Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Wed 12.17.2008
Fed cuts rate to 'virtually zero' US interest rates were cut to a historic low of virtually zero as America resorted to drastic action in its battle to stave off a crippling recession and deflation. Wall Street shares soared after the Federal Reserve, the powerful US central bank, stunned markets by cutting interest rates from an already 50-year low of 1 per cent to between zero and 0.25 per cent. The unprecedented move to combat a slump that threatens to turn into a Thirties-style Depression far exceeded a more modest half-point rate cut to 0.5 per cent predicted by experts.
Swiss gold bullion in huge demand as trust in banks dives Swiss gold refiners are having great difficulty in keeping up with demand for gold bullion leading to long delivery times as investors wary of other stores of wealth. Sealed off by grey concrete walls and barbed wire, the workmen in protective glasses and steel-toed boots at this smelter cannot work fast enough to meet demand from the nervous rich for gold. This refinery near Lake Lugano in the Alps is running day and night as people worried about recession rush to switch their assets into something that may hold its value. "I have been in the gold business for 30 years and I have never experienced anything like this," said Bernhard Schnellmann, director for precious metal services at the refiner Argor-Heraeus, one of the world's three largest.
Our Ponzi Economy As the multi-billion dollar Ponzi scheme orchestrated by Wall Street insider Bernard Madoff unravels in the media spotlight, the nation is being presented with a rare opportunity to understand the true nature of many of our most cherished financial structures. Hopefully we have the wisdom to connect the dots. Although the $50 billion loss engineered by Madoff is truly a staggering accomplishment (and was done using old-fashioned fraud rather than the mathematical wizardry that has characterized Wall Street’s recent larcenies) the size of the scheme pales in comparison to the multi-trillion dollar Ponzi structures run by the United States government. In fact, rather than looking to jail Madoff, President-elect Obama should consider making him our new Treasury Secretary. If not that, at least make him the czar of something!
Morgan Stanley's loss is worse than expected Morgan Stanley on Wednesday posted its own quarterly deficit, dogged, as rival Goldman Sachs reported a day earlier, by frozen credit markets, falling asset prices and stagnant underwriting. Morgan said it lost $2.30 billion, or $2.34 a share, in the fiscal fourth quarter, compared to a loss of $3.59 billion, or $3.61 a share, in the year-earlier period. Net revenue was $1.8 billion, compared with negative $400 million in last year's fourth quarter. Analysts polled by Thomson Reuters expected the firm to lose $298 million, or 34 cents a share, on revenue of $3.78 billion. Analyst estimates had been falling for weeks as researchers figured out just how bad things had become in November as Wall Street continued to struggle with its exposure to residential and commercial real estate loans, other credit investments and plunging equity markets. Results in the current quarter included mortgage-related losses of $1.2 billion compared with about $9.4 billion in the fourth quarter of 2007, the company said.
Gov. David Paterson unveils dire New York State budget that includes new taxes, layoffs and cuts Gov. Paterson's proposed $121 billion budget hits New Yorkers in their iPods - and nickels-and-dimes them in lots of other places, too. Trying to close a $15.4 billion budget gap, Paterson called for 88 new fees and a host of other taxes, including an "iPod tax" that taxes the sale of downloaded music and other "digitally delivered entertainment services." "We're going to have to take some extreme measures," Paterson said Tuesday after unveiling the slash-and-burn budget.
The dead mall problem As the recession leaves more retail casualties in its wake, rising store bankruptcies and mall closures could have devastating economic consequences. As more stores exit malls, regional mall vacancies could rise past 7% by year-end, a level not hit since the first quarter of 2001, according to real estate research firm Reis. Major cities across America will be impacted, said David Birnbrey, Chairman and co-CEO of Atlanta-based The Shopping Center Group, a retail real estate services firm. Both Birnbrey and Susan Wachter, professor with University of Pennsylvania's Wharton Real Estate Department, warn the social and economic impact of empty stores can be devastating.
Kiss the dollar rally goodbye It wasn't that long ago that the dollar was strengthening against the once-mighty euro, leading anyone that could still afford a plane ticket to Paris to celebrate that they could suddenly get more baguettes for their buck. But what a difference a Fed rate cut and more bailouts make. Since the Fed lowered rates to 1% in late October, the euro has gained 10% against the greenback. During that time frame, the government has also been forced to essentially print more money to help pay for several new initiatives aimed at boosting the flagging economy. Well, guess what? The Fed cut interest rates again on Tuesday to a target of between 0% and 0.25%. And the government is likely to add more to the bailout tally before the end of the year with an emergency loan to keep General Motors (GM, Fortune 500) and Chrysler LLC from bankruptcy.
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