Friday, November 30, 2007

Chinese maker apologizes for toys tainted with 'date rape' chemical

A Chinese manufacturer is apologizing for "damaging" the image of products made in China by producing toys that were tainted with a "date rape" drug.

The director of the company (Jssy Ltd.) says the incident has given the "Made in China" brand a negative impact during the Christmas season.

The popular craft toys, known as Aqua Dots in North America and Bindeez in Australia, were pulled from store shelves earlier this month. At least nine children in the U.S. and three in Australia became sick after swallowing the beads.

The toys are coated with a chemical, which when eaten, can metabolize into the so-called date-rape drug (gamma hydroxy butyrate) - which can cause breathing problems, loss of consciousness, seizures, drowsiness, coma and death.

Read Complete Story

Government-Run Investment Funds Becoming Increasingly Powerful

With oil prices having quadrupled in the past five years, oil-exporting countries are awash with hard currency, much of which is being channeled into government-run investment funds. VOA's Barry Wood reports that the funds are controversial because of a lack of transparency and fear that their investments might be used for political purposes.

Abu Dhabi's investment fund this week injected $7.5 billion into America's biggest financial institution, Citigroup. The transaction gives the Abu Dhabi Investment Authority (ADIA) a nearly five percent stake in the New York-based bank. Ted Truman, a former U.S. Treasury official now a researcher at Washington's Peterson Institute, recently completed a study of sovereign wealth funds. He says Abu Dhabi's investment in Citigroup is not a surprise.

"First of all, Citi needs the capital," said Ted Truman. "That's the most important thing. Citi needs the capital and Abu Dhabi was a natural because it has probably the largest sovereign wealth fund currently. We don't know how large it is, but let's say it is $700 billion.

Read Complete Story

Finding "Made in USA" Products the Easy Way

A newly formed business provides data to the consumer regarding what products are made in the US and where they can be purchased. The website www.madebyyankees.net has been developed to assist consumers in finding exactly what they are looking for, fast and easy.

Guys Mills, PA, The holidays are in sight and domestic products are choice gifts for giving this season. The perception however, is that "Nothing is made in America." Parents who want viable and safe toys are frustrated with store shelves lined with imported products.

A newly formed business, Made by Yankees, has one sole purpose; provide data to the consumer regarding what products are made in the US and where they can be purchased.

The website www.madebyyankees.net has been developed to assist consumers in finding exactly what they are looking for, fast and easy. This is a no non-sense exclusive database providing consumers the names of American made products and retailers with out spending a lot of time looking at boxes or surfing the web. The range of products to be found on this site includes household products, sporting goods, toys and tools.

Read Complete Story

US govt, banks near deal to freeze subprime rates - report

The Bush administration and major financial institutions are close to agreeing on a plan that would temporarily freeze interest rates on certain troubled subprime home loans, according to people familiar with the negotiations, the Wall Street Journal reported.

An accord could reassure investors and strapped homeowners, as interest rates on more than 2 mln adjustable mortgages are scheduled to jump over the next two years. It could also give a boost to the Bush administration, which is facing criticism for inaction amid the recent housing turmoil.

The plan is being negotiated between regulators including the Treasury Department and a coalition of mortgage-related companies including Citigroup Inc (NYSE:C) , Wells Fargo & Co (NYSE:GWF) (NYSE:JWF) (NYSE:WSF) (NYSE:WPF) (NYSE:WFC) , Washington Mutual Inc (NYSE:WM) and Countrywide Financial Corp. (NYSE:CFC)

People familiar with the talks say the individual members have agreed to follow any agreement reached by the coalition.

Details of the plan, which could be announced as early as next week, are still being worked out. In general, the government and the coalition have largely agreed to extend the lower introductory rate on home loans for certain borrowers who will have trouble making payments once their mortgages increase.

Read Complete Story

Jobless claims spike

The Department of Labor report surprised economists, who forecasted that claims would remain steady.

The number of new people signing up for jobless benefits last week jumped sharply, suggesting that the labor market is softening as national economic activity slows.

The Labor Department reported Thursday that new applications filed for unemployment insurance rose by a seasonally adjusted 23,000 to 352,000. It was the highest level since Feb. 10.

The report surprised economists. They were forecasting claims to hold steady around 330,000.

Read Complete Story

Thursday, November 29, 2007

Cramer Goes to Cali, Finds a Crisis

Jim Cramer, the boo-yah yelling financial advisor of CNBC’s Mad Money, recently left Wall Street and went out to California. What he saw there was a housing market in full-blown crisis.
Touring the Inland Empire, Cramer viewed the decimation created by the current housing and mortgage meltdown: in street after street, neighborhood after neighborhood the homes sat with no buyers. The only noticeable occupants were the mosquito’s whose eggs found safe harbor in the rain-filled pools of foreclosed homes.

Across the nation the problem is spreading with homes sitting empty and their prices in a free fall. On Tuesday the S&P Case/Shiller Index- regarded as one of the most accurate national housing indicators- recorded a drop in home prices nationwide of 1.7% from the previous quarter, the largest recorded drop in the index’s 21 year history.

And it is only going to get worse, especially in California. A panel of experts are predicting a drop in home value as high as 25%, and for the market to not bottom out until well into 2009.
By the time it takes to correct itself, it is estimated that $1.7 trillion in inflated housing wealth will have evaporated and consumer spending hit hard. An average of 4 to 9 cents is lost in spending for every dollar a homes’ value declines, based on projections consumer spending will take a hit of $153 billion.

Cramer returned from his trip deeply impacted- and recalled his experience in this video. He said things that many without media platforms have said before- that the people on the east coast, including the Fed, do not understand how bad housing really is- that the housing market is in crisis.

The same Cramer I, and many others, had critiqued as representing the schism in thought between Wall Street and Main Street, was now telling his money-managing friends that they were out of touch.

And he is right.

The economy faces a crisis. Americans have grown more and more dependent on inflated housing prices, credit and other means of ‘fake’ wealth. At the same time, our national debt, balance of trade deficit and current account deficits are all reaching record highs, while the nations manufacturing base has lost an estimated 3 million jobs in the last decade.

The housing crisis that is decimating California is a troubling sign of things to come; the symptoms of the larger sickness that has seen our country moving away from genuine production into non-tradable goods.

When it is all added up- decreasing home prices, debts, rising oil costs, the plummeting dollar- the troubling reality of the American economy emerges: we are not as wealthy as we think we are.

The Fed, the President and members of Congress should take a trip out to California soon to see the devastation. Maybe as they are walking around the newly built ghost towns of housing developments, and between copious applications of mosquito repellant- they can come up with some policy to get us out of this mess.

Jim Cramer made the trip- and he came back changed.

Jim Baird is the managing editor at EconomyInCrisis.org. He is a journalist and commentator. Mr. Baird studied in the Honors Politics program at the University of Edinburgh and is a graduate of The Ohio State University where he studied political science and journalism.

Macquarie Media makes more US acquisitions

The American arm of the Macquarie Media Group has expanded its presence in the United States by acquiring two companies worth $182 million.

MMG said its acquisition of the Chesapeake Publishing Corporation and the Brown Publishing Company will 33 new mastheads to its American Consolidated Media business, taking the total number of publications to 104, in 18 regional markets.

The purchase will be wholly debt-funded and is expected to add to earnings in this financial year.

"This is a positive development for ACM," MMG chief executive Mark Dorney said in a statement released to the market.

"Chesapeake and Brown are attractive media properties that match the quality of the existing ACM portfolio.

Read Complete Story

China agrees to end unfair trade subsidies

The Bush administration announces a major breakthrough in the tense trade relationship between the United States and China.

The Bush administration announced Thursday that China has agreed to eliminate improper trade subsidies it was using to the detriment of U.S. and other foreign companies.

The deal, announced in Washington by U.S. Trade Representative Susan Schwab, represented a major breakthrough in the tense trade relations between the two countries. It came after lengthy negotiations that started when the administration filed a case against China on the issue in February before the World Trade Organization, the Geneva-based body that oversees the rules of world trade.

Read Complete Story

Fed sees signs of slowing US economy: Beige Book

Signs of a US economic slowdown are starting to become apparent with consumer spending becoming "soft" amid a deep slump in housing, the Federal Reserve said in its Beige Book report Wednesday.

The report, to be used by the central bank at its December 11 policy meeting, said that the economy "continued to expand during the survey period of October through mid-November but at a reduced pace compared with the previous survey period."

Among the 12 districts, "seven reported a slower pace of economic activity while the remainder generally pointed to modest expansion or mixed conditions," the report said.

The Beige Book report and comments from Fed vice chairman Donald Kohn earlier in the day suggest that the central bank is willing to consider further interest rate cuts despite its official stand that the economic risks are "roughly balanced."

Kohn said the Fed "should not hold the economy hostage" to teach a lesson to financial market speculators and must remain nimble in the face of a rapidly shifting economic picture.

