Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Thur 08.14.2008
U.S. Foreclosures Increase 55%, Bank Seizures Rise to Record Bank repossessions almost tripled in July and U.S. foreclosure filings increased 55 percent from a year earlier as falling prices cut homeowner equity, accelerating the housing decline, RealtyTrac Inc. said. Bank seizures rose 184 percent, the most since reporting began in January 2005, the Irvine, California-based seller of foreclosure data said today in a statement. More than 272,000 properties, or one in 464 U.S. households, got a default notice, was warned of a pending auction or were foreclosed on. Nevada, California and Florida had the highest rates. "It's getting worse," Rick Sharga, RealtyTrac's executive vice president for marketing, said in an interview. "The number of properties that have been foreclosed on by the banks and still haven't sold is the highest we've ever seen."
Bank Failures Rise but Critics Say Not Fast Enough First the borrowers. Now the banks. Federal and state regulators have closed eight banks this year, four since the start of July, as rising borrower defaults on residential and commercial real estate loans start to push some lenders into default, too. There were no bank failures in 2005 or 2006 and only three in 2007. Now, some analysts expect a few hundred banks to fail over the next several years -- the most since the savings-and-loan crisis two decades ago. And some critics say the failures aren't happening fast enough. They say regulators are keeping some troubled banks on life support by allowing them to spend money to stay in business that should be reserved to cover loan losses after the bank has failed.
Fed's Stern Sees Weak Economy Into Next Year The U.S. is likely to face weak economic activity into next year, although a sustained drop in energy prices may help engineer a more favorable inflation environment over time, a veteran Federal Reserve official said. In an interview with Dow Jones Newswires, Federal Reserve Bank of Minneapolis President Gary Stern argued that the economy continues to face continuing "headwinds" from the housing and financial markets. "I expect the expansion to remain modest certainly into next year because I think it will take some time for the headwinds to dissipate," he said. Housing still has a ways to go, though he expects a stabilization at some point next year.
Saving Wall Street From Itself By unleashing banks and brokerages, deregulation created vast wealth—and, now, vast problems. Is it time to resurrect Glass-Steagall? Placing blame for the subprime crisis has become a priority among politicians and pundits, right up there with preventing another financial meltdown. The spread of securitization and a fall in lending standards have been easy, if hard-to-visualize, targets. But some commentators have dangled the possibility that much more tangible actors are to blame: the government and its zeal for deregulation. "We are in a worldwide crisis now because of excessive deregulation," Democratic Representative Barney Frank of Massachusetts, the chairman of the House Financial Services Committee, recently told the Washington Post.
It's Too Soon to Toast the End of Credit Crisis With U.S. stocks and the dollar on the upswing and commodities heading south, hope springs eternal that the worst of the credit crisis may be behind us. What started out as scattered problems with sketchy subprime loans somehow managed to infect the broader housing market, batter the biggest financial institutions, bring Bear Stearns Cos. down and Fannie Mae and Freddie Mac to their knees, decimate the derivatives market, and cause businesses to cut payrolls and consumers to curtail spending. In other words, the entire U.S. economy save the export sector is feeling the aftershock. And with growth now slowing in Europe and Japan, export demand may be at risk. A year from now things will no doubt look better than they do now. Banks have already reported losses and writedowns of a half trillion dollars; forecasts of $1 trillion no longer seem far-fetched.
Retailers Fight The Anti-Shopping Spree Retailers aren't expecting the economy to improve in time for their crucial back-to-school events, or even their big holiday bonanzas, but they have finally started reacting by cutting costs and slashing inventory. They're also working hard to draw in the customers that are still spending. A slew of major retailers reported earnings on Wednesday, citing the down economy and shoppers' weariness about spending as the reasons for their declines and cautious forecasts.
Retailers Brace For Ugly Fall Just a couple of weeks or so until the kids return to school. Gas prices are high, consumer confidence low--an ugly picture for retailers trying to lure shoppers through the door at a critical time of year. Even the most optimistic forecasts say 2008 will show the lowest seasonal sales growth in six years. The likely winners? Those offering cut-rate prices or spending heavily on promotions. Wednesday the government reported July retail sales were the weakest in five months, with sales at department stores and general merchandise stores up just 0.3% from the prior year. The same day, department-store barometer Macy's issued a lackluster earnings report, announcing it made 17 cents a share for the second quarter, two cents below Wall Street estimates. Same-store sales dropped 2.1% from last year's quarter.
