U.S. markets are closed for Good Friday. PTG is closed today.
By Coincidence or Not, Good Friday Trading-Free Since '07 Panic The New York Stock Exchange is closed today, as it has been every Good Friday for nearly a century and a half except for in 1898, 1906 and 1907. That last one was in the same year as the infamous Panic of 1907, when the value of U.S. stocks plunged by more than a third. Hence, a legend that persists 101 years later: Traders get to stay home the Friday before Easter not just because it's a Christian holy day but because of its association with one of history's great bear markets.
Fed Bypasses Emergency-Loan Policy on Rate for Securities Firms The Federal Reserve bypassed its own emergency-lending policies to let securities firms borrow at the same interest rate as commercial banks as the central bank sought last weekend to stave off a financial-market meltdown. Guidelines revised in 2002 say the Fed should charge non- banks more than the highest rate that commercial banks pay. Instead, Chairman Ben S. Bernanke and his colleagues, in emergency votes on March 16, invoked broader authority in the Federal Reserve Act to give Wall Street dealers the same rate as banks, a Fed staff official said on condition of anonymity.
Fasten your seat belts Fed soon could raise rates as aggressively as it has cut them The last time I chatted with Dan Seiver was immediately following the Federal Reserve's interest-rate cut on Jan. 30. Seiver edits a newsletter that I track called the PAD System Report, which has a decent long-term track record. In his spare time after producing his newsletter, Seiver finds time to be an emeritus professor of economics at Miami University of Ohio and a visiting professor of economics and finance at San Diego State University. I decided to check in with Seiver after this week's rate cut, not only to get his thoughts about what the Fed is likely to do next but also to chide him for predicting in late January that the Fed would only cut rates an additional half point and then be done altogether with its rate-cutting. As fate would have it, of course, the Fed earlier this week cut rates by three-quarters of a percent, and it is not at all clear that the Fed won't cut even more in coming weeks and months.
Who’s Next After Bear? A Wall Street Scorecard The failure of Bear Stearns last week has raised questions about the health of other major banks and securities firms. While it’s unlikely that another major player will go under, several, including Citigroup and Merrill Lynch, remain in fragile condition, experts say. Here’s a brief prognosis for a few of the biggest financial institutions, from most vulnerable to least. Citigroup: The nation’s largest bank has recently seen its share price drop below book value ($22.74 as of Dec. 31), a sign that investors see more losses ahead. Merrill Lynch analysts say that charge-offs on loans and investments for the first quarter could cost Citi $18 billion, leading to a loss for the period.
Lehman Sees Risk of Double-Dip Recession Investors already coming to grips with the prospect of a looming U.S. recession face the even bleaker notion of a "double-dip" economic downturn, U.S. investment bank Lehman Brothers said Thursday. The persistent slump in housing will continue to drag on consumers and growth while tight credit conditions, a weakening job market and record energy costs are also taking a toll on the economy, according to economists at the bank. Double-dip recession last hit the United States in the early 1980s and sent Japan's economy reeling for much of the 1990s Treasury, Abu Dhabi, Singapore Meet on Sovereign Wealth Funds The U.S. Treasury Department Thursday said it agreed with Abu Dhabi and Singapore on a set of principles for sovereign wealth funds that specifies politics should not influence their decisions. The foreign-controlled funds, many based in the Middle East, have aroused U.S. lawmakers' concern because they have poured billions of dollars into large stakes in Wall Street firms and other businesses and fanned fears the U.S. was losing control of its destiny. But Treasury Secretary Henry Paulson, in a statement after meeting government officials from Abu Dhabi and Singapore as well as some individual funds, said they were welcome in the United States and set out principles that also guide the behavior of countries that are getting the funds' money.
Mortgage Crisis Widens at Lenders, Banks The U.S. mortgage and credit crisis deepened on Wednesday, as Accredited Home Lenders Holding Co, HSBC Holdings Plc and Lehman Brothers Holdings Inc announced a total of 3,400 job cuts, as concern mounted about the longer-term impact on the economy. Accredited, a subprime mortgage lender, said it stopped taking loan applications and would cut 1,600 of its 2,600 jobs as it shuts most of its retail and wholesale operations by Sept. 5. "There is no functioning subprime market," said Bose George, a Keefe, Bruyette & Woods Inc. analyst. "This is the only way to weather the storm: cut the work force, stop making loans they can't sell, and hope things get better."
