Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Mon 03.31.2008
Brace for $1 Trillion Writedown of `Yertle the Turtle' Debt Be it ever so devalued, $1 trillion is a lot of dough. That's roughly on a par with the Russian economy. More than double the market value of Exxon Mobil Corp. About nine times the combined wealth of Warren Buffett and Bill Gates. Yet $1 trillion is the amount of defaults and writedowns Americans will likely witness before they emerge at the far side of the bursting credit bubble, estimates Charles R. Morris in his shrewd primer, ``The Trillion Dollar Meltdown.'' That calculation assumes an orderly unwinding, which he doesn't expect. ``The sad truth,'' he writes, ``is that subprime is just the first big boulder in an avalanche of asset writedowns that will rattle on through much of 2008.''
As Jobs Vanish and Prices Rise, Food Stamp Use Nears Record Driven by a painful mix of layoffs and rising food and fuel prices, the number of Americans receiving food stamps is projected to reach 28 million in the coming year, the highest level since the aid program began in the 1960s. The number of recipients, who must have near-poverty incomes to qualify for benefits averaging $100 a month per family member, has fluctuated over the years along with economic conditions, eligibility rules, enlistment drives and natural disasters like Hurricane Katrina, which led to a spike in the South. But recent rises in many states appear to be resulting mainly from the economic slowdown, officials and experts say, as well as inflation in prices of basic goods that leave more families feeling pinched. Citing expected growth in unemployment, the Congressional Budget Office this month projected a continued increase in the monthly number of recipients in the next fiscal year, starting Oct. 1 — to 28 million, up from 27.8 million in 2008, and 26.5 million in 2007.
Paulson calls for total regulatory revamp U.S. Treasury Secretary Henry Paulson is calling for extensive, wide-ranging reforms to the way the government regulates financial markets, including proposals to give the Federal Reserve more power and create new bodies to monitor mortgages and other transactions. Paulson is slated to formally present the Treasury Department's new plan in a speech scheduled for Monday morning. Among the many items in the plan is a proposal to make the Fed "responsible for overall issues of financial market stability," according to the executive summary. Paulson's recommendations come on the heels of the Fed and Treasury's dramatic bailout of Bear Stearns Cos
Fed eyes Nordic-style nationalisation of US banks The US Federal Reserve is examining the Nordic bank nationalisations of the 1990s as a possible interim solution to the US financial crisis. The Fed has been criticised for its rescue of Bear Stearns, which critics say has degenerated into a taxpayer gift to rich bankers. A senior official at one of the Scandinavian central banks told The Daily Telegraph that Fed strategists had stepped up contacts to learn how Norway, Sweden and Finland managed their traumatic crisis from 1991 to 1993, which brought the region's economy to its knees. It is understood that Fed vice-chairman Don Kohn remains very concerned by the depth of the US crisis and is eyeing the Nordic approach for contingency options.
Chaos on Wall Street The big banks' fear of big losses is threatening to bring down the entire system, with dire consequences for all of us. Here's what's going on, and what we can do about it. What in the world is going on here? Why is Washington spending billions to bail out Wall Street titans while leaving struggling homeowners to fend for themselves? Why are the Federal Reserve and the Treasury acting as if they're afraid the world may come to an end, while the stock market seems much less concerned? And finally, what does all this mean to those of us who aren't financial professionals? Okay, take a few breaths, pour yourself a beverage of your choice, and I'll tell you what's happening - and what I think is going to happen. Although I expect these problems will resolve themselves without a catastrophic meltdown, I'll also tell you why I'm more nervous about the world financial system now than I've ever been in my 40 years of covering business and markets.
Truck drivers’ strike picks up speed When my story from last week about plans for a truckers’ strike appeared Monday on the high-traffic Drudge Report Web site, the calls and e-mails poured in.I heard from CNN in Atlanta as well as small-time radio stations across the nation. I hung up the phone after listening to a dozen new messages and had four more come in during the few minutes I was tying up the line. The potential impact of this thing is tremendous, and people are beginning to notice. The call for a drivers’ shutdown started small — with an owner/operator who hauls cattle in Missouri. The trucker, Dan Little, posted his plans to shut down on his Web site, and someone brought it to our attention at the Times.
Opec blames oil prices on floundering US currency THE president of Opec has predicted that the price of oil could stay as high as 110 a barrel for the rest of the year, spurred by investors seeking a hedge against the weakening US dollar. Chakib Khelil, president of the global oil cartel, who is also the Algerian Energy Minister, said: "There are big pressures on Opec — and some consuming nations would like to present Opec as being behind current high prices."But the truth is that the current prices are linked to US economic problems as well as to the value of the dollar."His comments came after the US urged Saudi Arabia to boost production in an attempt to ease the price of oil. There are hopes that a recession in America and moves by China to reduce economic growth will lead to a fall in demand for commodities such as oil and result, in turn, in falling oil prices.
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Fri 03.28.2008
Silver vs. Gold: 2004 to Today In August of 2004, when silver was $6 and gold was $380, I wrote the following four reasons for liking silver more than gold: Mine production could not satisfy physical demands of either gold or silver. However, I like silver better because most official sectors, such as the US government, have run out of silver. Only governments do nutty things like selling a valuable asset to suppress its price. I trust the private enterprises holding silver stockpiles to be logical (i.e. profit-seeking) participants in the silver market. If Mr. David Morgan were right that China provided most of the silver to fulfill the demand for the last few years, then the silver picture would just get more bullish. I expect China in a year or two will be a net silver importer (if it has not already), just like soybeans, copper, steel, and any other commodity you can think of.
Consumer spending flat in February U.S. consumer spending was flat in February after adjusting for inflation, the third consecutive month of weak consumer demand, the Commerce Department reported Friday. Real consumer spending has risen less than 0.1% seasonally adjusted since November, a clear sign that the main engine of U.S. economic growth is stalling as job growth wanes and house prices tumble. Real consumer spending is on track to rise 0.8% annualized for the first quarter, economists said. "The plunging confidence numbers clearly point to an outright decline in the second quarter," wrote Ian Shepherdson, chief U.S. economist for High Frequency Economics.
Dollar Departure For Chinese Exporters Global industries are looking for ways to operate without the help of America's erratic currency. We learned yesterday that one of the world's biggest pension funds is shunning the paltry returns on U.S. government debt. Today the Financial Times is reporting that an increasing number of Chinese exporters are migrating away from the dollar to settle non-U.S. transactions. Alibaba.com, a company parly owned by Yahoo that hooks up international buyers with Chinese suppliers, says the vast majority of its 700,000 suppliers are moving to pounds, euros or even using China's own renminbi to complete sales. Abandoning the dollar is an attempt to minimize currency risk. Alibaba's chief executive explained his company's position, saying that prior to greenback volatility, dollar prices were valid for a month or two. Those same quotes are now good for just seven days.
Fannie Mae And Freddie Mac May Need $20 Billion Part of the plan to fix the mortgage crisis is for Fannie Mae (FNM) and Freddie Mac (FRE) to buy more debt securities. To do that, they will need more capital, perhaps as much as $20 billion. According to Bloomberg ``That's the top end of the range,'' James Lockhart,director of the Office of Federal Housing Enterprise Oversight said, Even in this day and age of multi-billion bail-outs, that is a lot of money. The companies will have to sell stock or bonds to raise capital. The may push their share prices down again because of dilution. The federal government probably does not want foreign capital to fund the new requirements. So, who does that leave?
Foreclosing on Fido In the swank Country Club area of Anthem, Ariz., Barbara Ward-Windgassen's rescue group has saved a bichon frise, Lhasa apso and shih tzu -- some with their leashes still on -- after their owners had abandoned them in their foreclosed high-priced homes. She's also helped find new homes for a rottweiler and pit bull that were being cared for over the fence by neighbors for nearly two months after the family left them in the back yard when their house was taken back by the bank. Call it reckless abandonment. Shelters and animal rescue organizations across the country are packed cage-to-cage with dogs and cats, even birds and reptiles, that have been ditched or dropped off as scores of foreclosed-upon homeowners relocate.
Fed Leaders Ponder an Expanded Mission In the past two weeks, the Federal Reserve, long the guardian of the nation's banks, has redefined its role to also become protector and overseer of Wall Street. With its March 14 decision to make a special loan to Bear Stearns and a decision two days later to become an emergency lender to all of the major investment firms, the central bank abandoned 75 years of precedent under which it offered direct backing only to traditional banks. Inside the Fed and out, there is a realization that those moves amounted to crossing the Rubicon, setting the stage for deeper involvement in the little-regulated markets for capital that have come to dominate the financial world.
Jump in rice price fuels fears of unrest Rice prices jumped 30 per cent to an all-time high on Thursday, raising fears of fresh outbreaks of social unrest across Asia where the grain is a staple food for more than 2.5bn people. The increase came after Egypt, a leading exporter, imposed a formal ban on selling rice abroad to keep local prices down, and the Philippines announced plans for a major purchase of the grain in the international market to boost supplies. Global rice stocks are at their lowest since 1976. On Friday the Indian government imposed further restrictions on the exports of rice to combat rising local inflation, with traders warning that the new regime would de facto stop all India’s non-basmati rice sales.
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Thur 03.27.2008
Our Financial House of Cards and How to Start Replacing It With Solid Gold A credit crisis has been spreading through the economic system. It began with the collapse of the housing bubble, which was the result of years of Federal-Reserve-sponsored credit expansion. This credit expansion poured hundreds of billions of dollars into the purchase of homes largely by sub-prime borrowers who never had a realistic capability of repaying their mortgage debts in the first place. And, not surprisingly, large numbers of them in fact stopped making the payments required by their mortgages. At first apparently confined to the market for sub-prime mortgages, the credit crisis has spread to other portions of the mortgage market, to the usually staid municipal bond market, and within the last week or so has led to a run against a major investment bank (Bear Stearns).
White House and Fed divided on taxpayers bailing out banks A rift is emerging between the White House and the US Federal Reserve over whether banks should be bailed out by taxpayers, The Times has learnt. It is understood that President Bush and his advisers are concerned about the repercussions of protecting a financial institution from bankruptcy because of its own poor decisions. The White House is anxious about the long-term implications of a bank bailout and of the extension of emergency cheap credit facilities to investment firms. In what is an election year in the United States, the President is worried that Washington will be accused of using taxpayers’ money to protect executives, staff and shareholders from the consequences of poor risk management.
GDP unrevised at 0.6% in fourth quarter The U.S. economy downshifted abruptly in the fourth quarter, growing at a 0.6% annual rate, the slowest pace since late 2002, the Commerce Department estimated Thursday. The 0.6% estimate for gross domestic product, unrevised from the previous two estimates, was exactly as forecast by economists surveyed by MarketWatch. By contrast, GDP grew at a 4.9% annual rate in the third quarter. The final estimate for fourth-quarter GDP contained little that was new, aside from fresh data on corporate profits: After-tax profits from current production fell $37.9 billion, or 3.3% quarterly, to an annualized $1.11 trillion. Net cash flow fell $55.7 billion, or 4.4%.
Equity Loans as Next Round in Credit Crisis Little by little, millions of Americans surrendered equity in their homes in recent years. Lulled by good times, they borrowed — sometimes heavily — against the roofs over their heads. Now the bill is coming due. As the housing market spirals downward, home equity loans, which turn home sweet home into cash sweet cash, are becoming the next flash point in the mortgage crisis. Americans owe a staggering $1.1 trillion on home equity loans — and banks are increasingly worried they may not get some of that money back. To get it, many lenders are taking the extraordinary step of preventing some people from selling their homes or refinancing their mortgages unless they pay off all or part of their home equity loans first. In the past, when home prices were not falling, lenders did not resort to these measures.