Retail Sales Feed a Mood of Decline Another month of weak retail sales in July added to evidence that the spending power of American consumers has weakened considerably, despite the booster shot of billions of dollars from the government’s tax stimulus program. Even as gasoline prices started to retreat, consumers paid more last month for imported goods, the government reported on Wednesday, as import prices rose at the fastest annual rate in 25 years.
Retail sales drop for first time in 5 months July retail sales dip 0.1 percent as shoppers shun autos and face higher gas bills Retail sales delivered the weakest performance in five months in July as shoppers shunned autos while they paid more for gas. With the mass mailings of $92 billion in rebate checks now just a memory, there is concern the fragile economy could slow even more in the second half of this year. The Commerce Department reported Wednesday that retail sales fell 0.1 percent last month, the first decline since a 0.5 percent tumble in February. It was a worse showing than the flat reading economists had been expecting and followed a revised but still weak 0.3 percent reading for June. Analysts said retail sales would have been more feeble without the $92 billion in rebate payments the government sent out in May, June and July. Those checks helped to counter plunging home prices, rising unemployment and soaring gasoline prices. The bulk mailings are now over, though, leaving economists worried about what will happen next to spending.
Credit-Crunch Villains Should Own Up, Do Penance Psychiatry suggests that people hit by catastrophe begin in denial, become angry, then try to bargain their way out of the dilemma, then get depressed, before finally accepting their misfortune and resuming their lives. One year on, the villains of the credit crunch haven't moved past denial. In the current edition of the Economist, there's a 2,000- word article by an unidentified risk manager at what the weekly magazine calls a "large global bank." Even though the author is shielded by anonymity, he -- I'll bet you beer for a month that a woman didn't write it -- refuses to take any blame for acquiescing in the hubris that brought the finance industry's most munificent decade to a shuddering, writedown-ridden halt.
Around the world, pessimism about the economy More signs of the economic slowdown appeared on two continents, Asia and Europe. In Europe, the Bank of England offered on Wednesday a pessimistic outlook for the rest of the year, saying that it expected inflation to hit 5 percent because of energy and food prices and the economy to stagnate. And in Asia, Japan appears to be flirting with a recession, government data showed Wednesday. "The numbers were awful," Hideo Kumano, chief economist at Dai-ichi Life Research Institute in Tokyo, said after the Japanese government reported that the gross domestic product shrank at an annual 2.4 percent rate in the three months that ended June 30. "Things are going to be very tough in the second half of the year." Even as commodity prices are beginning to ease, the credit and housing crises in the United States, coupled with the highest inflation in a generation, are weighing on consumers.
Stocks Fold in Face of Higher Oil, Weak Retail Stocks in New York briefly flirted with positivity Wednesday afternoon but sold off into the close after an increase in crude prices and disappointing July retail sales news earlier in the day dealt a double blow to investor sentiment.
Oil rebounds after US gasoline supplies drop Oil jumps to $116 a barrel after government reports big drop in US gasoline supplies Oil prices rebounded Wednesday, jumping back to $116 a barrel after the government reported a bigger-than-expected drop in U.S. gasoline supplies. But more signs of dwindling U.S. demand cast doubt on the rally's longevity. At the pump, a gallon of regular gasoline shed on average another penny overnight to $3.787, according to auto club AAA, the Oil Price Information Service and Wright Express. That's nearly 8 percent lower than record prices above $4 a gallon reached last month, but still 37 percent higher than a year ago; retail gasoline prices tend to lag behind crude oil's moves by several weeks.