Slowdown could have been avoided A well-respected economist says the U.S. is now in a recession...and that Congress and the Federal Reserve could have stopped it. Congress and the Federal Reserve missed their chance to keep the country from falling into recession by acting too slowly, according to a well-respected economist. Lakshman Achuthan, the managing director of the Economic Cycle Research Institute, said the economy has now fallen into what he calls "a recession of choice." He argues that the economic stimulus package passed by Congress this year is too late to help many consumers and businesses and that the Federal Reserve was too timid when it started trimming interest rates last fall.
New Jobless Claims Rise to Two-Month High The number of newly laid off workers filing for unemployment benefits rose last week to the highest level in nearly two months, providing more evidence that the weak economy is having an adverse impact on the labor market. The Labor Department said Thursday that applications for jobless benefits totaled 378,000 last week. That was an increase of 22,000 from the previous week and was a far bigger jump than had been expected.
Gold continues slide as dollar rallies Precious metal falls 8.2% on the week amid broad sell-off in commodities Gold prices lost another 2.7% Thursday, sliding further after the metal's worst one-day drop in nearly two years, as dollar strength and traders raising cash ahead of the long weekend fueled a broad sell-off in commodities. April gold futures fell $25.30, or 2.7%, to end at $920 an ounce on the New York Mercantile Exchange. On Wednesday, gold plummeted $59 as traders began selling most commodities, many of which had recently rallied to historic highs. After hitting a record high of $1,034 an ounce Monday, gold's subsequent sharp drop led it to post a 8.3% decline for the shortened week. U.S. markets, including the Nymex, will be closed Friday.
California Leads U.S. in Defaults, Home-Price Decline Sacramento may eliminate up to 600 jobs in the city's first staff reductions in half a century, and the police and fire departments in the California capital may have their budgets cut by 20 percent. The culprit is the collapse of the U.S. housing market. California, the birthplace of the subprime mortgage industry, is paying the highest price of any state as the housing meltdown persists. Its gross domestic product will drop 1.5 percent in the first half of 2008, the most in the U.S., analysts at Lexington, Massachusetts-based Global Insight Inc. estimate.
Subprime Eyed by Blackstone, Goldman for Contrarian Hedge Funds Hedge fund manager Steve Moyer joined 4,000 realtors and bargain hunters at a five-hour Southern California housing auction in February. As the tuxedoed barker peddled foreclosed homes for hundreds of thousands of dollars below their previous sale prices, Moyer took notes -- research that may help him make money from the biggest housing collapse in 26 years. Moyer, who helps oversee $7 billion at Tennenbaum Capital Partners LLC, is part of the rush of more than 70 hedge funds -- including those run by Blackstone Group LP and Goldman Sachs Group Inc. -- to snap up distressed mortgages and securities from banks battered by the subprime meltdown. "The risk is getting in too soon, before all the losses are flushed out,'' says Moyer of Santa Monica, California-based Tennenbaum, which is considering investments in securities linked to the housing market. "It's really just hard to call the bottom.''
BOJ Official Warns Japan Economy Slowing Senior Central Banker in Japan Warns That Economy Is Slowing Sharply Japan's interim central bank chief vowed Friday not to let the absence of a governor hamper the country's economic and financial activities while another central bank official said the economy is slowing "sharply." The Bank of Japan has no governor after the opposition controlled upper house of parliament rejected two government nominations in a row, saying they were too politically connected as former Ministry of Finance bureaucrats to uphold the central bank's independence. The five-year term of former Gov. Toshihiko Fukui ended Wednesday. A new central bank deputy head, Masaaki Shirakawa, whose nomination was approved last week, was named acting governor this week. "We are in an unusual situation without a governor," Shirakawa said at a press conference Friday. "But we cannot let the bank's operations stall. I will fulfill my duties until a governor is appointed."
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