The events of the past few months in global credit and other asset markets show that the world economy must be shielded from the actions of financiers and that bankers, insurers and money managers must be protected from themselves.
Everyone mentions the need for lower interest rates and government aid to homeowners, but few advocate tougher regulation of the wholesale market. Like the 1980s U.S. savings-and-loan debacle, the Latin-debt crisis in the same decade and the technology bubble in the late 1990s, the U.S. mortgage mess offers more evidence that while deregulated markets are great at generating booms, their ability to clean up the aftermath of a bust is less impressive.
U.S. and other financial regulators, under the auspices of the Bank for International Settlements, will have to come up with a common set of rules to avoid a repeat of the subprime meltdown.
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Friday, February 29, 2008
Petroplus Prospects In U.S. Market
Swiss refiner Petroplus is looking to take on the American market with a $2 billion acquisition war-chest, at a time when oil majors like BP and Royal Dutch Shell are selling U.S. refinery assets to concentrate on more profitable ventures.
Zug-based Petroplus (other-otc: PEPFF - news - people ), Europe's largest independent refiner, has put together an investment vehicle with buyout firms Blackstone (nyse: BX - news - people ) and First Reserve. Each partner has put up $667 million for the purchase of crude oil refineries in the United States, which would be a first dip into the American market for Petroplus.
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Zug-based Petroplus (other-otc: PEPFF - news - people ), Europe's largest independent refiner, has put together an investment vehicle with buyout firms Blackstone (nyse: BX - news - people ) and First Reserve. Each partner has put up $667 million for the purchase of crude oil refineries in the United States, which would be a first dip into the American market for Petroplus.
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U.S. Consumer Spending Picked Up Along With Inflation
Consumer spending in the U.S. rose more than forecast in January, reflecting a jump in prices that is eroding Americans' buying power.
The 0.4 percent increase in purchases followed a 0.3 percent gain in December, the Commerce Department said today in Washington. The Federal Reserve's preferred measure of inflation climbed 0.3 percent, the most in four months.
After adjusting for higher prices, spending stalled for a second month, increasing concern that the biggest part of the economy is faltering. Confidence among consumers is waning as fuel costs jump, property values decline and banks restrict lending.
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The 0.4 percent increase in purchases followed a 0.3 percent gain in December, the Commerce Department said today in Washington. The Federal Reserve's preferred measure of inflation climbed 0.3 percent, the most in four months.
After adjusting for higher prices, spending stalled for a second month, increasing concern that the biggest part of the economy is faltering. Confidence among consumers is waning as fuel costs jump, property values decline and banks restrict lending.
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Recession worry mounts on weak GDP, job claims
The sluggish U.S. job market deteriorated further last week, adding to troubling signs for an economy that barely grew in the final quarter of 2007, according to government reports on Thursday.
Labor Department data showed first-time claims for jobless benefits increased by 19,000 last week to a seasonally adjusted 373,000, a level considered to be near-recessionary by some and raising risks of a poor monthly payrolls report next week.
Separate data showed gross domestic product, which measures total goods and service output in the United States, rose in the fourth quarter at a glacial annual rate of 0.6 percent, slowing almost to a halt from the rapid 4.9 percent pace in the previous three months.
The growth rate was the same as the Commerce Department's first estimate delivered a month ago, defying expectations of an upward revision and heightening fears that the world's largest economy may slip into recession this year.
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Labor Department data showed first-time claims for jobless benefits increased by 19,000 last week to a seasonally adjusted 373,000, a level considered to be near-recessionary by some and raising risks of a poor monthly payrolls report next week.
Separate data showed gross domestic product, which measures total goods and service output in the United States, rose in the fourth quarter at a glacial annual rate of 0.6 percent, slowing almost to a halt from the rapid 4.9 percent pace in the previous three months.
The growth rate was the same as the Commerce Department's first estimate delivered a month ago, defying expectations of an upward revision and heightening fears that the world's largest economy may slip into recession this year.
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Double blow sends US into danger zone
THE US economy skidded to a near halt in the final quarter of last year, clobbered by dual slumps in housing and credit that caused people and businesses to spend and invest more sparingly.
Gross domestic product grew at an annualised 0.6 per cent in the December quarter, the US Commerce Department reported. The reading - unchanged from a month ago - underscored how much momentum the economy has lost. In the previous quarter, the economy grew at an annualised 4.9 per cent pace.
Gross domestic product measures the value of all goods and services produced in the US and is the best barometer of the country's economic health. "The economy just kept its head above water," said Nigel Gault, an economist at Global Insight.
Economists had been expecting growth of 0.8 per cent. But the housing picture looked even more bleak in the latest report.
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Gross domestic product grew at an annualised 0.6 per cent in the December quarter, the US Commerce Department reported. The reading - unchanged from a month ago - underscored how much momentum the economy has lost. In the previous quarter, the economy grew at an annualised 4.9 per cent pace.
Gross domestic product measures the value of all goods and services produced in the US and is the best barometer of the country's economic health. "The economy just kept its head above water," said Nigel Gault, an economist at Global Insight.
Economists had been expecting growth of 0.8 per cent. But the housing picture looked even more bleak in the latest report.
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NAFTA was a mistake
If NAFTA were really a free trade agreement, it would contain just a page or two on eliminating tariffs.
Instead, NAFTA is an 824-page tome packed with rules to protect drug companies, banks and Wall Street investors. Safeguards for workers, the environment or food quality don't merit even a footnote.
Supporters of NAFTA made three major promises to the American people: NAFTA would bring hundreds of thousands of new jobs to America; NAFTA would raise wages for American workers; and NAFTA would empower Mexico to flourish and prosper, staunching the flow of undocumented workers into the USA.
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Instead, NAFTA is an 824-page tome packed with rules to protect drug companies, banks and Wall Street investors. Safeguards for workers, the environment or food quality don't merit even a footnote.
Supporters of NAFTA made three major promises to the American people: NAFTA would bring hundreds of thousands of new jobs to America; NAFTA would raise wages for American workers; and NAFTA would empower Mexico to flourish and prosper, staunching the flow of undocumented workers into the USA.
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Tuesday, February 26, 2008
Tulip Services plans $40 mn US acquisition
Tulip IT Services, a New Delhi-based data communication and software services firm, having raised $150 million via foreign convertible currency bonds (FCCB), has earmarked around $40 million (Rs 160 crore) for a acquisition.
It plans to acquire a company in the US having managed services capability.
Further, the company has set aside $60 million (around Rs 240 crore) for expanding its network, around $20 million (Rs 80 crore) for setting up data centres and an equal amount will be invested in the statewide area networks (SWAN) project.
Tulip is setting up data centres in Mumbai, Bangalore, Chennai and Hyderabad. The first, in Delhi, is already operating.
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It plans to acquire a company in the US having managed services capability.
Further, the company has set aside $60 million (around Rs 240 crore) for expanding its network, around $20 million (Rs 80 crore) for setting up data centres and an equal amount will be invested in the statewide area networks (SWAN) project.
Tulip is setting up data centres in Mumbai, Bangalore, Chennai and Hyderabad. The first, in Delhi, is already operating.
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HSH Nordbank Sues UBS in New York to Recoup Subprime Losses
UBS AG, Europe's largest bank by assets, was sued by the German state-owned bank HSH Nordbank AG seeking to recover losses on a $500 million portfolio linked to the U.S. subprime mortgage market.
HSH Nordbank, in a complaint filed yesterday in state court in New York, said it bought North Street 2002-4, a portfolio of collateralized debt obligations tied to the U.S. mortgage market, in 2002. Zurich-based UBS violated ``contractual obligations and fiduciary duties'' by changing the portfolio in ways ``solely for the benefit of UBS,'' the Hamburg-based bank said in a statement.
``UBS exploited the structure for its own ends, at HSH's expense, in violation of its contractual and fiduciary duties,'' the bank said in the complaint.
``UBS knowingly and deliberately created a compromised structure,'' HSH Nordbank said in the complaint. ``Indeed, within just one year, under the guise of shifting to real estate investments, UBS more than doubled the profit it extracted at the expense of HSH, to a staggering $275 million.''
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HSH Nordbank, in a complaint filed yesterday in state court in New York, said it bought North Street 2002-4, a portfolio of collateralized debt obligations tied to the U.S. mortgage market, in 2002. Zurich-based UBS violated ``contractual obligations and fiduciary duties'' by changing the portfolio in ways ``solely for the benefit of UBS,'' the Hamburg-based bank said in a statement.
``UBS exploited the structure for its own ends, at HSH's expense, in violation of its contractual and fiduciary duties,'' the bank said in the complaint.
``UBS knowingly and deliberately created a compromised structure,'' HSH Nordbank said in the complaint. ``Indeed, within just one year, under the guise of shifting to real estate investments, UBS more than doubled the profit it extracted at the expense of HSH, to a staggering $275 million.''
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Consumer confidence lowest in 5 years
Conference Board's measure tumbles below expectations amid concern about jobs and slowing business activity.
A key measure of consumer confidence dropped significantly in February, to the lowest level in more nearly five years, amid mounting concerns about jobs and slowing business activity.
The New York-based Conference Board said Tuesday that its Consumer Confidence Index plummeted to 75, the lowest level since March 2003, from a revised 87.3 in January. Analysts had expected a decline to 82, according to Briefing.com.
The index rose slightly in December, but has now declined for a second-straight month. The 12.3 point monthly decline was the largest since September 2005.
Consumers claiming business conditions are "bad" rose to 21.8% from 20%, while those claiming business conditions are "good" decreased to 18.5% from 20.7%.
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A key measure of consumer confidence dropped significantly in February, to the lowest level in more nearly five years, amid mounting concerns about jobs and slowing business activity.
The New York-based Conference Board said Tuesday that its Consumer Confidence Index plummeted to 75, the lowest level since March 2003, from a revised 87.3 in January. Analysts had expected a decline to 82, according to Briefing.com.
The index rose slightly in December, but has now declined for a second-straight month. The 12.3 point monthly decline was the largest since September 2005.
Consumers claiming business conditions are "bad" rose to 21.8% from 20%, while those claiming business conditions are "good" decreased to 18.5% from 20.7%.
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Greenspan negative on US economy
The former chairman of the US central bank Alan Greenspan has warned that US economic growth has stalled and a quick recovery is not likely.
"As of right now US economic growth is at zero," he said, adding the longer it stayed this way the greater the risk of a deep recession.
Wall Street giants Goldman Sachs and Merrill Lynch have both forecast that the US economy will contract in 2008.
The US Federal Reserve has said 2008 growth will be between 1.3% and 2%.
The forecast, made last week, was half a percent lower than the Fed's previous estimation.
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"As of right now US economic growth is at zero," he said, adding the longer it stayed this way the greater the risk of a deep recession.
Wall Street giants Goldman Sachs and Merrill Lynch have both forecast that the US economy will contract in 2008.
The US Federal Reserve has said 2008 growth will be between 1.3% and 2%.
The forecast, made last week, was half a percent lower than the Fed's previous estimation.
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Deep recession feared in U.S.
Economists are no longer talking about a U.S. recession but a deep recession after figures yesterday showed business sentiment continued to plummet in early February.
Forecasts for a more severe retreat came as CIBC World Markets forecast U.S. house prices would end up sliding 20% before the dust has settled on the American housing meltdown. CIBC estimated 50% of U.S. homeowners who took out below-prime mortgages in 2006 will end up in a negative-equity position -- owing more than their house is worth.
"There seems to be a sense of a very deep-seated collapse in the economy," said Michael Englund, chief economist at Action Economics.
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Forecasts for a more severe retreat came as CIBC World Markets forecast U.S. house prices would end up sliding 20% before the dust has settled on the American housing meltdown. CIBC estimated 50% of U.S. homeowners who took out below-prime mortgages in 2006 will end up in a negative-equity position -- owing more than their house is worth.
"There seems to be a sense of a very deep-seated collapse in the economy," said Michael Englund, chief economist at Action Economics.
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January foreclosures up 57%
Filings saw yet another big jump last month, compared to levels a year ago; 45,327 homes were lost to bank repossessions.
Foreclosure filings nationwide soared 57% in January over the same month last year - another indication that the nation's housing woes are deepening.
A study released Tuesday by RealtyTrac, an online marketer of foreclosure properties, showed that 233,001 homes were affected, 8% more than in December. Of that total, 45,327 homes were lost to bank repossessions.
The only good news was the comparatively modest month-to-month increase in total filings.
"It could be that some of the efforts on the part of lenders and the government - both at the state and federal level - are beginning to take effect," said James Saccacio, RealtyTrac's chief executive.