Goldman Balks at Helping Rich Clients Recover From 'Auction Rate' Securities $$ For once, Wall Street isn't bending over backward for its richest clients. That is causing new controversy for investment banks, which have already committed to reimburse mom-and-pop investors, charities, and small businesses for more than $40 billion in illiquid "auction rate" securities. Wealthy clients, institutions and corporations have been largely left out of those pacts. The quandary is acute for Goldman Sachs Group Inc., which caters only to the wealthy. While a string of large Wall Street brokers announces daily settlements in the billions, Goldman has been mum about its plans, so far refusing to buy back clients' auction-rate paper
In a Generation, Minorities May Be the U.S. Majority Ethnic and racial minorities will comprise a majority of the nation’s population in a little more than a generation, according to new Census Bureau projections, a transformation that is occurring faster than anticipated just a few years ago. The census calculates that by 2042, Americans who identify themselves as Hispanic, black, Asian, American Indian, Native Hawaiian and Pacific Islander will together outnumber non-Hispanic whites. Four years ago, officials had projected the shift would come in 2050. The main reason for the accelerating change is significantly higher birthrates among immigrants. Another factor is the influx of foreigners, rising from about 1.3 million annually today to more than 2 million a year by midcentury, according to projections based on current immigration policies.
GM engineer says rechargeable car is on schedule Early versions of the Chevrolet Volt's battery packs are powerful enough to run the high-stakes rechargeable car, but dozens of issues remain before General Motors Corp. can start selling the revolutionary vehicle in 2010 as planned. The Volt's chief engineer is on a tight schedule to figure out how the car will handle the batteries' weight, dissipate their heat and mechanically transfer their power to the wheels. That's not to mention the list of issues that have nothing to do with the fact that the car plugs in to the wall for recharging. But the 47-year-old veteran GM engineer who was recruited from a GM post in Germany to run the high-profile project is driven by knowing the entire company's future could rest on it.
Chrysler exec says Cerberus is in for long term Even if private equity firm Cerberus Capital Management LP intends to sell Chrysler LLC in pieces, Chrysler Vice Chairman Tom LaSorda says it won't happen anytime soon. Cerberus founder Stephen Feinberg has given assurances that the investment firm will stay with Chrysler for the long term, LaSorda said Wednesday. But even if it wanted to sell after owning the automaker for just over a year, now is not the time with the U.S. auto industry in a slump, LaSorda said. "No one is going to buy a car company like this in the market that its in," he told reporters after speaking at the Center for Automotive Research Management Briefing Seminars in Traverse City. "One could argue is it worth as much as they paid for it initially based on today's market?" LaSorda said Chrysler's brands - Chrysler, Jeep and Dodge - are worth a lot if they are sold.
China Points the Way to Profits as the New Global Manufacturing Leader There’s more bad news for those of you who are worrying about the United States’ global geo-strategic position. According to a recent report, starting next year, Chinese manufacturing output will exceed that of the United States. In concrete figures, of the world’s $11.8 trillion of manufacturing value added output expected to be produced in 2009, China will account for 17%, while the United States will account for 16%. For investors, even those based in the United States, the implication is clear: a substantial part of any investor’s portfolio should be in China and any other countries where manufacturing is growing as a percentage of the world total.
Europe Economy Shrinks as Spending, Investment Falter Europe's economy contracted for the first time since the introduction of the euro almost a decade ago as faltering sales undermined investment by companies and soaring costs eroded consumer spending power. Gross domestic product fell 0.2 percent in the second quarter from the first, when it increased 0.7 percent, the European Union statistics office in Luxembourg said today. The year-on-year growth rate slowed for a third straight quarter, to 1.5 percent. Separate figures showed inflation held at 4 percent in July, less than initially estimated.
Economic Malaise Threatens To Undermine European Unity MADRID -- The fruits of Spain's economic transformation found their way to Maria Dolores Barroso's cafe. Fueled in large part by a massive building boom, the Spanish "miracle" brought new jobs to legions of construction industry workers -- many of whom would pack her cafe at sundown, dropping their euros on beer and savory tapas well into the madrileño night. But as Europe confronts its toughest economic test since the official creation of the European Union in 1993, Barroso has hung a "for sale" sign on her cafe door. Business has dried up -- falling 80 percent in six months -- as Spain has joined a growing list of European nations slouching toward recession. The abruptly weakening European economies caused a sharp sell-off of the euro last week that sent the dollar to its biggest gain in more than six years on Friday. Those gains continued yesterday.
