Why gold remains a valuable hedge for investors A little less than 12 months ago, the world's biggest financial players suddenly found they could not turn some $1.3 trillion of their assets into cash. These assets – bonds backed by US home-buyers with low (or no) incomes – had become utterly illiquid. No one would buy or lend against them, not at any price. And an asset you can't sell or borrow against is worth precisely nothing. The resulting mayhem? It would have sounded frivolous two years ago. But the subprime crisis caused the first run on a British bank run in 130 years, a forced collapse in US interest rates, and the fire-sale of Wall Street's fifth largest investment bank for just 16¢ on the dollar.
U.S. retail sales drop for third month in five U.S. retail sales fell for the third time in the past five months, with April undermined by a big decline in auto sales, the Commerce Department reported Tuesday. Retail sales fell 0.2% on a seasonally adjusted basis, a reversal after a 0.2% gain in March. Sales over the past three months were down 0.4% compared with the prior three months. And for the past year, sales were up 2%. The figures are not adjusted for price changes. Excluding a 2.8% drop in motor vehicles, retail sales rose 0.5% last month, stronger than the 0.1% gain expected and the biggest increase since January. Sales excluding autos were also revised higher for March.
US has April surplus but budget strained The US government posted a $US159.3 billion ($A169.52 billion) surplus in April, helped by the mid-month deadline for individuals meeting 2007 tax obligations, but it was down from the prior year's surplus, the Treasury Department reported on Monday.In April 2007, the surplus was $US177.7 billion ($A189.1 billion). In the first seven months of fiscal 2008, which ends on September 30, the government's budget deficit swelled by 88.4 per cent to $US152.2 billion ($A161.97 billion), from $US80.8 billion ($A85.98 billion) in the first seven months of fiscal 2007. The latest figures point to growing strain on the budget, which is poised to face a deeper deficit as payments under an economic stimulus program agreed by Congress and the Bush administration get into full swing.
China to Shut Mines, Oil Wells, Plants, After Quake China ordered coal mines, chemical plants and oil and gas wells to halt production to avoid further casualties after the country's strongest earthquake in 58 years killed almost 10,000 people. Companies in affected areas must evacuate workers and can't resume output until conditions allow for safe operations, the Beijing-based State Administration of Work Safety said on its Web site today. Sichuan province, where yesterday's 7.9 magnitude temblor struck, holds about 40 percent of China's natural gas reserves and accounted for 22 percent of its output in 2006. The earthquake damaged power plants and transmission lines and may cut the nation's energy demand. The State Electricity Regulatory Commission, China's power industry regulator, today ordered ``24-hour'' monitoring at generation and distribution networks and asked utilities to report accidents immediately.
Credit crisis makes Americans sell possessions Americans who have lost their homes in the property crisis are starting to lose their possessions too as even the cost of storage proves too much for them. Auctioneers across the United States are conducting sales at self-storage facilities, selling off the contents of units belonging to people who have fallen behind with their payments. Thousands of Americans have lost their homes in the sub-prime mortgage meltdown and many have turned to putting their belongings in storage ready for a day when they could buy another home. There are 51,000 self-storage facilities across the US and business has been booming since the recession.
Broker Earnings Estimates Cut by Oppeheimer Oppenheimer cut its earnings estimates on some U.S. brokers based on its outlook on the capital markets and sizable estimated revenue reversals due to an accounting rule that lets companies elect to use fair value for certain assets and liabilities. "We expect that most of the gains booked in the first quarter will be reversed in the second quarter," analyst Meredith Whitney said in a note to clients. The Financial Accounting Standards Board (FASB), which sets accounting rules in the United States, adopted a fair value option in February 2007 that allows companies to irrevocably choose to record the value of certain financial instruments on their balance sheets based on what that instrument could be traded for in a current market transaction
Bank of America: Customers Feel "Significant" Pressure Bank of America says it is seeing rising credit costs, as it continues to wade through a challenging economic cycle. At an investor conference in New York on Tuesday, Liam McGee, Bank of America's president of global consumer and small business banking, said customers are feeling "significant economic pressure" as deflating home prices leaves little equity for consumers to borrow against. The Charlotte-based company says it expects losses in its home equity portfolio to go higher in the near-term and projected future losses in that area that exceed the bank's earlier range of 2 percent to 2.5 percent. "It will be higher than 2.5 percent," McGee said. "I think we are doing all the right things to mitigate it and we will just have to manage through it.
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