From Market Movers….

Wachovia’s real problem with Golden West, it turns out, is not the headline acquisition cost, so much as the inherited Golden West loan portfolio, which includes a staggering $121 billion – no, that’s not a misprint – in “pick-a-pay” mortgages.

These loans behave just like you think they do: borrowers get to decide how much money they’re going to pay back each month. Predictably enough, that isn’t working out too well.

On Monday, Wachovia conceded total losses from Pick-A-Pay loans could eventually amount to a staggering 7% to 8% of the loans’ combined value, a range of $8.5 billion to $9.7 billion.

Read on Naked Capitalism…..

Ah, what cheery news this morning. Oil at a new high, producer price increases running twice as high as expectations, real estate repossessions running double the rate of last year. Yet the Dow is up a tad on the report that New York manufacturing increased. Pray tell what is New York manufacturing, besides the garment business, artisanal cheese, Long Island wine, and tree farms? The last three items probably aren’t included in the factory index; nevertheless, a clearer image might staunch unwarranted enthusiasm.

Read on CNN…

Riots from Haiti to Bangladesh to Egypt over the soaring costs of basic foods have brought the issue to a boiling point and catapulted it to the forefront of the world’s attention, the head of an agency focused on global development said Monday.

“This is the world’s big story,” said Jeffrey Sachs, director of Columbia University’s Earth Institute.

“The finance ministers were in shock, almost in panic this weekend,” he said on CNN’s “American Morning,” in a reference to top economic officials who gathered in Washington. “There are riots all over the world in the poor countries … and, of course, our own poor are feeling it in the United States.”

Read in the Times….

CITIGROUP and Merrill Lynch will heap further pain on Wall Street this week as they reveal additional sub-prime write-downs totalling $15 billion (£7.6 billion) or more.

In another sign of the intense pressure on leading banks, Deutsche Bank is attempting to offload some of its €35 billion (£28 billion) of toxic debt to a consortium of private-equity firms.

Huge exposure to American mortgages is expected to result in Citi taking a $10 billion hit to its accounts, dragging the bank to a first-quarter loss of almost $3 billion. Some analysts believe Citi’s write-downs could stretch to as much as $12 billion.

Merrill will suffer $5 billion of write-downs, analysts say, which would push the bank $2.7 billion into the red.

Dryfly is a regular commentator on calculated risk and one of the better (best?) ones. He really should start his own blog. Here is what he had to to say about high levels of investment in China…..

I work for companies who have put plants in China – they have been racing to get the plants in & operational & then transfer over & convert money about as fast as they can. As much as the Chinese will allow. They did it to get in under the revaluation should it happen. Lotsa companies are doing that.

Currency controls in PRC make it difficult to move big sums fast so the way to get around it is buy or build a plant IN China. Then liquidate it when the revaluation occurs – you should come away with more dollars for doing little or nothing IF all goes as planned…

In response to further questions he elaborated a bit more by saying…..

He doesn’t know where the ‘hot money’ is – no one does or isn’t saying – my guess is companies like the one’s I sell for are moving way more in than they need to operate. WAY MORE. They want it in RMB IN CHINA BANKS before the revaluation. So some of this transfer is in bricks & mortar and illiquid and some is liquid ‘operating capital’.

A lot of smart folks are going to end up too smart by half before this is all over.

The “he” in the above comment is talking about Brad Setser who has been wondering about China’s accounts lately.

Dryfly mostly worries about these “smart” people getting margin calls. But I wonder if anyone will want to buy the factories from them when they want to cash in. To me, that is the biggest risk.

A week ago, or around then, P.B. messaged me that there was a person who needed light duty work, and he was going to utilize this person to help me catch up on claims. Technically, P.B. is not the person to do that; I report to K.K. But K.K. doesn’t care if someone else takes Click Here to continue reading.