Conflict Narrows Oil Options for West When the main pipeline that carries oil through Georgia was completed in 2005, it was hailed as a major success in the United States policy to diversify its energy supply. Not only did the pipeline transport oil produced in Central Asia, helping move the West away from its dependence on the Middle East, but it also accomplished another American goal: it bypassed Russia. American policy makers hoped that diverting oil around Russia would keep the country from reasserting control over Central Asia and its enormous oil and gas wealth and would provide a safer alternative to Moscow’s control over export routes that it had inherited from Soviet days. The tug-of-war with Moscow was the latest version of the Great Game, the 19th-century contest for dominance in the region.
Bush, Sending Aid, Demands That Moscow Withdraw President Bush sent American troops to Georgia on Wednesday to oversee a “vigorous and ongoing” humanitarian mission, in a direct challenge to Russia’s display of military dominance over the region. His action came after Russian soldiers moved into two strategic Georgian cities in what he and Georgian officials called a violation of the cease-fire Russia agreed to earlier in the day. Mr. Bush demanded that Russia abide by the cease-fire and withdraw its forces or risk its place in “the diplomatic, political, economic and security structures of the 21st century.” It was his strongest warning yet of potential retaliation against Russia over the conflict.
Georgian City Still Controlled by Russian Forces President Dmitri Medvedev of Russia on Thursday said that Russia would act as an international guarantor of South Ossetia and Abkhazia, the two pro-Russian enclaves at the center of the crisis that have long desired separation from Georgia. President Bush warned Russia of possible retaliation. As Secretary of State Condoleezza Rice headed to the region for discussions on the crisis and to show support for Georgian President Mikheil Saakashvili, the Russian position seemed to be a direct challenge to President Bush who said a day earlier that he “insists that the sovereign and territorial integrity of Georgia be respected.”
Georgia On Our Minds Mission accomplished. By playing with the former Soviet republic of Georgia like a cat with a mouse, Vladimir Putin established who controls this valuable piece of real estate--and sent a message to the U.S. and anybody else who would find a secure route for Central Asian oil past Russian gatekeepers. As the missiles flew, BP was forced to shut down the Baku-Sipsa pipeline carrying oil from Azerbaijan to the Georgian port of Sipsa. It probably would have been forced to shut down the far more important Baku-Tbilisi-Ceyhan pipeline were it not already idled because of an apparent terrorist attack in Turkey.
Russian Assault in Georgia Threatens New Cold War fter sending tanks, troops and warplanes into Georgia last week, Russian President Dmitry Medvedev yesterday ordered a halt to the ground offensive. By the standards of military conflicts in the region, it was a short one. The Caucasian War of the 19th century, when Russia expanded its influence in the region, lasted from 1817 to 1864. Yet just because this one was short -- and it remains to be seen whether the cease-fire holds -- doesn't mean its impact won't be long-lasting. Russia is threatening a new Cold War by dispatching troops to the independent state of Georgia. The trouble is, there isn't much reason to think it will do better this time around than it did in its Cold War with the U.S. and the West last century. We will all be poorer if there is more tension between Russia and the rest of the world. And Russia will suffer most of all.
Peace Plan Offers Russia a Rationale to Advance TBILISI, Georgia — It was nearly 2 a.m. on Wednesday when President Nicolas Sarkozy of France announced he had accomplished what seemed virtually impossible: Persuading the leaders of Georgia and Russia to agree to a set of principles that would stop the war. Handshakes and congratulations were offered all around. But by the time the sun was up, Russian tanks were advancing again, this time taking positions around the strategically important city of Gori, in central Georgia. It soon became clear that the six-point deal not only failed to slow the Russian advance, but it also allowed Russia to claim that it could push deeper into Georgia as part of so-called additional security measures it was granted in the agreement. Mr. Sarkozy, according to a senior Georgian official who witnessed the negotiations, also failed to persuade the Russians to agree to any time limit on their military action.
Moscow Agrees To Georgia Truce Russian Attacks Continue After Statement TBILISI, Georgia, Aug. 12 -- Russia said Tuesday that it had ended its five-day tank and bomber assault against Georgia and agreed to a French peace plan by which most Russian forces would return home and international mediators would work to settle the long and explosive conflict between Georgia and Russian-backed South Ossetian separatists.
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