"The big question is whether those efforts are truly helping homeowners avoid foreclosure in the long term, or if they are just forestalling the inevitable for many beleaguered borrowers," he said.
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Foreclosure filings nationwide soared 57% in January over the same month last year - another indication that the nation's housing woes are deepening.
A study released Tuesday by RealtyTrac, an online marketer of foreclosure properties, showed that 233,001 homes were affected, 8% more than in December. Of that total, 45,327 homes were lost to bank repossessions.
The only good news was the comparatively modest month-to-month increase in total filings.
"It could be that some of the efforts on the part of lenders and the government - both at the state and federal level - are beginning to take effect," said James Saccacio, RealtyTrac's chief executive.
"The big question is whether those efforts are truly helping homeowners avoid foreclosure in the long term, or if they are just forestalling the inevitable for many beleaguered borrowers," he said.
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Monday, February 25, 2008
RFCL looking for acquisitions in US, Europe
Veterinary products and speciality chemicals maker RFCL, a part of private equity firm ICICI Venture, is scouting for acquisitions abroad to establish a base in the high volume US and European markets, as it sees revenues crossing the Rs 500 crore mark by 2010.
The company, which also manufactures chemicals used in medical diagnostics, is looking for opportunities in lab chemicals and animal healthcare products segment abroad for which it has appointed Yes Bank as its consultant.
"The share of India in lab chemicals and animal healthcare segment is only one per cent. The sector offers huge growth potential overseas and in order to cash in on this opportunity, we have to be present in bigger markets such as Europe and US," RFCL Managing Director Sushil Mehta told PTI.
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The company, which also manufactures chemicals used in medical diagnostics, is looking for opportunities in lab chemicals and animal healthcare products segment abroad for which it has appointed Yes Bank as its consultant.
"The share of India in lab chemicals and animal healthcare segment is only one per cent. The sector offers huge growth potential overseas and in order to cash in on this opportunity, we have to be present in bigger markets such as Europe and US," RFCL Managing Director Sushil Mehta told PTI.
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Dollar near 3-wk low vs euro on US recession fears
The dollar hovered near a three- week low against the euro on Monday, dogged by worries the U.S. economy may fall into recession and by market expectations for the Federal Reserve to lower interest rates more.
The euro was supported after data late last week showed that euro-zone services growth sprang back in February from a 4-1/2-year low, tempering expectations for a near-term rate cut by the European Central Bank.
A focus for this week will be how the possible bailout of U.S. bond insurer Ambac Financial Group turns out, traders said. A person familiar with the matter said on Friday that a rescue for Ambac may be announced on Monday or Tuesday.
"While the European economy seems to be slowing down, that data has been mixed," said a senior trader for a major Japanese trading house.
"It seems hard for the euro to fall too much," he said, adding that the euro was also supported by the fact that there had been no big negative surprises in earnings reports from European banks this month.
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The euro was supported after data late last week showed that euro-zone services growth sprang back in February from a 4-1/2-year low, tempering expectations for a near-term rate cut by the European Central Bank.
A focus for this week will be how the possible bailout of U.S. bond insurer Ambac Financial Group turns out, traders said. A person familiar with the matter said on Friday that a rescue for Ambac may be announced on Monday or Tuesday.
"While the European economy seems to be slowing down, that data has been mixed," said a senior trader for a major Japanese trading house.
"It seems hard for the euro to fall too much," he said, adding that the euro was also supported by the fact that there had been no big negative surprises in earnings reports from European banks this month.
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More signs of home sales weakness
Realtors' group report shows lowest level in existing sales since it began keeping records in 1999.
The new year picked up where 2007 left off, as sales of existing homes fell in January to the lowest level in nearly a decade, according to a reading by an industry trade group released Monday.
The National Association of Realtors reported that sales by homeowners fell 0.4% in January to an annual pace of 4.89 million, down from the revised December reading of 4.91 million.
The reading was the lowest since the group began reporting annual sales pace in 1999, down 23.4% from a year earlier. Nevertheless, sales narrowly beat expectations. Economists surveyed by Briefing.com expected the report to show existing home sales slowed to an annual pace of 4.8 million.
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The new year picked up where 2007 left off, as sales of existing homes fell in January to the lowest level in nearly a decade, according to a reading by an industry trade group released Monday.
The National Association of Realtors reported that sales by homeowners fell 0.4% in January to an annual pace of 4.89 million, down from the revised December reading of 4.91 million.
The reading was the lowest since the group began reporting annual sales pace in 1999, down 23.4% from a year earlier. Nevertheless, sales narrowly beat expectations. Economists surveyed by Briefing.com expected the report to show existing home sales slowed to an annual pace of 4.8 million.
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US recession danger as house prices tumble
Last week, some grim statistics came out of the United States. I've been bearish about the world's largest economy for some time. This column first warned that America faced recession back in January 2007!
But even I was spooked by the minutes of the Federal Reserve's most recent policy meeting, held last month. For the US central bank not only cut this year's growth forecast but, at the same time, raised its estimates for 2008 inflation.
Fed policy-makers predict the US will grow only 1.5 per cent this year - down from the 2.2 per cent forecast they made back in October. That's certainly not consistent with "recession" - defined as at least two successive quarters of negative growth - for two reasons.
Firstly, the economy could contract for six months, then expand during the second half of the year, while still registering a 1.5 per cent annual growth rate. These forecasts could also spell recession as it's impossible, at a time like this, for the Fed to be anything other than as optimistic as it can possibly be.
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But even I was spooked by the minutes of the Federal Reserve's most recent policy meeting, held last month. For the US central bank not only cut this year's growth forecast but, at the same time, raised its estimates for 2008 inflation.
Fed policy-makers predict the US will grow only 1.5 per cent this year - down from the 2.2 per cent forecast they made back in October. That's certainly not consistent with "recession" - defined as at least two successive quarters of negative growth - for two reasons.
Firstly, the economy could contract for six months, then expand during the second half of the year, while still registering a 1.5 per cent annual growth rate. These forecasts could also spell recession as it's impossible, at a time like this, for the Fed to be anything other than as optimistic as it can possibly be.
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US could suffer massive recessio
The US could see a major recession, according to analyst Nouriel Roubini, of the Stern School of Business of New York University.
There is now a consensus that the US will see a slowdown and probably a recession in the near future, but Roubini predicted this as far back as mid-2006, when his position was in the clear minority.
Worryingly, Roubini now forecasts that the chances of a disastrous sequence of events with dire economic and financial consequences are rising.
Between four and six trillion dollars would be slashed from household wealth if prices crash by 20-30% as he predicts.
This would worsen the already substantial writedowns from the subprime mortgage crisis and trigger defaulting on unsecured personal debt, the downgrading of monoline insurers and possibly the bankruptcy of a major financial institution.
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There is now a consensus that the US will see a slowdown and probably a recession in the near future, but Roubini predicted this as far back as mid-2006, when his position was in the clear minority.
Worryingly, Roubini now forecasts that the chances of a disastrous sequence of events with dire economic and financial consequences are rising.
Between four and six trillion dollars would be slashed from household wealth if prices crash by 20-30% as he predicts.
This would worsen the already substantial writedowns from the subprime mortgage crisis and trigger defaulting on unsecured personal debt, the downgrading of monoline insurers and possibly the bankruptcy of a major financial institution.
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Economists: U.S. Recession Inevitable In 2008
More economists are forecasting gloomier days ahead for the American economy, believed to be steps away from entering a recession phase. The National Association for Business Economics said within three months the number of economists who foresee a further downturn doubled in one quarter to 45 percent.
When a first survey was completed on Nov. 6, less than 20 percent believed a recession was underway. A second poll of 49 professional economic forecasters from Jan. 25 to Feb. 13 yielded more dire business prospects for the U.S. economy.
The survey said the first quarter growth rate will likely be a measly 0.4 percent, while the American economy will sputter with a 1 percent expansion by the second quarter. The slowdown is because of the worst housing crisis to his the U.S. in 25 years, problems in the financial markets and spiraling fuel prices.
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When a first survey was completed on Nov. 6, less than 20 percent believed a recession was underway. A second poll of 49 professional economic forecasters from Jan. 25 to Feb. 13 yielded more dire business prospects for the U.S. economy.
The survey said the first quarter growth rate will likely be a measly 0.4 percent, while the American economy will sputter with a 1 percent expansion by the second quarter. The slowdown is because of the worst housing crisis to his the U.S. in 25 years, problems in the financial markets and spiraling fuel prices.
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Six Economic Questions The Presidential Candidates Must Answer
Senators Clinton, Obama, and McCain - the following are six major questions that we demand answers to in order for you to be worthy of our votes.
1. The World Trade Organization "WTO" - Through this agreement (which is in violation of our constitution), foreigners now control our economy and restrict our ability to do what is in our best interest. How will you change it? Read the whole article.
2. The China Issue- Should we allow the Chinese communist government to buy a large percentage of our means of production which they are now doing, which will inevitably place us in colonial status again. Read the whole article.
3. The Truth About NAFTA -What will you do about NAFTA and other job-killing “free trade” deals that are causing our industrial base to crumble? Read the whole article.
4. Living on Unaffordable Imports and Debt- We are now almost totally dependant on foreigners to support us. How will we ever become a productive self supporting country again? Read the whole article.
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1. The World Trade Organization "WTO" - Through this agreement (which is in violation of our constitution), foreigners now control our economy and restrict our ability to do what is in our best interest. How will you change it? Read the whole article.
2. The China Issue- Should we allow the Chinese communist government to buy a large percentage of our means of production which they are now doing, which will inevitably place us in colonial status again. Read the whole article.
3. The Truth About NAFTA -What will you do about NAFTA and other job-killing “free trade” deals that are causing our industrial base to crumble? Read the whole article.
4. Living on Unaffordable Imports and Debt- We are now almost totally dependant on foreigners to support us. How will we ever become a productive self supporting country again? Read the whole article.
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Friday, February 22, 2008
Huawei says 3Com acquisition a 'business concern'
China's Huawei Technologies Co Ltd's said Friday its acquisition of U.S. network equipment maker 3Com Corp with Bain Capital Partners LLC is for nothing but a business investment.
Huawei, the country's top telecom equipment maker, made the announcement after the three parties withdrew their joint filing to U.S. regulators concerning the $2.2 billion proposed acquisition.
"Huawei joined in the acquisition of 3Com at the invitation of Bain Capital Partners LLC in early 2007 as a minority partner. Both sides launched the acquisition for business concern," according to a statement released by Huawei on Friday.
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Huawei, the country's top telecom equipment maker, made the announcement after the three parties withdrew their joint filing to U.S. regulators concerning the $2.2 billion proposed acquisition.
"Huawei joined in the acquisition of 3Com at the invitation of Bain Capital Partners LLC in early 2007 as a minority partner. Both sides launched the acquisition for business concern," according to a statement released by Huawei on Friday.
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China's acquisitions provoke unease
Flush with hundreds of billions of dollars, China Inc. is still having trouble investing abroad, running into foreign security worries as it tries to acquire companies and resources.
more stories like this
The latest casualty: A deal by a Chinese maker of telecom gear and an American private equity firm to buy U.S. tech company 3Com.
The bidders say they just want to make money. But acquisitions are a political minefield because many Chinese buyers are owned by or close to the communist government, feeding fears that Beijing might gain access to military technology or control of strategic resources.
"Where it looks purely commercial, everyone finds that acceptable, but where it touches on resources or security concerns, it just falls into a different basket," said William Hess, China analyst for the consulting firm Global Insight. "As soon as politics enters into the equation, it raises the risks for all parties. It's not just a business case."
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more stories like this
The latest casualty: A deal by a Chinese maker of telecom gear and an American private equity firm to buy U.S. tech company 3Com.
The bidders say they just want to make money. But acquisitions are a political minefield because many Chinese buyers are owned by or close to the communist government, feeding fears that Beijing might gain access to military technology or control of strategic resources.
"Where it looks purely commercial, everyone finds that acceptable, but where it touches on resources or security concerns, it just falls into a different basket," said William Hess, China analyst for the consulting firm Global Insight. "As soon as politics enters into the equation, it raises the risks for all parties. It's not just a business case."
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U.S. life insurers’ subprime losses may hit $8B: Fitch
U.S. life insurers’ unrealized investment losses related to subprime and other mortgage investments are in the $7 billion to $8 billion range, but the exposure is manageable, Fitch Ratings Ltd. said in a report.
Chicago-based Fitch said that the expected loss range for subprime and so-called Alt-A residential mortgage collateral represents about 13% of the insurers’ holdings and 3% of aggregate industry statutory capital. Alt-A mortgages are those that fall between prime and subprime.