Analysts say Fed policymakers appear divided on the need to cut interest rates and whether the economy faces a serious downturn or recession.

Read Complete Story

Toy Shopping? Buy “Made in the U.S.A.”

So you want to buy American as you check off that Christmas toy list? You can, though it may seem as if everything on the shelves was manufactured somewhere else. There are many American toy companies alive and thriving in the USA, including the Holgate Toy Company of St. Paul, Minnesota, which has been making children’s toys since the days of George Washington (actually, since 1789).

It never ceases to amaze me how the simplest toys last the longest, not just in terms of the immediate attention span but in the kind of activities enjoyed by generation up generation of children. As a child, wooden toys and “old-fashioned” button and block toys were favorites, some bought, some handmade. You can find them in independent toy stores, country stores, and specialty children stores; “Made in America” toys are hardest to find when you are shopping in the mass market box-style chain stores.

The Holgate company is one of the premiere American-based toy manufacturers; their craftsmen created the My First Block Wagon, a simple pull toy filled with building blocks — it’s a toy that several incarnations later comes in other sizes with ever more blocks. They created the Hickory Dickory Dock Clock, a variety of wooden stepping stools that is the wooden precursor to the plastic See and Say toy. Holgate makes myriad durable, colorful (and non-toxic) wooden toys. They also carry items such as cloth finger and walking puppets, and many infant and toddler toys as well as playthings for older children.

Read Complete Story

U.S. Economy: Home Sales Slide More Than Forecast

Sales of previously owned U.S. homes fell more than forecast in October and orders for cars, planes and other durable goods dropped for a third month, the longest slump in 3 1/2 years.
The figures came as Federal Reserve Vice Chairman Donald Kohn signaled he's open to lowering interest rates again given ``the degree of deterioration'' in financial markets. Stocks rose as Kohn's remarks cemented forecasts for a rate cut next month to help keep the economy from sliding into recession.

Falling ``consumer confidence and the slowing in capital- goods orders does bring us closer to recession,'' said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina. ``I take Kohn's remarks as a good sign that the Fed is looking at the credit market issues, as well as the economic data, and deciding to react.''

Purchases of existing homes dropped 1.2 percent to an annual rate of 4.97 million, the fewest since the National Association of Realtors began keeping the records in 1999. Orders for items made to last several years fell 0.4 percent, the Commerce Department said today in Washington.

The Standard & Poor's 500 stock index gained 2.9 percent to close at 1,469.02. Federal funds futures indicated a 100 percent chance policy makers will lower borrowing costs for a third straight meeting on Dec. 11.

Read Complete Story

Impending Destruction of the US Economy

Hubris and arrogance are too ensconced in Washington for policymakers to be aware of the economic policy trap in which they have placed the US economy. If the subprime mortgage meltdown is half as bad as predicted, low US interest rates will be required in order to contain the crisis. But if the dollar’s plight is half as bad as predicted, high US interest rates will be required if foreigners are to continue to hold dollars and to finance US budget and trade deficits.
Which will Washington sacrifice, the domestic financial system and over-extended homeowners or its ability to finance deficits?

The answer seems obvious. Everything will be sacrificed in order to protect Washington’s ability to borrow abroad. Without the ability to borrow abroad, Washington cannot conduct its wars of aggression, and Americans cannot continue to consume $800 billion dollars more each year than the economy produces.

A few years ago the euro was worth 85 cents. Today it is worth $1.48. This is an enormous decline in the exchange value of the US dollar. Foreigners who finance the US budget and trade deficits have experienced a huge drop in the value of their dollar holdings. The interest rate on US Treasury bonds does not come close to compensating foreigners for the decline in the value of the dollar against other traded currencies. Investment returns from real estate and equities do not offset the losses from the decline in the dollar’s value.

China holds over one trillion dollars, and Japan almost one trillion, in dollar-denominated assets. Other countries have lesser but still substantial amounts. As the US dollar is the reserve currency, the entire world’s investment portfolio is over-weighted in dollars.

No country wants to hold a depreciating asset, and no country wants to acquire more depreciating assets. In order to reassure itself, Wall Street claims that foreign countries are locked into accumulating dollars in order to protect the value of their existing dollar holdings. But this is utter nonsense. The US dollar has lost 60% of its value during the current administration. Obviously, countries are not locked into accumulating dollars.

Read Complete Storyhttp://www.vdare.com/roberts/071127_destruction.htm

Wednesday, November 28, 2007

Australia's Macquarie Media acquires US publications for 159.5 mln usd

Australia's Macquarie Media Group said Wednesday its wholly owned US unit, American Consolidated Media LLC, has agreed to acquire, in separate transactions, 22 publishing assets from Chesapeake Publishing Corp and 11 publications from the Brown Publishing Company.

The listed Macquarie Group unit said the acquisitions have a combined enterprise value of 159.5 million US dollars, representing an enterprise value to earnings before interest, tax, depreciation and amortization (EBITDA) multiple of 10.3 times based on the calendar 2006 EBITDA of 15.5 million US dollars.

The acquisition of the Brown publications is expected to be completed in early December with Chesapeake to be completed by early January, it said.

Chesapeake publishes 22 local publications across two contiguous regions on the east side of the Chesapeake Bay region, principally in Maryland. Brown publishes 11 local publications serving seven isolated rural markets in Southern Ohio.

Both businesses publish in markets that are characterised by sustained long-term income growth, which is above the US national average, Macquarie Media chief executive Mark Dorney said.

Read Complete Story

U.S. Economy: Confidence Drops More Than Predicted

Consumer confidence fell more than forecast in November as Americans struggled with surging fuel costs and falling home prices.

The Conference Board's confidence index decreased to 87.3, the lowest level since the aftermath of Hurricane Katrina in 2005, the New York-based group said today. House values dropped 4.5 percent in the third quarter from a year earlier, the most since records began in 1988, S&P/Case-Shiller reported separately today.

The gloomier mood increases the likelihood that holiday sales, which account for a fifth of retailers' yearly revenue, will be disappointing. Federal Reserve policy makers and private economists have cut growth forecasts as the housing slump enters its third year and jeopardizes consumer spending.

``This is a strong indication that consumers are going to pull back sharply and growth is going to be very weak,'' said Nigel Gault, chief U.S. economist at Global Insight Inc. in Lexington, Massachusetts. ``The message to the Fed should be that they need to keep cutting rates.''

October's confidence reading was revised down to 95.2, from a previously reported 95.6. None of the 67 economists surveyed by Bloomberg News predicted the size of the decline. The median forecast was 91.

Stocks Jump

Treasury securities dropped and stock prices rose as investors focused on news that Citigroup Inc. will receive a cash infusion from Abu Dhabi's government. The Dow Jones Industrial Average was up 215 points, or 1.9 percent, to close at 12,958.44.

Read Complete Story

Home prices take steeper downturn

Third-quarter home prices dropped 1.7% from prior quarter, largest drop in 21-year history - S&P Case/Shiller.

Home prices have fallen steadily since July 2006, but plunged even more steeply in the third quarter, according to a report released Tuesday by S&P Case/Shiller.

According to the Case/Shiller index, which covers 20 local markets and a national average, third-quarter home prices dropped 1.7 percent from the second quarter.

The housing market could possibly get a lot worse, according to Yale economist and index co-founder, Robert Shiller. He was asked at a press conference following the release of the latest index data whether housing price increases, which had far outstripped income gains, could revert back to more normal ratios.

Shiller said, "You're talking about [home-price] declines of 50 percent, in real terms. That's not out of the question."

Referring to the latest declines, Shiller said they were notable for two reasons. "First, the third quarter decline, at 1.7%, was the largest quarterly decline in the index's 21-year history. And, second, the year-over-year decline posted its second consecutive record low at minus 4.5%."

The index, which many experts consider the most accurate snapshot of home price trends, revealed that prices peaked in the summer of 2006 and have fallen 5 percent since then.

Home price growth started to slow in November 2005 and turned negative in August 2006.
Of the 20 markets covered, 15 showed negative returns and all 20 had negative returns for September, compared with a month earlier.

Read Complete Story

Citigroup-Abu Dhabi deal: A sign of the times

Sovereign wealth funds are looking to park more of their $2 trillion with U.S. companies.

Citigroup's newfound $7.5 billion cash infusion from Abu Dhabi's state investment fund may not cure all that ails the embattled bank, but it heralds the growing influence of sovereign wealth funds.

With similar government-owned funds swimming in cash, more iconic U.S. firms like Citigroup may find themselves owned, at least in part, by foreign governments.

Sovereign wealth funds, which act as a country's investment arm, have long been investing money gained through exports or from the sale of commodities such as oil.

But because of their rapidly expanding size, these funds have become harder to ignore.

Located both in the oil-rich Middle East, as well as other nations such as Russia and Singapore, the funds' combined assets under management are expected in the next three years to quadruple in size to $7.9 trillion from $1.9 trillion, according to Merrill Lynch.

