Friday, August 29, 2008

Iraq's First Oil Agreement a $3 Billion Deal with China?

The AP reported on the Iraqi central government's negotiated oil deal with China National Petroleum Company.

China and Iraq have signed a $3 billion deal revising an earlier agreement for China's biggest oil company to help develop the Ahdab oil field, an official at the Iraq's Oil Ministry said today.

The deal, restoring a project canceled after the 2003 U.S.-led invasion of Iraq, was signed last night by Chinese officials and Iraqi Oil Minister Hussain al-Shahristani.

"The initial agreement has been signed, and we are waiting to see the approval of both governments," said Sarhad Fatah, a spokesman at the Iraqi Embassy in Beijing.

Fatah would not disclose the value of the deal, but an official at the Oil Ministry in Baghdad confirmed it would be worth $3 billion. He requested anonymity because the agreement hasn't been approved by the cabinet yet.

Did anyone ask our soldiers for their reaction?

Carlyle Group's "Hair of the Dog" Strategy on Banks

The Carlyle Group's Randall Quarles, prior Undersecretary of Treasury, wants banking regulations changed. He wants the Federal Reserve to grant private equity underwriters (PEU's) greater flexibility in buying chunks of American banks. This involves relaxing current restrictions on how large a stake non-banking firms can own.

And why are current restrictions considered onerous? Reuters said:

They can still take smaller stakes that are below certain ownership levels, but the firms fear they will then have too little power to sway a bank's strategy.

Sway a bank's strategy? Oh, they mean crank up the risk/reward curve. Isn't that what got banks in trouble to begin with? They wrote down billions in investments in high risk loans, packaged as Triple-A securities by hard partying, fee generating Wall Street.

Also, Carlyle has experience cranking that risk/reward curve. Highly leveraged Carlyle Capital Corporation and dice rolling, energy affiliate SemGroup declared bankruptcy.

The rationale for allowing private equity to own greater portions of banks is "they have the money." Yes, and liquor stores have plenty of alcohol. Welcome to "hair of the dog" financial reactioneering.

Carlyle goes to the bottle frequently for billions in loans. How nice to have their own still, I mean a captive bank. Will George W. allow them to make their own hooch?

Tuesday, August 26, 2008

Blue Dogs Turn Into Azure Chupacabras

Moderate Blue Dog Democrats got a bit mangy after imbibing at the AT&T reception at the Democratic National Convention. The corporate giant wanted to say "gracias" for their recently passed telecom immunity. It turns out the Blue Dog's next event is an "Energy Mid-Day Reception for invited guests only. Location: Unannounced." Glenn Greenwald, not welcome.

After downing drinks and snacking on finger food with oil, gas and energy lobbyists, where will the CorporaCrats go next? Surely, the Goat lobby has some cabrito for the now hungry, blue hairless Chupacabras. Beware of the ravenous Azure Chupacabra Democrats! They sell fheir fur for blood money...

New Report on Poverty & Uninsured Doesn't Add Up

If America is no poorer than before, why did so many people qualify for Medicaid, government sponsored health insurance for low income citizens? With the Bush administration blocking state efforts to expand coverage during 2007, what drove legions of Americans to Medicaid? Was it our faltering economy? And what was the impact of citizenship requirements on coverage? How much of the expansion in government insurance was Medicare Advantage, a highly profitable product line for health insurers? Let's look at the numbers that drove my questions.

The Census Bureau released its 2007 estimates for income and health insurance coverage this morning. It states:

1. The official poverty rate in 2007 was 12.5 percent, not statistically different from 2006.

2. In 2007, 37.3 million people were in poverty, up from 36.5 million in 2006.

3. The poverty rate increased for children under 18 years old (18.0 percent in 2007, up from 17.4 percent in 2006)

4. Poverty rates in 2007 were statistically unchanged for non-Hispanic Whites (8.2 percent), Blacks (24.5 percent), and Asians (10.2 percent) from 2006. The poverty rate increased for Hispanics (21.5 percent in 2007, up from 20.6 percent in 2006).

The total U.S. population grew from 296.4 million in 2006 to 298.7 million in 2007. With approximately 15% of our nation uninsured, one might expect that number to grow correspondingly, by some 300,000 people. But it didn't! The number of people without health insurance fell by 1.3 million, according to the Census Department. It fell from 47 million to 45.7 million uninsureds.