Furthermore, Fitch said it expects the industry to report between $2 billion and $3 billion in realized losses on a pretax basis for the fourth quarter of 2007.
Fitch said, however, that it “continues to view the U.S. life insurance industry as well-capitalized.”
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Chicago-based Fitch said that the expected loss range for subprime and so-called Alt-A residential mortgage collateral represents about 13% of the insurers’ holdings and 3% of aggregate industry statutory capital. Alt-A mortgages are those that fall between prime and subprime.
Furthermore, Fitch said it expects the industry to report between $2 billion and $3 billion in realized losses on a pretax basis for the fourth quarter of 2007.
Fitch said, however, that it “continues to view the U.S. life insurance industry as well-capitalized.”
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Manufacturing activity in Philadelphia slumps
Report also shows that the outlook for manufacturing in the region is bleak.
A key survey of manufacturing activity in the Philadelphia area found that conditions worsened this month and that the outlook for the sector is deteriorating.
The Federal Reserve Bank of Philadelphia's Business Outlook Survey index fell to -24.0 from -20.9 in January, when the index reached it's lowest point in six years.
The bank's future general activity index, which survey's manufacturer's outlook for growth over the next six months, declined to -16.9 from 5.2 in January, its lowest reading since 1990.
The outlook for employment in the sector also declined. For the first time since 2001, the bank's future employment index fell below zero, slipping to -8.8 in February.
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A key survey of manufacturing activity in the Philadelphia area found that conditions worsened this month and that the outlook for the sector is deteriorating.
The Federal Reserve Bank of Philadelphia's Business Outlook Survey index fell to -24.0 from -20.9 in January, when the index reached it's lowest point in six years.
The bank's future general activity index, which survey's manufacturer's outlook for growth over the next six months, declined to -16.9 from 5.2 in January, its lowest reading since 1990.
The outlook for employment in the sector also declined. For the first time since 2001, the bank's future employment index fell below zero, slipping to -8.8 in February.
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Fixed mortgage rates rise, adjustable rates fall
Long-term fixed mortgage rates return to January levels; average adjustable-rate mortgage rates slightly lower than earlier this year, says Freddie Mac.
Adjustable-rate mortgages could become more popular as the difference between long-term fixed rates and adjustable rates increases, Freddie Mac reported Thursday.
"After trending up in the past two weeks, long-term fixed mortgage rates are back up to nearly where they were at the beginning of the year. In contrast, average rates on adjustable-rate mortgages are about 0.5 percentage points below levels of the first week of this year," said Freddie Mac (FRE, Fortune 500) vice president and chief economist Frank Nothaft in statement Thursday.
"As the spread between long-term fixed-rates and adjustable-rates widens, it's possible we could see a slight increase in the popularity of adjustable-rate mortgages," Nothaft noted.
The government-sponsored loan buyer said 30-year fixed-rate loans averaged 6.04% for the week ending Thursday, up from 5.72% last week.
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Adjustable-rate mortgages could become more popular as the difference between long-term fixed rates and adjustable rates increases, Freddie Mac reported Thursday.
"After trending up in the past two weeks, long-term fixed mortgage rates are back up to nearly where they were at the beginning of the year. In contrast, average rates on adjustable-rate mortgages are about 0.5 percentage points below levels of the first week of this year," said Freddie Mac (FRE, Fortune 500) vice president and chief economist Frank Nothaft in statement Thursday.
"As the spread between long-term fixed-rates and adjustable-rates widens, it's possible we could see a slight increase in the popularity of adjustable-rate mortgages," Nothaft noted.
The government-sponsored loan buyer said 30-year fixed-rate loans averaged 6.04% for the week ending Thursday, up from 5.72% last week.
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Leading indicators point to further weakness
The Conference Board's measure of future economic activity declines for fourth straight month.
An indicator of the economy's future performance fell for the fourth straight month in January, according to a report released Thursday by the Conference Board.
The Conference Board's index of leading U.S. economic indicators fell 0.1% to 135.8 last month, matching the 0.1% decline logged in December. The decline was in line with economists' expectations, according to Briefing.com.
Falling stock prices, along with a drop in housing permits, contributed to the slip. However, money supply, lower-than-expected unemployment and positive consumer expectations helped keep the decline in check.
Positive measurements have not been strong enough to fully offset the negative ones, said Ataman Ozyildirim, an economist at the Conference Board, a business research group.
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An indicator of the economy's future performance fell for the fourth straight month in January, according to a report released Thursday by the Conference Board.
The Conference Board's index of leading U.S. economic indicators fell 0.1% to 135.8 last month, matching the 0.1% decline logged in December. The decline was in line with economists' expectations, according to Briefing.com.
Falling stock prices, along with a drop in housing permits, contributed to the slip. However, money supply, lower-than-expected unemployment and positive consumer expectations helped keep the decline in check.
Positive measurements have not been strong enough to fully offset the negative ones, said Ataman Ozyildirim, an economist at the Conference Board, a business research group.
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Thursday, February 21, 2008
Foreign acquisitions still provoke unease
Flush with hundreds of billions of dollars, China Inc. is still having trouble investing abroad, running into foreign security worries as it tries to acquire companies and resources.
The latest casualty: A deal by a Chinese maker of telecom gear and an American private equity firm to buy U.S. tech company 3Com.
The bidders say they just want to make money. But acquisitions are a political minefield because many Chinese buyers are owned by or close to the communist government, feeding fears that Beijing might gain access to military technology or control of strategic resources.
"Where it looks purely commercial, everyone finds that acceptable, but where it touches on resources or security concerns, it just falls into a different basket," said William Hess, China analyst for the consulting firm Global Insight. "As soon as politics enters into the equation, it raises the risks for all parties. It's not just a business case."
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The latest casualty: A deal by a Chinese maker of telecom gear and an American private equity firm to buy U.S. tech company 3Com.
The bidders say they just want to make money. But acquisitions are a political minefield because many Chinese buyers are owned by or close to the communist government, feeding fears that Beijing might gain access to military technology or control of strategic resources.
"Where it looks purely commercial, everyone finds that acceptable, but where it touches on resources or security concerns, it just falls into a different basket," said William Hess, China analyst for the consulting firm Global Insight. "As soon as politics enters into the equation, it raises the risks for all parties. It's not just a business case."
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Fed slashes half point off 2008 US economic growth forecast
The Federal Reserve on Wednesday slashed its 2008 US economic growth forecast by a half point to a range of 1.3 to 2.0 percent, citing the housing slump, tight credit and higher oil prices.
But the central bank, while stressing the uncertainty of the outlook, predicted the economy would pick up steam in 2009.
The Fed's sharp downward revision in 2008 output growth expectations followed a three-quarter-point reduction in November, to 1.8-2.5 percent from 2.5-2.75 percent.
The Fed said the "considerably lower" forecast was due to a number of factors, "including a further intensification of the housing market correction, tighter credit conditions amid increased concerns about credit quality and ongoing turmoil in financial markets, and higher oil prices."
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But the central bank, while stressing the uncertainty of the outlook, predicted the economy would pick up steam in 2009.
The Fed's sharp downward revision in 2008 output growth expectations followed a three-quarter-point reduction in November, to 1.8-2.5 percent from 2.5-2.75 percent.
The Fed said the "considerably lower" forecast was due to a number of factors, "including a further intensification of the housing market correction, tighter credit conditions amid increased concerns about credit quality and ongoing turmoil in financial markets, and higher oil prices."
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Inflation riddle hard to figure out
Wednesday's report of a larger-than-expected increase in the January consumer price index sparked talk of an inflation "scare" compounding the recession "scare" already on investors' minds.
Competing evidence of higher inflation, the worst in at least two years, and possibly the first recession in seven years creates a quandary for everyone from Federal Reserve policymakers to ordinary investors.
If the Fed keeps cutting interest rates, as expected, won't inflation pressures build? If the Fed fights inflation by being less aggressive in its rate cuts, won't the sluggish economy get worse?
If investors hedging against inflation bid up commodity prices and shares of food and energy producers, won't the purchasing power of an overall portfolio be eroded by surrendering to inflation?
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Competing evidence of higher inflation, the worst in at least two years, and possibly the first recession in seven years creates a quandary for everyone from Federal Reserve policymakers to ordinary investors.
If the Fed keeps cutting interest rates, as expected, won't inflation pressures build? If the Fed fights inflation by being less aggressive in its rate cuts, won't the sluggish economy get worse?
If investors hedging against inflation bid up commodity prices and shares of food and energy producers, won't the purchasing power of an overall portfolio be eroded by surrendering to inflation?
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Specter of stagflation returns to haunt U.S. economy
American consumer prices rose sharply last month and oil prices hit a record above $100 a barrel Wednesday, fueling inflationary pressures that could complicate efforts to steer the U.S. economy away from recession.
Despite a weakening economy that many analysts, including the Federal Reserve chairman, Ben Benanke, say should put a damper on inflation, prices have kept rising at a worrisome pace. Over the past three months, inflation has risen at an annual rate of nearly 7 percent, more than double the pace in the previous three months, the U.S. Labor Department said Wednesday.
Fueling the increase are energy costs, which have soared at a 44 percent annual rate since November, according to the department.
"We've got a rock-and-a-hard-place problem if inflation is setting in," said Larry Chorn, chief economist at Platts, a publisher of energy market information.
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Despite a weakening economy that many analysts, including the Federal Reserve chairman, Ben Benanke, say should put a damper on inflation, prices have kept rising at a worrisome pace. Over the past three months, inflation has risen at an annual rate of nearly 7 percent, more than double the pace in the previous three months, the U.S. Labor Department said Wednesday.
Fueling the increase are energy costs, which have soared at a 44 percent annual rate since November, according to the department.
"We've got a rock-and-a-hard-place problem if inflation is setting in," said Larry Chorn, chief economist at Platts, a publisher of energy market information.
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Credit crisis hits Main Street
Bond market woes make municipal borrowing more expensive and that could mean higher taxes and fewer services.
When Wilkes-Barre Mayor Thomas Leighton hears about the troubles afflicting bond insurer Ambac Financial Group, he worries whether his Pennsylvania city can renovate a blighted park or repair the sewer system.
Wilkes-Barre, which suffers from a weak BBB credit rating, depends on bond insurance to issue municipal bonds at favorable rates. If Ambac were to lose its AAA rating and its credibility, it could mean higher taxes, fewer services and lost jobs for the people of Wilkes-Barre.
"Without affordable funding, projects don't get built, streets don't get repaved," Leighton said. "It affects the people driving on those roads and the people paving those roads."
The credit crisis that began in the subprime mortgage market last year has now spread to municipal bonds. Governments and public authorities face steep increases in borrowing costs because investors are losing confidence in the credit markets and the companies that insure the debt.
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When Wilkes-Barre Mayor Thomas Leighton hears about the troubles afflicting bond insurer Ambac Financial Group, he worries whether his Pennsylvania city can renovate a blighted park or repair the sewer system.
Wilkes-Barre, which suffers from a weak BBB credit rating, depends on bond insurance to issue municipal bonds at favorable rates. If Ambac were to lose its AAA rating and its credibility, it could mean higher taxes, fewer services and lost jobs for the people of Wilkes-Barre.
"Without affordable funding, projects don't get built, streets don't get repaved," Leighton said. "It affects the people driving on those roads and the people paving those roads."
The credit crisis that began in the subprime mortgage market last year has now spread to municipal bonds. Governments and public authorities face steep increases in borrowing costs because investors are losing confidence in the credit markets and the companies that insure the debt.
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Wednesday, February 20, 2008
New single-family homes at 17-year low
Starts and permits continue to be weak, but pickup in condo and apartment construction lift overall housing starts.
New construction of single-family homes fell to a 17-year low in January, according to a government report on the battered housing market released Wednesday.
At the same time, a pickup in apartments and condo construction resulted in a rare gain for housing starts overall.
Starts of single-family homes fell to an annual rate of 743,000 in the tenth straight monthly decline.
The level of single-family home building is down 5 percent from December, 34% from a year earlier and 60% from the record high reached only two years ago.
Still even with the continued decline in single-family homes, housing starts edged up to an annual
rate of 1.02 million from the revised 1 million rate for December. The overall number for January was roughly in line with the forecasts of economists surveyed by Briefing.com.
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New construction of single-family homes fell to a 17-year low in January, according to a government report on the battered housing market released Wednesday.
At the same time, a pickup in apartments and condo construction resulted in a rare gain for housing starts overall.
Starts of single-family homes fell to an annual rate of 743,000 in the tenth straight monthly decline.
The level of single-family home building is down 5 percent from December, 34% from a year earlier and 60% from the record high reached only two years ago.