While government debt like U.S. Treasuries have long been their investment vehicle of choice, the funds' appetites have grown more complex as they have searched for greater returns, said Jay Bryson, global economist at Wachovia Corp.

Read Complete Story

'Ho, Ho, Ho' may be 'Oh, No' for economy

When the bills come due, the holiday consumer spending spree could be a 'last hurrah' for the nation's economic growth.

Santa Claus may leave a recession under the tree this year, as economists worry that tighter credit standards will put the brakes on consumer spending in the new year.

Consumers flashing credit cards have gotten the holiday shopping period off to a relatively good start since they pushed away from the Thanksgiving dinner table last Thursday.

ShopperTrak RCT Corp., which monitors sales at 50,000 retailers, estimates that total sales rose 8.3 percent to about $10.3 billion on Black Friday, the day after Thanksgiving. And online retailers are believed to have broken one-day records for traffic and sales on so-called Cyber Monday, as they logged in for more than $700 million in purchases.

But when their credit card bills start coming due early next year, consumers could face problems they haven't had to address in years, as the credit crunch puts a squeeze on additional spending going forward.

Debt proofing your holiday

"We think this holiday shopping period will be a last hurrah for a while," said Mike Schenk, senior economist with the Credit Union National Association.

Read Complete Story

Tuesday, November 27, 2007

Why Good Jobs For Graduates Are Missing

US colleges and universities continue to graduate hundreds of thousands of qualified engineers, IT professionals, and other professionals who will never have the opportunity to work in the professions for which they have been trained. America today is like India of yesteryear, with engineers working as bartenders, taxi cab drivers, waitresses, and employed in menial work in dog kennels as the offshoring of US jobs dismantles the ladders of upward mobility for US citizens.

The latest report from the Bureau of Labor Statistics shows that the real wages and salaries of US civilian workers are below those of 5 years ago. It could not be otherwise with US corporations offshoring good jobs in order to reduce labor costs and, thereby, to convert wages once paid to Americans into multi-million dollar bonuses paid to CEOs and other top management.

Good jobs that still remain in the US are increasingly filled with foreign workers brought in on work visas. Corporate public relations departments have successfully spread the lie that there is a shortage of qualified US workers, necessitating the importation into the US of foreigners. The truth is that the US corporations force their American employees to train the lower paid foreigners who take their jobs. Otherwise, the discharged American gets no severance pay.

Over the last year (from June 2006 through June 2007) the US economy created 1.6 million net private sector jobs. As Charles McMillion of MBG Information Services reports each month, essentially all of the new jobs are in low-paid domestic services that do not require a college education.

The category, “Leisure and hospitality,” accounts for 30% of the new jobs, of which 387,000 are bartenders and waitresses, 38,000 are workers in motels and hotels, and 50,000 are employed in entertainment and recreation.

The category, “Education and health services,” accounts for 35% of the gain in employment, of which 100,000 are in educational services and 456,000 are in health care and social assistance, principally ambulatory health care services and hospitals.

“Professional and technical services” accounts for 268,000 of the new jobs.

“Finance and insurance” added 93,000 new jobs, of which about one quarter are in real estate and about one half are in insurance. “Transportation and warehousing” added 65,000 jobs, and wholesale and retail trade added 185,000.

Over the entire year, the US economy created merely 51,000 jobs in architectural and engineering services, less than the 76,000 jobs created in management and technical consulting (essentially laid-off white collar professionals).

Except for a well-connected few graduates, who find their way into Wall Street investment banks, top law firms, and private medical practice, American universities today consist of detention centers to delay for four or five years the entry of American youth into unskilled domestic services. America as the land of opportunity has passed into history.

*The above has been excerpted from “Return of The Robber Barons” by Paul Craig Roberts. Roberts served as Assistant Secretary to the Treasury in the Reagan Administration. He was an editor and columnist for the Wall Street Journal and Business Week. In 1993, Forbes Media Guide ranked him as one of the top seven journalists in the United States. Currently he is a nationally syndicated columnist for Creators Syndicate and a frequent contributor to EconomyInCrisis.org.

India's Nirma to buy US-based natural soda ash producer for undisclosed sum

Indian soap and detergent maker Nirma Ltd said it is acquiring US natural soda ash producer Searles Valley Minerals for an undisclosed sum.

In a filing to the Bombay Stock Exchange, the company said it will buy Searles Valley from an affiliate of Sun Capital Partners Inc and other minority shareholders.

RJ Joshipara, vice president of finance at Nirma, said the company was not in a position to disclose financial details due to US regulations.

Nirma said its combined annual soda ash capacity will increase to over 2 mln tonnes, placing it among the top seven world producers of soda ash.

At 0800 GMT, Nirma shares were up 8 pct at 221 rupees, while the overall market was down 0.62 pct at 19,127.95 points.

Read Complete Story

Thousands of Citigroup jobs at risk as bank tries to cut subprime costs

Thousands of jobs could go at Citigroup (NYSE:C) as part of the bank's cost-cutting programme aimed at rebalancing its books after having to write down 16.9 bln usd worth of subprime assets, the Telegraph says without citing sources.

The cuts could eclipse those made by the bank in April, when then CEO Charles Prince said that he would slash 17,000 jobs.

The bank did not confirm job cuts, but did say it was looking at ways of saving cash.

'We are engaged in a planning process in anticipation of our new CEO, and our business heads are planning ways in which we can be more efficient and cost-effective to position our businesses in line with economic realities. Any reports on specific numbers are not factual,' the paper was told.

Copyright Thomson Financial News Limited 2007. All rights reserved.

Read Complete Story

Abu Dhabi buys $7.5 billion stake in Citigroup

Citigroup has announced that it will sell a $7.5-billion stake to a Middle Eastern sovereign fund in the latest bid to shore up its precariously low capital base.

The fund, the Abu Dhabi Investment Authority, has agreed to buy a 4.9 percent equity stake in a complex transaction that has been approved by U.S. regulators. It will have no role in the management or governance of Citigroup, nor any presence on Citigroup's board. The deal was announced Monday in New York.

Abu Dhabi's 4.9 percent stake means that nearly 10 percent of Citigroup will be controlled by Middle Eastern investors. Prince Walid bin Talal of Saudi Arabia already owns a roughly 5 percent stake after bailing out the company in the early 1990s.

"This investment reflects our confidence in Citi's potential to build shareholder value," said the fund's managing director, Sheikh Ahmed bin Zayed al-Nahyan.

The investment from Abu Dhabi underscores Citigroup's precarious capital position, and also highlights the growing petrodollar wealth of Mideast countries, which are buying up assets and taking stakes in numerous American companies.

Read Complete Story

The US dollar: the long farewell?

It's just straws in the wind so far. India's Ministry of Culture announces that foreign tourists can no longer pay in dollars when visiting the Taj Mahal and other heritage sites; they have to pay in good, hard rupees. Iran and Venezuela call for a joint OPEC statement on the weak US dollar, and Saudi Arabian Foreign Affairs Minister Saud Al-Faisal warns that any public reference to the US dollar's problems could cause the troubled currency to "collapse". Rap star Jay-Z's latest video shows our hero flashing a wad of euros, not dollars.

Only straws in the wind, but all in the past couple of weeks. For the majority of Americans who do not travel abroad, the only visible effect so far of the dollar's steep fall has been higher fuel prices at the pump.

The Chinese imports that fill the big-box stores still cost the same, because the Chinese yuan is still pegged to the American dollar. But that may be about to change, along with many other things.

At the beginning of 2003, one euro bought one US dollar. Eighteen months ago, it bought $1.20. Now it is pushing $1.50, and there is no reason to think that it will stop there. Three of the world's biggest oil exporters, Iran, Venezuela and Russia, are demanding payment in euros rather than US dollars. Last week a Chinese central bank vice-director, Xu Jian, gave voice to the suspicion of many others, saying that the US dollar was "losing its status as the world currency."

Read Complete Story

How a Housing Boom Turned Into a Bust

By Kathy Chu with Sharon Silke Carty, Greg Farrell, Barbara Hagenbaugh, Edward Iwata, Noelle Knox and Adam Shell

If you haven't yet felt the impact of the nation's credit crisis, just wait. Chances are, you won't have to wait long.

So far, the turmoil may feel a bit remote for average people: Failed mortgage lenders. Gargantuan write-downs by banks. Foreclosures for people who couldn't really afford the mortgages they got.

STORY: Pain isn't restricted to struggling homeowners

What about the rest of us? Are we in danger? No one knows for sure, but quite likely, yes.
As the credit crisis seeps into farther-flung corners of the economy, more of us will find it harder — and costlier — to borrow money. The value of the funds in our retirement accounts could shrink. People with subpar credit will likely find it more difficult to qualify for auto and home-equity loans. Even consumers who make the cut may need higher credit scores and more documentation.

FIND MORE STORIES IN: Investors Housing

With loans harder to get, people will hesitate to buy cars, boats and other big-ticket items. The gravest fear? That weak consumer spending — along with surging energy prices, a long housing slump and sluggish job growth — will plunge the economy into a recession.