Did employers step up and cover more workers? Not according to the report:

The percentage of people covered by private health insurance was 67.5 percent, down from 67.9 percent in 2006. The percentage of people covered by employment-based health insurance decreased to 59.3 in 2007 from 59.7 percent in 2006. The number of people covered by employment-based health insurance, 177.4 million, was not statistically different from 2006.

If employers didn't pick up the slack, who did? Government programs providing coverage for the elderly and poor grew by some 2.7 million people. Medicaid, coverage for the poor, made up 1.6 million of the total.

Yet, despite all this good news, 8.1 million children have no health insurance. The breakdown by race shows:

20.5 million uninsured Whites (non-Hispanic)
7.4 million Blacks without coverage
14.8 million Hispanics with no health insurance

The Census Department estimated the number of uninsureds by region of the country (page 22 of the report). The Northeast had the greatest percentage decrease, 7.5% or 500,000 people Massachusetts implemented a statewide program to ensure all residents have health insurance coverage. Coincidence or cause and effect?

The report shows the expansion in coverage was limited to households making less than $50,000. Very little movement occurred in categories $50,000 and above. The Bush administration worked diligently to restrict states wanting to change income requirements for Medicaid and Children's Health Insurance. It remains to be seen how those efforts impacted the number of uninsured.

The report did not break down Medicare recipients into standard Medicare vs. Medicare Advantage. I mined three large health insurers 2007 annual reports for some insight.

Humana recorded an increase of 140,000 Medicare Advantage enrollees from 2006 to 2007.

WellPoint's report stated "Senior membership increased 57,000, or 5%, driven by growth in Medicare Advantage membership, partially offset by a slight decline in Medicare Supplement membership."

UnitedHealth had a different story. The number of individuals served by Medicare Advantage products as of December 31, 2007 decreased by 75,000, or 5%, from 2006. Yet, rate increases on Medicare Advantage contributed to a 7% revenue growth for that corporate segment.

There is an odd tension in all these numbers. Is the pursuit of profit working against getting citizens covered? While Harry and Louise are back on TV encouraging change, who are they supporting? Insurance companies are doing quite well. They even make money off the expanded Medicaid and CHIP coverage as state contractors. They currently make a nice profit on Medicare Part D and Medicare Advantage.

Who will win out as this mixed Census Department report is digested? Will it be used as a club to beat up "illegals", blacks, Hispanics, and the poor? Will it serve as a guiding light, a beacon that calls us to do better by our fellow citizens? Will insurers' 15% annual return get higher priority than the uninsured American?

Stay tuned! A donnybrook is on the horizon as businesses look to shed that pesky health insurance benefit. Union leaders and our elected shills are paving the way for that to happen. The question is how they'll use this report to accomplish their aim.

Monday, August 25, 2008

Carlyle's FRSGlobal Expands Bank Risk Management Capabilities

The Carlyle Group read the signs on the wall when it purchased FRSGlobal two years ago. The firm sells risk management and regulatory compliance software to banks. FRSGlobal's profits nearly doubled since then.

The Carlyle affiliate agreed to buy Iris, a small risk management firm, to add risk-assessment capabilities to its business. Funny, I expected to see Frances Townsend's name in the Financial Times piece. She helped Carlyle manage risk after Hurricane Katrina.

Mrs. Townsend omitted affiliate LifeCare's twenty four patient deaths from her White House Lessons Learned report. One might expect someone with an iris to see this glaring omission. Not to worry, Fran's risk management consultation services are available. My guess is they're pricey.

Tuesday, August 19, 2008

Lou Stepping Down as Carlyle's Chairman

The Carlyle Group announced the resignation of Lou Gerstner as Chairman of the politically connected private equity underwriter (PEU). His role will change to Senior Advisor for several of Carlyle's buyout funds.

Did failures at Carlyle Capital, Blue Wave, SemGroup and LifeCare create a surge that pushed Lou from the top chair? Mr. Gerstner reduces his role, effective September 30.