Still even with the continued decline in single-family homes, housing starts edged up to an annual
rate of 1.02 million from the revised 1 million rate for December. The overall number for January was roughly in line with the forecasts of economists surveyed by Briefing.com.
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Consumer prices jump more than forecast
Rise is the biggest in 19 months for prices excluding food and energy, a worrying sign for the Fed.
Consumer prices rose in January, fanning concerns that high inflation may keep the Federal Reserve from maintaining its aggressive interest rate-cutting campaign.
The Consumer Price Index, a key inflation reading, rose 0.4% last month, according to the Labor Department. That matched the 0.4% jump recorded in December and exceeded the 0.3% rise economists surveyed by Briefing.com had forecast.
The more closely watched core CPI, which strips out volatile food and energy prices, rose 0.3%, representing the biggest jump in 19 months. Economists had expected a 0.2% rise after a 0.2% jump in December.
The rise in January left overall prices 4.3% above where they were 12 months earlier, up from the 4.1% rise on that basis in December.
Food prices were much higher in January. A recent driver of inflation, food prices jumped 0.7% from a 0.1% rise in December, the largest monthly increase since last February.
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Consumer prices rose in January, fanning concerns that high inflation may keep the Federal Reserve from maintaining its aggressive interest rate-cutting campaign.
The Consumer Price Index, a key inflation reading, rose 0.4% last month, according to the Labor Department. That matched the 0.4% jump recorded in December and exceeded the 0.3% rise economists surveyed by Briefing.com had forecast.
The more closely watched core CPI, which strips out volatile food and energy prices, rose 0.3%, representing the biggest jump in 19 months. Economists had expected a 0.2% rise after a 0.2% jump in December.
The rise in January left overall prices 4.3% above where they were 12 months earlier, up from the 4.1% rise on that basis in December.
Food prices were much higher in January. A recent driver of inflation, food prices jumped 0.7% from a 0.1% rise in December, the largest monthly increase since last February.
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Dollar Declines to 2-Week Low Against Euro on Rate Speculation
The dollar fell to the lowest level in two weeks versus the euro on speculation the Federal Reserve will keep cutting its benchmark interest rate, widening the U.S. yield disadvantage with Europe.
The dollar's decline started after the governor of the Bank of France, Christian Noyer, said there is cause for ``optimism'' about economic growth in the euro region. Brazil's real rose to an eight-year high as a boom in exports and the highest inflation-adjusted bond yields in emerging markets lured investors. The pound fell to a one-month low against the euro.
``The U.S.'s deteriorating yield outlook, combined with its worsening underlying fundamentals, is weighing on the dollar,'' said Omer Esiner, a foreign-exchange analyst at currency-trading company Ruesch International Inc. in Washington. ``The U.S. economy is slowing at a very fast pace and that will continue to fuel further dollar-negative interest rate cuts.''
The dollar fell to $1.4726 per euro at 4 p.m. in New York, from $1.4658 yesterday. It declined to as low as $1.4757, the weakest since Feb. 5. The yen was little changed at 158.57 per euro, from 158.63. The dollar declined to 107.68 yen, from 108.23.
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The dollar's decline started after the governor of the Bank of France, Christian Noyer, said there is cause for ``optimism'' about economic growth in the euro region. Brazil's real rose to an eight-year high as a boom in exports and the highest inflation-adjusted bond yields in emerging markets lured investors. The pound fell to a one-month low against the euro.
``The U.S.'s deteriorating yield outlook, combined with its worsening underlying fundamentals, is weighing on the dollar,'' said Omer Esiner, a foreign-exchange analyst at currency-trading company Ruesch International Inc. in Washington. ``The U.S. economy is slowing at a very fast pace and that will continue to fuel further dollar-negative interest rate cuts.''
The dollar fell to $1.4726 per euro at 4 p.m. in New York, from $1.4658 yesterday. It declined to as low as $1.4757, the weakest since Feb. 5. The yen was little changed at 158.57 per euro, from 158.63. The dollar declined to 107.68 yen, from 108.23.
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Subprime loans defaulting even before resets
It turns out that massive interest rate spikes aren't the problem -- many borrowers couldn't afford these mortgages even at the low, introductory interest rates.
For months, we've fretted about the Armageddon that will hit when subprime adjustable rate mortgages start resetting to much higher interest rates.
What's happening is even worse: Many of these loans are defaulting well before their rates increase.
Defaults for subprime loans issued in 2007 - none of which have reset yet - hit 11.2 percent in November. That represents perhaps 300,000 households, and is twice the default rate that 2006 loans had 10 months after being issued, according to Friedman, Billings Ramsey analyst Michael Youngblood.
Defaults are spiking well before resets come into play thanks to the lax lending environment of the past few years. Many borrowers were approved for mortgages that they had little chance of affording, even at the low-interest teaser rates .
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For months, we've fretted about the Armageddon that will hit when subprime adjustable rate mortgages start resetting to much higher interest rates.
What's happening is even worse: Many of these loans are defaulting well before their rates increase.
Defaults for subprime loans issued in 2007 - none of which have reset yet - hit 11.2 percent in November. That represents perhaps 300,000 households, and is twice the default rate that 2006 loans had 10 months after being issued, according to Friedman, Billings Ramsey analyst Michael Youngblood.
Defaults are spiking well before resets come into play thanks to the lax lending environment of the past few years. Many borrowers were approved for mortgages that they had little chance of affording, even at the low-interest teaser rates .
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Get ready for a recession...in 2009
High inflation may keep the Fed from lowering interest rates much further...and that could lead the economy to weaken even more next year.
Guess what, kids: Inflation isn't going away. And that means the Federal Reserve's job is getting tougher.
Oil is hovering around $100 a barrel. And the January Consumer Price Index figures - released Wednesday morning - showed inflation bubbling up.
With that in mind, some see dimming hopes for more aggressive interest rate cuts by the Federal Reserve.
The high inflation figures will "further complicate the Fed's easing campaign," said Ashraf Laidi, chief currency strategist with CMC Markets US, a New York-based brokerage firm, in a note Wednesday morning.
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Guess what, kids: Inflation isn't going away. And that means the Federal Reserve's job is getting tougher.
Oil is hovering around $100 a barrel. And the January Consumer Price Index figures - released Wednesday morning - showed inflation bubbling up.
With that in mind, some see dimming hopes for more aggressive interest rate cuts by the Federal Reserve.
The high inflation figures will "further complicate the Fed's easing campaign," said Ashraf Laidi, chief currency strategist with CMC Markets US, a New York-based brokerage firm, in a note Wednesday morning.
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America's economy risks the mother of all meltdowns
I would tell audiences that we were facing not a bubble but a froth - lots of small, local bubbles that never grew to a scale that could threaten the health of the overall economy." Alan Greenspan, The Age of Turbulence.
That used to be Mr Greenspan's view of the US housing bubble. He was wrong, alas. So how bad might this downturn get? To answer this question we should ask a true bear. My favourite one is Nouriel Roubini of New York University's Stern School of Business, founder of RGE monitor.
Recently, Professor Roubini's scenarios have been dire enough to make the flesh creep. But his thinking deserves to be taken seriously. He first predicted a US recession in July 2006*. At that time, his view was extremely controversial. It is so no longer. Now he states that there is "a rising probability of a 'catastrophic' financial and economic outcome"**. The characteristics of this scenario are, he argues: "A vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe."
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That used to be Mr Greenspan's view of the US housing bubble. He was wrong, alas. So how bad might this downturn get? To answer this question we should ask a true bear. My favourite one is Nouriel Roubini of New York University's Stern School of Business, founder of RGE monitor.
Recently, Professor Roubini's scenarios have been dire enough to make the flesh creep. But his thinking deserves to be taken seriously. He first predicted a US recession in July 2006*. At that time, his view was extremely controversial. It is so no longer. Now he states that there is "a rising probability of a 'catastrophic' financial and economic outcome"**. The characteristics of this scenario are, he argues: "A vicious circle where a deep recession makes the financial losses more severe and where, in turn, large and growing financial losses and a financial meltdown make the recession even more severe."
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Tuesday, February 19, 2008
U.S. 2007 trade deficit drops because of falling imports
The total U.S. trade deficit in goods and services fell 6.8 percent in 2007, from $758.52 billion to $711.61 billion, with all of the net improvement generated by a major fall-off in imports, not the export boom touted by U.S. government officials according to a U.S Business and Industry Council report.
The report went on to say that in many of the sectors generating the economy’s highest paying jobs and greatest productivity growth and technological progress – manufacturing and high-tech manufacturing – meaningful trade deficit improvement was difficult to find.
Total exports of goods and services recorded its second straight year of double-digit growth. But the 12.18 percent increase in 2007 – to $1.62 trillion – was slightly slower than the 12.68 percent increase registered in 2006. The big change in trade flows came on the import side, where growth slowed from 10.35 percent in 2006 to 5.86 percent in 2007. Total import levels hit $2.33 trillion last year.
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The report went on to say that in many of the sectors generating the economy’s highest paying jobs and greatest productivity growth and technological progress – manufacturing and high-tech manufacturing – meaningful trade deficit improvement was difficult to find.
Total exports of goods and services recorded its second straight year of double-digit growth. But the 12.18 percent increase in 2007 – to $1.62 trillion – was slightly slower than the 12.68 percent increase registered in 2006. The big change in trade flows came on the import side, where growth slowed from 10.35 percent in 2006 to 5.86 percent in 2007. Total import levels hit $2.33 trillion last year.
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Donors have sent $72 million to help reduce national debt
It's the biggest tin cup in the world.
More than $9.2 trillion in the hole, the U.S. Treasury Department is hitting up donors to help pay off the debt. Civic-minded citizens send checks — mostly between $10 and $100 — to a post office box in Parkersburg, W.Va., and the donations quickly make their way into the public coffers.
"Some folks send in money on a regular basis," said Bureau of the Public Debt spokesman Pete Hallenbach. "It's kind of curious."
Since 1961, concerned citizens, grateful emigrees and schoolchildren culling quarters from pickle jars have ponied up $72 million in donations to help offset rivers of government red ink.
It hasn't made much of a dent in the debt.
With the federal government burning through nearly $6 million a minute, the money sent in over the past 47 years covers just 12 minutes of government spending. And with this year's budget deficit set to hit $410 billion, the country is piling on additional debt at a rate of $1.1 billion a day, or a staggering $46 million every hour.
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More than $9.2 trillion in the hole, the U.S. Treasury Department is hitting up donors to help pay off the debt. Civic-minded citizens send checks — mostly between $10 and $100 — to a post office box in Parkersburg, W.Va., and the donations quickly make their way into the public coffers.
"Some folks send in money on a regular basis," said Bureau of the Public Debt spokesman Pete Hallenbach. "It's kind of curious."
Since 1961, concerned citizens, grateful emigrees and schoolchildren culling quarters from pickle jars have ponied up $72 million in donations to help offset rivers of government red ink.
It hasn't made much of a dent in the debt.
With the federal government burning through nearly $6 million a minute, the money sent in over the past 47 years covers just 12 minutes of government spending. And with this year's budget deficit set to hit $410 billion, the country is piling on additional debt at a rate of $1.1 billion a day, or a staggering $46 million every hour.
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‘US Growth May Fall to 7-Year Low’
U.S. economic growth may fall to a seven-year low this year, hit by the subprime mortgage meltdown, according to the Bank of Korea (BOK) Tuesday.
In a report on the prospects for the U.S. economy, the central bank expects the United States to see a continuous fall in private consumption and construction investment, pulling down its economic growth. However, the economy may pick up slowly in the latter half of the year on a combination of factors, including a rise in exports, additional interest rate reductions, the government's stimulus package and private firms' efforts to resolve non-performing loans, the BOK said.
``Annually, U.S. economic growth is projected to fall to the lowest level since 2001 at a little over 1 percent,'' the report said.
The bank said three factors will decide the fate of the U.S. economy ― the sluggish housing industry; the growing losses of private firms from their investments in subprime-related securities and derivatives; and sluggish consumption amid rising inflation.
In December, the jobless rate soared to 5 percent, the highest since 5.1 percent in September 2005. The economic downturn may make it more difficult for people to get jobs this year, the report said.
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In a report on the prospects for the U.S. economy, the central bank expects the United States to see a continuous fall in private consumption and construction investment, pulling down its economic growth. However, the economy may pick up slowly in the latter half of the year on a combination of factors, including a rise in exports, additional interest rate reductions, the government's stimulus package and private firms' efforts to resolve non-performing loans, the BOK said.
``Annually, U.S. economic growth is projected to fall to the lowest level since 2001 at a little over 1 percent,'' the report said.