Read Complete Story

Monday, November 26, 2007

US Nov investor morale falls to 2-year low-UBS

Investors' confidence in the U.S. economy fell to its lowest level in two years in November amid worries about high energy prices and the downturn in the housing market, a survey showed on Monday.

The UBS/Gallup Index of Investor Optimism fell to 44 in November, the lowest point since September, 2005 in the aftermath of Hurricane Katrina. The index was down 26 points from 70 in October and less than half its level of 103 in January.

The decline in the index in November was the biggest one-month drop since September 2005.
Respondents remained pessimistic about prospects for the housing market, with 80 percent saying they believed that real estate conditions were deteriorating.

"The current slump in the economy will not right itself until we see an ease in the consumer credit crunch and some substantial improvement in the housing sector," Maury Harris, Chief US Economist at UBS Investment Bank, said in the report.

Read Complete Story

Dubai Ports mulling acquisitions to re-enter U.S.

DP World (DPW.DI: Quote, Profile, Research), the container port handler forced to sell its U.S. assets over security concerns, said on Monday it was considering making acquisitions in the United States.

"We are reviewing it," said Mohammed Sharaf, DP World's chief executive officer, when asked about the possibility of buying in the United States.

"We are looking at the U.S. market and we're looking at different areas," he told reporters in Dubai, declining to be more specific.

Read Complete Story

Euro trades close to 1.50 dollars

The euro crept higher on Monday after striking a series of historic peaks close to 1.50 dollars last week as dealers worried about the health of the US economy.

The European single currency stood at 1.4865 dollars, compared with 1.4836 late in New York on Friday.

The euro has struck an historic 1.4967 dollars on Friday. The dollar has since rebounded slightly, boosted by a rebound on Wall Street late last week after a busy start to the US holiday season, dealers said.

With no major data pegged for release on Monday, dealers looked to US existing home sales data due out Tuesday and new home sales figures set for Wednesday.

"This week, the dollar should remain on the back foot," Commerzbank analyst Gavin Friend said.

"Fresh housing data is likely to confirm market concerns on possible billions of writedowns in the US financial sector," he added.

The dollar has fallen sharply this year against other world currencies, hit by a US housing slump
that has brought tightening credit conditions.

Read Complete Story

Worst is not over for the US

THE worst is still not over for the US financial services sector, as major banks, investment houses and mortgage lenders continue to report huge losses from exposures to the subprime mortgage market.

Goldman Sachs, in a recent research report, estimated industry-wide losses from declines in the market value of subprime mortgage-related collateralised debt obligation (CDO) to be almost US$150bil.

Write-offs in the third quarter of the year totalled US$18bil from financial firms globally while recent pre-announcements from some firms indicated US$22bil would be written off in the fourth quarter, suggesting US$108bil unaccounted for mark-to-market losses coming, it noted.

The Organisation for Economic Cooperation and Development has estimated that losses could even hit US$300bil.

Earlier in the month, US banking titan Citigroup said it would have to write off up to US$11bil, far higher than anticipated. Other banks also warned of write downs, including Wachovia, Bank of America and JP Morgan Chase.

UBS Investment Bank believes the financial sector will generally continue to experience volatility, elevated credit spreads (including swap spreads) and less liquid conditions in the interbank market.

Read Complete Story

Don't look now: Here comes the recession

Even with a boost from holiday spending, the U.S. economy looks shaky, thanks to slumping housing prices, Wall Street woes and debt-laden consumers. How bad could it get?

The cash registers were ringing on Black Friday, but make no mistake: American consumers are jittery, and seem all but certain to push the U.S. economy into recession.

After years of living happily beyond their means, Americans are finally facing financial reality. A persistent rise in energy prices will mean bigger heating bills this winter and heftier tabs at the gas pump. Job growth is slowing and wage gains have been anemic. House prices are sliding, diminishing the value of the asset that's the biggest factor in Americans' personal wealth. Even the stock market, which has been resilient for so long in the face of eroding consumer sentiment, has begun pulling back amid signs of deep distress in the financial sector.

Read Complete Story

Wednesday, November 21, 2007

Dubai eyes U.S. banks and property after crisis

DUBAI (Reuters) - The Dubai government agency that bought into Deutsche Bank (DBKGn.DE: Quote, Profile, Research) this year said it could invest in U.S. banks, property and other sectors after the dust settles on a mortgage crisis that has cut asset prices.

Banks that have reported losses from defaults on subprime, or high-risk mortgages, could be among the targets for DIFC Investments, which is helping drive Dubai's push to build two of the world's 10 largest financial institutions in eight years.

"There are good opportunities and the prices are good, but is this the bottom or is there more downturn to come?" Omar bin Sulaiman, governor of the Dubai International Financial Centre (DIFC), told Reuters on Monday.

Asked whether the targets could include firms such Citigroup (C.N: Quote, Profile, Research) and Merrill Lynch (MER.N: Quote, Profile, Research), bin Sulaiman said: "Without mentioning names we have a track record of taking stakes in major banks, with the right partners for management."

Citigroup, the largest U.S bank, and Merrill Lynch, the world's largest brokerage, replaced their chief executives after reporting credit market losses of at least $21 billion between them.

Read Complete Story

Myths of manufacturing

Recently Hale "Bonddad" Stewart, who normally writes informative posts about finance, let loose with a string of myths about manufacturing (both at Huffington Post and Daily Kos) that really got my blood boiling. Nothing like boiling blood to get those fingers moving, I always say! So I thought I would address various myths, most of which Bonddad managed to touch on. Also, I figure that some clarifications might be in order for those that read both my post on the necessity of manufacturing and Ryan Avent's spirited challenge.

Bonddad's myths: a strong U.S. manufacturing base will be bad for trade, is an artifact of World War II, is not necessary for high-tech industries or a thriving middle class, depends on low-cost labor, and ultimately, is not possible.

First, Bonddad puts forth the idea that a rebuilt manufacturing base would require an end to trade. In fact, without a renewed manufacturing base, U.S. trade could collapse. The best way to ensure a robust trading partner is to make sure that that partner has a vibrant manufacturing base -- which is why China, Europe, and Japan have booming export economies. As I argued in my earlier post, we can't trade services for all of our manufactured goods, and in fact 80 percent of interregional trade is goods trade, only 20 percent in services. We can import manufactured goods now because other countries are still accepting more than $700 billion dollars a year in return for goods.

Second, Bonddad seems to think that American post-WWII manufacturing dominance was a result of the destruction of our competitors during the war. Yes, right after World War II, the U.S. economy was 50 percent of the entire world's GNP. But even before WWII and at the height of the Great Depression, the U.S. alone accounted for over 40 percent of the world's industrial output. Much of the 20th century was, as Time's founder Henry Luce once put it, the "American Century," at least for manufacturing.

Read Complete Story

Subprime mortgage crisis far from over, "survivors' conference" hears

They dubbed it "The Survivors' Conference." In early November, 2,000 people who handled asset-backed securities for a living crowded into a hotel ballroom in Orlando, Florida, to hear speaker after speaker explain why 2008 may be their worst year ever.

The subprime mortgage crisis, which claimed the jobs of three chief executives and prompted more than $45 billion in write-downs at the world's biggest banks, may end up spilling into 2009.

"These events tend to become deeper and play out longer than most people initially expect," said Michael Mayo, an analyst covering securities firms at Deutsche Bank in New York. "This is one of the slowest moving train wrecks we've seen."

The tumbling U.S. housing market will continue to inflict the damage. Mortgage-backed securities and collateralized debt obligations containing those securities are falling in price and will not find their footing anytime soon. That was because most of the subprime mortgages, which provided collateral for $800 billion in securities, had yet to go bad, said Christopher Whalen of Institutional Risk Analytics in Hawthorne, California.

"The collateral is not yet problematic," Whalen said. "That's the next big shoe to drop."

Read Complete Story

Ailing dollar falls to historic low against euro

The ailing US dollar tumbled to a historic low against the euro Tuesday as concerns mounted about US economic growth after the Federal Reserve trimmed back its growth projections, traders said.

Fears of slower economic growth, largely driven by a lingering housing slump and a related credit squeeze, have weighed heavily on the dollar in recent weeks.

Fears that overseas investors and countries, especially China which holds over a trillion dollars in foreign exchange reserves, could sell or convert their dollar holdings have also depressed the dollar.

The euro, which has rocketed in value against the dollar this year, soared as high as 1.4853 dollar. It was at 1.4836 dollars at 2200 GMT, compared with 1.4665 dollars late Monday.

The euro hits its highest level against the dollar since the single currency's creation in 1999.
"When concerns over the economy grow, you turn to stable currencies -- for example the dollar, but ultimately the dollar is going down so now you would buy the euro," said Neil Mellor, a currency strategist at Bank of New York.

Falling interest rates have also depressed the dollar, the Fed cut borrowing costs in September and October in a bid to underpin economic momentum, as investors generally prefer to invest in countries where rates are rising or higher.