Report Assails Auditor for Work at Failed Home Lender In a sweeping accusation against one of the country’s largest accounting firms, an investigator released a report on Wednesday that said "improper and imprudent practices" by a once high-flying mortgage company were condoned and enabled by its auditors. KPMG, one of the Big Four accounting firms, endorsed a move by New Century Financial, a failed mortgage company, to change its accounting practices in a way that allowed the lender to report a profit, rather than a loss, at the height of the housing boom, an independent report commissioned by a division of the Justice Department concluded. The result of a five-month investigation, the report is the most comprehensive and damning document that has been released about the failings of a mortgage business.
California freefall: Home prices down 26% in February Signs of distress are piling up in the California housing market, where prices are falling at three times the national rate of decline.--Statewide, median sales prices fell by a stunning 26% from year-ago levels in February, with home prices dropping at a rate of nearly $3,000 a week, the California Association of Realtors reports. Further, the CAR says the Fed's interest rate-cutting campaign "will have little near-term direct effect on the housing market."--In the San Fernando Valley, losing a home to foreclosure is now almost as common for families as buying a home. The L.A. Daily News: "During January and February, there were 1,084 foreclosures and 1,335 sales of houses and condos in Valley communities from Glendale to Calabasas, according to the San Fernando Valley Economic Research Center at California State University, Northridge."
Crude oil surges after Basra pipeline bombing The price of crude oil surged this morning after saboteurs bombed one of Iraq's main oil pipelines in what was feared to be a backlash attack by powerful Shia Muslim militias. The attack is being seen as an act of retaliation for the Government's campaign to crack down on the Shia private armies, many of them Iranian-backed, which have exerted a powerful and violent influence over the south and centre of Iraq. The explosion on the Zubair 1 pipeline, four miles south of Basra, happened on the third day of an operation by the Iraqi Army to defeat and round up gunmen in the oil port of Basra. "The pipeline was severely damaged," said an official for the Southern Oil Company.
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Wed 03.26.2008
Metals - Gold rises as dollar weakness continues to spur buying Gold rose while the dollar remained weak, oil prices ticked up and fund money returned to the commodity sector. Bullion fell over 10 pct last week from record highs above 1,000 usd as players took profits but gold's main drivers -- a weak dollar, persistent economic weakness and high oil prices -- remain supportive for the metal. 'The weakening dollar and the rise in oil prices as well as firmer prices across the agricultural sector supported gold's recovery yesterday and ongoing inflationary concerns coupled with safe-haven buying are likely to underpin gold prices over the forthcoming months,' said Barclays Capital analysts.Gold moves in the opposite direction to the dollar, as it is seen as an alternative asset, and in line with oil prices, as bullion is bought as a hedge against energy-led inflation.
Gold has potential to double: UBS Gold may have eased back from last week’s record high of US$1,030.80 an ounce, but the yellow metal is well positioned for growth and could potentially double in price, Tony Lesiak, analyst at UBS, says in a note to investors. Mr. Lesiak says gold appears relatively cheap compared to oil on a historical basis, holding the potential for gold to more than double to levels where it will regain its long term average relationship. However, he said the price of gold was hard to call at present and prices may not move much in the coming weeks."In the near-term, fundamental value will not mean very much: positioning and the need to raise liquidity will determine what happens to precious metals - and indeed other asset classes," Mr. Lesiak says.
Wall Street May Face $460 Bln in Losses, Goldman Wall Street banks, brokerages and hedge funds may report $460 billion in credit losses from the collapse of the subprime mortgage market, or almost four times the amount already disclosed, according to Goldman Sachs Group Inc. Profits will continue to wane, other analysts said. ``There is light at the end of the tunnel, but it is still rather dim,'' Goldman analysts including New York-based Andrew Tilton said in a note to investors today. They estimated that residential mortgage losses will account for half the total, and commercial mortgages as much as 20 percent. Earnings and share prices at U.S. financial institutions tumbled in the past year as fallout from the mortgage crisis spread to other markets. Demand for mortgage-backed securities evaporated, leading to the collapse of Bear Stearns Cos., once that market's largest underwriter, and a Federal Reserve-led bailout by JPMorgan Chase & Co. earlier this month.
Hoarding by banks stokes fear over crisis Central banks' efforts to ease strains in the money markets are failing to stop financial institutions from hoarding cash, stoking fears that the recent respite in equity markets may not signal the end of the credit crisis.Banks' borrowing costs - a sign of their willingness to lend to each other - in the US, eurozone and the UK rose again even after the Federal Reserve's unprecedented activity in lending to retail and investment banks against weaker than usual collateral and similar action in Europe.The continued friction in the money markets came even as stock markets were showing new signs of optimism in spite of fresh data from the US showing consumers at their most pessimistic for 35 years and house prices falling at the fastest rate on record.
FDIC to boost staffing in bank failures Federal banking regulators will hire 140 new employees in an effort to reassure the public they are well-positioned to deal with a possible increase in bank failures over the next year, the Federal Deposit Insurance Corp. said Tuesday. The agency will increase the staff of the Division of Resolution and Receiverships by 60%, most of who would be temporary and based in Dallas. "We want to make sure that we're prepared," said FDIC Chief Operating Officer John Bovenzi, quoted by the Associated Press in a story published earlier Tuesday. Last month, the FDIC said it would attempt to rehire 25 former employees specializing in bank insolvency. Those 25 retirees are included in the 140 total new hires.
Demand for durable goods falls 1.7% in Feb. Demand for machinery and other capital goods sank in February, driving orders for durable goods down 1.7%, the Commerce Department reported Wednesday. The unexpected decline in orders for big-ticket items marked the second straight monthly drop, an indication that domestic demand is weakening faster than exports can grow. "This is another report that has a strong recessionary feel about it," wrote John Ryding, chief U.S. economist for Bear Stearns. "The data strongly suggest that the period of retrenchment in the manufacturing sector is likely to get far worse before things stabilize," wrote Joseph Brusuelas, chief U.S. economist for IDEAglobal. Economists surveyed by MarketWatch had been looking for total orders to rise 0.5% after a revised 4.7% decline in January.
New-home sales fall to 13-year low Sales of new homes in the United States fell to a 13-year low in February, dropping 1.3% to a seasonally adjusted annual rate of 590,000, the Commerce Department estimated Wednesday. Sales have fallen four months in a row and are off about 30% in the past year. The number of homes on the market dropped by 2.1% to 471,000, the lowest since July 2005. This indicates builders are trying to work off their bloated inventories of unsold homes. However, the pace of sales has slowed even more. Inventory represented a 9.8-month supply at the February sales rate, unchanged from January and the highest since 1981. Inventories are likely understated, also because of cancellations.
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Tues 03.25.2008
Next Stop: $2,000 Gold Last week has to be one of the most stunning in the history of financial markets.It started with the weekend sale of venerable Bear Stearns to JP Morgan for the laughably low price of $2 a share, setting the tone for what will be remembered as a prophetic event for the week that followed, and ultimately, for the months that will follow.The Fed has essentially funded the sale of a distressed asset to avoid the collapse of Bear Stearns, which, if allowed to happen, would put so many other banks into a state of insolvency that the domino effect would ultimately cause more big banking names to fall. The term "capitulation" comes to mind. So what has happened, is the Fed is exercising its right to print money with renewed abandon, comforted by the short term validation of its strategy afforded by the Dow's responsive surge.
Looks Like There's a Silver Shortage Worried by the steep correction in silver? Don't worry, just reduce your leverage. Silver has always corrected by roughly a third after its sharp ascents in the past 5 years. This is due to the extreme tightness of this market where a billion of whatever fiat currency still can do a lot of damage. At one point the short sellers will be run over by the very real freight train of exploding physical demand that has led to what looks like a worldwide shortage in bullion. The US Mint has been out of the gold sale business for almost half a year now, filling orders on very few days since September. Currently only the new 2008 gold proof Eagles are on offer. All uncirculated bullion coins are not available. Platinum coins have not been available in a while too. Now the physical delivery problems spread to silver as well. The US Mint says it will ship silver eagles again after April 9. But taking it from past experience, this schedule may be delayed again.
Home prices fall a record 10.7% in past year Home prices in 20 major U.S. metro areas have plunged a record 10.7% in the past year as prices continued to decelerate, Standard & Poor's said Tuesday. The 20-city Case-Shiller home price index fell a record 2.4% in January, the 18th consecutive decline in prices. For 10 major cities, prices fell 2.3% in January and 11.4% for the past 12 months. "No markets seem to be completely immune from the housing crisis,' said David Blitzer, chairman of the index committee at S&P. Of the 20 cities, only Charlotte, N.C., has managed any gains in the past year, rising a meager 1.8%. For the fifth straight month, all 20 cities recorded lower prices compared with the previous month.
Food stamps double since '01 Nearly one in 10 Ohioans now receives food stamps, the highest number in the state's history. Caseloads have almost doubled just since 2001, with 1.1 million residents now collecting benefits, according to the Ohio Department of Job and Family Services.Low wages, unemployment and the rising cost of groceries, gasoline and other necessities are to blame for financial hardships facing many Ohio families.Caseloads have been rising steadily in the past seven years, said Brian Harter, spokesman for the state agency which oversees the food-stamp program."Look at unemployment during this time," he said.Ohio's jobless rate is 5.3 percent, up from 4.4 percent in 2001.
March consumer confidence down, outlook grim U.S. consumer confidence fell in March, the Conference Board reported Tuesday, and expectations hit a 35-year low as pessimistic views of the business climate, the job market and personal income weighed on sentiment. The March consumer confidence index fell to 64.5 from a revised reading of 76.4 in February. Economists surveyed by MarketWatch had expected a March reading of 73.3. Confidence has taken a hit in recent months from worries about jobs, housing prices and the economy. Consumer confidence is at its lowest since the Iraq War in 2003. "Looking ahead, consumers' outlook for business conditions, the job market and their income prospects is quite pessimistic and suggests further weakening may be on the horizon," said Lynn Franco, director of consumer research at the private Conference Board.
U.S. supply will determine what happens to your buying power When was the last time you read about the money supply, other than in this column? In my view, you would do well to start paying attention to the money supply and its rate of growth, since it has significant implications for you in both the short and in the long run. In the short run, the amount of money that the Federal Reserve pumps into the economy will determine what will happen to the buying power of your dollar and mine. Over the longer term, it will determine the size and scope of the next bubble. How this works is nothing more mysterious than the law of supply and demand. In the case of our dollars, right now, their supply is far outpacing their demand. When this happens to any good or service, its value falls - and money is no exception.
Desperate for cash, many in U.S. taking high-interest 'payday' loans As hundreds of thousands of American homeowners fall behind on their mortgage payments, more people are turning to short-term loans with extreme interest rates, just to get by.While hard figures are hard to come by, evidence from nonprofit credit and mortgage counselors suggests that the number of people using these so-called "payday loans" is growing as the U.S. housing crisis deepens."We're hearing from around the country that many folks are buried deep in payday loan debts as well as struggling with their mortgage payments," said Uriah King, a policy associate at the Center for Responsible Lending.A payday loan is typically for a few hundred dollars, with a term of two weeks, and an interest rate as high as 800 percent. The average borrower ends up paying back $793 for a $325 loan, according to the center.
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Mon 03.24.2008
Gold drop was not that bad IT'S time for gold investors to get a grip. The so-called big fall last week was, first, nothing of the sort and, second, was more a reflection of panic at the trading desks rather than from the gold consumer.The accompanying graph shows that there was a much greater plunge by the yellow metal two years ago. The graph uses the spot price for comparative purposes, which is why the recent high is shown at $US1002.95 an ounce rather than the April contract, which hit $US1033.90. The spot price's fall from its high on Monday was of the order of 8.3 per cent. Bad enough. But in the four weeks to June 14, 2006, bullion's spot price fell 21.7 per cent. There was another, lesser, retreat in the following September and then almost a year going sideways. And then look what happened: it bolted.
