Billionaire dreamlist: helipad and private beach

(Reuters Life!) - Credit crunch? What credit crunch?

More billionaire house hunters than ever are scouring the globe in search of the perfect hideaway.

So how about a Parisian mansion with its own ballroom, a forest-fringed estate in Andalusia complete with helipad or maybe a villa in Anguilla with a "feather-topped beach lapped by deep turquoise waters."

Reveling in the purple prose so beloved by estate agents, the glossy magazine Country Life has picked five of the top properties on the market that even the super-rich dream about.

For $95 million, why not snap up Hillandale, an English country-style estate just 50 miles from Manhattan.

Just four minute's drive from the billionaire's playground of Monaco you could put in a bid for the Domain, a Cote d'Azur mansion with its own stud farm, paddocks and dressage arena.

The credit crunch may have hit big spenders in London's City financial district who once happily invested their huge bonuses in property. But the billionaires are not feeling the chill.

 

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Gold's glitter lures buyers

(Reuters) - Gold's near vertical climb to historic highs approaching the key $1,000 mark shows no sign of abating as bullish forces such as a sinking dollar and record high oil are not seen fading anytime soon.

Fears that expensive oil will stoke inflation combined with worries over potential stock market losses and the U.S. on the brink of possible economic recession will propel gold higher still, analysts say.

"Don't be surprised to see gold trade up to $1,100 (an ounce) or even $1,200 before year-end 2008," said Jeffrey Nichols, managing director of American Precious Metals Advisors.

"And, with the right confluence of economic and geopolitical developments, we could see gold spike to $1,500 or even $2,000 in the next few years," he said.

Gold hit a record high of $991.90 an ounce on Thursday and was at $986.90/987.40 at 1144 GMT. It has jumped 20 percent this year, 56 percent in the past 12 months, doubled in about 2 years and surged from a low of around $250 in August 1999.

It was previously fixed at a record high of $850 in January 1980 as high inflation linked to strong oil, Soviet intervention in Afghanistan and the impact of the Iranian revolution prompted investors to heavily buy gold. After adjusting for inflation, the 1980 high was $2,119.30 at 2007 prices.

The market has ridden waves of investor buying, which lifted prices nearly 50 percent in the past six months, ignoring a handful of negative factors, with most players betting on even higher prices this year and next.

 

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Credit Swaps Thwart Fed's Ease as Debt Costs Surge

(Bloomberg) -- Credit trading models used by Wall Street have gone haywire, raising company borrowing costs even as Federal Reserve Chairman Ben S. Bernanke cuts interest rates.

General Electric Co. is one of five U.S. companies rated AAA by both Standard & Poor's and Moody's Investors Service, making its ability to repay debt unquestioned. Yet when the Fairfield, Connecticut-based company sold 2.25 billion euros ($3.35 billion) of five-year bonds last week, its annual interest payment was $17 million higher than on a sale nine months ago.

Borrowers from investor Warren Buffett's Berkshire Hathaway Inc. to Germany's HeidelbergCement AG face the same predicament. Yields on $5.12 trillion of corporate bonds tracked by Merrill Lynch & Co. average 2.05 percentage points more than U.S. Treasuries, the most since at least 1997.

The higher costs are an unintended consequence of securities that allow investors to speculate on corporate creditworthiness. So-called correlation models used to value them have become unreliable in the fallout from the U.S. subprime mortgage crisis. Last month some showed the odds of a default by an investment-grade company spreading to others exceeded 100 percent -- a mathematical impossibility, according to UBS AG.

``The credit-default swap market is completely distorting reality,'' said Henner Boettcher, treasurer of HeidelbergCement in Heidelberg, Germany, the country's biggest cement maker. ``Given what these spreads imply about defaults, we should be in a deep depression, and we are not.''

Hedging Losses

The problem started in the second half of last year when subprime mortgage delinquencies started to rise, causing investors to retreat from complex instruments such as synthetic collateralized debt obligations, or packages of credit-default swaps that became hard to value. The swaps are contracts based on bonds and used to speculate on a company's ability to repay debt.

As values of CDOs began to fall, banks that had sold swaps underlying the securities started to buy indexes based on them instead, a method of hedging their losses on portions of the CDOs they owned. The purchases are driving the cost of the contracts higher, raising the perception that company bonds tied to the swaps are suddenly riskier and leading investors to demand higher yields throughout the corporate debt market.

The Markit CDX North America Investment-Grade Index, a gauge of credit-default swaps on 125 companies from Wal-Mart Stores Inc. to Walt Disney Co., more than doubled since the start of the year to a record 171 basis points on March 4. The index, which dropped to a low of 29 in February last year, was at 170.5 basis points at 7:10 a.m. in New York, according to Deutsche Bank AG.

 

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Carlyle Fund Gets Default Notice After Margin Calls

(Bloomberg) -- Carlyle Group's publicly traded mortgage bond fund failed to meet margin calls and said it received a notice of default.

Carlyle Capital Corp. missed four of seven margin calls yesterday totaling more than $37 million, the Guernsey, U.K.- based fund said today in a statement. The fund expects to get at least one more notice of default related to the margin calls.

The collapse of the subprime mortgage market has prompted investors to flee all but the safest forms of debt, leading to the failure of hedge funds including Peloton Partners LLP. The Carlyle fund raised $300 million in July and used loans to buy about $22 billion of AAA rated so-called agency mortgage securities issued by Fannie Mae and Freddie Mac.

``The credit crisis is spilling over to the next asset class, agency bonds,'' said Philip Gisdakis, senior credit strategist at UniCredit SpA in Munich. ``There's never just one cockroach. If you see one highly leveraged hedge fund going bust, then there's another on the way.''

Peloton, the London-based hedge-fund firm run by former Goldman Sachs Group Inc. partners, announced plans last week to liquidate its ABS Fund after ``severe'' losses on mortgage-backed debt and demands from banks to repay loans. Thornburg Mortgage Inc. in Santa Fe, New Mexico, plummeted 62 percent in New York trading this week after the home lender received a default notice on a $320 million loan.

Widening Spreads

Carlyle Capital, run by John Stomber, fell 1.7 percent in Amsterdam trading today to $11.80. The fund originally sold shares at $19 each. Emma Thorpe, a London-based spokeswoman for U.S. private-equity firm Carlyle Group, declined to comment.

The agency mortgage-bond market has about $4.5 trillion of securities, according to estimates from UniCredit. The spread between 30-year agency mortgage bonds and 10-year U.S. Treasuries widened to more than 200 basis points yesterday, the highest since 1986, according to Bloomberg data cited by UniCredit today.

At the same time, money-market rates for euros and pounds climbed to the highest since mid-January, signaling the global squeeze on short-term bank lending may be returning. The three- month London interbank offered rate, or Libor, for euros advanced 1 basis point to 4.4 percent yesterday, the highest since Jan. 18, according to the British Bankers' Association.

``Market conditions are the worst anyone in this industry can remember,'' said Alain Grisay, chief executive officer of London-based F&C Asset Management Plc, on a conference call with reporters today. ``I don't think anyone has a recollection of a total disappearance in liquidity. I just cannot remember a time when for six months there are billion of dollars worth of assets out there for which there is just no market.''

 

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