Read Complete Story

Few bright spots in Fed's new outlook

U.S. growth to slow in 2008; Bernanke faces new pressure to cut key interest rate in December

The U.S. Federal Reserve Board has unveiled its most expansive forecast ever, and the prognosis isn't good.

The U.S. economy is likely to grow just 1.8 to 2.5 per cent next year, and will gather steam only modestly in 2009 and 2010, according to the forecast, which was released yesterday along with minutes from the central bank's Oct. 30-31 meeting.

The forecast is down markedly from its last one in June, and the Fed warned ominously that key risks could make things much worse - a more severe credit crunch, an even deeper housing slump and continued financial market turmoil.

"Most participants judged that the uncertainty attending their October projections for real GDP growth was above typical levels seen in the past," the Fed said.

Fed officials also predicted tamer inflation for 2008 (1.8 to 2.1 per cent) and higher unemployment (4.8 to 4.9 per cent) than they forecast in June.

And that adds up to an increased likelihood of another rate cut when the Fed interest rate policy committee meets again Dec. 11.

"The latest forecast leaves the door wide open for additional interest rate cuts," said economist Ryan Sweet of Moody's Economy.com.

Trading in federal funds futures now puts the odds of a December rate cut at more than 90 per cent.

Read Complete Story

We should march on Washington to protest free trade

After World War II, American workers were the best paid in the world and the middle class was the wealthiest. America was the breadbasket of the world and its manufacturing was the most efficient. What happened? Look at us now.

With each purchase of an American product — whether manufactured, grown or mined — American workers and retirees benefited, along with the federal, state and local governments, the Social Security trust fund and Medicare. With the purchase of a foreign- made product, all of the above suffer a net loss.

America has become a nation of importers and consumers. It is running a trade deficit of $2 billion a day. Over the last 20 years, we have accumulated a trade deficit of more than $4 trillion. This is more than $13,000 each American owes to a foreign country.

Warren Buffet said it well: “We are becoming a nation of share croppers.”

For the first time in American history, children of the middle class will have a lower standard of living than their parents.

Our wages are stagnating or declining and the cost of energy, food and health care continue to increase.

For the first time in our country’s history, we are importing more agricultural products than we are exporting. Imported food is not safe. Less than 1 percent of food from China has been inspected by an American. Food has been sold that is poisonous for humans and our pets. Your children’s health and lives are at risk.

The United States was on the winning side in World War II because we were able to convert our existing industries from commercial products to tanks, warships, bombers, fighters and other equipment needed to fight the war.

Now we have lost the electronic entertainment and toy industries. We have lost 3 million manufacturing jobs. We are bankrupting, downsizing, offshoring and selling U.S. manufacturing industries to countries like China. This is destroying our ability to defend our country.

For a nation to be strong and prosper, it must grow, dig or manufacture. This produces wealth. Trade is good. Free trade is good, too, but only if all of the countries play by the same rules and strong U.S. government controls are enacted and enforced.

The leaders of the countries with large surpluses of exports to the United States profess to be free traders, but in reality they pursue predatory trade policies. The Chinese treat their companies as sacred, wealth-producing industries. They promote exports and discourage imports. They keep wages low, rebate value-added taxes on their exports and charge value-added taxes on imports.

They counterfeit and steal copyrights, trademarks and patents. They provide domestic industries with local tax incentives, offer special financing and charge tariffs on imports. They target specific industries to monopolize. They also keep the value of their currency low in relation to the U.S. dollar. This makes their U.S. prices lower. This creates jobs and wealth in their country and U.S. dollar surpluses.

This is not trade, and it certainly is not fair or free trade. No U.S. manufacturer can compete with the predatory trade practices of countries that take advantage of our free trade policy. We will continue to lose jobs, industries and wealth unless we change our policies.

The good news is that the majority of the middle class, both Republicans and Democrats, now believe free trade has done more harm than good. This was reported in a Wall Street Journal- NBC News Poll on Oct. 4. Common sense finally prevails.

The elite of both parties — that is the wealthy, the managers of the transnational companies, bankers, fund managers, importers and retailers — make huge profits from outsourcing jobs, investing overseas and importing cheap foreign products. Therefore, the elite remain free-traders.

This group also provides major funding for the senators and congressmen of both parties, providing the free-trading elite with greater influence than their numbers. Many of our top elected officials are free-traders. House Speaker Nancy Pelosi and Rep. Charles Rangel, chairman of the House Ways and Means Committee, worked with the Bush administration to pass the Peruvian Free Trade Agreement Thursday in the House.

I want to help, but I cannot do this alone. During the Depression in 1933, many veterans of World War I were out of work. They marched on Washington in an attempt to get early payments on a bonus they had been promised. They were unsuccessful, but many believe that the GI Bill benefits provided to World War II veterans was a result of that 1933 march.

I propose that thousands of us march on Washington to save jobs and protest free trade. Gathering thousands of voters to demonstrate has worked before on other issues, such as civil rights. We can change the U.S. government’s free trade policy, but only if thousands are willing to make the sacrifice to help themselves, their children and their grandchildren. Please let me know if I have your support.

Tuesday, November 20, 2007

Freddie Mac scrambles for cash

Finance company's shares plunge on news that it has turned to Wall Street and may cut dividends as losses cut deep into capital.

Freddie Mac, a government-sponsored enterprise designed to help provide financing to the mortgage market, announced Tuesday that it is looking to raise cash itself after a larger-than-expected loss cut its capital close to the bone.

The news whacked the company's shares nearly 30 percent in midday trading.
Wall Street was spooked by Freddie's announcement that its capital surplus had fallen by $1.2 billion, to only $600 million above a mandatory target set under a consent decree with regulators.

Freddie also said it has hired Wall Street firms Goldman Sachs (Charts, Fortune 500) and Lehman Brothers (Charts, Fortune 500) to help it "consider very near term capital-raising alternatives."

The firm reported a net loss of $2 billion, or $3.29 a share, in the third quarter.
The firm also announced an $8.1 billion, or 25 percent drop, in the fair value of its assets - another way it measures its financial performance - and it said it had set aside $1.2 billion to cover credit losses.

Read Complete Story

OPEC May Seek Non-U.S. Dollar Currency

Iranian President Mahmoud Ahmadinejad said Sunday that oil cartel OPEC is interesting in converting its cash reserves into a currency other than the depreciating U.S. dollar, which he called a "worthless piece of paper."

"They get our oil and give us a worthless piece of paper," Mr. Ahmadinejad told reporters after the close of the summit in the Saudi capital of Riyadh.

The Iranian hard-liner blamed the falling dollar on President Bush's policies and their allegedly negative effect on other nations.Oil prices globally are tied to the U.S. dollar.

Oil producers have become concerned about that recently as the falling dollar may be contributing to higher oil prices and a decreasing value of dollar reserves.

"All participating leaders showed an interest in changing their hard currency reserves to a credible hard currency," Mr. Ahmadinejad said. "Some said producing countries should designate a single hard currency aside from the U.S. dollar ... to form the basis of our oil trade."

Read Complete Story

China hopes for U.S. dollar solution

Follows currency turbulence. PM concerned about preserving value of $1.43-trillion foreign-exchange reserves

China's central bank voiced support for a strong dollar yesterday just as the country's prime minister expressed concerns over preserving the value of the nation's $1.43-trillion (U.S.) foreign exchange reserves.

Central bank governor Zhou Xiaochuan said Beijing hoped for an orderly solution following recent market turbulence stirred by defaults of U.S. mortgages and that it sought dollar strength given the global economic context.

"So in this sense actually we hope to see a strong dollar," he told reporters.

"We support a strong dollar," he said, adding his comments were unrelated to China's foreign exchange reserves.

Zhou's comments in South Africa coincided with others relayed by Chinese Prime Minister Wen Jiabao in Singapore.

In a speech touching on other economic issues, Wen said Beijing was under pressure to preserve the value of its reserves, the world's largest.

"We have never been experiencing such big pressure," Wen told a business gathering. "We are worried about how to preserve the value of our reserves."

China does not disclose the composition of its reserves, but some analysts reckon 65 per cent to 70 per cent are held in dollar-denominated assets. Analysts also believe Beijing has gradually reduced the proportion of its dollar holdings to diversify its investments.

Read Complete Story

China's Growing Inflation Woes Could Spur Price Hikes In U.S.

China's home-grown inflation may be on the way here, along with its exports.

China's consumer prices shot up 6.5% in October vs. a year earlier, matching decade-high levels set in August, as food costs vaulted.

For the U.S. and other countries, China's inflation bears watching. That's because China has played a big role in easing global inflation by manufacturing low-cost goods.

China's booming demand for raw materials has driven up prices for energy, metals (OOTC:EMCKF) (NYSE:EMU) (OOTC:EYMTF) and other commodities. The upside has been that Chinese finished goods prices declined. But, that may be ending.