The bank said three factors will decide the fate of the U.S. economy ― the sluggish housing industry; the growing losses of private firms from their investments in subprime-related securities and derivatives; and sluggish consumption amid rising inflation.
In December, the jobless rate soared to 5 percent, the highest since 5.1 percent in September 2005. The economic downturn may make it more difficult for people to get jobs this year, the report said.
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Don't "subprime" Social Security
During the push to privatize Social Security, the idea's foes were accused of not trusting the American people to manage their own money. The naysayers prevailed, and aren't we glad.
How interesting that the buildup to the mortgage meltdown employed many of the same sales tactics as the Social Security privatization scheme. Resentment, fear, flattery and hype — plus scant details on fees and other costs — all went into the pitch.
When a former Fed official called for rules to tame the subprime-mortgage business, the peddlers howled. This was an attack on low-income people, particularly those of color, they said. Without lax lending practices, fewer minorities would have enjoyed the blessings of homeownership.
It turns out that many never really "owned" much if any of their homes — they just held a lot of expensive debt that let them put their names on a deed. People losing their houses may find themselves poorer than before they started.
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How interesting that the buildup to the mortgage meltdown employed many of the same sales tactics as the Social Security privatization scheme. Resentment, fear, flattery and hype — plus scant details on fees and other costs — all went into the pitch.
When a former Fed official called for rules to tame the subprime-mortgage business, the peddlers howled. This was an attack on low-income people, particularly those of color, they said. Without lax lending practices, fewer minorities would have enjoyed the blessings of homeownership.
It turns out that many never really "owned" much if any of their homes — they just held a lot of expensive debt that let them put their names on a deed. People losing their houses may find themselves poorer than before they started.
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Most Americans unprepared for retirement
Majority of workers will not be able to cover their health care expenses and maintain their standard of living in retirement, according to a new study.
A majority of American workers will not be able to maintain their current standard of living after they retire, according to a report released Tuesday.
The Center for Retirement Research (CRR) estimates 61% of households are "at risk" of being unable to live the way they would like and pay for their health care when they get old.
CRR considers consumers to be "at risk" if their savings, Social Security and pension benefits combined will fall at least 10% short of the income needed in retirement to support the same standard of living they enjoyed while working.
Previous reports have considered health care to be a cost that retirees factor in by "rearranging their basket of consumption" - that is, spending less on consumer goods.
CRR's study assumes that people want to spend the same amount on goods in retirement that they do now and that they consider health insurance and the added health care costs associated with growing old to be an additional expense.
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A majority of American workers will not be able to maintain their current standard of living after they retire, according to a report released Tuesday.
The Center for Retirement Research (CRR) estimates 61% of households are "at risk" of being unable to live the way they would like and pay for their health care when they get old.
CRR considers consumers to be "at risk" if their savings, Social Security and pension benefits combined will fall at least 10% short of the income needed in retirement to support the same standard of living they enjoyed while working.
Previous reports have considered health care to be a cost that retirees factor in by "rearranging their basket of consumption" - that is, spending less on consumer goods.
CRR's study assumes that people want to spend the same amount on goods in retirement that they do now and that they consider health insurance and the added health care costs associated with growing old to be an additional expense.
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Iran Establishes Non-USD Oil & Gas Trading
The Iranian Oil Bourse, a non-U.S. dollar forum established for the trade of oil, gas and petrochemicals, is set to open for business on Kish Island on Feb. 17, according to EIN News and Iranian television.
The Bourse had been set to open during the week commemorating the anniversary of the Islamic Revolution, said Iran's Foreign Minister Davoud Danesh-Jafari, but the Internet communication breakdown delayed the launch.
The primary trade currency used by the Bourse will be the euro. The Iranian Bourse would establish a euro-based oil marker if successful.
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The Bourse had been set to open during the week commemorating the anniversary of the Islamic Revolution, said Iran's Foreign Minister Davoud Danesh-Jafari, but the Internet communication breakdown delayed the launch.
The primary trade currency used by the Bourse will be the euro. The Iranian Bourse would establish a euro-based oil marker if successful.
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Monday, February 18, 2008
Qatar Buys Credit Suisse Shares, Prime Minister Says
Qatar is buying shares in Credit Suisse Group and plans to spend as much as $15 billion on European and U.S. bank stocks over the next year, the Gulf state's prime minister said in an interview.
``We have a relation with Credit Suisse and we bought some of the stock from the market, actually, but I cannot say what percentage because still we are in the process,'' Sheikh Hamad bin Jasim bin Jaber al-Thani, who is also chief executive officer of the Qatar Investment Authority, said in an interview late yesterday in Doha.
Persian Gulf sovereign wealth funds, whose coffers are swelling from near-record oil prices, and counterparts in Asia have been snapping up stakes in banks battered by U.S. subprime mortgage losses. Citigroup Inc. received $14.5 billion from investors including Singapore and Kuwait since mid-December.
``Subprime losses are clearly not confined to U.S. banks and European banks are seeking funding,'' Giyas Gokkent, head of research at National Bank of Abu Dhabi PJSC, said in a phone interview today. ``Gulf funds have surpluses to spend and are looking for long-term appreciation. If investments help develop their domestic financial markets too, so much the better.''
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``We have a relation with Credit Suisse and we bought some of the stock from the market, actually, but I cannot say what percentage because still we are in the process,'' Sheikh Hamad bin Jasim bin Jaber al-Thani, who is also chief executive officer of the Qatar Investment Authority, said in an interview late yesterday in Doha.
Persian Gulf sovereign wealth funds, whose coffers are swelling from near-record oil prices, and counterparts in Asia have been snapping up stakes in banks battered by U.S. subprime mortgage losses. Citigroup Inc. received $14.5 billion from investors including Singapore and Kuwait since mid-December.
``Subprime losses are clearly not confined to U.S. banks and European banks are seeking funding,'' Giyas Gokkent, head of research at National Bank of Abu Dhabi PJSC, said in a phone interview today. ``Gulf funds have surpluses to spend and are looking for long-term appreciation. If investments help develop their domestic financial markets too, so much the better.''
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Time for Sovereign Wealth Rules
Imagine what would happen were a candidate for president to propose that the federal government begin buying up shares of major U.S. banks. Denunciation would be swift. Amid cries of "socialism," critics would warn of the potential for undue political interference in private economic decision making.
In 2001, Treasury Secretary Paul O'Neill told Congress, "Government has no business owning private companies." He got no arguments.
As Americans, we realize the folly of allowing our government to own our private companies, yet paradoxically, some appear far less alarmed by the prospect of another country's government doing the same.
Foreign governments, operating sovereign wealth funds, have recently been purchasing sizable stakes in U.S. companies -- particularly in the financial services sector -- and hardly a question has been asked. It is time that we start.
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In 2001, Treasury Secretary Paul O'Neill told Congress, "Government has no business owning private companies." He got no arguments.
As Americans, we realize the folly of allowing our government to own our private companies, yet paradoxically, some appear far less alarmed by the prospect of another country's government doing the same.
Foreign governments, operating sovereign wealth funds, have recently been purchasing sizable stakes in U.S. companies -- particularly in the financial services sector -- and hardly a question has been asked. It is time that we start.
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US consumer confidence has slumped to 'recession' levels
Consumer confidence in the United States has slumped to levels usually associated with the onset of a recession.
The Reuters/University of Michigan Survey of Consumers index of sentiment for this month dropped to its lowest reading since February 1992. With a 1985 base of 100, yesterday's figure of 69.6 was well below the 78.4 level reached at the end of January and was also shy of analysts' expectations.
Consumer spending accounts for around 70 per cent of the US economy and, as the world's "consumer of first and last resort" Americans' buying habits affect every major economy. American consumers spent about $9.5 trillion (£4.5 trillion) last year, while Chinese could only manage $1 trillion and the Indians $650bn. China, often cited as being "decoupled" from the US economy derives 8 per cent of its national income directly from US consumption.
American households are seeing the worst squeeze on their disposable income since 1980, with higher fuel prices, food bills and the cost of servicing their record debts proving an increasingly heavy burden. The amount Americans must spend each month on debt service, housing, medical care, food and energy rose to 66.9 per cent of their spending in December, the highest since record-keeping began in 1980, according to figures supplied by Bloomberg.
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The Reuters/University of Michigan Survey of Consumers index of sentiment for this month dropped to its lowest reading since February 1992. With a 1985 base of 100, yesterday's figure of 69.6 was well below the 78.4 level reached at the end of January and was also shy of analysts' expectations.
Consumer spending accounts for around 70 per cent of the US economy and, as the world's "consumer of first and last resort" Americans' buying habits affect every major economy. American consumers spent about $9.5 trillion (£4.5 trillion) last year, while Chinese could only manage $1 trillion and the Indians $650bn. China, often cited as being "decoupled" from the US economy derives 8 per cent of its national income directly from US consumption.
American households are seeing the worst squeeze on their disposable income since 1980, with higher fuel prices, food bills and the cost of servicing their record debts proving an increasingly heavy burden. The amount Americans must spend each month on debt service, housing, medical care, food and energy rose to 66.9 per cent of their spending in December, the highest since record-keeping began in 1980, according to figures supplied by Bloomberg.
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Friday, February 15, 2008
IMF to China: ease exchange rate controls
International Monetary Fund chief urges China to loosen valuations of yuan against the dollar in effort to address global imbalances.
The managing director of the International Monetary Fund said Friday he is urging Chinese leaders to ease exchange rate controls to address global financial imbalances and their own economic challenges.
Slower U.S. economic growth should affect China but the IMF still expects the economy to expand about 10% this year, said Dominique Strauss-Kahn. He met Thursday with Premier Wen Jiabao and other Chinese leaders.
"What I am working at is trying to explain to Chinese authorities... that it's in their own interests to have more flexible exchange rates," Strauss-Kahn said. He said that would "help to address both China's economic challenges and global imbalances."
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The managing director of the International Monetary Fund said Friday he is urging Chinese leaders to ease exchange rate controls to address global financial imbalances and their own economic challenges.
Slower U.S. economic growth should affect China but the IMF still expects the economy to expand about 10% this year, said Dominique Strauss-Kahn. He met Thursday with Premier Wen Jiabao and other Chinese leaders.
"What I am working at is trying to explain to Chinese authorities... that it's in their own interests to have more flexible exchange rates," Strauss-Kahn said. He said that would "help to address both China's economic challenges and global imbalances."
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Beating foreclosure: Who to call
Homeowners in trouble have to wade through many options to see whether they qualify for any assistance from their lender.
Delinquent borrowers face a dizzying array of options when it comes to saving their homes.
On Tuesday, a coalition of the nation's six largest lenders agreed to give seriously delinquent homeowners a month's breathing room before proceeding with foreclosure.
A day earlier, Countrywide (CFC, Fortune 500) and Acorn announced a plan to try to help subprime borrowers get back on track with their monthly payments.
These efforts come two months after the Bush Administration announced an interest rate freeze for some homeowners with subprime adjustable rate mortgages.
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Delinquent borrowers face a dizzying array of options when it comes to saving their homes.
On Tuesday, a coalition of the nation's six largest lenders agreed to give seriously delinquent homeowners a month's breathing room before proceeding with foreclosure.
A day earlier, Countrywide (CFC, Fortune 500) and Acorn announced a plan to try to help subprime borrowers get back on track with their monthly payments.
These efforts come two months after the Bush Administration announced an interest rate freeze for some homeowners with subprime adjustable rate mortgages.
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Best U.S. factory jobs in rising jeopardy
A new round of cutbacks by Detroit's automakers carries a larger message – that America's manufacturing workers are under new pressure in jobs where labor unions had once been able to command middle-class wages for assembly-line jobs.
The point was punctuated this week as General Motors announced the largest ever annual loss by a maker of automobiles. In a bid to restore profitability, GM said it would offer incentives to convince older, highly paid assembly workers to retire early. Ford and Chrysler are pursuing similar worker buyouts.
The moves signal what some analysts say is an accelerating effort to trim wages and workforces. Essentially, the old Big Three are becoming a much smaller three. The pressures facing Detroit fit a larger pattern. Many US manufacturers are facing rising pressure from foreign rivals. The good news is that US factories are becoming more competitive. The bad news is that the needed streamlining is coming at the expense of American workers.
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The point was punctuated this week as General Motors announced the largest ever annual loss by a maker of automobiles. In a bid to restore profitability, GM said it would offer incentives to convince older, highly paid assembly workers to retire early. Ford and Chrysler are pursuing similar worker buyouts.