Nobody Wants Silver So Badly, You Can't Buy Any It's just like pro rasslin', maw. He's up ... he's down ... he's been thrown completely out of the ring and landed in the laps of New York's governor and his ... is that his wife? What's this? Silver is down yet another dollar today, after being down over a buck and a half yesterday? So, the stock market must be up a gazillion points, eh? Nope. Then, the dollar - they must have struck the world's biggest gusher on the White House lawn? Nope. But the dollar is up - way up. Will it stay up? Nope.
Truckers ‘going broke’ and threatening to strike What started as a small, online grassroots effort now appears to have the potential for something bigger. Dan Little, the owner/operator of a livestock hauling company in Carrollton, Mo., estimated Tuesday that at least 1,000 other truckers from across the United States have committed so far to joining him in a strike on April 1. Although none of the truckers interviewed Tuesday at the Iowa 80 Truck Stop, Walcott, which is just off Interstate 80 west of Davenport, has heard of the intended strike, some said they would shut down, too. Weldon Kinnison, a Virginia trucker who was hauling soft drink from Indiana to Denver, heard about the plans for a strike for the first time Tuesday while stopping at Walcott. "I’m an owner/operator with the American Truckers Association," he said. "I’d park my truck for a week with the cattle haulers.
Bank of America may write down $6.5 billion Bank of America Corp. could tally a $6.5 billion provision in the first quarter to cover potential losses in its home equity and mortgage portfolios, Punk Ziegel and Co. analyst Richard Bove was quoted as saying by the Bloomberg news agency. All the same, the bank will still report a profit when it releases its next quarterly results April 21, Bove was reported to say Saturday. The analyst also wrote that he doesn't foresee an economic slide that would create the need for Bank of America's record reserve buildup, citing the change in the value of the dollar and steps by the Federal Reserve as likely to ease the credit crisis, the report said.
Home resales up first time in seven months Boosted by a record decline in prices, the U.S. housing market showed signs of stability in February, with sales of existing home rising modestly for the first time in seven months, the National Association of Realtors reported Monday. Resales of U.S. homes and condos rose 2.9% to a seasonally adjusted annualized rate of 5.03 million, ahead of the 4.85 million pace expected by economists surveyed by MarketWatch. It's the strongest sales pace since October. Sales are down 23.8% compared with a year ago. Inventories of unsold homes fell 3% to 4.03 million, representing a 9.6-month supply at the February sales pace. Inventories are not seasonally adjusted, but a decline from January to February is unusual.
Fed's rescue halted a derivatives Chernobyl When the Federal Reserve stepped in to save Bear Stearns, most people had no idea what was at stake, writes Ambrose Evans-Pritchard We may never know for sure whether the Federal Reserve's rescue of Bear Stearns averted a seizure of the $516 trillion derivatives system, the ultimate Chernobyl for global finance. "If the Fed had not stepped in, we would have had pandemonium," said James Melcher, president of the New York hedge fund Balestra Capital. "There was the risk of a total meltdown at the beginning of last week. I don't think most people have any idea how bad this chain could have been, and I am still not sure the Fed can maintain the solvency of the US banking system."
Bear Stearns to axe 8,000 staff More than 8,000 staff will face the axe at Bear Stearns worldwide once the stricken US investment bank is acquired by JP Morgan next month, as fears mount that the credit crunch could keep downward pressure on share prices throughout 2008. Wall Street analysts believe well over half of Bear Stearns's employees will be made redundant, with around 600 jobs at risk in London, where the company employs 1,350 people. JP Morgan declined to comment. So far, the credit crunch has seen relatively modest falls on the US and UK stock markets, where the Dow Jones (see graph) and FTSE 100 have declined by about 15 per cent since their high point in 2007 - more gently, so far, than during previous crises.
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Fri 03.21.2008
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."
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Thur 03.20.2008
Commodities crater on inflation outlook, economy Fed's warning on inflation, renewed economic fears take steam out of rally Prices in oil, gold, wheat and other commodities took a dive Wednesday, one day after the Federal Reserve highlighted its inflation concerns as it cut rates and indirectly took away some of the fizz from the recent commodity rally. The Fed's rate cut of 75 basis points, less than the market expected, and its statement acknowledging the threat of inflation served as "fair warning to commodity speculators," according to William Knapp, managing director at In past weeks, inflation worries, fueled in part by the Fed's focus in recent months on cutting rates to spur growth, sent investors flocking to oil, gold and grains as safe-haven investments. The weak dollar, which had fallen alongside the rate cuts, had also helped push these dollar-denominated commodities to record highs.
Gov't Eases Fannie, Freddie Restraints FThe government on Wednesday relaxed capital requirements at Fannie Mae and Freddie Mac as part of a plan to quickly inject an additional $200 billion of financing for home loans. The initiative, which will require Fannie and Freddie to raise substantial funds, is part of a broader government strategy to ease a credit crisis that has made it difficult for consumers and businesses to borrow, and spread fear throughout global financial markets.
CEO: Ford Layoffs Possible if Buyouts Fail Ford Motor Co has other options to cut costs if a just-completed round of buyouts for its U.S. blue-collar work force comes up short of its targets, the automaker's chief executive said Wednesday. "We have a lot of other options to keep right-sizing the place," Ford Chief Executive Alan Mulally said in a presentation to analysts in New York that was monitored by Webcast.
Carlyle Capital: Fund is Insolvent Investment company Carlyle Capital Corp said on Wednesday that its liquidators have determined the fund to be insolvent and that investors were not likely to get any proceeds after its operations wind up. Amsterdam-listed Carlyle, which late on Tuesday asked for trade in its shares to be suspended, said in a statement that it had "extremely limited cash assets".
Securities Drag Credit Suisse 2007 Credit Suisse Slashes 2007 Figures, Cuts Forecast After Internal Probe Into Securities Credit Suisse Group on Thursday slashed previously released 2007 profit figures because of an internal investigation into securities valuations and said it doesn't expect to post a profit for the first quarter. Credit Suisse said it has determined that the pricing errors "were, in part, the result of intentional misconduct by a small number of traders.
Citigroup Plans to Cut More Than 5% of Securities Employees Citigroup Inc., the biggest U.S. bank by assets, plans to cut more than 5 percent of staff in the securities unit to rein back expenses after U.S. subprime- mortgage related losses. Dollar Rises Against Euro, Yen as Oil, Commodity Prices Decline The dollar rose to its strongest in a week against the euro as speculation a global economic slowdown will reduce demand for raw materials pushed gold and oil lower. The European common currency declined after Credit Suisse Group said it may have a loss this quarter because of writedowns on debt securities. The dollar climbed to the highest level in more than a week versus the currencies of its major trade partners as crude dropped after a U.S. government report showed weaker demand for fuel.
As Bear Stearns Implodes, Spector Keeps $382 Million Warren Spector, forced out as president of Bear Stearns Cos. last August, may have outdone his former mentor James ``Jimmy'' Cayne as the 85-year-old brokerage firm imploded. After a spat over politics in 2004, Cayne, then Bear Stearns's chief executive officer, changed the company's deferred compensation plan, prompting Spector to sell $382 million of stock. As of last March, his stake in the New York-based firm had dwindled to 0.06 percent, worth about $8 million when he left.
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Wed 03.19.08
Fed Cuts Key Interest Rate 75 Basis Points to 2.25 The Federal Reserve slashed a key U.S. interest rate by three-quarters of a percentage point Tuesday, a substantial cut but smaller than many in financial markets had expected, as part of an effort to hold off a deep recession and financial meltdown. The Fed's action takes the bellwether federal funds rate to 2.25 percent, the lowest since February 2005, and comes two days after the central bank announced the latest in a series of emergency measures to stem a fast-spreading global financial crisis. Many in financial markets had expected the Fed to chop the overnight rate by a full point.
Bernanke Confounds Rate-Cut Calls, Avoids Rattling Investors Federal Reserve Chairman Ben S. Bernanke bucked investors' bets on a deeper interest-rate cut without spoiling the biggest U.S. stock-market rally in five years. Policy makers yesterday lowered their benchmark rate by 0.75 percentage point, falling short of traders' bets for at least a full percentage point. The Federal Open Market Committee, in its announcement, left the door open for further reductions. At the same time, it restored language saying inflation has picked up. "The Fed still has its primary focus on growth and the threat to growth from markets,'' said James O'Sullivan, a senior economist at UBS Securities LLC in Stamford, Connecticut. "This is still a huge move,'' given that Alan Greenspan, Bernanke's predecessor, never lowered rates more than a half-point at a single meeting, O'Sullivan said.
Monster Rally Fools No One The second epic short-squeeze in a little more than a week has sent bears a clear message: If you want to get rich betting on the sure thing, you had better be prepared to die trying. The Dow Industrials popped for a 420-point gain yesterday, driven as always by hysterical short-covering. Compounding the bears’ shock and awe was the fact that the catalyst for this latest rally was a news announcement that should have disappointed investors. A 100-basis-point easing had been all but ordained by the bond markets, but the actual cut came in at 75 basis points. Rather than plunging in despair, however, stocks sold off only moderately in the gratuitous gyrations that followed. Bears need only have looked in a mirror to see what was holding stocks up. Big Federal Bailout of Housing Gains Momentum The expression "We're from the government, we're here to help" may come back in vogue as global markets continue to feel the impact of the U.S. housing market slump. The fallout from the housing market claimed the 85 year old U.S. investment bank Bear Stearns & Co and its 14,000 employees as its latest victims on Sunday, and is threatening to rock markets even more, and drag the faltering U.S. economy into a recession.
Dollar Falls on Speculation Housing Slump to Swell Bank Losses The dollar fell against the euro, erasing most of yesterday's gains, on speculation the worst U.S. housing slump in a quarter of a century will swell credit-market losses. The currency weakened against the Japanese yen and the Swiss franc after Bank of America Corp. predicted the Federal Reserve will lower its target rate by another 75 basis points this year following a reduction to 2.25 percent yesterday. Reports this week on U.S. mortgage demand and manufacturing will probably show the economy is slowing.
Fannie Mae And Freddie Mac Get New Rules Fannie Mae (FNM) and Freddie Mac (FRE) are about to get less strict capital rules and that should put $200 billion into the mortgage market. According to Reuters "Under the agreed-to plan, the two companies will be permitted to use some of their capital reserves to soak up mortgage assets while pledging to raise equity capital -- probably in the form of preferred stock -- in the near future."
Porsche, Sprint Unsettle Banks With Rush for Credit Citigroup Inc., JPMorgan Chase & Co. and the rest of the banking industry face a new drain on their capital. Borrowers from Sprint Nextel Corp. to Porsche Automobil Holding SE to MGIC Investment Corp. are drawing on credit lines. JPMorgan analysts say it's the start of a trend that may force banks to raise as much as $40 billion to keep an adequate cushion against potential losses. Companies are scrambling for cash at one of the worst times for the financial services industry. The world's biggest firms have taken $195 billion in writedowns and losses on securities tied to subprime mortgages, and the 10 biggest U.S. banks have the lowest capital levels in at least 17 years, according to Credit Suisse Group. The tapping of credit lines may be enough to grind new lending to a halt, said David Goldman, a senior portfolio strategist at London-based hedge fund Asteri Capital
Calculating an End to the Credit Crisis How long will the credit crisis last and how bad will it get? Experts say the turmoil will extend at least through the end of the year and could cost financial institutions up to $600 billion in losses, leading perhaps to a 10 percent shrinkage in their assets. The exact answer to the question depends on how severely the meltdown spreads beyond subprime mortgage securities to other areas of the credit markets.