Surging food costs in China could drive wages higher as workers demand raises, some economists say. The big concern: Rising labor costs will push China into a broad inflationary spiral.

That would lead to higher prices for clothing, toys, steel and other products it exports. If China's exports get pricier, that would feed into U.S. inflation through a hike in the cost of imported goods.

Import Prices Climbing

October import costs from China rose 2.2%, the biggest yearly gain since surveys began in 2004. Import prices from China have climbed for a record five months in a row.

"The trend has been all upward and is now much higher than it has been," said Seamus Smyth, an economist at Goldman Sachs. (NYSE:GS) "A lot of it is China's internal labor costs are rising and they've allowed the yuan to move up a little against the dollar as well. All those factors make Chinese goods more expensive."

Read Complete Story

Commentary: U.S. must confront essential economic problems

Federal Reserve policymakers and critics labor under false assumptions. Hawks believe tighter credit can stave off inflation. Doves hew to lower rates to mitigate risks of recession.
Rocketing oil prices may accelerate inflation, while the credit and housing crises and the huge trade deficit threaten recession. However, these cannot be countered adequately by modulating interest rates.

China and India are growing 10 percent a year, causing global oil demand to outrun supply and pushing prices to near $100 a barrel. The United States consumes only one-quarter of the world’s oil, and accounts for a smaller share of growth in demand. Trimming U.S. gross domestic product with tight credit would slice an inconsequential fraction off global oil consumption and little affect broader U.S. inflation. Yet the drag of tight credit and higher gas prices on consumer purchases, together, could sink the U.S. economy.

The grip of foreign oil can be relieved only by higher auto mileage standards and tougher conservation measures, and by further developing domestic petroleum, nuclear and alternative energy sources. Neither political party has demonstrated the courage to ask Americans to do what is necessary.

Over the next 18 months, 2 million adjustable-rate mortgages will reset to higher interest rates, and many homeowners cannot afford the payments. Without viable refinancing options, many homes will go on the market. The negative consequences for consumer spending and unemployment are obvious.

Read Complete Story

A Perfect Storm Stalks American Prosperity

The skies are darkening, and ominous new considerations are intruding on the politics of 2008. The softening economy, accumulating foreclosures for homeowners, more multibillion-dollar write-offs by major banks, the swooning dollar and stock market, oil prices approaching $100 a barrel - the list goes on, inviting a trendy cliché: the "perfect storm" stalking American prosperity. The Federal Reserve chair will never predict recession - it would be self-fulfilling if he did. But Ben Bernanke came close when he acknowledged to Congress that things are going to get worse before they get better.

Most Americans are ill prepared for a catastrophic reckoning. Everything else aside, the basic fact of our national condition is indebtedness. That means when jobs disappear and wages slump further, the struggle to keep up with the mortgage or rent will intensify for a broad swath of the population. The pain this time will not be confined to a few laid-off "losers."

Presidential candidates have not had much to say about these gloomy realities, but they soon will. A down economy adds another heavy blow to Republican prospects but also presents a challenge for Democrats. The incumbent party takes a serious hit if an election-year recession develops (ask Jimmy Carter, in 1980, or George H.W. Bush, in 1992). But that bad news might encourage Democrats to be even more cautious than they already are. Voters will want to know of a potential president, first, whether he or she grasps what is upon us and, second, what he or she intends to do about it if elected.

Monday, November 19, 2007

Housing Starts May Drop to 14-Year Low: U.S. Economy Preview

Housing starts in the U.S. fell to a 14-year low in October, signaling the real-estate slump will continue to weigh on growth, economists said before a report this week.

Construction fell 1.8 percent to an annual rate of 1.17 million homes, according to the median forecast of economists surveyed by Bloomberg News before a Commerce Department report on Nov. 20. Building permits, an indicator of future activity, fell 2.1 percent to a 1.2 million pace, economists forecast.

Sales are dropping and inventories are growing as the collapse in subprime lending and the prospect of further declines in property values scare away buyers. Tumbling residential construction will weaken the economy into 2008.

``The housing recession looks far from over,'' said Michelle Meyer, an economist at Lehman Brothers Holdings Inc. in New York. ``Builders continue to cut construction aggressively.''

A Nov. 19 report will reinforce the view that prospects for the housing market are worsening. The National Association of Home Builders/Wells Fargo index of builder confidence probably fell to a record-low 17 this month from 18 in October, according to the survey median.

Read Complete Story

EADS plans US acquisitions to reduce dollar exposure - CEO

EADS is looking to make acquisitions in the US in order to reduce its exposure to a weaker dollar, chief executive Louis Gallois told the Financial Times.

'My main concern for the future is the weakness of the US dollar,' he said. 'It is a sword of Damocles hanging over our heads and it is a fantastic handicap against our only competitor [Boeing (nyse: BA - news - people )] in commercial aircraft.'

Gallois said in the interview that US acquisitions as well as partnerships and alliances had been identified as targets for 'Vision 2020', a recently agreed corporate strategy that is to be presented soon to employees.

Gallois confirmed that one EADS takeover move considered in the US had been blocked by a controlling shareholder on the grounds that the Franco-German group could have lost management control of the operation.

French daily Les Echos reported last month citing unnamed sources that Lagardere SCA blocked a bid by EADS for United Industrial Corp. (nyse: UIC - news - people )

Read Complete Story

OPEC SUMMIT ROUNDUP Ahmadinejad attacks US dollar, says won't use oil as weapon

Riyadh, Saudi Arabia (Thomson Financial) - Iran's President Mahmoud Ahmadinejad kept up his attack on the weak US dollar at the close of this weekend's Third OPEC Summit, but said the Islamic republic would not use oil as a weapon despite the spectre of increasing US political sanctions.

Speaking at a slapped-together press conference at the end of the two-day summit, Ahmadinejad denied Iran would cut its supply of oil to the world market -- without direct attack or invasion -- should the US ratchet up its pressure.

'We would never look to use oil as a weapon', Ahmadinejad said in response to a Thomson Financial News question.

The media-savvy Ahmadinejad's words echoed those of the new OPEC chairman, King Abdullah of Saudi Arabia, at the summit's gala opening. The King said oil 'must not become an instrument for conflict'.

Ahmadinejad went on to say that from an 'an economic point of view, from a political point of view, from a military point of view, there is no possibility of a new war in the region'.

Read Complete Story

Dubai may buy into U.S. banks after mortgage crisis

The Dubai government agency that bought into Deutsche Bank (DBKGn.DE: Quote, Profile, Research) this year said on Monday it was considering investing in U.S. financial services firms affected by the mortgage-market crisis.

DIFC Investments, one of the agencies Dubai has used to buy foreign assets, is identifying "good opportunities for acquisitions" in the United States, the governor of the Dubai International Financial Centre (DIFC) said on Monday.

Asked whether the targets could include U.S. banks such as Citigroup (C.N: Quote, Profile, Research) and Merrill Lynch (MER.N: Quote, Profile, Research), Omar bin Sulaiman told Reuters: "Without mentioning names we have a track record of taking stakes in banks, with the right partners for management."

"The price has to be right and the strategy has to be aligned," he said.
Asked whether it made sense to invest in banks which have taken a hit from the mortgage crisis, he said: "Yes, but we are looking at all sectors not just financial sectors."

Read Complete Story

Beijing attacks US congressional report warning of Chinese spying risk

BEIJING: Beijing on Monday attacked a U.S. congressional panel's warning about Chinese spying, calling it "brazen interference" in China's internal affairs.

The U.S.-China Economic and Security Review Commission said in its annual report to Congress last week that Chinese espionage represents the greatest threat to U.S. technology.

It called for counterintelligence efforts to stop China from stealing U.S. manufacturing expertise and warned that small and medium manufacturers "face the full brunt of China's unfair trade practices, including currency manipulation and illegal subsidies for Chinese exports."

Chinese Foreign Ministry spokesman Liu Jianchao, in a statement posted on the ministry's Web site, said: "This report ignores the fact of China's progress in the areas of politics, economics, and society, is rooted in prejudice, and brazenly interferes in China's internal affairs."

"We have already raised serious representations with the U.S. side expressing our resolute opposition," Liu said.

Read Complete Story

The Economy's $2 Trillion Worry

The subprime spread continues: A Goldman Sachs report says the overall impact of mortgage losses on economic activity could be huge

Just a few months ago, analysts believed the collapse of subprime mortgage securities and related investments would lead to losses of $50 billion to $100 billion, a large but manageable number. Now, a new report from Goldman Sachs (GS) says losses from subprime exposure could be much larger than recently assumed, hitting as much as $400 billion. But that's not the extent of the financial carnage: Goldman said the full impact on the economy could be even more substantial, because the losses could compel banks and other lenders to curtail lending by as much as $2 trillion.

If banks trim their lending by that amount, consumers and businesses won't be able to borrow the money they need to maintain strong economic expansion. "This is a large shock. It corresponds to 7% of the total debt owed by U.S. nonfinancial sectors," wrote Goldman Senior Economist Jan Hatzius, the author of the report. "The drag on economic activity could be substantial."

