Morgan and the Big Bear

Let's start by saying $2 per share was absolutely absurd. Speculation along cannot account for a 60% discount, especially on governement insured debt.

NEW YORK (AP) -- JPMorgan Chase & Co. was discussing a deal that would increase fivefold its offer for Bear Stearns Cos. to $10 a share, The New York Times reported Monday.

The talks Sunday were an attempt to satisfy Bear Stearns stockholders upset over JPMorgan's offer of $2 a share for the struggling investment bank, the newspaper said on its Web site, citing people involved in the negotiations.

The original price for Bear Stearns was part of a deal struck last week at the urging of the Federal Reserve and Treasury Department.

The Fed, which would need to approve any change in the agreement, was balking at the new price, the Times said. Such opposition could postpone the new agreement or derail it entirely.

In an attempt to speed majority shareholder approval, Bears board was trying to authorize the sale of 39.5 percent of the firm to JPMorgan, the Times said. State law in Delaware, where the companies are incorporated, allows a company to sell up to 40 percent without shareholder approval.

A spokeswoman for JPMorgan declined to comment Sunday night, the Times said. A Bear Stearns representative could not be reached.

A spokesman for the Federal Reserve would not comment on the central banks involvement in the negotiations, but denied it had directed the original sale price, the newspaper said.

Oil 3 of 3

While teh crude markets are often that - crude and privative. The laws of oligopoly do not outweigh the simply demand curve; even though it is not always evident

New technology
Advanced methods of locating and extracting crude will inevitable lead to more complete exploitation of reserves. On average only 1/3 of the available crude in a single location is ever extracted. With new technological advances means that we can re-visit already "tapped out" fields.

Global Downturn
The USA has seen a recession, at least it appears that way, and if China's (and India) industrial revolution begins to peak then the need will also ease. Additionally, these emerging markets realize that their needs are a ecological drain, and they too will eventually become more serious about alternative energy sources.

Exploration
Offshore drilling; the Arctic Circle; Brazil; Gulf of Mexico; Nigeria, Sudan; and even the bottom of the Ocean

Substitutes
Economist estimate that by the year 2012 the USA will be giving farmers $92 billions dollars a year in subsidies, and this is just in the ethanol arena. Ethanol is in abundant supply, and there are numerous way to produce it. This will help curb our need for crude. Additionally, the next generation of nuclear reactors are on the drawing boards of the World's top scientific minds as we speak; those same scientist are also thinking of ways ti create synthetic crude. They have already made diamonds, oil is next.

I am in no way predicting that we will ever see prices near what we did in the late 80s and early 90s, when you could stilll get change for a buck and a gallon of gas, but I am saying that the market will eventually correct itself. We have used over 1 trillion barrels of oil since the mind 50s, and there may be 3 trillion barrels left, but just has human energy was passed over for animals, and animal power was elicpsed by steam, crude too will meet its match - one day, and when it does we can all fill our car up for less than $25 again.

Why oil prices will fall 2 of 3

With prices close to all-time inflation adjusted record, energy companies, governments, prospectors, and common citizens are investing heavily into facilities that generate crude and crude substitutes. Consumers of fuel oil and petrol products are starting to use their brains and economize; over time, these changes in behavior will shift the balance of power in the favour of the consumer. When this demand curve begins to shift an oil glut will emerge.

Across the country in states like Texas, Ohio, California, and Wyoming rusted well are coming back online and beginning to pump crude. Further the Chinese, is pursuing exploration with African nations Sudan, Chad, and the Congo. So the explotation of reserves will continue. Also, in Alberta, Canada Shell and other big wigs are developing massive strip mines to dig out tar sand. Tar sand can be refined into petroleum for about $30 per barrel.

It was just a few short years ago, when major energy giants were slashing their exploration budgets and cutting jobs; now those positions are en vouge again and its time to dig.

Why oil prices will fall 1 of 3

We have all been watching the prices of oil very closely, and it has continued to climb adn climb. It seems to have finally stabilized, for the time being, around the min-ninety dollars/ barrel range. Much of the price is based in simple economic thoery:supply and demand. However, it was speculation that drove the price into the 90s in the first place. Under our latest outlook, world oil demand is anticipated to rise by 2.1%, or about 1.65 MMB/D next year, a downward revision from last month’s report by some 300 MB/D due to our higher price expectations.

While car and commuter traffic place a huge role in our energy consumption, we ofter forget about the other aspect of energy use: FOOD. We all have to eat, and the increased fuel cost lead to increased production and distribution cost. So that leads investors to look for new cost-effective ways to extract oil.

A further means of adding oil reserves is through investment in enhanced recovery. In
the context of a simple model, it could be treated in various ways. An extreme assumption is that enhanced recovery investment adds reserves but not capacity. Hence it would simply extend thelife of the reservoir. Here the value of the added barrel of reserves would be the value of a barrel produced in T years, or (P - C)vT, recalling that vT is the relevant discount factor. This would imply, from expression (1), that marginal replacement cost by means of enhanced recovery, mec, would be related to reserves value by: V(TvT/a) = mec.

A more appropriate assumption about the value of a barrel of reserves added through
enhanced recovery would be that it would reduce the rate of decline of production from a reservoir as well as increasing the reserves. This could be incorporated in a more general modelthan the one here that assumes constant output.

DTC meets OTC

According to the partners, it represents the OTC derivatives industry's only automated solution for calculating, netting and issuing payments between counterparties to bilateral contracts.

Managed by the DTCC's Trade Information Warehouse, the service reduces risks by replacing manually processed bilateral payments with automated netted payments. Previously institutions had to rely on a global network of correspondents and a degree of faith that they had received payments in one currency as they paid in another.