The moves signal what some analysts say is an accelerating effort to trim wages and workforces. Essentially, the old Big Three are becoming a much smaller three. The pressures facing Detroit fit a larger pattern. Many US manufacturers are facing rising pressure from foreign rivals. The good news is that US factories are becoming more competitive. The bad news is that the needed streamlining is coming at the expense of American workers.
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Greenspan: Recession chances '50% or better'
Former Fed chairman, speaking at Houston conference, also promotes nuclear power and electric cars.
Former Federal Reserve Chairman Alan Greenspan said Thursday there's at least a 50% chance the United States will slip into recession, and that the storm clouds over the economy won't clear until home prices bottom out.
Greenspan, speaking at the Cambridge Energy Research Associates' annual energy conference in Houston, said that what may derail the economy are tightening credit markets and a potential slowdown in consumer spending sparked by defaults in the real estate market.
"We're clearly on the edge, it's 50% or better" chances the economy will slip into recession, he said.
If it weren't for the fact that business were so well-supplied with capital - thanks to the low interest rates over the last several years - he said the economy would already be in recession.
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Former Federal Reserve Chairman Alan Greenspan said Thursday there's at least a 50% chance the United States will slip into recession, and that the storm clouds over the economy won't clear until home prices bottom out.
Greenspan, speaking at the Cambridge Energy Research Associates' annual energy conference in Houston, said that what may derail the economy are tightening credit markets and a potential slowdown in consumer spending sparked by defaults in the real estate market.
"We're clearly on the edge, it's 50% or better" chances the economy will slip into recession, he said.
If it weren't for the fact that business were so well-supplied with capital - thanks to the low interest rates over the last several years - he said the economy would already be in recession.
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Where the growth is now (hint: not the U.S.)
Everybody is talking about a U.S. recession...but there are still plenty of good investment opportunities if you look at the rest of the globe.
It's easy to get depressed about the outlook for stocks if you look only at what's going on in the United States.
But any smart investor should have a portfolio that it is globally diversified. And now more than ever, there is a case to be made for broadening your investment horizon.
Even as more and more experts talk up the increased likelihood of a U.S. recession, there have been plenty of headlines that illustrate the rest of the world is still in decent economic shape. That should help both shares of large U.S. multinationals, as well as foreign firms.
TalkBack: Is now the time to buy more international stocks?
Earlier this week, Coca-Cola reported solid quarterly profits thanks largely to healthy soda sales internationally.
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It's easy to get depressed about the outlook for stocks if you look only at what's going on in the United States.
But any smart investor should have a portfolio that it is globally diversified. And now more than ever, there is a case to be made for broadening your investment horizon.
Even as more and more experts talk up the increased likelihood of a U.S. recession, there have been plenty of headlines that illustrate the rest of the world is still in decent economic shape. That should help both shares of large U.S. multinationals, as well as foreign firms.
TalkBack: Is now the time to buy more international stocks?
Earlier this week, Coca-Cola reported solid quarterly profits thanks largely to healthy soda sales internationally.
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Obama pledges to spend $210B on economy
Candidate says as president he would try to create more jobs in construction and environmental industries.
Democrat Barack Obama said Wednesday that as president he would spend $210 billion to create jobs in construction and environmental industries, as he tried to win over economically struggling voters.
Obama's investment would range over 10 years as part of two programs. The larger is $150 billion to create 5 million so-called "green collar" jobs to develop more environmentally friendly energy sources.
Sixty billion would go to a National Infrastructure Reinvestment Bank to rebuild highways, bridges, airports and other public projects. Obama estimated that could generate nearly 2 million jobs, many of them in the construction industry that's been hit by the housing crisis.
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Democrat Barack Obama said Wednesday that as president he would spend $210 billion to create jobs in construction and environmental industries, as he tried to win over economically struggling voters.
Obama's investment would range over 10 years as part of two programs. The larger is $150 billion to create 5 million so-called "green collar" jobs to develop more environmentally friendly energy sources.
Sixty billion would go to a National Infrastructure Reinvestment Bank to rebuild highways, bridges, airports and other public projects. Obama estimated that could generate nearly 2 million jobs, many of them in the construction industry that's been hit by the housing crisis.
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Thursday, February 14, 2008
1st annual trade gap drop in 6 years
Weak dollar helps bring 2007 deficit lower. December shortfall of $58.8 billion is narrower than expected.
The gap between the nation's imports and exports narrowed in December, according to a government report Thursday, leaving the gap for the year sharply lower and ending a five-year streak of record annual trade deficits.
The December gap came in at $58.8 billion, down from $63.1 billion in November. Economists surveyed by Briefing.com had forecast the gap would narrow to $61.5 billion.
A weak dollar during the year lifted exports, which allowed the 2007 trade gap to narrow by 6.2% to $711.6 billion, even as imports continued to increase due to the record price for oil imports during the year.
The average price of a barrel of imported oil hit a record $82.76 during the month, up 3.9% from November and 53.7% from year-earlier levels. The December spike in prices brought the full-year average price for oil imports to $64.27 a barrel, up 10.8% from 2006.
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The gap between the nation's imports and exports narrowed in December, according to a government report Thursday, leaving the gap for the year sharply lower and ending a five-year streak of record annual trade deficits.
The December gap came in at $58.8 billion, down from $63.1 billion in November. Economists surveyed by Briefing.com had forecast the gap would narrow to $61.5 billion.
A weak dollar during the year lifted exports, which allowed the 2007 trade gap to narrow by 6.2% to $711.6 billion, even as imports continued to increase due to the record price for oil imports during the year.
The average price of a barrel of imported oil hit a record $82.76 during the month, up 3.9% from November and 53.7% from year-earlier levels. The December spike in prices brought the full-year average price for oil imports to $64.27 a barrel, up 10.8% from 2006.
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Commerzbank subprime woes spoil 2007 record profit
Commerzbank AG saw its bill from the subprime crisis creep up towards 800-million euros (C$1.2-billion) in 2007 and warned that it could get worse, taking the shine off a record profit.
Falling provisions for bad debts helped Germany's second-biggest listed bank raise net profit 19 percent to 1.9-billion euros last year, broadly in line with what the market expected.
The lender's problems with its 1.2-billion euro portfolio of subprime-linked investments cast a shadow over the results and chief Klaus-Peter Mueller's last year with the bank before he moves into the role of non-executive chairman in May.
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Falling provisions for bad debts helped Germany's second-biggest listed bank raise net profit 19 percent to 1.9-billion euros last year, broadly in line with what the market expected.
The lender's problems with its 1.2-billion euro portfolio of subprime-linked investments cast a shadow over the results and chief Klaus-Peter Mueller's last year with the bank before he moves into the role of non-executive chairman in May.
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Asian companies eyeing US apparel buys this year
Apparel companies from Hong Kong, China and Japan are currently looking to acquire US apparel brands this year, according to executive interviews conducted by mergermarket.
Acquirers, either previously reported or cited in this article, could include listed Hong Kong-based entities Golife Concepts, Li & Fung, Lawsgroup, Bosideng International Holdings and Esprit Holdings, as well as listed Tokyo-based Fast Retailing, among others.
Potential US targets could include, according to prior reports, private New York-based apparel businesses such as Michael Kors, Anna Sui, Catherine Malandrino or Tuleh, and private Vernon, California-based AZ3 which makes clothing under the BCBG Max Azria and Herve Leger brands, as well as private San Diego-based Gordon Rush and listed Florida-based Perry Ellis, to name a few.
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Acquirers, either previously reported or cited in this article, could include listed Hong Kong-based entities Golife Concepts, Li & Fung, Lawsgroup, Bosideng International Holdings and Esprit Holdings, as well as listed Tokyo-based Fast Retailing, among others.
Potential US targets could include, according to prior reports, private New York-based apparel businesses such as Michael Kors, Anna Sui, Catherine Malandrino or Tuleh, and private Vernon, California-based AZ3 which makes clothing under the BCBG Max Azria and Herve Leger brands, as well as private San Diego-based Gordon Rush and listed Florida-based Perry Ellis, to name a few.
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Swiss bank UBS reports huge loss after subprime debacle
Swiss banking giant UBS plunged to its first-ever full-year net loss on Thursday after losing 18 billion dollars in the US subprime mortgage crisis.
Bank chairman Marcel Rohner said the losses were "unacceptable".
UBS revealed a net loss of 4.4 billion Swiss francs (4.0 billion dollars, 2.7 billion euros) in 2007, compared to a profit of 12.3 billion Swiss francs in 2006.
"We are obliged to confirm these unacceptable results," the bank's chief executive officer Marcel Rohner told a telephone conference.
"While most of our businesses continued to be very profitable, the sudden and serious deterioration in the US housing market, in combination with our large exposure in sub-prime mortgage-related securities and derivatives, has driven us into loss for the year," he said.
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Bank chairman Marcel Rohner said the losses were "unacceptable".
UBS revealed a net loss of 4.4 billion Swiss francs (4.0 billion dollars, 2.7 billion euros) in 2007, compared to a profit of 12.3 billion Swiss francs in 2006.
"We are obliged to confirm these unacceptable results," the bank's chief executive officer Marcel Rohner told a telephone conference.
"While most of our businesses continued to be very profitable, the sudden and serious deterioration in the US housing market, in combination with our large exposure in sub-prime mortgage-related securities and derivatives, has driven us into loss for the year," he said.
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Want rebate? Must file
President Bush signed the economic-stimulus package into law Wednesday, but as many as 10 million to 20 million Americans will need to file tax returns they didn't expect to file if they want to receive a rebate check, according to a rough estimate from the Internal Revenue Service.
Anyone eligible for the tax rebate must file a return to get a check. For most of the some 130 million Americans eligible for a payment, that means filing a return as normal, the IRS said in a news conference. The tax agency will figure out the rebate for you based on your 2007 return.
But some lower-income taxpayers and recipients of Social Security and veterans' benefits aren't normally required to file returns. If they want their stimulus payment this year, they'll have to send in a tax return.
The IRS said that it will work with the Social Security Administration, the Department of Veterans' Affairs and other organizations to ensure people eligible for the rebate are aware they need to file.
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Anyone eligible for the tax rebate must file a return to get a check. For most of the some 130 million Americans eligible for a payment, that means filing a return as normal, the IRS said in a news conference. The tax agency will figure out the rebate for you based on your 2007 return.
But some lower-income taxpayers and recipients of Social Security and veterans' benefits aren't normally required to file returns. If they want their stimulus payment this year, they'll have to send in a tax return.
The IRS said that it will work with the Social Security Administration, the Department of Veterans' Affairs and other organizations to ensure people eligible for the rebate are aware they need to file.
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Renewing American Industry
The U.S. Business and Industry Council has developed an excellent strategy for revitalizing our nation's industrial capacity. There is no question that America needs a national industrial policy to rebuild the manufacturing sector. Here are the highlights from the Council's Plan For American Industrial Renewal:
The United States faces a manufacturing emergency. Unless serious measures are taken soon, America will become a second-class manufacturing power, greatly diminishing its own future economic prospects. National security and flexibility in foreign affairs will be severely compromised. The international imbalances created by the manufacturing crisis will push the world into a major dollar crisis and could cause a major depression.
The Federal government has failed to combat predatory foreign trade practices aimed at undermining U.S. producers in their home market. Perversely, Washington has responded to these failures by encouraging U.S. manufacturers to supply our market from low-cost third world production platforms like Mexico and China.
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The United States faces a manufacturing emergency. Unless serious measures are taken soon, America will become a second-class manufacturing power, greatly diminishing its own future economic prospects. National security and flexibility in foreign affairs will be severely compromised. The international imbalances created by the manufacturing crisis will push the world into a major dollar crisis and could cause a major depression.
The Federal government has failed to combat predatory foreign trade practices aimed at undermining U.S. producers in their home market. Perversely, Washington has responded to these failures by encouraging U.S. manufacturers to supply our market from low-cost third world production platforms like Mexico and China.
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Wednesday, February 13, 2008
Lenders agree to slow down foreclosures
In the latest move aimed at halting a swelling and steady flow of mortgage foreclosures, on Tuesday six of the nation's largest mortgage lenders bowed to government pressure and joined forces to give all homeowners who are seriously delinquent on their loans another chance.
The lenders have agreed to freeze foreclosures for a month to give borrowers and lenders time to work out a repayment plan.
Named Project Lifeline, the initiative is a step-by-step approach for homeowners who are 90 days or more behind in their mortgage payments, a circumstance that already puts them in serious risk of losing their homes. These borrowers -- many of whom have not contacted their lender -- could begin receiving letters from them as soon as this week.
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The lenders have agreed to freeze foreclosures for a month to give borrowers and lenders time to work out a repayment plan.
