through the Suez Canal. debkafile's military sources: Parts of the fleet will in fact be deployed in the three waters around Israel's southern and western shores.
Tehran is taking advantage of the lack of military and diplomatic momentum on the part of US and Israel for a naval thrust to expand its range of operations and encroach on their areas of control.

It is also a rapid response to the arrival of the USS Enterprise carrier with a strike group carrying 6,000 sailors and marines and 80 warplanes in the Mediterranean at the end of last week on its way to the Arabian Sea opposite Iran. British ex-Prime Minister Tony Blair's call on the West to stop apologizing and react to Iran with force was not lost on the rulers of the Islamic Republic.

The Navy Commander, Rear Admiral Habibollah Sayyari spoke of three or four vessels including Iran's first home-made destroyer, Jamaran, with back-up operational units standing by for urgent support missions.

His deputy, Rear-Admiral Gholam Reza Bi-Gham said the deployment would last about a year and at some future time, long-distance submarines would join the fleet.

Since Nov. 2008, the Iranian Navy has been conducting anti-piracy patrols between the Gulf of Aden Straits of Bab al-Mandeb off Yemen so some of its units are not far away.

Both admirals reported that a flotilla of Iranian naval officer cadets would soon be dispatched to the Mediterranean and Red Seas to gain experience in these new areas and gather intelligence.
Iran recently purchased three Kilo class submarines from Russia and is using them in the Persian Gulf. debkafile's military sources report they belong to a bygone generation of subs and lack advanced electronic systems, making it hard for them to stay deep down underwater for long periods without surfacing.

For two years, Iranian military shipyards have been building miniature submarines, war ships and fast assault craft. Most Western naval give them low ratings in performance especially in view of their outdated electronics.

debkafile's military sources, however, estimate that if deployed in support of the warships assigned to the Mediterranean and Red Seas, those mini-submarines and assault craft could be extremely troublesome and give plenty of headaches to American, Israel and Egyptian naval commanders.

Islam and Jihad Grow in Europe

The growing demographic picture of millions of Muslim immigrants and their descendants in Europe is beginning to bear bitter fruit in a quiet “under the radar” jihad against Israel.

Muslim lobby groups representing this sector are rapidly gaining a hold on Europe's relations with the State of Israel and the Middle East, contends writer Soeren Kern in a long, well-referenced article entitled “Europe's Muslim Lobby” published last week in Hudson New York. Kern notes in the report that in Britain alone there are 3 million Muslims. In France there are more -- 4.1 million -- and in Germany, home to Europe's largest Muslim community, there are more than 4.5 million.

“Several European countries, for instance, eager to maintain good relations with local Muslim communities, are laying the political groundwork for the EU to recognize a Palestinian state, possibly as early as October 2011, even if negotiations for a permanent settlement between Israel and the Palestinian Authority are not concluded – a total abrogation of the UN's signed Oslo accords,” Kern explains.

In December 2009, the EU adopted for the first time a resolution explicitly called for Jerusalem to become the future capital of the hoped for PA country, the writer adds. In December 2010, a group of former EU leaders and officials published a letter urging the EU to implement sanctions against Israel to force the Jewish State to bow to the PA's will.

The continent has also become the breeding ground for “lawfare” -- anti-Israel lawsuits aimed at harassing former and current leaders of the Jewish State, while delegitimizing its status and paralyzing its ability to act against terror.

And as European officials increasingly demonize Israel, the European street becomes more convinced in the “evil” of the Jewish State, eventually voting in more anti-Zionist leaders who enact more anti-Israel policies -- and the circle of hate slowly closes in a noose around Israel's neck.

A recent survey conducted by the University of Bielefeld showed that more than 50 percent of Germans equated Israeli policies towards PA Arabs with Nazi treatment of the Jews. A report commissioned by the EU Monitoring Center on Racism and Xenophobia – now called the EU Agency for Fundamental Rights – found that Muslim immigrants were largely responsible for the sharp increase in anti-Semitic violence in Europe, according to Kern's article.

In Europe, where Islam is the fastest-growing religion, and where the number of Muslims has tripled over the past three decades, “Predictably, Muslim lobby groups pressured the EU into preventing that report from being released to the general public,” Kern wrote with grim irony.

(IsraelNationalNews.com)

Nevada jobless rate hits new high in December

CARSON CITY, Nev. (AP) - Nevada's unemployment rate hit a new high in December, jumping to 14.5 percent despite employers adding 2,700 jobs, officials said Friday.

About 193,500 Nevadans were out of work and seeking employment, said Bill Anderson, chief economist for the Nevada Department of Employment, Training and Rehabilitation.

Of those, 46 percent were considered long-term unemployed—people who have been without a job for 27 weeks or longer.

"Unfortunately, improvement on the jobs front failed to translate into fewer people out of work," Anderson said.

The December report shows the Great Recession continues to strangle the Silver State's economic recovery.

The seasonally adjusted jobless rate fell slightly in October after two months of record highs, before ticking up again in November to 14.3 percent.

Anderson said the report for December did contain some positive signs.

"December's increase does not change indications that the distressed labor market is starting to stabilize," he said. "It will be a long process to reverse the damage caused by the recession over the past few years."

Gov. Brian Sandoval, who will outline his budget proposal Monday in his State of the State address, has said job creation is a priority, and he will oppose any new taxes or fees to balance the budget.

Nevada's economy, highly dependent on sales and casino taxes, has been ravaged by the recession that began in 2007. The state's once robust construction industry that carried the economy through previous downturns collapsed with the nationwide housing crisis, exacerbating the economic freefall.

In 2006, nearly 150,000 people were employed in Nevada construction trades, representing 12 percent of employment statewide. Since then, 93,000 jobs have been lost, and the industry accounts for just 5 percent of the job market.

The national unemployment rate is 9.4 percent, and Nevada leads other states in joblessness, bankruptcies and foreclosures.

The jobless rate in Las Vegas climbed 0.6 percent in December to 14.9 percent, also a new high.

Elsewhere, the rate rose 0.5 percent to 13.8 percent in Reno, 0.9 percent to 14 percent in Carson City, and 0.4 percent to 8 percent in Elko.