Chukotka to strike gold With temperatures falling to minus 40 degrees Centigrade in winter, Chukotka in Russia’s north east is not an easy place to live. Still, although weather conditions are tough, the land is rich in gold and coal. The region has been showing stable growth over the last few years and it seems the trend is set to continue. Regarding gold deposits, Chukotka is one of Russia's richest regions, with extraction expected to reach 30 tonnes per year by 2020.
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Tues 03.18.2008
Fed Poised to Cut Interest Rates Again Fed Poised to Cut Rates Aggressively As It Combats Weak Economy and Severe Credit Crisis The Federal Reserve is expected to aggressively lower interest rates in its intensified battle against the credit crisis and spreading economic weakness. The question is whether all of the effort will turn the tide. Federal Reserve Chairman Ben Bernanke and his colleagues have already been working overtime, employing a variety of novel approaches to keep the economy out of a recession or at least moderate the impact of any downturn.
Bernanke May Cut Benchmark Rate by Most Since Volcker Federal Reserve Chairman Ben S. Bernanke may be readying the deepest interest-rate cut in a generation as the central bank struggles to prevent a meltdown in financial markets and a recession. Traders predict the Federal Open Market Committee, meeting today in Washington, will lower the overnight lending rate by a full percentage point or more, based on futures prices in Chicago. That would be the biggest reduction since 1984, when Paul Volcker led the central bank, and would bring the benchmark rate down to 2 percent. The Fed took emergency steps over the weekend to stave off a financial panic, lowering its rate on direct loans to banks and becoming lender of last resort for Wall Street's biggest dealers in government bonds.
Citigroup And Lehman Will Disappear The story is the same every decade or so. Bad economic times cause well-known businesses to fail. They are bought out and merged, and they simply cease to exist as the public and investors knew them for decades. After the 85-year-old Bear Stearns (BSC) went the way of all flesh, rumors surfaced that Lehman Brothers (LEH) or Citigroup (C) might be next. If things get bad enough, either one might get sucked up into another company. Rogers Blasts Paulson, Bear Stearns Bailout You can add Treasury Secretary Henry Paulson to the list of U.S. economic officials who don’t measure up in the eyes of investment guru Jim Rogers. He thinks Federal Reserve policy is turning the dollar into a toxic currency and finds it laughable that Paulson publicly voices support for the greenback while the Fed is debasing it.
Wall Street Woes May Force Bush to Assert Bigger Role in Market The accelerating crisis in U.S. financial markets may pressure the Bush administration to abandon its reluctance to act more aggressively to avoid a meltdown. President George W. Bush and Treasury Secretary Henry Paulson so far have responded to the upheaval by proposing a series of voluntary measures. The collapse of Bear Stearns Cos. amid a credit crunch and the near certainty of a recession are likely to prompt Paulson to get Bush to embrace a more activist approach, Democratic lawmakers say. "Paulson will tell him what to do,'' said House Majority Leader Steny Hoyer of Maryland, who has spoken recently with the former chairman of Goldman Sachs Group Inc. "Paulson gets the depth of the problems.'' Industrial Output Suffers Steepest Fall in 4 Months U.S. industrial production dropped at the sharpest rate in four months during February and the nation's mines, factories and utilities ran at their slowest rate in more than two years, the Federal Reserve said on Monday. Total industrial output fell 0.5 percent in February — much steeper than Wall Street economists' forecasts for a 0.1 percent decline - after rising a slim 0.1 percent in January. It was the biggest drop in monthly output since a 0.6 percent tumble last October.
Fed Becomes Lender of Last Resorts The Federal Reserve is urgently moving to contain a deepening credit crisis and restore confidence in panicked financial markets by becoming a lender of last resort for Wall Street investment houses, which were able to secure short-term emergency loans beginning Monday. On Wall Street, investors remained somewhat skittish. The Dow Jones industrials, which were down more than 175 points in early trading, moved into positive territory later in the morning. Trading on world markets was down sharply.
U.S. Housing Starts Probably Fell to 17-Year Low in February Builders in the U.S. broke ground on the fewest houses in 17 years last month as the real estate recession showed no sign of abating, economists said ahead of a government report today. Residential starts fell 1.7 percent to an annual rate of 995,000, according to the median of 64 economists surveyed by Bloomberg News. Permits, a gauge of future building, probably fell to a 1.02 million pace from 1.061 million in January. The Federal Reserve, which is forecast to cut its benchmark interest rate by a full percentage point today, is struggling to stem a meltdown in financial markets that is damaging the economy. Stabilization in housing may be difficult to engineer as property values fall, while lenders tighten borrowing rules and keep mortgage rates elevated.
Owners go to extremes to sell homes in slow market GIMMICKS GRAB BUYERS' INTEREST, BUT PRICE SELLS Frustrated as her house languished on the market for three straight summers, J.J. Rodgers is trying a new sales tactic: giving the two-story home away in an essay contest. Already, she's received more than 500 entries - each essay requires a $100 entry fee - for her four-bedroom home in Red Feather Lakes, Colo. She's hoping for a minimum of 2,000 entries, or $200,000 in fees, by the May 25 deadline to pay off the mortgage, cover closing costs and have a little left over. Rodgers last listed the property at $169,000 after cutting the price three times. "We don't have anything to lose," said Rodgers, 45. "If we're unsuccessful, at least we did something different from what we've already tried."
China Increases Bank Reserve Ratio to Cool Inflation China told banks to set aside more reserves for the second time this year, hours after Premier Wen Jiabao said the government will take "forceful'' steps to damp inflation at an 11-year high. Lenders must place a record 15.5 percent of deposits with the central bank, up from 15 percent previously, the People's Bank of China said in a statement on its Web site today. The increase will take effect on March 25. China will tackle soaring prices with "appropriate and forceful'' measures, Wen said at his annual press conference at the end of the National People's Congress in Beijing. Stocks tumbled the most in seven weeks on concern China's battle against inflation will slow the economy, which expanded 11.2 percent in the fourth quarter.
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Mon 03.17.2008
Gold and oil soar amid market turmoil Gold and oil prices shot up to hit fresh record highs overnight as turmoil in stock markets intensified following the news that Bear Stearns, America's fifth largest bank, has been sold to JP Morgan Chase at a knockdown price. The news sent the US dollar tumbling to a record low, leading investors to seek shelter in gold and commodities.
Falling Dominoes Rising Gold Gold is the leading indicator of systemic collapse The failure of Windows Vista to improve upon Microsoft’s accepted standard is an indication that an era is ending. Another indication—just as obvious and far more significant—US central bank credit is no longer automatically able to create economic expansion. Suddenly, cheap credit does not produce growth. An era is over. Credit, like steroids, can be classified as a performance enhancing drug. When introduced into an economic system, its effects are obvious and, in the beginning, positive. Like steroids, however, over time its effects become less positive and underlying problems more apparent and, in the end, are often fatal, e.g. deflation and the Great Depression.
Spot gold surges more than 3 percent to over $1,030 Spot gold surged more than 3 percent on Monday to a record high of above $1,030 per ounce as the dollar tumbled on deepening U.S. financial concerns. The dollar sank after JPMorgan Chase said it would buy cash-trapped Bear Stearns and the Federal Reserve cut its discount rate. Spot gold rose as high as $1,030.80 as of 0144 GMT.
Oil Rises to New Record As Dollar Drops Oil Prices Rise to All-Time High of Almost $112 a Barrel As US Dollar Sinks Oil prices jumped to an all-time trading high of almost $112 a barrel Monday as the tumbling U.S. dollar and plunging stock markets prompted investors to seek shelter in commodities. Investors fled the dollar after a surprise move Sunday by the U.S. Federal Reserve to provide cash to financially squeezed Wall Street investment houses pushed the battered dollar deeper into multiyear lows against the yen. "The Fed's move overall will help the liquidity of the U.S. dollar, and that will really further soften the dollar," said Victor Shum, an energy analyst with Purvin & Gertz in Singapore. "Meanwhile, investors seem to be just following the mantra of buying oil and commodities to hedge against the falling dollar and inflation."
Dollar hammered on financial fears One of few currencies not outperforming the greenback is U.K. sterling The Bear Stearns fire sale and the Federal Reserve's emergency decision to cut its discount rate sent the dollar to plunging to historic lows against major counterparts on Monday. In an extraordinary move, the Federal Reserve Sunday night announced it had cut its discount rate by a quarter percentage point to 3.25% and offered to lend money to an unprecedented list of firms. What's more, the Fed's rate-setting Federal Open Market Committee is now expected to cut its key Fed funds rate by as much as a full percentage point to 2% when it holds its regularly scheduled meeting Tuesday.
Economy most troubled since WWII: Greenspan Today's economic condition could likely be seen as "the most wrenching since the end of the second world war," wrote former Federal Reserve chairman Alan Greenspan in the Financial Times on Monday. The U.S. financial crisis won't end until housing prices stabilize, but that won't happen for months, wrote Greenspan.
Bernanke Plays `Whac-A-Mole' With Turmoil in Markets Federal Reserve Chairman Ben S. Bernanke may be facing something worse than a loss of personal credibility on Wall Street and in Washington: waning faith in the ability of the institution he leads to turn around the economy and the financial markets anytime soon. Bernanke has reached deep into the Fed's toolkit to come up with innovative ways to head off a recession and restore some calm in credit markets. While many have initially been greeted with rallies in stocks, cumulatively they haven't yet had lasting impact on bringing down credit costs and setting the stage for economic recovery.
Fed Takes New Steps to Ease Crisis The Federal Reserve, in an extraordinarily rare weekend move, took bold action Sunday evening to provide cash to financially squeezed Wall Street investment houses, a fresh effort to prevent a spreading credit crisis from sinking the U.S. economy. The central bank approved a cut in its emergency lending rate to financial institutions to 3.25 percent from 3.50 percent, effective immediately, and created a lending facility for big investment banks to secure short-term loans. The new lending facility will be available to big Wall Street firms on Monday.
JPMorgan to Buy Bear for $2 a Share JPMorgan Says It Will Buy Ailing Bear Stearns, Former Wall Street Rival, for $2 a Share With a deal finally struck, JPMorgan Chase & Co. will embark on the tough task of absorbing Bear Stearns Cos., once among its biggest rivals on Wall Street. As the assimilation proceeds, the financial industry wants to know exactly how badly Bear Stearns bet on mortgage-backed investments. Unwinding the nation's fifth-biggest investment houses should provide some insight into what other financial institutions might have on their books.
Paulson defends Bear Stearns bailout The U.S. treasury secretary, Henry Paulson, defended on Sunday the Federal Reserve's decision to help rescue Bear Stearns, the teetering Wall Street investment bank. He sidestepped questions about whether other financial firms were on shaky ground and the possibility of additional interventions of this kind, saying, "I'm convinced that they're going to come out of this situation very strong."
Central Bank Offers Loans To Brokers, Cuts Key Rate The Federal Reserve announced one of the broadest expansions of its lending authority since the 1930s in an effort to stem a credit crisis that is engulfing the financial system and threatening a deep recession. For the first time securities dealers, effective today and for at least the next six months, may borrow from the Fed on much the same terms as banks. The Fed also lowered the rate charged on such borrowings from what's known as its discount window by a quarter of a percentage point, to 3.25%, and extended the maximum term to 90 days from 30.
Shares of Lehman Brothers tumble in premarket trading on report of deals banned with the bank Shares of Lehman Brothers Holdings Inc. plunged in premarket trading Monday after a news report that Southeast Asia's largest bank instructed traders in an e-mail not to do business with the bank. DBS Group Holdings Ltd. took back those instructions, but after the fall of the once venerable Wall Street bank Bear Stearns on Sunday, skittish investors sold off quickly and Lehman shares fell more than 27 percent, or $10.76, to $28.50. DBS sent an e-mail to several traders instructing them not to conduct any new dealings with Lehman Brothers or Bear Stearns Cos., two people familiar with the situation said, according to Dow Jones.