Named Project Lifeline, the initiative is a step-by-step approach for homeowners who are 90 days or more behind in their mortgage payments, a circumstance that already puts them in serious risk of losing their homes. These borrowers -- many of whom have not contacted their lender -- could begin receiving letters from them as soon as this week.
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CIC gears up for $30bn drive
China's $200bn sovereign wealth fund is preparing to grant mandates of as much as $30bn to international fund managers and is expected to receive another injection of capital for its offshore investments from the country's $1,530bn in foreign exchange reserves.
China Investment Corp is about to notify shortlisted candidates from more than 100 applicants hoping to manage its investments in global equity markets and is planning to put about $4bn into a fund managed by JC Flowers, the US private equity firm, that will target ailing financial institutions.
Last week, CIC also invited international fund managers to apply to manage its global fixed-income investments. According to people involved in the application process, the fund plans to grant equity and fixed-income mandates totalling as much as $30bn, nearly half the amount it has available for all its offshore investments.
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China Investment Corp is about to notify shortlisted candidates from more than 100 applicants hoping to manage its investments in global equity markets and is planning to put about $4bn into a fund managed by JC Flowers, the US private equity firm, that will target ailing financial institutions.
Last week, CIC also invited international fund managers to apply to manage its global fixed-income investments. According to people involved in the application process, the fund plans to grant equity and fixed-income mandates totalling as much as $30bn, nearly half the amount it has available for all its offshore investments.
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Weak dollar favours US acquisitions
The weak dollar is favourable for making acquisitions in the US market, said Giorgio Zappa, managing director at Finmeccanica SpA.
In the last years, Finmeccanica has said it wants to make US acquisitions, including in defence electronics. The company has 3 bln eur available for acquisitions, it said recently.
'With a dollar so low, it is the best moment to make acquisitions in the US,' said Zappa.
'We have already thought about it before and the main reason we think about it today,' he said.
'But the interest of the group is to acquire companies which increase value-added and strategic market positioning,' he said.
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In the last years, Finmeccanica has said it wants to make US acquisitions, including in defence electronics. The company has 3 bln eur available for acquisitions, it said recently.
'With a dollar so low, it is the best moment to make acquisitions in the US,' said Zappa.
'We have already thought about it before and the main reason we think about it today,' he said.
'But the interest of the group is to acquire companies which increase value-added and strategic market positioning,' he said.
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Rust and Sun Belt cities lead '07 foreclosures
Detroit, Stockton and Las Vegas are top activity centers for troubled homeowners, according to a new study.
Rust Belt and Sun Belt cities led the nation in metro-area foreclosure rates for 2007, according to a new report released Wednesday.
Detroit led the list with nearly 5% of its households entering some stage of foreclosures, which is 4.8 times the national average, according RealtyTrac, an online marketplace for foreclosure properties.
Of the 100 largest U.S. cities surveyed by RealtyTrac, 86 reported higher foreclosure rates.
Separately, a RealtyTrac spokeswoman told CNNMoney.com that the number of homes that were repossessed, or taken back by the bank, jumped 50% nationwide last year to 404,849 from 268,532 in 2006.
After Detroit, the city with the second highest foreclosure rate was Stockton, Calif., with 4.8% of its households experiencing some foreclosure action, followed by Las Vegas, where 4.2% of households were hit with foreclosure.
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Rust Belt and Sun Belt cities led the nation in metro-area foreclosure rates for 2007, according to a new report released Wednesday.
Detroit led the list with nearly 5% of its households entering some stage of foreclosures, which is 4.8 times the national average, according RealtyTrac, an online marketplace for foreclosure properties.
Of the 100 largest U.S. cities surveyed by RealtyTrac, 86 reported higher foreclosure rates.
Separately, a RealtyTrac spokeswoman told CNNMoney.com that the number of homes that were repossessed, or taken back by the bank, jumped 50% nationwide last year to 404,849 from 268,532 in 2006.
After Detroit, the city with the second highest foreclosure rate was Stockton, Calif., with 4.8% of its households experiencing some foreclosure action, followed by Las Vegas, where 4.2% of households were hit with foreclosure.
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Budget deficit more than doubles
Treasury Department projects total deficit for 2008 at $410 billion, near all-time high.
The federal budget deficit is running at a pace that is more than double last year's imbalance through the first four months of the budget year.
In its monthly review of the government's finances, the Treasury Department said Tuesday that the budget was in surplus in January, but totals $87.7 billion so far this budget year, double the $42.2 billion imbalance recorded during the same period in 2007. The new budget year started last Oct. 1.
The Bush administration sent its final budget request to Congress last week, projecting that the deficit for all of 2008 will total $410 billion, very close to the all-time high in dollar terms of $413 billion in 2004.
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The federal budget deficit is running at a pace that is more than double last year's imbalance through the first four months of the budget year.
In its monthly review of the government's finances, the Treasury Department said Tuesday that the budget was in surplus in January, but totals $87.7 billion so far this budget year, double the $42.2 billion imbalance recorded during the same period in 2007. The new budget year started last Oct. 1.
The Bush administration sent its final budget request to Congress last week, projecting that the deficit for all of 2008 will total $410 billion, very close to the all-time high in dollar terms of $413 billion in 2004.
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America for sale
It's not just Wall Street bailouts. Foreign ownership of U.S. assets is accelerating - and that's a worrisome trend.
The big foreign-money purchases of stakes in Citigroup, Merrill Lynch, and Morgan Stanley are merely a hint of what's ahead in 2008. Foreign buyers, such as sovereign wealth funds from countries like Kuwait and Singapore, will continue to make headlines by grabbing major U.S. assets this year, and the trend is much broader than investments in Wall Street firms that need a capital infusion. What's important to understand is why this is happening - the reasons go beyond what most people realize - and why it may be even more worrisome than it seems.
Such deals were hot even before the bank bailouts. Foreign buyers set a record last year by purchasing $414 billion of U.S. assets - even more than they bought in the wonder year of 2000. The usual explanation is that the dollar was cheap, which was certainly an important factor. But more had to be going on. Many of the biggest deals were done by Asian or Middle Eastern buyers who already hold much of their wealth in dollars.
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The big foreign-money purchases of stakes in Citigroup, Merrill Lynch, and Morgan Stanley are merely a hint of what's ahead in 2008. Foreign buyers, such as sovereign wealth funds from countries like Kuwait and Singapore, will continue to make headlines by grabbing major U.S. assets this year, and the trend is much broader than investments in Wall Street firms that need a capital infusion. What's important to understand is why this is happening - the reasons go beyond what most people realize - and why it may be even more worrisome than it seems.
Such deals were hot even before the bank bailouts. Foreign buyers set a record last year by purchasing $414 billion of U.S. assets - even more than they bought in the wonder year of 2000. The usual explanation is that the dollar was cheap, which was certainly an important factor. But more had to be going on. Many of the biggest deals were done by Asian or Middle Eastern buyers who already hold much of their wealth in dollars.
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OPEC May Drop Dollar for Euro
As I've stated previously, for over 3 decades now, U.S. Oil pricing agreements with OPEC have provided THE foundation for the US dollar's elite status in the world and oil replaced gold (after being dropped by Nixon in 1971) as the backing for the World’s Reserve Currency.
We Americans, however, were never satisfied with just having a good thing, as we wanted our cake and needed to eat it too, so we racked up enormous/un-payable debts to pay for lots of guns and butter, sold toxic securitized AAA rated garbage to our best friends, family and business partners, squandered international goodwill through inept/arrogant foreign policy, and as of late, we’ve thrown all caution and common sense into the wind and are now vigorously trying to hyper-inflate our way out of this current deflationary banking/financial crisis.
Well it was great while it lasted, but the gig is nearly up.
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We Americans, however, were never satisfied with just having a good thing, as we wanted our cake and needed to eat it too, so we racked up enormous/un-payable debts to pay for lots of guns and butter, sold toxic securitized AAA rated garbage to our best friends, family and business partners, squandered international goodwill through inept/arrogant foreign policy, and as of late, we’ve thrown all caution and common sense into the wind and are now vigorously trying to hyper-inflate our way out of this current deflationary banking/financial crisis.
Well it was great while it lasted, but the gig is nearly up.
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Tuesday, February 12, 2008
G.M. Reports Quarterly Loss of $722 Million
General Motors reported a $722 million fourth-quarter loss on Tuesday and offered more buyouts to all 74,000 of its unionized employees in another bid to keep its turnaround from stalling.
The loss translated into $1.28 a share, compared with a profit of $950 million, or $1.68 a share, in the period a year earlier. The swing was attributed to a drastically slowing vehicle market and big losses at its finance arm, the General Motors Acceptance Corporation.
Fourth-quarter revenue was $47.1 billion, down from $50.8 billion in 2006, because the company has since sold 51 percent of G.M.A.C. and now only counts revenue from its remaining stake. Automotive revenue was $46.7 billion in the quarter, up $3 billion from a year ago.
Excluding what G.M. said were one-time items, profit was $46 million, or 8 cents a share, compared with an adjusted profit of $180 million, or 32 cents a share, in the period a year earlier.
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The loss translated into $1.28 a share, compared with a profit of $950 million, or $1.68 a share, in the period a year earlier. The swing was attributed to a drastically slowing vehicle market and big losses at its finance arm, the General Motors Acceptance Corporation.
Fourth-quarter revenue was $47.1 billion, down from $50.8 billion in 2006, because the company has since sold 51 percent of G.M.A.C. and now only counts revenue from its remaining stake. Automotive revenue was $46.7 billion in the quarter, up $3 billion from a year ago.
Excluding what G.M. said were one-time items, profit was $46 million, or 8 cents a share, compared with an adjusted profit of $180 million, or 32 cents a share, in the period a year earlier.
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$30B Fed auction aims to ease credit crisis
Following aggressive rate cuts, the Federal Reserve provided $30 billion to commercial banks in the fifth such auction since December.
The Federal Reserve, seeking to combat the effects of a serious credit crisis, said Tuesday it had auctioned $30 billion in funds to commercial banks at an interest rate of 3.010%.
It marked the fifth in a series of auctions that so far have pumped $130 billion in money into the nation's banking system in an effort to provide cash-strapped banks with extra reserves. The Fed's hope is that the increased resources will keep banks lending and prevent a severe credit
squeeze from making the current economic slowdown worse.
The latest auction results showed that the Fed's effort is having success. The 3.010% interest rate is the lowest rate for any of the five auctions held so far. It was slightly below the previous auction where the interest rate had been 3.123%.
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The Federal Reserve, seeking to combat the effects of a serious credit crisis, said Tuesday it had auctioned $30 billion in funds to commercial banks at an interest rate of 3.010%.
It marked the fifth in a series of auctions that so far have pumped $130 billion in money into the nation's banking system in an effort to provide cash-strapped banks with extra reserves. The Fed's hope is that the increased resources will keep banks lending and prevent a severe credit
squeeze from making the current economic slowdown worse.
The latest auction results showed that the Fed's effort is having success. The 3.010% interest rate is the lowest rate for any of the five auctions held so far. It was slightly below the previous auction where the interest rate had been 3.123%.
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Mortgage Crisis Spreads Past Subprime Loans
The credit crisis is no longer just a subprime mortgage problem.
As home prices fall and banks tighten lending standards, people with good, or prime, credit histories are falling behind on their payments for home loans, auto loans and credit cards at a quickening pace, according to industry data and economists.
The rise in prime delinquencies, while less severe than the one in the subprime market, nonetheless poses a threat to the battered housing market and weakening economy, which some specialists say is in a recession or headed for one.
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As home prices fall and banks tighten lending standards, people with good, or prime, credit histories are falling behind on their payments for home loans, auto loans and credit cards at a quickening pace, according to industry data and economists.
The rise in prime delinquencies, while less severe than the one in the subprime market, nonetheless poses a threat to the battered housing market and weakening economy, which some specialists say is in a recession or headed for one.
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Vote on world's next megabubble
'Peak Oil' vs. 'alternative energy' vs. 9 billion people in 2050 spells war
Hollywood tag lines fit Exxon Mobil's $40 billion profit as well as the movies: "There will be Blood. There will be Greed. There will be Vengeance."
Our "war of civilizations" is not of theologies but a primal battle to control basic resources essential to survival. Yes, there is blood ... and oil ... and greed ... and vengeance ... and wars for survival.
At the highest level, this war's being waged in the elite towers of Wall Street and London and Dubai and Singapore: Quants in Turnbull & Asher shirts trading commodity derivatives, gunning for megabonuses, soaring high, like stealth bombers detached from the bloody fighting 40,000 feet below.
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Hollywood tag lines fit Exxon Mobil's $40 billion profit as well as the movies: "There will be Blood. There will be Greed. There will be Vengeance."