In the first quarterly central settlement cycle for the new service on December 20, the amount of trading obligations requiring financial settlement was reduced by 98 per cent, from USD14.3bn gross to USD288m net.

Gross settlements by the 14 participating OTC derivatives dealers were consolidated from 340,000 to 123 net settlements with the new arrangements. Payments were made in five currencies, the US dollar, euro, Japanese yen, sterling and Swiss francs.

'There are few opportunities of this magnitude in the OTC derivatives market to reduce operational risks while at the same time increase operating efficiencies,' says Diane Schueneman, head of global infrastructure solutions at Merrill Lynch. 'The central settlement service developed by DTCC and CLS represents a tremendous advance for the operations area of this industry.'

Randolph Cowen, co-chief administrative officer, Goldman Sachs, adds: 'Central settlement provides the credit derivatives market with infrastructure that assures certainty of payment and processing scalability to address the explosion of credit derivatives transaction volume and the inherent operational risk of the previous highly manual processes.

'The central settlement process, which leverages DTCC's Trade Information Warehouse, has produced full straight-through processing, allowing us to go all the way from confirmation to payment calculation to settlement with virtually no manual intervention.'

With the new service, bilateral netting and settlement is completed and reports generated for counterparties early in the morning on settlement day. The function has been designed to enable payments associated with transactions confirmed through Deriv/SERV and residing in the warehouse's global contract repository to be netted by value date, currency and counterparty.

Payments eligible for settlement include initial payments and one-time fees, coupon payments and payments associated with post-trade events. In 2007 Deriv/SERV processed more than 5.8 million OTC derivatives transactions.

The warehouse generates bilaterally netted payment instructions and sends them to CLS for settlement. CLS automatically notifies its settlement members, who effect settlement through CLS on a multilateral, netted basis. Over time, the number of currencies in which payments can be made will be expanded from the initial five.

'The settlement service breaks new ground in OTC derivatives operations,' says Michael Bodson, the executive managing director responsible for business management, strategy and marketing for all DTCC businesses.

'Counterparties used to manage payment reconciliations and funds transfers for thousands of payments on a bilateral basis using manual processes. Now, once trades are fed into the Trade Information Warehouse, these steps are handled automatically and, for the first time, counterparties obtain a full audit trail. The results in terms of cost savings, risk mitigation and efficiency gains are tremendous.'

During the initial launch, which followed an extensive testing period, the participating dealers settled with each other in defined clusters. During 2008 additional dealers will go live on the service, and participants will begin settling among each other outside of their defined clusters. Also during 2008 the warehouse's settlement capabilities will be expanded in preparation for bringing buy-side firms on board.

'By combining CLS's multi-currency liquidity management capability with DTCC's automated processing platform for OTC derivatives, the new central settlement service demonstrates how industry utilities working together can provide enhanced value to the market,' says Rob Close, president and chief executive of CLS Bank International.

'The synergies between our organisations and the efforts of our member banks have enabled us to deliver this important new service in record time and at low cost.' DTCC and CLS launched their partnership to build the central settlement solution in December 2006.

CLS Bank International, which is owned by 70 of the world's largest global financial institutions, settles more than 400,000 instructions equivalent to approximately USD4trn each day and provides global settlement services in 15 currencies.

The DTCC, through its subsidiaries, provides clearance, settlement and information services for equities, corporate and municipal bonds, government and mortgage-backed securities, money market instruments and OTC derivatives, and is a leading processor of mutual fund and insurance transactions.

Hedge Fund analyst?

What does a hedge fund get for $20,000,000 a year? Alan Greenspan.Yes its true, Alan Greenspan, the former chairman of the US Federal Reserve, is to become an adviser to Paulson & Co, the $28bn New York-based hedge fund company that achieved spectacular investment returns at the height of the credit squeeze last year.

Mr Greenspan will join the advisory board of the credit specialist investment house. Paulson will be the only hedge fund that Mr Greenspan will work with under the terms of the agreement.

Is Swiss secrecy over?

YES. At least for US clients, the end is year. UBS one of the biggest casualties of the US subprime crisis, faces an additional blow to its profitability after a decision to wind down its traditional Switzerland-based private banking business for rich US clients.

The move by the world’s biggest wealth manager follows a reassessment of the risks and rewards from an activity that has drawn increasing attention from US regulators, especially the IRS. Governemnts have been putting pressure because of the fear that they are loosing revenue.

Profitability for the US business is not disclosed. However, private banking is one of UBS’s most lucrative activities and the bank enjoys among the highest margins of top international wealth managers. In 2006, private banking accounted for SFr5.8bn ($5.3bn) of the group’s total pre-tax profit of SFr14.4bn.

UBS’s decision, announced internally in late November but only confirmed publicly on Wednesday, follows the earlier termination of business with Iran. The moves are unconnected but reflect rising reputational concerns at a group that employs about a quarter of its staff in the US.

About 60 private bankers in Zurich, Geneva and Lugano are affected. A few might transfer to UBS Swiss Financial Advisers, a Zurich subsidiary created specially to meet US regulatory requirements, but not enjoying Swiss banking secrecy on securities transactions.

“We are talking to lots of people. It is clear there has been a rather exceptional situation over the past three to four months,” said an executive at Impact Partners, a Geneva executive search company dealing with some of the UBS staff affected.

Employees declined to comment, for fear of breaching internal guidelines or Swiss bank secrecy law. But former staff have described falling morale and conflicts between ambitious internal growth targets and ever-tighter compliance rules.

“This strategic alignment brings our services closer to the clients, streamlines operations and enhances our ability to en­sure compliance with applicable laws and regulations,” said UBS.

However, where UBS will not be, some small Aisle will step in a provide clients numbered accounts. The service will fall back into the shadows, where it began and continue -- just this time it will stay behind closed doors.