Gold Declines as Investors Judge Rally Overdone; Silver Drops Gold declined in London as investors judged a five-week rally that took the metal to within 0.5 percent of a record was overdone. Silver also dropped. ``Any bull market doesn't go in a straight line,'' Robert Rasbach, a director of Ambrian Asset Management, said in an interview in London. Ambrian manages the $37 million Golden Prospect Precious Metals fund. ``With bull markets, you progress and then come off, and then progress again.'' Should bullion breach the $850 record, the next ``target'' would be $1,000, Rasbach said. ``It's all coming together for gold,'' he said. ``The dollar is looking weak, jewelry demand is healthy and China is talking about diversifying its foreign reserves.''
Citi downgrades E-Trade to sell rating E-Trade Financial Corp. shares faced more selling pressure Monday morning, reflecting a Citigroup warning that the online broker could face bankruptcy following its latest earnings warning. The shares fell in late trading Friday and weakened further before the bell, precipitated by the company backing off an earnings forecast made less than a month ago because the value of its asset-backed securities portfolio dropped further. "The continued negative news flow about charges resulting from its mortgage and CDO exposure, an SEC inquiry, and continued deterioration in its financial condition, all increase the likelihood of significant client attrition," Citi analysts said Sunday.
Countrywide warns on credit ratings Embattled mortgage lender Countrywide Financial Corp. in a regulatory filing conceded that if its credit ratings fall below investment grade, its access to the public corporate-debt markets "could be severely limited." Additionally, ratings agencies cutting its debt to junk status would lead to higher rates when the company renegotiates its financing arrangements beyond current maturity dates. "Our ability to place custodial deposit accounts on deposit with our bank subsidiary could be affected if our credit ratings were reduced below investment grade," The three ratings agencies -- Moody's, Standard & Poor's and Fitch -- currently have investment-grade ratings on Countrywide, but they all have affixed the ratings with some form of negative outlook, Countrywide said.
Citigroup, Banks Agree on `Super-SIV,' Person Says Citigroup Inc., Bank of America Corp. and JPMorgan Chase & Co., the three largest U.S. banks, reached an agreement on the structure of an $80 billion fund to help revive the market for short-term debt, a person familiar with the talks said yesterday. Bankers working on the deal met at Bank of America's offices in New York on Nov. 9 and settled on a simpler plan than initially proposed last month, according to the person, who declined to be named because the agreement isn't public. Under the original initiative brokered by Treasury Secretary Henry Paulson, the fund would buy some of the $320 billion in assets held by so-called structured-investment vehicles, known as SIVs.
Subprime Losses May Reach $400 Billion, Analysts Say Losses from the falling value of subprime mortgage assets may reach $300 billion to $400 billion worldwide, Deutsche Bank AG analysts said. Wall Street's largest banks and brokers will be forced to write down as much as $130 billion because of the slump in subprime-related debt, according to a report today by Mike Mayo, a New York-based analyst. The rest of the losses will come from smaller banks and investors in mortgage-related securities. Citigroup Inc., Merrill Lynch & Co. and Morgan Stanley led more than $40 billion of writedowns of assets as record U.S. foreclosures plundered asset prices. About $1.2 trillion of the $10 trillion of outstanding U.S. home loans are considered to be subprime, Mayo said in the note. ``We're not out of the woods yet,'' said Mondher Bettaieb- Loriot, who helps manage the equivalent of about $58 billion at Swisscanto Asset Management in Zurich.
Talk of Worst Recession Since the 1930s After what Los Angeles money manager Arnold Silver called "a brutal three days," the question is: What now for the market?A Wall Street superstar this year who runs Balestra Capital Partners, Jim Melcher, says he's "worried about a recession. Not a normal one, but a very bad one. The worst since the 1930s. I expect we'll see clear signs of it in six months with a dramatic slowdown in the gross domestic product."Balestra Capital, a $350 million New York hedge fund, was up 3% for the past three market sessions, when the Dow Jones Industrials, spearheaded by widespread declines in financial stocks and fears of more billion-dollar-plus asset write-downs, tumbled more than 677 points, or about 4.5%. The Nasdaq fared worse, skidding about 7%, triggered by across-the-board declines in those fast-stepping technology stocks.
Could California be in recession? California is on the edge of recession, economists say. Or perhaps the nation's most populous state is already in one. "California seems to be sliding into recession," wrote Jan Hatzius, chief economist for Goldman Sachs, in a research note earlier this week. Hatzius based his appraisal on the sharp increase in the unemployment rate in the state from 4.7% in November 2006 to 5.6% in September 2007. While a 5.6% jobless rate may seem low, the important thing is how much it's risen. Hatzius said any increase of more than 0.6 percentage points in California's unemployment rate has always been associated with a national recession. "Together with the regional recessions already under visible in Florida and Nevada, a California recession would mean that the housing bust has pushed an area responsible for 20% of U.S. gross domestic product into an outright downturn," Hatzius said in a research note.
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