Read Complete Story

Friday, November 16, 2007

US accuses China of vast industrial spying

China is running an "aggressive and large-scale industrial espionage campaign" against American technology, a US congressional commission says, in a report that will exacerbate growing tensions between the two countries.

The hard-hitting report, by the US-China Economic and Security Review Commission, accused China of backsliding over free trade reforms and of using spies to enable its companies to get hold of technology without having to pay for the research.

"Chinese espionage activities in the United States are so extensive that they comprise the single greatest risk to the security of American technologies," it said, adding that scientists and engineers were enlisted to get hold of secrets "by whatever means possible - including theft".

At a time when China's growing industrial strength and its effects on manufacturing in America are becoming a major election issue, the report will worsen fears that two of the world's biggest economies are heading for a trade war as well as gearing up for a new arms race.

Read Complete Story

Paulson says strong dollar in US interest, economy goes through 'ups and downs'

A 'strong' American currency is in the nation's interest, though the US economy is prone to swings like any other economy in the world, US Treasury Secretary Henry Paulson said today.

'As I said when I came out and talked on Friday, a strong dollar is very much in our nation's interest,' Paulson said, 'our economy, like any other, goes through ups and downs.'

The US economy's 'fundamental long-term strength is going to be reflected in the currency markets,' the Treasury chief told reporters aboard his Air Force jet en route to Cape Town, South Africa.

The greenback was higher Thursday but has been declining steadily against the world's major currencies.

Paulson is on the second day of six-day tour of Africa, where he is scheduled to attend the G20 meetings in Kleinmond, South Africa this weekend.

Read Complete Story

India to buy 400 firms in US, EU after 2010: Assocham

In tune with ongoing trend, India Inc would buy 400 firms in European Union and the US market every year from 2010 onwards, according to a study by Assocham.

"Indian companies acquired more than 180 companies in Europe and US, up from 130 in 2005. The number would exceed 210 by end of current fiscal and the tempo would further be facilitated towards the projected numbers," Assocham President, Venugopal N Dhoot said in a statement.

A paper on 'dynamics of mergers and acquisitions' by European Institute for Asian Studies (EIAS) revealed that most of the M&A activities would revolve around steel, auto component, pharmaceuticals and chemicals offering low-cost high value products.

Read Complete Story

Starbucks stirs concerns over economy

Shares in Starbucks slumped after the café chain on Thursday stirred concerns about the health of the US economy when it reported its first quarterly fall in traffic at its US stores and announced plans for its first television advertising campaign.

The planned holiday season advertising comes as Starbucks acknowledged that its supposedly “recession proof” sales of frappuccinos and flavoured latte drinks were feeling the impact of broader slowdown in US consumer spending.

Shares in Starbucks fell 8.6 per cent at $22.02. The company’s shares are now down 38 per cent this year.

Announcing fourth-quarter results, Jim Donald, chief executive officer, said the company was “seeing this pushback that other retailers have described’’ and that a July price increase of about 9 cents a cup in the US had also hurt traffic.

In another indicator of consumer strain, two mainstream US retailers, JC Penney and Kohl’s, on Thursday blamed economic concerns for disappointing quarterly results, and lowered forecasts for the holiday quarter.

Read Complete Story

The broader implications of the sub-prime mess

I sometimes wonder if people who analyze the financial markets miss the forest because they are looking too closely at the trees. Why else would someone ask, as some analysts have done this week, why investors are leery of buying shares in the big U.S. financial institutions?
It seems self-evident that the U.S. sub-prime fiasco and subsequent revelations about how sub-standard mortgages were repackaged and sold around the world are reason enough to avoid this sector, at least until it becomes clear the crisis is over. Announcements this week of billions more in write-downs related to this mess indicate it is not yet contained — even within the institutions most affected.

More importantly, the practices uncovered in the initial stages of the crisis raise broad questions for investors about how the financial sector goes about its business and whether regulators are adequately protecting their interests. Stepping back even further, there is a large question mark hanging over the U.S. economy.

The list of dubious practices begins with the offer of mortgages to people who could not afford the payments. Some of these mortgages appeared designed to fail, with built-in increases in the interest rate. So-called neutron loans – they killed the people and left the houses – don't sound like particularly sound business for a bank, unless of course you sell the mortgage to someone else who then assumes the risk, which is what happened.

Read Complete Story

Fed pumps 47.25 bln dlrs into US banking system

The Federal Reserve injected 47.25 billion dollars into US money markets Thursday to help ease tight liquidity, the central bank said.

It was the largest single-day cash infusion since September 2001, when the terror attacks in New York and Washington shocked the financial markets, according to the Federal Reserve of New York, which conducts the operations for the Fed.

The New York Fed said it had injected the money in three separate operations: 19.25 billion dollars in a one-day operation, 20 billion dollars in a six-day operation and eight billion dollars in a 14-day operation.

However, due to the expiration of other operations, the combined injections produced a net increase in liquidity in the banking system of 6.75 billion dollars, which is considered a moderate rise, a New York Fed official said.

Read Complete Story

Thursday, November 15, 2007

Petsec to hit target with US buys

The company expects to produce more than 15 billion cubic feet equivalent (Bcfe) in calendar 2008, and 8Bcfe in calendar 2007.

Last week, it completed the acquisition of seven gas fields in the Gulf of Mexico for $US110 million ($122 million), from privately owned US oil and gas company LLOG Exploration, adding to its operations in the Gulf of Mexico and onshore Louisiana.

Petsec now has 56 offshore leases and six onshore projects.

Chairman Terry Fern said yesterday the acquisitions had doubled the company's existing gas reserves to 68.3Bcfe.

"The (new) assets are producing currently at the rate of about 35 million cubic feet of gas a day and that will mean we'll produce something in the order of nine to 10Bcfe in 2008 (from those fields)," Mr Fern said.

"In addition to our existing reserves, we'll produce in excess of 15Bcfe.
"That should generate well in excess of $US80 million free cash flow.

Read Complete Story

Bernanke says US economy likely to slow

Federal Reserve Chairman Ben Bernanke said Thursday that economic growth will slow noticeably in coming months while surging oil costs will raise inflation pressures. But he said the economy is nowhere close to the stagflation nightmare of the 1970s and he predicted an economic rebound by mid-2008.

Bernanke stressed that the central bank, which has cut a key interest rate twice over the past two months, was closely watching developments and would be prepared to respond as needed. However, he stressed that the central bank believes economic risks are roughly balanced at present between the threat of weaker growth and higher inflation.

The Fed sent a clear signal that last week‘s rate cut may be all that is needed to deal with the economy‘s problems, a disclosure that sent financial markets into a slump that has deepened as a number of corporate giants — including General Motors, Citicorp and Merrill Lynch — have announced huge losses in recent days.

After falling by as much as 200 points, the Dow Jones industrial average closed out another difficult trading session down 33.73 points at 13,266.29. That decline followed a 360.92-point plunge on Wednesday, which had been the third drop of more than 350 points in the past month.

Read Complete Story

Weak dollar sparks takeover interest in U.S. miners

The U.S. dollar's weakness against other currencies is hurting overseas operations of American mining companies, but analysts say it could make them more attractive to foreign takeover.

"Everyone's a target," said Brett Levy, co-director of high yield research at Jeffries & Co. He noted that companies producing raw materials for steel-making, such as metallurgical or coking coal and iron ore, were particularly attractive.

He singled out iron ore pellet producer Cleveland Cliffs (CLF.N: Quote, Profile , Research), while other analysts bandied around names like metals processor Allegheny Technologies (ATI.N: Quote, Profile , Research), aluminum producer Alcoa (AA.N: Quote, Profile , Research) and Freeport-McMoRan Copper & Gold (FCX.N: Quote, Profile , Research).

Levy said with a weaker dollar, U.S. companies operating in Australia or Canada whose currencies have risen against the greenback, could be vulnerable.

"Guys whose costs are driven globally with revenue driven domestically will get squeezed, like the mining guys."

Read Complete Story

US advisory panel says Chinese spying is US technology's No. 1 threat

A congressional advisory panel said Thursday that Chinese spying in America represents the greatest threat to U.S. technology and recommended lawmakers consider financing counterintelligence efforts meant to stop China from stealing U.S. manufacturing expertise.

The U.S.-China Economic and Security Review Commission also said in its annual report to Congress that small and medium U.S. manufacturers, which represent more than half the manufacturing jobs in America, "face the full brunt of China's unfair trade practices, including currency manipulation and illegal subsidies for Chinese exports."

China's economic policies create a trade relationship that is "severely out of balance" in China's favor, said the commission, which Congress set up in 2000 to investigate and report on U.S.-China issues.

Carolyn Bartholomew, the commission's chairwoman, told reporters that "China's interest in moving toward a free market economy is not just stalling but is actually now reversing course."