Who will take his place? It's likely a big name, one with stellar business and political connections. Who will be drawn to the top slot at Carlyle with their nearly $83 billion in funds managed? Given the evolving of Eisenhower's military-industrial complex into today's government industrial monstrosity, the PEU's selection of a new chair could tell more about America, than either Vice Presidential appointment. Strange days, indeed!

Friday, August 15, 2008

ExxonMobil Sponsors Political Coverage at CBS, CNN, & National Journal

The most profitable corporation in the world has to do something with all that cash. ExxonMobil stepped up as a major sponsor this election season. Exxon is the proud sponsor of CNN's coverage of both the Democratic and Republican Conventions. They're behind the National Journal's reporting on both events. And don't forget, CBS's political news coverage, branded as "On the Road", comes courtesy of ExxonMobil.

What are the implications for coverage, given that ExxonMobil PAC donates 87% to Republicans and 13% to Democrats? They're mobilizing some 100,000 employees and retirees to turn out in groves come November via Citizen Action Teams. It looks like the ExxonMobil message will be loud and clear the next few months. Over $40 billion in annual profits allows one to float their message.

Wednesday, August 13, 2008

Carlyle Group Sells Steel Tube Maker to Russians

Days after the Russian Army steamed deep into democratic Georgia, The Carlyle Group announced the sale of John Maneely Co. to a Russian steelmaker for $3.5 billion. Carlyle paid $550 million for the firm in 2006, then added two other tube makers, Atlas Tube Inc. and Sharon Tube Co.

Note the tube connection. Didn't we accuse Saddam Hussein of taking delivery of steel tubes capable of delivering nuclear weapons, of wanting to build a super gun?

The deal is expected to close in the fourth quarter. That is if CFIS approves yet another Carlyle sale of assets for foreign companies.

Standard Aero and Landmark Aviation went to Dubai Aerospace with nary an objection from the feds, nor a peep from the media. One might expect over 50 U.S. airport operations to create a bigger furor than a handful of ports, especially given the UAE's record of bribing Saddam.

One could conclude Carlyle's money machine is a higher priority for the Bush administration, who celebrates their Pennsylvania Avenue neighbor's potential 500% profit in two years. Don't worry that a huge American manufacturer will be under the control of a firm from a "dictatorial" country.

Russian aggression will not go unanswered according to VP Dick Cheney. Of course, it will involve the sale of more steel tubes.

Sunday, August 10, 2008

Carlyle's Lord Browne Sugar Coats BP Blast

Three years after the BP refinery explosion in Texas City that killed 15 people, the CEO finally testified as to his knowledge of company operations. It turns out Lord John Browne doesn't know much, given his frequent responses of "I can't recall" and "I was not aware". Was Alberto Gonzales the inspiration for John's testimony?

One might expect a CEO who'd participated in two outside investigations to know a bit more. Consider all of John's learning opportunities and how he responded:

March 2005 An explosion at BP's Texas City refinery killed 15 people and injured 180.

September 2005 The U.S. Occupational Safety and Health Administration found BP committed more than 300 willful violations of its rules and fined the company $21.3 million.

December 2005 BP's own report blamed failures by management at the refinery, saying it didn’t make safety a priority, tolerated risks and failed to communicate. But BP added it “found no evidence of anyone consciously or intentionally taking actions or decisions that put others at risk.”

January 2007 Lord Browne announces his resignation, effective in July

January 2007 James Baker of Baker Botts releases the results of a panel's investigation into the accident. It cited the company's emphasis on personal safety, while ignoring process safety. It gave a virtual free pass to senior management, citing only a corporate blind spot. (John Browne testified that he read this report)

March 2007 The U.S. Chemical Safety Board releases its report. The investigators concluded that cost cuts mandated by the company's London headquarters contributed to the tragedy - and that bosses ignored successive warnings that an accident was imminent (According to his legal testimony, John Browne did not read this report)

August 2007 The good Lord scampered to a cushy job with The Carlyle Group, via its Riverstone Energy joint venture.

April 2008 Lord John Browne gave legal deposition on the Texas City accident and his knowledge of contributory factors.

It turns out, Mr. Browne knew the right people instead of the right answers. James Baker helped him dance out of a situation, one the Lord promised to "make right." Besides going light on John in his investigation, Baker's buddies at Carlyle provided him gainful employment, enabling him to keep his butler and chauffeur.