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Fri 03.14.2008
Bear Stearns gets help from Fed, J.P. Morgan Bear Stearns Cos. said Friday that it got short-term financing from the Federal Reserve and J.P. Morgan Chase after the brokerage firm's liquidity "deteriorated significantly" during the past 24 hours. J.P. Morgan also said it's working with Bear to secure permanent financing or "other alternatives" for the brokerage firm. "Our liquidity position in the last 24 hours had significantly deteriorated," Alan Schwartz, chief executive at Bear, said in a statement. "We took this important step to restore confidence in us in the marketplace, strengthen our liquidity and allow us to continue normal operations. "Bear Stearns has been the subject of a multitude of market rumors regarding our liquidity," he added. "We have tried to confront and dispel these rumors and parse fact from fiction."
Most Economists in Survey Say Recession Is Here Economists in the latest Wall Street Journal forecasting survey are increasingly certain the U.S. has slid into recession, a view reinforced by new data showing a sharp drop in retail sales last month. "The evidence is now beyond a reasonable doubt," said Scott Anderson of Wells Fargo & Co. Thirty-six of 51 respondents, or more than 70%, said in a survey conducted March 7-11 that the economy is in recession. The Commerce Department said yesterday that retail sales fell 0.6% in February; sales excluding the volatile auto and auto-parts categories fell 0.2%. The declines reflect a sharp slowdown in consumer spending, which accounts for more than 70% of U.S. economic activity, as Americans grapple with high gasoline and food costs and declines in home values and other asset prices.
Dollar falls below parity vs Swiss franc The dollar fell below parity with the Swiss franc for the first time on Friday as fears about more credit turmoil and a U.S. recession sparked broad selling of the U.S. currency. The dollar fell to an all-time low of 0.9987 Swiss francs , according to electronic trading platform EBS. It last traded at 1.0026 francs.
Home Prices Plunge Across California Median home prices plunged in many of California's most populous counties in February, with Southern California leading the slide with an overall drop of 17.9 percent compared to a year earlier, according to new housing data released Thursday. The drops reflect a deepening housing crisis in the state, which saw home values soar during the housing boom then decline sharply in most areas. Median home prices fell this year in 15 major counties, DataQuick Information Systems said. The median price in a six-county area of Southern California fell to $408,000 -- the lowest level since October 2004, when it was $402,500. That median is 19.2 percent below the region's peak price of $505,000 last summer, and it's 1.7 percent below January's median, the firm said.
Dollar under pressure as US outlook darkens The dollar remains under pressure against all major currencies on fears that the Federal Reserve may need to slash interest rates further to stop the downward spiral in the credit markets. The greenback was at 100.57 against the yen after breaking below 100 yesterday in a day of wild trading, that set off alarm bells at Japan's Keidanren industry lobby. It touched a record low of $1.5651 against the euro and came within a whisker of parity with the Swiss franc for the first time in history. It rebounded somewhat in London today and was trading at $1.5582 by mid morning. However, Mitul Kotecha, head of currency strategy at Credit Agricole, said: "The real risk remains that we get a dollar rout. The news from from the US is consistently negative and investors are actually not overly long euros."
Problems of sagging dollar likely to snowball Battered by bad news and mounting fears over the American economy, the dollar is plumbing new depths, helping drive prices of commodities like oil and gold to record levels. The dollar has been declining in value against the euro and several other currencies since 2002, slamming travelers to Europe and American consumers purchasing European goods. Politicians are deploring the weak dollar as a sign of American economic decline and influence. To make matters worse, many economists say that the problems of a sagging dollar are feeding off each other. As the dollar weakens, holders of dollars, especially those overseas, are aiming for better returns on their assets by diversifying their portfolios toward other currencies, sending the dollar into further decline. "If we look forward, we are going to see the U.S. economy weakening more and interest rates cut more," said Desmond Lachman, a resident fellow at the conservative American Enterprise Institute. "The immediate prospects for the dollar don't look encouraging."
Dollar Puts Morgan, Goldman on `Intervention Watch' The dollar's record-breaking slide may trigger the first coordinated effort to shore up the currency in 13 years, according to strategists at Morgan Stanley and Goldman Sachs Group Inc. The currency yesterday fell below $1.56 a euro for the first time and slumped to the lowest level in 12 years versus the yen. That has prompted complaints from European Central Bank President Jean-Claude Trichet and Japanese Finance Minister Fukushiro Nukaga. U.S. Treasury Secretary Henry Paulson said yesterday he backs a ``strong dollar'' and refused to elaborate when questioned at a press conference in Washington. The challenge for officials is fighting the $3.2 trillion- a-day currency market while the Federal Reserve reduces interest rates and the U.S. economy falters. With traders increasing bets on a weaker dollar, the Group of Seven nations may be compelled to act, some strategists said.
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Thur 03.13.2008
Gold futures soar above $1,000 an ounce Gold futures briefly broke the psychologically important level of $1,000 an ounce Thursday, propelled by ongoing dollar weakness and bleak news from the financial sector. Gold soared as high as $1,001 an ounce on the New York Mercantile Exchange. Gold for April delivery was last up $17.50 at $998 an ounce. "Gold prices looked set to finally achieve the $1,000 mark this morning, as background market conditions shifted from bad to worse overnight," said Jon Nadler, senior analyst at Kitco Bullion Dealers, in a research note. "This will likely become known as the Carlyle/Drake Rally," Nadler said. "The imminent doom of the bond fund and probable demise of the hedge fund sent icy shivers through the financial markets that way overshadowed the (brief) cheer we witnessed following the Fed's term facility plan the other day."
Despite the Federal Reserve's efforts Wall Street fears a big US bank is in trouble Global stock markets may have cheered the US Federal Reserve yesterday, but on Wall Street the Fed's unprecedented move to pump $280 billion (£140 billion) into global markets was seen as a sure sign that at least one financial institution was struggling to survive. The name on most people's lips was Bear Stearns. Although the Fed billed the co-ordinated rescue as a way of improving liquidity across financial markets, economists and analysts said that the decision appeared to be driven by an urgent need to stave off the collapse of an American bank. "The only reason the Fed would do this is if they knew one or more of their primary dealers actually wasn't flush with cash and needed funds in a hurry," Simon Maughan, an analyst with MF Global in London, said.
Carlyle Capital on verge of collapse Carlyle Capital, the bond fund affiliated with private equity firm The Carlyle Group, is on the verge of collapse after failing to agree a new financing deal with lenders. The fund said late Wednesday that it expects lenders will soon take possession of "substantially all" its remaining assets after it was unable to meet surging margin calls on its portfolio of residential-mortgage-backed securities. Carlyle's woes contributed to a slump in European and Asian stock markets Thursday as investors feared credit problems will continue to spread. The news also helped drive the dollar below 100 yen for the first time since 1995. So far, Carlyle said it's defaulted on $16.6 billion of its debt and its remaining borrowing is expected to go into default soon.
Retail sales sink 0.6% in February Consumer spending weakened again in February as U.S. retail sales fell 0.6%, the Commerce Department reported Thursday. Most kinds of retail stores reported lower seasonally adjusted sales in February even before the impact of inflation was counted. The figures were weaker than expected by Wall Street economists, who forecast no change in retail sales. Sales in November and December were also revised lower on balance by 0.2%. Sales fell 0.7% in December and rose 0.4% in January. Over the past three months, sales were down 0.1% compared with the previous three months. "These data suggest that the economic drag from housing and the much tighter credit standards is slowly undermining consumer spending,"
Dollar's tumble rattles global markets The dollar tumbled to its lowest in 12 years against the Japanese yen and was weaker against a string of currencies as fears for the health of the US economy deepened. The currency has been sliding all year as the slump in America's housing market and the subsequent crisis in financial markets shows no sign of easing. Today's weakness, particularly marked against the yen, was triggered in part by the news that the assets of a large credit fund owned by private equity giant Carlyle Group will be seized by creditors. Federal Reserve chairman Ben Bernanke's fear of a full-blown economic crisis - made clear this week by his pledge to throw $200bn at commercial banks - has sent many investors fleeing dollar-based assets. With US interest rates already down 2.25 percentage points this year, and expected to be cut further, the currency is holding little attraction for international investors.
$5 Gas By Labor Day If gasoline prices move from their current average price of $3.20 to $5, the cost of fuel for a family that spends $50 a week for gas would move up over $1,000 a year. That would wipe out any tax rebate payments from the Federal government and drive the economy deeper into its currently slowdown. It would also further fracture already delicate P&Ls and balance sheet at large auto makers and airlines. Retailers would get less traffic. Very few industries would be spared some effect. Rising oil prices cannot be fixed by the Fed, That means that the most crushing blow to the economy, higher fuel prices, is largely beyond the control of the government. Rising crude is driven by futures speculation, the falling dollar, and an imbalance of supply and demand.
Jim Rogers: 'Abolish the Fed' Federal Reserve Chairman Ben Bernanke should resign and the Fed should be abolished as a way to boost the falling dollar and speed up the recovery of the U.S. economy, investor Jim Rogers, CEO of Rogers Holdings, told CNBC Europe Wednesday. Asked what he would do if he were in Bernanke's shoes, Rogers, who slammed the Fed for pouring liquidity in the system and accepting mortgage-backed securities as guarantees, said: "I would abolish the Federal Reserve and I would resign." If this happened, "we don't have anybody printing money, we don't have inflation in the land, we don't have a collapsing U.S. dollar," he told "Squawk Box Europe."
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Wed 03.12.2008
A Golden Future For Silver One of the most important aspects of investing is that it is genuinely hard work. There are no shortcuts. Taking it easy for a while simply isn’t an option if you strive to make a decent return every year. One has to stay focused, in order that they will be able to anticipate and then take advantage of great opportunities, things which are rare. And yet, we are now being handed a great opportunity on a silver platter. This is an opportunity that could be life changing for many. I know that I have said it before, and that to some of you may think I sound like a broken record, but it is crucial for investors to act quickly in order that they might profit from this chance of a lifetime.
Is the dollar's decline about to accelerate? Remember the boy who cried wolf -- and one day the wolf ate him? How about crying "foreign debt"? We first asked this question nearly four years ago. We pointed out that critics used to claim the Reagan-era boom in the early 1980s was just due to borrowings from foreigners. It sounded plausible. But it just wasn't true. Foreign holdings of federal debt were low in the early 1980s, and falling. They bottomed at 13.4% at the end of the fiscal year in October 1984. But when we last looked, the wolf was at the door. Foreign holdings of federal debt had reached 37.3% at the end of fiscal 2003. Now the wolf is in the door. Foreign holdings of federal debt in 2007 reached a record: 45%.
Dollar Falls to Record Low on Concern Fed Package Won't Succeed The dollar fell to a record below $1.55 per euro on concern that the Federal Reserve's plan to provide funds to banks won't be enough to break the gridlock in money-market lending and stem credit losses. The U.S. currency erased more than half of yesterday's 1.6 percent rally versus the yen, the biggest in six months, which came after the Fed said it would extend $200 billion of credit to financial institutions to spur lending. Traders bet the Fed will cut rates by as much as three quarters of a percentage point next week to avert a recession, while the European Central Bank keeps borrowing costs unchanged. ``It's difficult for the dollar to gain traction,'' said Paresh Upadhyaya, who helps manage $50 billion in currency assets at Putnam Investments in Boston. ``The Fed is probably running out of options; the market is fixated on interest-rate differentials, which are clearly negative for the dollar.''
