Growing student loan defaults forces Sallie Mae to retract selling bonds

10:17 AM bonds, fed, investors, sallie mae, student loans, toxic assets 6 Comments

On April 29, Sallie Mae, the nation's largest student loan organization, was forced to pull back a bond offering of $225 million as investors refused interest in the lender due to the growing number of defaults taking place across the country.

Student-loan company Sallie Mae SLM -1.35% canceled a $225 million bond offering on Thursday after about two weeks on the market, according to people familiar with the deal. The move may mark a line in the sand: Investors whose thirst for yield has revived all manner of riskier asset classes decided they weren't getting paid enough to buy at the offered price amid rising student-loan defaults.

In the case of the canceled Sallie Mae offering, rising defaults could have crimped the cash flow of the federally backed loans supporting the new securities, because more defaults would mean less excess, or residual, income after holders of the original loans were paid. - Wall Street Journal

Even as central banks in Europe and the U.S. are willing to buy toxic assets like mortgage backed securities, which carry a risk threashold well above that of student loans, it appears the rubicon has been crossed by investors who no longer want to be fooled by the bubbles free money printing and quantitative easing provide, in an economy that is declining.

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Asian countries buying gold hand over fist as central banks dump paper to drop price

3:08 PM australia, cental banks, china, gold, japan, paper gold, physical gold, silver No Comments

Since last Friday, the gold spot price fell more than 9% as central banks dumped up to 500 tons of paper gold onto the markets.  These actions dropped gold from $1500+ to a low of $130 on April 15.

But even as the Western central banks work to manipulate paper gold prices, Asian countries such as China, Austrailia, and Japan are using this price drop to purchase tons of physical gold, at discounted prices.

Australia:

Gold sales from Perth Mint, which refines nearly all of the nation’s bullion, have surged after prices plunged, adding to signs that the metal’s slump to a two-year low is spurring increased demand.
“The volume of business that we’re putting through is way in excess of double what we did last week,” Treasurer Nigel Moffatt said, without giving precise figures. “There’s been people running through the gate.”
“There’s been significant sales made as people see this as great value,” Mr Moffatt said. “Gold owners are very reactive to significant market movements.”

China:

Beijing gold store two hours to sell 20,000 grams of gold bullion trading volume of nearly 200 million

Japan:

Japanese individual investors doubled gold purchases yesterday at Tokuriki Honten, the country’s second-largest retailer of the precious metal.

In the U.S., many gold and silver dealers such at Kitco have been experiencing buying so great, they have run out of stock, and hiked premiums by more than 50% on physical ounces.  And according to many analysts, this may be the last time to get physical gold and silver before it either runs out, or becomes to price restrictive to purchase.

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Philadelphia could be next to join Stockton in declaring municipal bankruptcy

2:42 PM bankruptcy, pensions, philadelphia. debt, stockton No Comments

Last week, a judge ruled that Stockton, California could declare bankruptcy to seek protection from their debt and creditors, and on April 16, it has been discovered that the city of Philadelphia is also investigating bankruptcy options in lieu of their massive debt and pension obligations.

Philadelphia Mayor Michael Nutter, whose municipality has the lowest credit rating of the five most-populous U.S. cities, will address investors at a conference financed by underwriters and closed to the public and the press.

The invitation bills tomorrow’s meeting as a chance to hear “Philadelphia leaders and investors discuss building the city’s future.”

Philadelphia is hoping to attract investors for the city, which is rated three steps above junk by Standard & Poor’s. The city and its authorities have $8.75 billion in outstanding debt as of September, according to bond documents. Philadelphia’s pension system is 47.6 percent funded this year, the documents say. - Bloomberg via Mish Shedlock

Should Philly be forced to sell city assets, or follow through with bankruptcy preceedings, then it will open the floodgates to a large number of other cities like Detroit, Camden, and perhaps even Chicago who are experiencing the same debt and underfunded pension levels.

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Bank run searces on Google reach all time high after Cyprus account thefts

11:10 AM bank run, cyprus, google, investors, theft 2 Comments

On April 3, google searches for the term bank run reached an all-time high, even surpassing the 2007 Lehman crisis, and the ongoing Greek and Spanish bank crises.

Courtesy of Google

Additionally, many top investors and economic analysts are saying that what took place in Cyprus is not just a one time event, but a blueprint for economies in the rest of Europe, as well as the United States.

There is an old adage that says, if you want to invest well, do what the rich do.  For anyone who had been front running the Cyprus banking haircuts, they would have realized that not only did 135 wealthy Cyprians move their money out of Cyprus banks before the bank holiday, but some of these elite included the President, and Finance Ministers who went on to agree to the theft of uninsured accounts.

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What is Bitcoin and why is it now over $100 U.S. dollars

6:40 AM bitcoin, currency, cyprus, dollar, euro, spain 1 Comment

On April 1, the digitial currency known as Bitcoin grew its market value to over $100 U.S. dollars, doubling in just the past two weeks.  As European countries like Cyprus, Greece, and Spain look towards the ECB and IMF bailouts, then people are looking towards an alternative currency in the wake of failed confidence in the Euro.

But what exactly is Bitcoin, and how is it different than any central bank backed fiat money?  Those questions were answered in an interview between Tom Woods and Bitinstant's Erik Voorhees a few weeks ago.

Take a look.

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