James A. Baker is the only the top of the Lord Browne rabbit hole. Falling further into his deposition, on page 19 one passes Condi Rice, George Bush and Dick Cheney.

The ties to James Baker are deep within BP. The politically powerful Texan performed legal work for the oil company. Also, the executive in charge of British Petroleum's refining operations, John Manzoni, served on a 21st Century Energy Task Force at the Baker Institute. Mr. Manzoni left BP shortly before his protector, Lord John.

Mr. Manzoni's testimony revealed his role in deferred maintenance at more than just the Texas City refinery. John had operational responsibilities for BP at their Prudhoe Bay, Alaska facilities. Deferred maintenance on the Alaskan oil pipeline in 1994-1996 contributed to the BP oil leak.

The depositions sounds incredibly similar to Bush minions, after they've had something blow up in their face. Consider these statements by Mr. Manzoni in regard to the accident that killed 15 people:

Q: You understand there are a number of allegations of deferred maintenance contributing to the condition of the units at Texas City and it also contributed to the failures resulting in the explosion of March 23, 2005?

A: I am not aware of any specifics of those allegations.

Q: Do you think you should?

A: I am much more concerned to assure that we have proper maintenance programs and that we are working to create the appropriate maintenance programs going forward.

Does that sound like Attorney General Michael Mukasy in response to Justice Department political hiring? Or maybe like Treasury Chief Hank Paulson on the subprime debacle?

A little deeper in Mr. Manzoni's testimony comes the familiar Bush defense, it was an unprecedented disaster! He had eight months to learn from Frances Townsend's sorry report on the White House's Katrina response. Here's John's lesson learned:

A: If we had known it had existed, we would have done, of course. We would have done more then. We simply didn't see it coming.

Bull hockey, Mr. Browne and Manzoni! It's a country club, where those in power aren't held accountable. But they do look after one another. Thanks to the dirty duo for testifying to this fact. (It's a shame neither man had the cojones to come clean, like the executive for Imperial Sugar. Graham H. Graham called conditions in the sugar plant in Port Wentworth, Georgia "shocking" and "disgraceful.")

Thursday, August 7, 2008

Bush Dons Chevron Shield for Burmese Junta

While in Thailand, President Bush heard compelling stories from Burmese refugees. Several oppressed citizens shared the stage with America's Commander in Chief.

LWAY AYE NANG: I would like to give our gratitude to the United States for the new sanctions in blocking the --

THE PRESIDENT: Right, right.

LWAY AYE NANG: -- to the United States. And this is really hitting the regime and -- the regime and their associates who have been defiling the country's natural resources for their own benefit and leaving ordinary citizens in extreme poverty.

Of course, the President confessed to Mrs. Lway that the White House and Congress gave Chevron a free pass to continue sending millions of dollars to junta. Didn't he? Nope, dishonest George continued his pattern of obfuscation and corporate worship.

Carlyle/Riverstone: Lose One, Gain Another

The Carlyle Group's energy joint venture, Riverstone Holdings, must feel a bit manic-depressive. Not long ago, they lost their investment in SemGroup to debt holders in a Chapter 11 bankruptcy. But the tough bounce back. LBO Wire stated:

"Riverstone Holdings LLC and Carlyle Group, which together manage the Riverstone/Carlyle Global Energy and Power Funds, have struck a deal to buy midstream energy company Gibson Energy Holdings Inc. from Hunting PLC for $1.1 billion."

Let's hope they don't lose billions hedging that midstream product with their new company.

Wednesday, August 6, 2008

Newt's "Build Now, Train More" to Lower Price of Health Care

To drive down health care costs, the U.S. should plan to build more hospitals now. It needs to accept more doctors into medical schools. At least that's the tonic according to Newt Gingrich's economic solutions for energy in his "Drill Here, Drill Now, Pay Less."

Probing deeper, Newt revealed a Princeton junior found a study showing future supply dropped prices immediately. The study by two economists was turned down for publication "because everyone already knows this." This novel discovery could well be applied to health care.

Will Newt offer "Build (New Beds) Now, Train More (MD's), Pay Less" as the tonic for health care? Doubtful, unless KKR's HCA sends big bucks to American Solutions for a Winning Solution, Gingrich's 527 group.