Fed takes boldest action since the Depression to rescue US mortgage industry The US Federal Reserve has taken the boldest action since the 1930s, accepting $200bn of housing debt as collateral to prevent an implosion of the mortgage finance industry and head off a full-blown economic crisis. The Bank of England, the key European central banks, and the Bank of Canada all joined in a co-ordinated move with a mix of policies to halt the dowward spiral in the credit markets, expanding on the "shock and awe" tactics used late last year. The Fed's dramatic step came after an emergency conference call by governors on Monday night. It followed the melt-down of the US chartered agencies -- Fannie Mae, Freddie Mac, and other lenders -- which together guarantee 60pc of the entire US home loan market.
China's oil reserve build-up adds to global demand China's plans to build its strategic petroleum reserves to at least 100 million barrels by 2010 could add more pressure to crude prices which have already been at record highs. The world's second-largest oil consumer already has built two underground storage reserves in east China and will put into use two more storage bases soon, a senior Chinese official said over the weekend, according to China's official Xinhua news agency. "Although China is not the only source of rising oil prices, it has consumed the largest share of the global increase in oil demand in the last seven years," said Donald Straszheim, chairman of Straszheim Global Advisors and an expert on Asian economies. "Building reserves will of course add more pressure on global oil prices."
Freddie Mac sees home prices falling further U.S. home prices have much further to fall, the chief executive of major mortgage-buyer Freddie Mac said Wednesday. Speaking to analysts on a conference call, CEO Richard Syron estimated that housing prices, from peak to trough, have dropped only a third as far as he thinks they're going to. The McLean, Va.-based company's expecting a peak-to-trough decline of 15% in all. On Feb. 28, Freddie Mac reported a fourth-quarter loss of $2.5 billion, blaming the weakened U.S. housing market and credit-related expenses.
Citi commits $1 bln to prop up two muni bond funds Citigroup Inc. is injecting $1 billion into two internal municipal bond hedge funds that were hit hard by recent disruptions in fixed-income markets, a spokesman for the giant bank said on Wednesday. Citigroup launched ASTA Finance, LLC and MAT Finance, LLC in 2002 to trade muni bonds. ASTA made leveraged investments in fixed-rate munis and tried to hedge the interest-rate risk of those positions. MAT focused on arbitrage, sniffing out anomalies between tax-free munis and similar taxable bonds. The two funds had roughly $2 billion in capital and through leverage, or borrowed money, had about $15 billion in assets. The normally placid muni bond market has been thrown into turmoil in recent weeks as the mortgage crisis has spread into a full blown credit crunch.
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Tues 03.11.2008
Goldcorp CEO predicts gold to top $1,000 U.S. Goldcorp Inc. expects the price of gold to top $1,000 (U.S.) an ounce and stay there for a long time, a development that will allow the company to improve operating margins, CEO Kevin McArthur said yesterday. McArthur, who is also president of the Canadian gold producer, said he thinks the price of gold, which was at $973 an ounce yesterday, is not "anywhere near a bubble." "We are not replacing the reserves that we're mining, and yet demand continues to grow worldwide. We're going to run out of gold," he said of the global gold industry. Higher gold prices will be the way to greater world production of the precious metal, he said.For its part, Goldcorp, which is unhedged on gold, plans to add to reserves and boost production by 50 per cent over the next five years, all while keeping a tight rein on costs.
Sprott sees gold doubling Turmoil in global credit markets may lead to the collapse of a North American bank, pushing bullion prices up to $2,000 (U.S.) an ounce as investors seek a haven in gold, Eric Sprott says. This year's decline in banking and brokerage stocks will worsen, said Mr. Sprott, 63, founder and chairman of Toronto-based Sprott Asset Management, which manages about $7-billion. In response, the company is short-selling financial stocks and increasing holdings in bullion and mining companies, Mr. Sprott said. He declined to name which bank he thought may collapse. "We're in a systemic financial meltdown," he said."There are probably 10 companies that are broke that are still trading - banks and financial institutions."
Fed turns on the spigot of money again The Federal Reserve and other leading central banks announced further steps Tuesday to flood dysfunctional credit markets with enough money to get them working again. The Fed announced a new temporary lending program that will allow participants in the bond markets to swap the mortgage-backed securities that they can't currently sell for highly liquid Treasurys that they can. The hope is that the extra money in the financial system will restore trust and keep prices of illiquid securities from plunging. After the latest action, the Fed will have provided more than $400 billion in Treasurys in an effort - so far futile - to grease the wheels of commerce that have seized up.
Trade gap widens to $58.2 billion in January The U.S. trade deficit widened slightly in January as strong exports were offset by higher oil prices, the government reported Tuesday. The nation's trade gap widened by 0.6% in January to $58.2 billion, the Commerce Department reported. The trade gap in December was revised lower to $57.9 billion from an initial estimate of $58.8 billion. This could boost the final estimate for fourth quarter gross domestic product. Despite the larger deficit in January, economists expect the relatively strong trade performance to contribute to first-quarter GDP growth. January exports rose 1.6% to $148.2 billion, while imports rose 1.3% to $206.4 billion.
Dollar blame game: One more reason for inflation Behind eye-popping price tags on bread, milk and gasoline, a cheaper greenback is partly to blame. The five-year slide in the U.S. dollar vs. its counterparts has overlapped with acceleration in consumer inflation. That's no coincidence, say some economists. Since it takes more dollars to import goods and services, such as oil, a weak dollar makes imported goods more expensive. "The weak dollar is behind all of the inflation pressures," says Ellen Zentner, U.S. macro economist at Bank of Tokyo-Mitsubishi UFJ. Since the start of the year, oil, gasoline, wheat and soy have all hit new record highs, a spike commodity analysts attribute to the weak dollar, supply squeezes and a rush of money from institutional investors seeking protection from inflation.
Derivatives the new 'ticking bomb' "Charlie and I believe Berkshire should be a fortress of financial strength" wrote Warren Buffett. That was five years before the subprime-credit meltdown. "We try to be alert to any sort of mega-catastrophe risk, and that posture may make us unduly appreciative about the burgeoning quantities of long-term derivatives contracts and the massive amount of uncollateralized receivables that are growing alongside. In our view, however, derivatives are financial weapons of mass destruction, carrying dangers that, while now latent, are potentially lethal." That warning was in Buffett's 2002 letter to Berkshire shareholders. He saw a future that many others chose to ignore. The Iraq war build-up was at a fever-pitch. The imagery of WMDs and a mushroom cloud fresh in his mind.
Bear Stearns denies cash crunch rumours Bear Stearns Cos and its former chief executive denied on Monday market speculation that the investment bank faced a cash crunch, helping pare losses after its shares had fallen to a five-year low. Bear's chairman of the executive committee, Alan ''Ace'' Greenberg, told Reuters speculation that the investment bank and securities firm was facing liquidity problems were ''totally ridiculous.'' Shares of Bear had fallen as much as 14% to a five-year low amid speculation that the bank, which suffered heavy mortgage-related losses last year, was facing a cash crunch. ''They're totally ridiculous,'' Greenberg, a legendary trader who ran the investment bank as CEO from 1978 to 1993, said of the market talk. ''They're rumors. What can I do about it?''
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Mon 03.10.2008
Next shoe to drop: Prime mortgages The credit crunch is cutting a broad swath across the economy, and it's hard to know how far it will go. That's because for years, the housing bubble was the heart of the economy. Several years ago, I sketched out a thesis called "The Next Time Down." Its onset took a bit longer than I had expected (like about three years) due to the lunacy in the credit markets. However, "the next time down" is essentially the situation in which we now find ourselves. According to a friend I've dubbed the "Lord of the Dark Matter," credit is rapidly being withdrawn across a broad spectrum -- especially for the major brokers, giants like Goldman Sachs and Citigroup, which have served as enormous financial intermediaries. This is now raising the costs for nearly all credit-oriented hedge funds. And, my friend said, the pace of massive de-leveraging could accelerate further. That in all likelihood would feed on itself.
Emergency cut coming? The markets are keyed into the Federal Reserve ahead of next week's FOMC meeting. The FBI is investigating Countrywide. Gas prices jump to record highs. Investors have to wait till the end of the week for more economic data. All eyes and ears are on the Federal Reserve. While most analysts expect the Fed to lower interest rates again next week, talk of another emergency rate-cut circulated again this morning, after the Labor Department on Friday showed an unexpected decrease of 63,000 jobs in February, the second straight monthly decline of jobs. "There's some rumbles going around the market that the Fed may do an emergency cut. We have a lot to digest," said Tim Smalls, head of U.S. stock trading at brokerage firm Execution, to Reuters.
Weak dollar pressures consumers to hedge risk It's not only jet-setters who feel the immediate effects of the dollar's recent declines, but also plenty of ordinary people who have incomes or property abroad. Dollar-based workers with a mortgage in Modena or a paycheck in Paris all of a sudden found themselves with a jump in costs -- or if they got paid in euros, a nice bonus they could spend in America. A few generations ago, it was mostly just the super-wealthy or those with exotic careers who faced such foreign exchange challenges. But as both companies and cultures become more international, financial services companies have begun offering more products aimed at hedging the risks -- and perhaps even enhancing the revenue -- of individuals whose lives straddle a currency besides the dollar.
'Doom and Gloom' has just begun "Dr. Doom" sure is living up to his name these days. Speaking to a packed room of financial planners here on Friday, the famed money manager and newsletter editor Mark Faber literally brought down the house with talk of a worthless dollar, a helpless U.S. central bank and a dire situation in which investors have just a few avenues left to turn to. "We may now have a hostile environment for all asset classes, with the exception of some real estate and commodities," said the editor of The Gloom, Doom and Boom Report, pointing out that since 2002 all asset classes have been rising -- a phenomenon that hasn't been seen for 200 years. "The current synchronized global economic boom and universal all-encompassing asset bubble will lead to a colossal bust," he said.
Surging costs of groceries hit home American families, already pinched by soaring energy costs, are taking another big hit to household budgets as food prices increase at the fastest rate since 1990. After nearly two decades of low food inflation, prices for staples such as bread, milk, eggs, and flour are rising sharply, surging in the past year at double-digit rates, according to the Labor Department. Milk prices, for example, increased 26 percent over the year. Egg prices jumped 40 percent. Escalating food costs could present a greater problem than soaring oil prices for the national economy because the average household spends three times as much for food as for gasoline. Food accounts for about 13 percent of household spending compared with about 4 percent for gas.
TIPS' Yields Show Fed Has Lost Control of Inflation Bond investors have never been so sure that the Federal Reserve will lose control of inflation. They're so convinced that they're giving up yields just to buy debt securities that protect against rising consumer prices. The yield on the five-year Treasury Inflation-Protected Security due in 2012 has been negative since Feb. 29, and traded today at minus 0.17 percent. The notes, which were first sold in 1997, have never before traded below zero. Even so, firms from Deutsche Asset Management to Vanguard Group Inc., the second- biggest U.S. mutual fund company, say TIPS are a bargain. For the first time in a generation, money managers must come to grips with a central bank that's more intent on spurring the economy than restraining price increases. With oil above $100 a barrel, gold approaching $1,000 an ounce and the dollar at a record low against the euro, TIPS show investors aren't convinced Fed Chairman Ben S. Bernanke will be able to tame inflation once policy makers stop cutting interest rates.
FBI checks out the truth of Countrywide's statements on quality of loans The FBI is investigating whether Countrywide, America’s biggest mortgage lender, lied to shareholders and regulators about the quality of its loan book and finances, amid concern that the credit crunch may be entering a new and dangerous phase. The FBI’s move comes as part of an inquiry into the way in which 15 lenders behaved leading up to and during America’s sub-prime mortgage crisis, which has rendered billions of dollars of bonds effectively worthless. The investigation into the veracity of financial statements made to the US Securities and Exchange Commission, Wall Street’s regulator, by the mortgage lender has also raised questions about whether Bank of America, which is in the process of buying Countrywide for $4 billion (£2 billion), is acquiring the group at an inflated price. The deal had been expected to be completed in August this year.