Read Complete Story

Subprime loan foreclosures hurt communities, report finds

Subprime loan foreclosures are having a spillover effect on communities, resulting in an estimated price tag for the nation of $223 billion, according to a new report.
The Center for Responsible Lending report cites Missouri as one of 24 states that each are projected to experience declines of more than $1 billion in local home values, which affects tax collections.

The study is one of the first attempts to distill the subprime-mortgage meltdown to a cost in the form of reduced housing values, which can create a ripple effect resulting in lower community revenues for schools, law enforcement, social welfare and other services.

“Subprime problems have become everyone’s problem,” Martin Eakes, the chief executive officer of the center, a nonpartisan research and policy organization, said Tuesday at a Washington news conference.

The study’s conclusions are underscored by statistics to be released today that show foreclosures on all loans nationwide have increased 100 percent from a year ago and 30 percent since June.

The Kansas City region, as is usually the case in such studies, fared relatively better than the national averages, even though foreclosures here also are up.

Read Complete Story

Trade jitters, anti-China sentiment rouse US voters

It could be expected that Iraq would play a big role in the 2008 U.S. election campaign. But if recent populist rallies are an indication, another country may be rousing even more anger from voters: China.

In all corners of an overflowing convention room this week in the industrial Rust-Belt city of Pittsburgh, voters, union officials and company executives alike railed against unfair trade -- and demanded U.S. politicians do something.

"Our government refuses to stand up to the Chinese and make a level playing field," John Ratzenberger, a U.S. television actor headlining the event, told about 800 factory workers and concerned voters, to applause.

The standing-room-only gathering was the fourth in a series of rallies in key U.S. states sponsored by the Alliance for American Manufacturing, a nonprofit group whose partners include the United Steelworkers union.

Read Complete Story

Sound Economic Advice

The toe-tapping song “The Auctioneer” was produced by EconomInCrisis to raise awareness about the problems generated by international acquisitions of American companies. Listen to it here (right click and select 'open in new window') and follow along with the lyrics below:

Lyrics:

High bidder, sly bidder
Coming to America
High bidder, foreign bidder,
Coming over here
Foreign bidder, buy bidder
Buying up America
Listen to the gavel of the auctioneer!

Bid ‘em up, hit ‘em up
Set ‘em up, get ‘em up
Buy ‘em up, tie ‘em up
You can’t fail!
Bring your money, bring your stash
We’re in need of ready cash
Come to the great all-American sale!

Come from the east,
come from the west,
Pick out the companies you like best,
Closing out all our American stock,
Everything going on the auction block

Worldwide, well-known American companies
Buy ‘em fast while they last
Get ‘em while they’re hot!
Roads and steel and automobile
Textiles, banks and who knows what

Food, Technologies, communication
Movies and companies centuries old
Machine tools, publishing, Aviation
Line ‘em up, sign em up, sold, sold, sold!

Names of companies, numerous to mention
Calling your attention to names of a few
Lucent Technology, Frigidaire, Pillsbury
RCA, Zenith and Miller Brew

Who gets the profit, who takes the loss,
Who becomes servant, who becomes boss,
That’s a distinction not very clear
When your fate is in the hands of the auctioneer

France and Germany, Netherlands too
Bid and won pieces of the Red, White and Blue,
So did the Brits and the Red Chinese
Koreans and the Swedes and the Japanese

High bidder, sly bidder
Buying up America
Making us a colony
Taking over here
What an absurd world
We became the third world
When you hear the gavel of the auctioneer!

Wednesday, November 14, 2007

Sovereign wealth funds action often under wraps

Sovereign wealth funds, on the hunt for higher returns, have stirred concerns that they may take control of strategic parts of developed economies.

Political leaders in major industrial countries are calling for more openness and transparency from these state-investment vehicles.

Of the 10 largest sovereign wealth funds, holding up to $2 trillion in assets, only four publish detailed annual financial statements.

The following list outlines the top funds in 10 countries and their asset picks where disclosed. COUNTRY: United Arab Emirates FUND: Abu Dhabi Investment Authority (ADIA) ASSETS: est. $250 billion to $875 billion ASSET ALLOCATION: Its estimated portfolio breakdown is 50 percent to 60 percent equities, 20 percent to 25 percent fixed income, 5 percent to 8 percent real estate, 5 percent to 10 percent private equity, and 5 percent to 10 percent alternative investments. ADIA is the largest shareholder in two of UAE's largest banks, National Bank of Abu Dhabi and Abu Dhabi Commercial Bank.

Read Complete Story

Subprime losses could reach $400 billion, analysts say

Banks worldwide may lose as much as $400 billion from subprime mortgages, as at least one in four of the risky home loans go into default, analysts said on Monday.

Mike Mayo, an analyst at Deutsche Bank Securities Inc, estimated $150 billion to $250 billion of losses based on $1.2 trillion of U.S. subprime loans, and an additional $150 billion of losses on derivatives linked to subprime debt.

David Hilder, a Bear Stearns & Co analyst, also estimated a $150 billion to $250 billion loss on subprime home loans, in what he called a $2 trillion market.

"Given our fundamental outlook, which is for rising inflows of non-performing loans in both mortgage and commercial loan portfolios, we believe the odds are in favor of the write-downs getting worse, rather than better," this year, Hilder wrote.

Banks including Citigroup Inc (C.N: Quote, Profile, Research), Merrill Lynch & Co (MER.N: Quote, Profile, Research) and Wachovia Corp (WB.N: Quote, Profile, Research) have announced more than $40 billion of write-offs this year as U.S. foreclosures set records and after investors stopped buying many kinds of risky debt.

Read Complete Story

America's disappearing middle class

It is already clear that one of the great US election issues of 2008 will be the relative impoverishment of the American middle class, defined in the American rather than the British sense to include well established blue-collar workers with families and mortgages.

Republicans who ignore this problem will find themselves talking only to the winners, the top 1% in the income scale - laughablyinadequate as an electoral base. Democrats who propound the usual socialist nostrums to cure it will find themselves ardent proponents of an economics that doesn’t work. A new intellectual paradigm is required.

The declining share of low and moderate income workers in the American pie is undeniable; the relative share of such workers peaked as long ago as 1973. For those with only high school qualifications or less, their absolute earnings peaked in 1973 and have declined substantially since then. From 1973 to 1995, this appeared to be simply a case of the rewards for skills increasing, with low skilled workers suffering increasingly in terms of earnings and job losses compared to those with a bachelor’s degree or better. Since 2000, however, the paradigm has changed, with all sectors of the workforce losing ground in absolute terms, except for the top 1% who have gained essentially all of the modest gains in employee incomes under the George W Bush administration.

Read Complete Story

U.S. Economy: Recession,

“For Consumers, the Hits Keep Coming” a recent banner headline in a New York Times-owned daily newspaper here in Northern California reports. The article misses the main points. If we continue to understand ourselves as primarily passive consumers, rather than as active citizens, the US economy will enter at least a recession, probably a depression, and possibly a collapse. Even our republic is at risk.

Rampant consumption, our addiction to growth, and our failure to accept limits to growth damage us. The headline beneath the banner—“Cleanup Response Criticized”—reveals one of the saddest results. We are not adequately cleaning up the San Francisco Bay after a recent oil spill. Many other aspects of our environment need cleaning up. Without a healthy natural environment and climate conducive to humans, no economy can endure. Over-consumption drives the increasingly extreme and chaotic climate.

We have contaminated our air and waterways, clear-cut our forests, and our inner cities are dying. The pollution of such natural resources often preceeds economic and societal collapses.
I appreciate the Press Democrat for recently reporting the emerging economic trends in numerous articles. What I miss is more analysis, connecting the dots and providing context. The shrinking dollar, soaring gas prices, housing slump and stock market fall, though inconvenient, are not the biggest threats to the economy. These are symptoms caused by deeper systemic problems. We need to learn from these events and discover how to build more sustainable societies. Otherwise, these “hits” are likely to increase and spread.

Read Complete Story

Dollar Crisis: Economic Pearl Harbor?

If China abandons the dollar for the euro, Americans will surely suffer. So far, that prospect has sparked mainly U.S. indignation

What do Brazilian supermodel Gisele Bündchen and the People's Republic of China have in common? The answer, as of last week, is that both distrust the dollar.

Patricia Bündchen, the twin sister and manager of the world's top model, announced that Gisele now prefers to be paid in euros rather than dollars. Almost simultaneously, the Chinese central bank predicted that the dollar is likely to lose its status as the world's leading currency.
One could easily overlook a supermodel's currency preferences, but China is a different story.

It's the beast breathing down America's neck.

The most important country in the world for the United States isn't Great Britain, Germany, Saudi Arabia, Russia or Iraq. China holds that dubious distinction, because it is also the country the US can least do without. Without its willingness to buy an almost unlimited supply of US treasury bonds, there would be no American spending miracle. Without a spending miracle there would be no economic growth. In other words, without China the US superpower would lose a significant share of its economic clout.

Read Complete Story