Newt Says Exxon Doesn't Need New Reserves

The media rushed Newt Gingrich after his formal remarks at the darkened House of Representatives. He joined the group of Capital Superman, who by their very words, dropped gasoline prices at the pump. In today's GOP Press Conference, SuperNewt offered the following on ExxonMobile, who days ago declared a nearly $12 billion quarterly profit. His remarks come near the 25:50 mark of the C-SPAN program:

"MobileExxon is going to make billions of dollars as long as supply is tight. And they already own the oil. They don't need drilling. The independents need drilling. The average American needs drilling. So the best way to take on big oil is to go to a dramatic drilling program and drive down the price of oil."

That's odd. ExxonMobile is #17 on the list of world oil companies in the size of its reserves. It is #1 on revenues and #1 on profits, but way behind on reserves. Middle East state owned oil companies stand at the top of the reserves list. Iran is #1 and Iraq #3. ExxonMobile is drooling at the bit over the prospect of Iraqi oil. Bush already cleared the table for big oil's access to the barely developed Iraqi oil fields. Will George W. do likewise with Iran in America's Contract on the Middle East?

Tuesday, August 5, 2008

Frances Townsend's "Patently Ridiculous" Report

Ex-White House Homeland Security Adviser Frances Townsend called the latest assertion of Bush malfeasance in building the case for war, "Patently ridiculous". She gave no consideration to author Ron Suskind's revelation that the White House ordered the CIA to fabricate a letter connecting Saddam Hussein to a 9/11 hijacker.

Fran's former associate in the White House, Tony Fratto called Suskind a nut, a conspiracy theorist. Neither spoke to the following:

Suskind noted in the acknowledgments that research assistant, Greg Jackson, “was sent to New York on a project for the book” in September 2007 and was “detained by federal agents in Manhattan. He was interrogated and his notes were confiscated, violations of his First and Fourth Amendment rights.”

It's not often crazy conspiracy theorists have anything worth taking, especially on "patently ridiculous" topics. Fran's words come full circle, given her Lessons Learned report on Hurricane Katrina. Who conducts "an investigation" and leaves out the hospital with the highest patient death toll post landfall? Mrs. Townsend omitted LifeCare Hosptials and their 24 patient deaths in her "patently ridiculous" whitewash. Weeks before landfall, the Carlyle Group closed the deal for LifeCare.

Congressmen Singlehandedly Lower Oil Prices

The Hill reported on the Superman-like abilities of a handful of Congressional representatives. They're able to lower oil prices with a single word, OK, multiple strings of words like "let my people vote," and "people have too much month at the end of their money." Let's see how these heroes did (history is from the Energy Information Administration):

March $3.258
April $3.441
May $3.764
June $4.065

This rise occurred while customers cut back their miles, 1.8% in April and 3.7% in May. The public is well aware of the record profits these prices produced for oil companies.

But a handful of elected leaders brought them crashing down by meeting in the dark in the Capital. Surely, they were powerful enough to get prices back to levels some 120 days ago? Sorry, our political heroes fell short.

Triple A reported gas prices (as of 8-4-08):

August $3.871

The nearly 20 cent decline is helpful in addressing my personal pocketbook energy glitch. But, I'm sure the yahoo's in D.C. had little to do with it, unless their political backers are trying to mollify an angry public before an election. After a similar summertime peak, October 2006 had the lowest gas price average for the whole year. Yet, Republicans lost their majority in both Houses.

Record oil company profits, not helpful. Claiming credit for the small decrease, delusional. That's America's Republican Party to the average citizen.

Monday, August 4, 2008

Carlyle Downs Booz

In a $2.54 billion swig, The Carlyle Group swallowed the government consulting and services arm of Booz, Allen, Hamilton. The private equity underwriter's press release stated:

“We look forward to supporting Ralph Shrader and his management team as we enter this new and important phase of Booz Allen’s leadership in the government services sector.”

Translation: Carlyle already has hundreds of affiliates, many firmly attached to the tit of the American government-industrial monstrosity (Eisenhower's military-industrial complex on steroids). Booz can increase the flow with their consulting recommendations. Pass the bottles, there's much to celebrate!