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Fri 03.07.2008
Wealthier households seek alternative assets Wealthy families with as much as $1.5 billion (U.S.) in investments are planning to channel more than half their money into so-called alternative products such as hedge funds and commodities, according to Merrill Lynch & Co.The family funds intend to hold 55 per cent in alternative investments within three years, compared with 48 per cent now, Merrill Lynch said in a survey released yesterday. The sum held in traditional investments, like stocks and bonds, will fall to 45 per cent from 52 per cent, Merrill said.Rich families, many of which employ their own fund managers, have already been at the forefront of investing in more diverse assets, said Merrill Lynch's Gary Dugan.
U.S. payrolls fall by 63,000 in February In the clearest suggestion yet of a recession, U.S. nonfarm payrolls fell by 63,000 in February, the second straight decline, the Labor Department reported Friday. It was the largest drop in payrolls since March 2003, when the economy was struggling through a jobless recovery. The drop was unexpected; economists were looking for a gain of about 20,000 in the survey of business establishments. Payrolls for December and January were revised down by 46,000. The job loss in January was revised to 22,000 from 17,000. In December, 41,000 net jobs were created, half the number estimated a month ago. Payrolls have declined by an average of 28,000 over the past three months, down from a gain of 80,000 or so a year ago.
U.S. central bank responds to 'heightened liquity pressures' The Federal Reserve on Friday announced two new steps to add cash to the banking system. Despite aggressive actions taken in recent months, a fresh wave of apprehension about the health of the U.S. and global financial markets has swept through credit markets this week. Banks have already reported tens of billion in losses, mostly via complex securities tied to subprime mortgage loans, and there's concern that more losses are coming. In addition, there are fresh worries about the health of the U.S. economy. In a statement, the Fed said simply that the measures were needed to address "heightened liquidity pressures in term funding markets." The Fed also said it was in close contact with foreign central banks concerning market liquidity conditions.
Americans poorer than a year ago Considering the impact of higher prices, a bigger debt burden and sagging home prices, Americans were poorer at the end of 2007 than they were the year before, the Federal Reserve reported Thursday. The net worth of U.S. households fell by $533 billion, or a 3.6% annual rate, in the fourth quarter of 2007, the first time total wealth has fallen since late 2002, the Fed said. For all of 2007, household net worth rose 3.4% to $57.7 trillion, the slowest growth in five years. After the effects of 4.1% inflation are included, real net worth fell for the year. The Fed's flow of funds report also confirmed a sharp slowdown in borrowing by households to the slowest growth in 10 years. Household borrowing rose at a 5.6% annual rate, less than half the debt growth seen during the credit boom years in 2003 through 2005.
Foreclosures hit another record high More foreclosure records were broken in the fourth quarter of 2007, the Mortgage Bankers Association reported on Thursday. The rate of mortgages entering foreclosure was at it highest level in the history of the MBA's quarterly national delinquency survey and the percent of loans somewhere in the foreclosure process also hit its highest level. The delinquency rate of loans past due but not in foreclosure was at its highest since 1985. "Declining home prices are clearly the driving factor behind foreclosures, but the reasons and magnitude of the declines differ from state to state," said Doug Duncan, chief economist of the MBA, in a news release. "In states like Ohio and Michigan, declines in the demand for homes due to job losses and out-migration have left those looking to sell the homes with fewer potential buyers, particularly with the much tighter credit restrictions borrowers now face.
It's the Stupid Economy Traveling through the country, I see the results of the economic downturn – from urban Miami neighborhoods to poor rural areas like Collinsville and Bird’s Landing north of San Francisco. In January alone, California employers cut 20,300 jobs from their payrolls. I notice more homeless people sleeping in the Oakland and San Francisco streets, or jornaleros, (day workers) waiting in vain for work! But for those who assume affluence as an axiom of life, such everyday reality seems as strange as science fiction. Back in 1992, President George H. W. Bush acted stunned when he first saw a scanner read a code on an item at a grocers' convention in Florida. By this time, the scanner and bar code had become routine in stores throughout the country – for those who went to stores to shop – not for the upper class.
Gas Prices: It’s the Money, Stupid Not a day goes by when people I deal with (mostly at the office) complain about the latest record price-per-barrel of crude or the pain at the gas pump. And yes, prices are a bit higher, in inflation-adjusted dollars, than they were the last time we had serious gas-price problems. But there is one crucial difference between 1980 and today: Supply. Whenever I hear the woe-is-me complaints from my co-workers, I steer the conversation this way: ME: Were you able to buy gas, at that price, today? THEM: Well…yes…but… ME: Is the gas always available? THEM: What do you mean? ME: I mean, is the station always open?
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Thur 03.06.2008
Gold, the great drama The Great Drama Unfolds -- Gold coins can be a bit difficult to handle. They are heavy, they are visible, and must be stored in a safe place. But for most people, gold coins (actual gold in one's possession) has one great advantage -- you're not tempted to sell your coins on every decline or correction in gold. For this reason, many people have done better holding a smaller number of Krugerrands or American Eagles than have larger traders who have moved in an out of gold in an attempt to "beat the market."
How High Can Gold Go? How high can gold go in this bull market? The answer may surprise you on the upside, as gold is still ridiculously cheap at the current price around $974. For gold to be equivalent to the 1980 high of $850 -- in real, inflation-adjusted terms -- it would have to rise to $6,030 per oz. That is a 6-fold rise from the current price. There are not many things changing hands at 16% of the inflation-adjusted price, but this is the current situation in gold. This is why the current bull market will send gold prices into the stratosphere, far beyond what even the wildest bulls are predicting now. The Consumer Price Index [CPI] currently released by the government is worthless political propaganda, so we're not going to use it to calculate the true inflation rate. Instead we're going to use the method for calculating the CPI in place in 1980 -- the year of gold's high.
Dollar Hits Third Record Low in a Week The dollar's plunge continued unabated Thursday, striking record lows after the European Central Bank kept its benchmark rate on hold and the U.S. released another batch of dour economic reports. The euro fetched a record $1.5347 in European morning trading before falling back to $1.5326. The sank to a record $1.5302 against the European currency Wednesday before easing back to $1.5262 at the close of trading. Meanwhile, the British pound broke through $2 again after the Bank of England also decided to keep its key refinancing rate unchanged at 5.25 percent. The British pound traded as high as $2.0033 before falling back to $2.0023. "Inflationary pressures similarly remain something of a high-profile concern of the Bank of England, but speculation continues to point toward a quarter point cut during the second quarter," said James Hughes of CMC Markets.
Bank’s Revenues Decline as Debtors Fail to Make Repayments The banks face "challenging conditions," says Fed governor Donald Kohn. Many are watching their revenues decline as debtors fail to pay up, while the value of their collateral goes down. Bankruptcy filings are going up, reports the LA Times, which it regards as a "grim omen." Delinquencies in Alt-A debt, a step above subprime, are rising. Car and truck sales were down 10% in February; both Ford and GM say they're cutting back on production. Is the United States in recession already? Yes, says Warren Buffett. Whether it is technically in a recession or not, we don't know. But it hardly matters. Across the board, indicators are signaling a slumpy economy. We're just waiting for the details - how slumpy? And for how long?
Oil Advances to Record $105.97 as Dollar Drops to All-Time Low Crude oil rose to $105.97 a barrel, the third day this week New York prices have reached a record, as the U.S. dollar fell to its lowest ever against the euro. Gold and copper also advanced to all-time highs as the sinking dollar made commodities priced in the U.S. currency cheaper. Oil closed at a record yesterday after U.S. crude inventories fell for the first time in eight weeks and OPEC refrained from raising production. ``The reason we've gone above $105 is that the market is still focused on the weakness of the dollar,'' Olivier Jakob, managing director of Petromatrix Gmbh in Zug, Switzerland, said. ``It's going to take more signs of demand destruction around the world before oil stops gaining on the dollar.''
Gas Prices up, Production Down: $5.19 for Regular If you're going to be heading down the Big Sur Coastline anytime soon, you'll probably going to want to have a full tank before you leave with the price of crude oil skyrocketing. With gasoline following the same direction, the Americo gas station in Gorda, just south of Big Sur is selling premium unleaded gas for $5.39 a gallon. If you can do without premium regular's a relative bargain at $5.19. Prices in many Bay Area cities remain above the statewide average with the price for a gallon of gas in Oakland at $3.51; San Francisco, $3.64; Salinas, $3.56; San Jose, $3.52; and Santa Cruz, $3.51. The average price for a gallon of gas in Santa Rosa sits just under the statewide average at $3.49 and in Vallejo a gallon is averaging $3.47, according to AAA.
OPEC blames 'mismanaged' U.S. economy for soaring oil prices OPEC, rebuffing calls from U.S. President George W. Bush to increase oil output, cited "mismanagement" of the American economy as a major factor driving prices up. Record prices are suddenly creating the sharpest tensions in years between the oil cartel and the United States, the world's largest oil consumer. Two days after the president called for more oil on the global market, OPEC members, meeting in Vienna, Austria, chose to leave their production levels unchanged, declaring that the market has plenty of oil already. The cartel's president on Wednesday blamed financial speculators and American economic problems, which have helped lower the value of the dollar, for the high oil prices. After the meeting, oil prices settled above $104 a barrel, a record.
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Wed 03.05.2008
View of the Day: Gold will plough through $1000 John Reade, precious metals analyst at UBS , has substantially raised his short-term targets for the gold price as he believes a different, dominant buying force has entered the market. He expects gold to reach $1,025 an ounce in one month's time and $1,075 in three months, compared with his previous targets of $850 and $800 respectively. "We have argued regularly that fundamental support for gold lies between $700 and $750," he says. "Yet gold stubbornly refuses to correct despite occasional periods of dollar strength, crude softness and the waxing and waning of risk appetite." Mr Reade believes that investors and asset managers are turning to the metal as a safe haven against financial market stress and fears of stagflation - evident from the very large volumes of physical investment buying, together with some large-scale transactions.
Private sector sheds 23,000 jobs, ADP survey says The nation's private-sector employment rolls dropped by 23,000 net jobs in February, according to the ADP employment index released Wednesday. This is the first decline since April 2003. Economists said it is clear that labor market conditions are deteriorating. Together with an estimated 25,000 or so government jobs that aren't included in the ADP index, the report suggests nonfarm payrolls likely grew a slim 2,000 last month. The government's closely followed report on nonfarm payrolls will be released Friday morning. The ADP survey came in weaker than expected. Analysts had been looking for job growth of about 20,000 in February, according to a survey of economists conducted by MarketWatch.
GM plant closures to reach seven by next week General Motors Corp. can thank the strike at American Axle & Manufacturing for giving the automaker a chance to bite into truck and sports utility inventories at a time when high gas prices and the housing crunch are slamming consumers. But unless a contract is hammered out soon, what may look like a serendipitous opportunity to clear out slow sellers could eventually take a bit out of GM's bottom line. With the expected shutdown of the GM's Toledo transmission factory next week, the total amount of plant closures could reach seven, GM said Tuesday. The affected plants employ 15,145 blue-collar workers, most of which have been or will be sent home.
Citi Falls on Worries About Cash Levels Citigroup shares sank to their lowest level in more than nine years, as stockholders recoiled at forecasts of more losses at the troubled bank and comments from a Middle East fund executive that Citi must raise more cash to stay in business. Samir al-Ansari, chief executive of the $13 billion government-owned investment firm Dubai International Capital, said Tuesday at a private equity conference that it will take more than the combined efforts of the Gulf's wealthiest investors -- the Abu Dhabi Investment Authority, the Kuwait Investment Authority and Saudi Prince Alwaleed bin Talal -- to save Citigroup. Back in January, Citi raised $12.5 billion from a group of investors including the Kuwait Investment
Double Bubble Trouble AMID increasingly turbulent credit markets and ever-weaker reports on the economy, the Federal Reserve has been unusually swift and determined in its lowering of the overnight lending rate. The White House and Congress have moved quickly as well, approving rebates for families and tax breaks for businesses. And more monetary easing from the Fed could well be on the way. The central question for the economy is this: Will this medicine work? The same question was asked repeatedly in Japan during its "lost decade" of the 1990s. Unfortunately, as was the case in Japan, the answer may be no. If the American economy were entering a standard cyclical downturn, there would be good reason to believe that a timely countercyclical stimulus like that devised by Washington would be effective. But this is not a standard cyclical downturn. It is a post-bubble recession.
New recession worry: Bank failures As if the economy wasn't already fighting enough strong headwinds, the risk of capital shortfalls and outright failure of the nation's banks is rising. The Federal Deposit Insurance Corp., the federal agency that backs bank deposits, last week reported the biggest jump in "problem institutions" it has seen since the savings and loan crisis of the late 1980s. While the extent of the problem is still low by historic standards, it identified 76 banks as in trouble - a 52% increase from a year ago. FDIC Commissioner Sheila Bair among regulators set to testify Tuesday at a Senate Banking Committee hearing on the state of the banking industry. Experts say the 76 banks now under scrutiny are likely only a small part of the problems now looming over the banking sector.
Banks' losses could put $900 billion squeeze on consumers The retailer Sharper Image offers a stark image of how the credit crisis on Wall Street is becoming a widespread credit crunch for the rest of America: The purveyor of gadgets recently declared bankruptcy, citing a tougher climate for financing among the reasons. That company is not an isolated case. Consumers and businesses now face an economic downturn made more difficult by a contraction among banks and other lenders. In fact, the health of banks has become perhaps the biggest source of uncertainty about the economy. How bad is the damage? By one new estimate, troubled mortgages alone could knock a full percentage point off economic growth in the year ahead. And mortgages are just part of the problem. With losses also rising on loans for everything from cars to commercial real estate, banks effectively will have less money available to make new loans – perhaps $900 billion less.
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Tues 03.04.2008
Creativity needed to limit foreclosures: Bernanke The mortgage and financial-services industry will have to use fresh thinking to reduce preventable foreclosures, said Federal Reserve Board Chairman Ben Bernanke on Tuesday. A willingness to consider new ideas has been a hallmark of the Bernanke Fed in the months since the financial market turmoil began last summer. For instance, the central bank has begun novel auctions of liquidity to get around the unwillingness of banks to borrow at the Fed's discount window. In a speech to community bankers in Orlando, Fla., Bernanke urged the banking industry to consider new approaches. "Efforts by both government and private-sector entities to reduce unnecessary foreclosures are helping but more can, and should, be done," Bernanke said.
Citigroup May Need Cash as Losses Mount, Dubai Says Citigroup Inc., the biggest U.S. bank, may need additional capital from outside investors as losses stemming from the collapse of the U.S. subprime mortgage market increase, the head of Dubai International Capital LLC said. Citigroup received $7.5 billion in November from Dubai's neighbor, Abu Dhabi, after record mortgage losses wiped out almost half the company's market value and led to the departure of Chief Executive Officer Charles Prince. The New York-based company said in January it was getting another $14.5 billion from investors, including the governments of Singapore and Kuwait. ``It will take a lot more than that to rescue Citi and other financial institutions,'' said Sameer al-Ansari, the chief executive officer of Dubai International, at a private-equity conference in Dubai today.
Dead dollar sketch Most people of a certain age who have spent time in Europe and the United States will remember the legendary Monty Python Dead Parrot sketch, which involves an irate customer bringing back a parrot that the pet shop owner has sold him, only the bird is actually dead and was nailed to the perch. The few readers not familiar with the sketch will simply have to take my word that this is one of the greatest moments in television history, although it is fairly trivial to search the Internet and watch all the various versions that will pop up. Readers in some countries where the Internet is proscribed may find it tough, but hey, if you made it to Asia Times Online, the next few steps cannot be that difficult.
Ford, GM, Toyota sell fewer cars in February Ford Motor Co., General Motors Corp. and Toyota Motor Corp. on Monday all reported declines in February U.S. sales, reflecting the tough climate for consumers during the persistent housing slump and credit crunch. The industry is in a "crisis, but a crisis is both good news and bad news," Dave Cole, Chairman for the Center for Automotive Research, said. "Crisis is bad news because it's very, very uncomfortable, but it's good news because it helps create a sense of urgency to make the fundamental changes required." "We think there's going to be a lot of stimulus in the economy in the second half of the year, and we're banking on that," GM sales analyst Mike DiGiovanni said in a conference call following the results.
The $34 trillion problem Twice I have asked Alan Greenspan what he considers the greatest threat to the U.S. economy, and both times he has answered immediately with a single word: Medicare. He isn't so worried about the trade deficit and the housing crash; he figures market forces will sort them out. But Medicare is something else - a multitrillion-dollar problem that's about to get dramatically worse, and one that nobody wants to talk about. You'd think that the greatest threat to America's economy would be Topic A for the presidential candidates. But it's actually a topic they hate to touch. Especially now. An analysis of their speeches shows that last year Senators Hillary Clinton, John McCain, and Barack Obama would occasionally mention the Medicare mess. But recently, with the economy slowing and voters feeling insecure, all three candidates have turned more populist: Their economic talking points are about feel-good reassurances, not about facing hard realities.
Iraq War Could Cost $5 Trillion "The biggest baby boom in history," the Financial Times calls it. No, this one is not in America... it's in Africa... Uganda to be precise, where the population has doubled in the last 20 years. By 2030 the population is expected to double again... to 60 million. Uganda is also the world's youngest country with more than half the population under the age of 18.We don't think too much about population growth anymore... not in Europe or America. In places like Italy and Spain, the local population isn't even replacing itself. The Russians' birth rate is so low they are practically disappearing and the Japanese too. But in other parts of the world, there are more and more mouths to feed - millions of them.
Fremont General says it got default notices Fremont General said on Tuesday that it got default notices from two affiliated entities that purchased a total of $3.15 billion of residential subprime mortgage loans from the company in March 2007. As part of the deals, Fremont promised that its tangile net worth wouldn't drop below $250 million. If that happened, Fremont agreed to make up the difference, either in cash or a letter of credit. Fremont said it probably won't be able to comply with that obligation. If the purchasers file a lawsuit against the company and it can't successfully defend that litigation, "its ability to continue to conduct business as a going concern would be called into question," Fremont said. Fremont shares fell rouhly 10% in early trading on Tuesday.
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Mon 03.03.2008
Gold adds more than 1% Gold futures rallied on, boosted Monday by the dollar's ongoing decline as investors trained their sights on the $1,000-an-ounce mark. Gold for April delivery was last at $988.40 an ounce, up $13.40, on the New York Mercantile Exchange. The contract's previous high was set just last Friday. Last week, gold posted a gain of $27.20 an ounce. The metal surged 5% over February and is up more than 15% in the year to date. "Despite remaining vulnerable to long liquidation, particularly should the dollar recover, it seems investors are still keen to enter the market with gold now well placed to challenge the psychological $1,000-an-ounce mark," said James Moore, analyst at TheBullionDesk.com, in a note.
Gold finishes a fabulous February Gold finishes a fabulous February, and the gold bugs' attention is turning to gold shares, and silver. When I last wrote about gold, with the pleasingly prescient headline "Gold's path to $1,000 now clear?", bullion had just staged a three day-bounce back after a terrible beating received on Feb 1st. Since then, as Australia's The Privateer put it recently: "The last two weeks have been absolutely stellar for gold, as it has moved three-quarters of the way between $U.S. 900 and the big $U.S. 1,000 over that period." Bill Murphy, who has followed gold closely for years, was motivated to put out a special Sunday alert: "To say that silver has been trading differently the past couple of months is an understatement ... As a veteran commodities trader, I could see, on a daily basis, somebody quietly accumulating silver on price dips ... never pushing the envelope, but buying silver at times when it normally would get trashed."
Why does the FDIC need more bank examiners? The clues are piling up: this is not a good year to be investing based on wishful thinking. I'm not a perma-bear, parsing the fine print, but I can read the writing on the wall about chronic economic crises. The Federal Deposit Insurance Corp. is planning to beef up its division of resolutions and receiverships, which handles failed banks, by 40% this year. The division currently has 233 employees. Considering that only three banks failed last year, why do they need more examiners? For now, the FDIC is looking to bring back 25 retired employees with experience in the bank closures of the 1980s and 1990s. No, it's not just a reunion of hard-nosed accountants who closed banks and savings and loans in notorious Friday night raids and liquidated their assets.
Losses Threaten Countrywide Deal Mounting losses in Countrywide's mortgage portfolio are putting the completion of its takeover by Bank of America in question. In Countrywide's 10K, filed last Friday, the company detailed the abysmal performance of option adjustable-rate mortgages, or Option ARMs. Option ARMs allow borrowers to choose between monthly payment options, the lowest of which result in principal being added to the balance of the loan, known as negative amortization (see number five). Option ARMs more than 90 days delinquent increased to 5.4%, up 900% from a year ago. In Countrywide's $28 billion Option ARM portfolio, 71% of borrowers are only making the minimum payment and 80% of the loans did not require borrowers to verify their income. $87 billion of the company's entire mortgage portfolio is backed by loans in either California or Florida
The Federal Reserve's rescue has failed The verdict is in. The Fed's emergency rate cuts in January have failed to halt the downward spiral towards a full-blown debt deflation. Much more drastic action will be needed. Yields on two-year US Treasuries plummeted to 1.63pc on Friday in a flight to safety, foretelling financial winter. The debt markets are freezing ever deeper, a full eight months into the crunch. Contagion is spreading into the safest pockets of the US credit universe. It is hard to imagine a more plain-vanilla outfit than the Port Authority of New York and New Jersey, which manages bridges, bus terminals, and airports. The authority is a public body, backed by the two states. Yet it had to pay 20pc rates in February after the near closure of the $330bn (£166m) "term-auction" market. It had originally expected to pay 4.3pc, but that was aeons ago in financial time.
Buffett: US Essentially in Recession Billionaire Warren Buffett said Monday that the U.S. economy is essentially in a recession even if it hasn't met the technical definition of one yet. Buffett said in an interview with cable network CNBC the reports he gets from the retail businesses his holding company owns show a significant slowdown in purchases. The chairman and CEO of Omaha-based Berkshire Hathaway Inc. said millions of people have also lost equity in their homes because home prices have dropped. The technical definition of a recession most economists use is two consecutive quarters of negative growth in the nation's gross domestic product. "I would say, by any commonsense definition, we are in a recession," Buffett said on CNBC. But Buffett said it's not clear how far the recession will go because that is difficult to predict.
HSBC forecasts significant palladium deficit Despite record platinum prices, HSBC metals analyst Victor Flores suggested Sunday that no clear evidence exists of a physical platinum shortage. Nevertheless, in a presentation to the Prospectors and Developers Convention in Toronto, Flores predicted that investors are "still going to see some significant deficits in the palladium market this year." Flores advised that ETF investors and automotive companies will drive platinum group metal prices this year. However, he added, platinum ETF demand can also be a potentially destabilizing force. HSBC is utilizing what Flores called a "new paradigm in the PGM markets calling for new analytical tools. Using a combination of the traditional metals forecast models with the stochastic process--used to track stock market and exchange rate fluctuations, HSBC forecasts equity and commodity prices.
- - - - - - - - - - - - - - - - Archived Page Link
- - - - - - - - - - - - - - - -
Patriot Trading Group
P.O. Box 25711, Scottsdale, AZ 85255 1-800-951-0592
RSS
![[Most Recent Quotes from www.kitco.com]](http://www.kitconet.com/images/quotes_7a.gif)