Sunday, August 3, 2008

Celestis Remains Lost, SpaceX Now 0 for 3

The New York Times reported on SpaceX's latest rocket failure, their third in a row. This launch went smoothly, until the second stage fired with the first section still intact. Lost were three satellites and the remains of 208 people, including "Scotty" from Star Trek, James Doohan. Family members hoped for a unique final resting place, weightless space with an incredible worldview. That alas, didn't happen.

But SpaceX did get a significant investment allowing it to continue launching Falcon 1's, as cited in the CEO's update. Elon said, "There should be absolutely zero question that SpaceX will prevail in reaching orbit and demonstrating reliable space transport." While that may be true, I venture the families of the 208 celestial passengers are questioning the final flight of their loved ones' remains.

SpaceX is slated to take over cargo hauling for NASA once the Space Shuttle program ceases. Let's hope they send one into successful orbit, confirming the public-private partnership. Celestis doesn't need any more truly unforgettable memorial events.

Saturday, August 2, 2008

Drive Less, Pay More

What should the public make of members of Congress chanting "Drill Now, Pay Less"? Given our second quarter experience of "Drive Less, Pay More", the public is livid and wants action. A review of miles driven and gas prices might be in order.

From the top graph, Americans dramatically increased their miles from 1992 to 2004. From 2004 to the present, the amount roughly levelled off.

So what happened to gas prices while the SUV driving public explored the blue yonder in spades? The bottom graph shows little change in gas prices at the pump from '92 to '04.

The big spike came when demand became range bound, from '04 to the present. Prices rose the most in the second quarter of '08 when drivers cut back 1.8% in April and 3.7% in May. Those sky high prices fueled record oil company revenues and profits for the third year in a row. What an odd picture? Reality is nothing like the ECON 101 dribble offered by grandstanding members of Congress and the Oilmen White House.

Friday, August 1, 2008

Supply & Demand Fiction for Gas Prices

While America's elected officials play out a theater of the absurd on energy, data pokes a hole in their foundational argument, that gas prices vary based on demand. They go up when the price of crude oil increases, but don't tick down much, if at all, when that input becomes cheaper.

What happened to demand the last 12 months? The Transportation Department noted Americans drove less than any period since 2004-2005. But the graph above shows a long term price increase, huh?

More instructive is April, when drivers cut back mileage by 1.8%, and May with its greater 3.7% decline. Demand fell significantly as Americans parked their vehicles. So prices fell right? Nope, they accelerated upward. At a time driving volume dropped some 5%, prices roared nearly 20% (as shown in the red circle on the graph above.)

Consumers adjusted demand downward and were met with racing price increases. it 's a great setup for Republican enticement of "Drill Now, Pay Less." But those who experienced "Drive Less, Pay More" should show their displeasure. A pox on political theater and corporate Congressional stooges.

Carlyle Group Blue Over Latest Failure

Hedging contributed to Carlyle's biggest failures. The latest casualty was Blue Wave Partners Management, swamped by the debt crisis which took down Carlyle Capital Corporation earlier this year.

Making bad bets sent another affiliate, SemGroup into Chapter 11 bankruptcy. Reuters reported the company "suffered $3.2 billion in losses on energy futures and derivatives trades that SemGroup says were designed to protect its physical oil trading business."

Carlyle is now liquidating its $600 million Blue Wave Partners Management while keeping its good name. They can drown their sorrows with $2.54 billion worth of Booz.

Chevron Reaches Profit Record As Well!

Add Chevron to the long list of oil companies banking record revenues and profits. Their Human Energy produced a $6 billion bottom line for the second quarter, up 11% from a year ago and 17% from the first quarter.

Demand fell, even as profits soared. Americans drove 40 billion fewer miles in 2008. A marked decline of 1.8% occurred in April. It accelerated to 3.7& in May. Fuel consumption in the past 12 months was the lowest since 2004-2005, according to the Energy Department.

Chevron's earnings report noted, "refined products sales declined 8%" from a year ago. Branded gasoline sales fell 5%.

Industry analysts note Exxon and Chevron will have to pump a lot more gas to meet their production forecasts, but you can't sell what people aren't buying. Might big oil have priced itself out of the market? It's doubtful, but it's time for some shared pain. That means the end to the three year record profit run.