Our "war of civilizations" is not of theologies but a primal battle to control basic resources essential to survival. Yes, there is blood ... and oil ... and greed ... and vengeance ... and wars for survival.
At the highest level, this war's being waged in the elite towers of Wall Street and London and Dubai and Singapore: Quants in Turnbull & Asher shirts trading commodity derivatives, gunning for megabonuses, soaring high, like stealth bombers detached from the bloody fighting 40,000 feet below.
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GM offers buyouts to 74,000
Auto giant aims to replace much of U.S. workforce with lower-paid new hires, dangling $140,000 buyouts to UAW members to stem North American losses.
In an effort to shave ongoing losses, General Motors offered lucrative buyouts Tuesday to 74,000 employees - its entire U.S. hourly workforce.
The nation's largest automaker announced the latest round of buyouts as it reported another loss on its core auto operations in the fourth quarter, which combined with charges taken earlier in the year left GM (GM, Fortune 500) with a company-record $38.7 billion net loss for 2007.
To try to stem automotive losses that have dogged the company since 2005, the company is making a range of offers, up to cash payments of $140,000 to the remaining 74,000 GM workers represented by the United Auto Workers union.
The goal is not to reduce headcount but rather to bring in new workers at a lower cost.
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In an effort to shave ongoing losses, General Motors offered lucrative buyouts Tuesday to 74,000 employees - its entire U.S. hourly workforce.
The nation's largest automaker announced the latest round of buyouts as it reported another loss on its core auto operations in the fourth quarter, which combined with charges taken earlier in the year left GM (GM, Fortune 500) with a company-record $38.7 billion net loss for 2007.
To try to stem automotive losses that have dogged the company since 2005, the company is making a range of offers, up to cash payments of $140,000 to the remaining 74,000 GM workers represented by the United Auto Workers union.
The goal is not to reduce headcount but rather to bring in new workers at a lower cost.
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The Mother of All Rip-offs “Get Ready For A Real Hosing”
Low interest credit and “financial innovation” are a deadly-combo. They've knocked the banking system for a loop, clogged the credit markets with billions of dollars of subprime sludge, and left the real estate market sprawling on the canvas. Still---even though $2 trillion of capitalization has been wiped-out from falling home prices; and even though the financial system is in a terminal state of paralysis---no one has been held accountable. In fact, not one trader, mortgage lender, rating's-agency official, fund manager, or investment banker has been indicted or charged with criminal wrongdoing.
NOT ONE. The system operates without rules or guard rails. It's the Wild West!
The system is so thoroughly marinated in corruption, that every trace of regulatory-oversight has been removed. The SEC is little more than a public relations sham loaded with business-friendly sycophants who try to sustain the publics confidence while kow-towing to their corporate paymasters. It's a complete hoax. Last week, the Chairman of the SEC, Christopher Cox, gave a speech at the Ronald Reagan Building. He said:
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NOT ONE. The system operates without rules or guard rails. It's the Wild West!
The system is so thoroughly marinated in corruption, that every trace of regulatory-oversight has been removed. The SEC is little more than a public relations sham loaded with business-friendly sycophants who try to sustain the publics confidence while kow-towing to their corporate paymasters. It's a complete hoax. Last week, the Chairman of the SEC, Christopher Cox, gave a speech at the Ronald Reagan Building. He said:
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Monday, February 11, 2008
Energy: The $22 trillion question
Securing supplies, the boom in Wall Street interest, and what $100 oil means for the economy are all up for discussion at upcoming energy conference.
How safe are our oil supplies? Where will the new supplies come from? Have high oil prices killed the economy? Are speculative investors responsible for the price runup?
These are all central - and contentious - questions in the world of oil. And they're all up for debate as leading members of the oil and energy industry gather in Houston, Texas for Cambridge Energy Research Associates' (CERA) annual energy conference.
Executives from ExxonMobil (XOM, Fortune 500), Chevron (CVX, Fortune 500), ConocoPhillips (COP, Fortune 500), Citigroup (C, Fortune 500) and Goldman Sachs (GS, Fortune 500), among others, will join United Nations officials, environmentalist, former Federal Reserve chairman Alan Greenspan and a host of other experts for a series of discussions beginning next week.
As the U.S. economy teeters on recession, the impact of $100 oil is being called into question.
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How safe are our oil supplies? Where will the new supplies come from? Have high oil prices killed the economy? Are speculative investors responsible for the price runup?
These are all central - and contentious - questions in the world of oil. And they're all up for debate as leading members of the oil and energy industry gather in Houston, Texas for Cambridge Energy Research Associates' (CERA) annual energy conference.
Executives from ExxonMobil (XOM, Fortune 500), Chevron (CVX, Fortune 500), ConocoPhillips (COP, Fortune 500), Citigroup (C, Fortune 500) and Goldman Sachs (GS, Fortune 500), among others, will join United Nations officials, environmentalist, former Federal Reserve chairman Alan Greenspan and a host of other experts for a series of discussions beginning next week.
As the U.S. economy teeters on recession, the impact of $100 oil is being called into question.
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A Plan For American Industrial Renewal
The U.S. Business and Industry Council has developed an excellent strategy for revitalizing our nation's industrial capacity. There is no question that America needs a national industrial policy to rebuild the manufacturing sector. Here are the highlights from the Council's Plan For American Industrial Renewal:
The United States faces a manufacturing emergency. Unless serious measures are taken soon, America willbecome a second-class manufacturing power, greatly diminishing its own future economic prospects. National security and flexibility in foreign affairs will be severely compromised. The international imbalances created by the manufacturing crisis will push the world into a major dollar crisis and could cause a major depression.
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The United States faces a manufacturing emergency. Unless serious measures are taken soon, America willbecome a second-class manufacturing power, greatly diminishing its own future economic prospects. National security and flexibility in foreign affairs will be severely compromised. The international imbalances created by the manufacturing crisis will push the world into a major dollar crisis and could cause a major depression.
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Economic woes may spread beyond U.S., Group of 7 warns
Finance leaders from the world's wealthiest nations warned on Saturday that global economic woes could get worse from the slump in the U.S. housing market but offered few specific remedies.
In a communiqué issued after meetings in Tokyo, the finance ministers and central bank chiefs of the Group of Seven industrialized nations offered a more pessimistic view of the global economy than four months ago, after their last meeting. At the same time, they also said global economic fundamentals remained strong, and the U.S. economy, the world's largest, was likely to avoid recession.
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In a communiqué issued after meetings in Tokyo, the finance ministers and central bank chiefs of the Group of Seven industrialized nations offered a more pessimistic view of the global economy than four months ago, after their last meeting. At the same time, they also said global economic fundamentals remained strong, and the U.S. economy, the world's largest, was likely to avoid recession.
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Saving us from our debt
The economic slowdown has exposed the extremes that have defined Americans for years: too much debt, chronic spending and little savings.
The U.S. economy depends a great deal on consumer spending. Repeat after me: Consumption accounts for 70 percent of the $14.08 trillion U.S. economy.
To buy what we want, Americans have taken on massive amounts of debt. We have done so even as our savings have evaporated. No, check that: Even as we have blown it all.
Conventional wisdom says that when money gets tight in the household budget, you tighten your belt. But many of us haven't done that. We've taken on more debt. We've charged things on credit cards. We've refinanced the mortgage - two, three, four times. All in the name of delaying that payback.
So along comes the president and Congress with an economic stimulus check for you. What the politicians, economists and Wall Street want you to do is to run to Best Buy (better yet, drive your Hummer there) and buy that plasma TV. Or hit the mall to buy those spring fashions at Macy's.
By doing that, you'll be priming the U.S. economy, helping it pull up from the slide that's been occurring.
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The U.S. economy depends a great deal on consumer spending. Repeat after me: Consumption accounts for 70 percent of the $14.08 trillion U.S. economy.
To buy what we want, Americans have taken on massive amounts of debt. We have done so even as our savings have evaporated. No, check that: Even as we have blown it all.
Conventional wisdom says that when money gets tight in the household budget, you tighten your belt. But many of us haven't done that. We've taken on more debt. We've charged things on credit cards. We've refinanced the mortgage - two, three, four times. All in the name of delaying that payback.
So along comes the president and Congress with an economic stimulus check for you. What the politicians, economists and Wall Street want you to do is to run to Best Buy (better yet, drive your Hummer there) and buy that plasma TV. Or hit the mall to buy those spring fashions at Macy's.
By doing that, you'll be priming the U.S. economy, helping it pull up from the slide that's been occurring.
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Survival strategies: Recession-proof your life
The economy and the markets may be in for a hard fall. Here's how you and your family can land safely.
Falling home values, rising unemployment, declining confidence among consumers and businesses and, lately, a swooning stock market. We may or may not be entering an official recession (defined as two consecutive quarters of shrinking economic activity), but either way 2008 has gotten off to a scarier start than most anyone predicted.
To lower your anxiety level and devise your own coping strategies - all without resorting to prescription medications - read this special report. You'll not only learn how the economy and markets might perform if we're in a real downturn (Breathe. Remember that knowledge is the key to overcoming fear.), you'll also get timely advice on what to do about your finances, investments, job and home. The economy and the markets will bring what they bring. Keep reading and learn how to take it all in stride.
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Falling home values, rising unemployment, declining confidence among consumers and businesses and, lately, a swooning stock market. We may or may not be entering an official recession (defined as two consecutive quarters of shrinking economic activity), but either way 2008 has gotten off to a scarier start than most anyone predicted.
To lower your anxiety level and devise your own coping strategies - all without resorting to prescription medications - read this special report. You'll not only learn how the economy and markets might perform if we're in a real downturn (Breathe. Remember that knowledge is the key to overcoming fear.), you'll also get timely advice on what to do about your finances, investments, job and home. The economy and the markets will bring what they bring. Keep reading and learn how to take it all in stride.
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Watch the Federal Debt Rise, Moment by Moment.
Further down on this page, I offer more evidence, including the estimate regarding the size of the off-budget debt (Social Security, Medicare, Federal pensions), which is approaching $72 trillion. But first, watch the video of David Walker, Comptroller General of the United States, which aired on CBS's "Sixty Minutes" on January 16, 2008.
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Friday, February 8, 2008
US lawmakers want tougher stance on sovereign funds
U.S. lawmakers called on Thursday for tough scrutiny of investment in the United States by funds owned by foreign governments, but the White House and some experts warned that overzealous regulation could scare away much needed capital.
U.S. debate over sovereign wealth funds has intensified in the wake of infusions of billions of dollars from state-owned funds from China, Kuwait and Singapore to rescue major Western banks ailing from the subprime mortgage crisis.
Concerns have been stoked by the emergence of sovereign wealth funds owned by countries such as China and Russia, which critics say invest with strategic or political motives that make them different from the pension or investment pools of countries such as Norway or Canada.
"Instead of rescuing our economy, these investments only deepen America's insecurity, forcing the U.S. further into debt to foreign interests," Ohio Democratic Rep. Marcy Kaptur told the U.S.-China Economic and Security Review Commission.
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U.S. debate over sovereign wealth funds has intensified in the wake of infusions of billions of dollars from state-owned funds from China, Kuwait and Singapore to rescue major Western banks ailing from the subprime mortgage crisis.
Concerns have been stoked by the emergence of sovereign wealth funds owned by countries such as China and Russia, which critics say invest with strategic or political motives that make them different from the pension or investment pools of countries such as Norway or Canada.
"Instead of rescuing our economy, these investments only deepen America's insecurity, forcing the U.S. further into debt to foreign interests," Ohio Democratic Rep. Marcy Kaptur told the U.S.-China Economic and Security Review Commission.
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China Sovereign Fund May Take U.S. Partner
To avoid being shut out by protectionist sentiment from the bargain sale under way in the Western banking sector, China Investment Corporation may go shopping hand in hand with U.S. private-equity fund JC Flowers.
The Chinese sovereign wealth fund is reportedly close to sealing an agreement with New York-based JC Flowers to set up a $4 billion new fund to invest in ailing financial institutions.
With $200 billion in registered capital, CIC has already left some footprints in Western financial turf. The fund plowed $3 billion into the buyout fund Blackstone (nyse: BX - news - people ) last summer and injected $5 billion into investment bank Morgan Stanley (nyse: MS - news - people ) in the fall. The deals have raised the hackles of Western bankers and politicians, arousing anxiety over the threat that China could gain a dangerous level of sway in the U.S economy.
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The Chinese sovereign wealth fund is reportedly close to sealing an agreement with New York-based JC Flowers to set up a $4 billion new fund to invest in ailing financial institutions.
With $200 billion in registered capital, CIC has already left some footprints in Western financial turf. The fund plowed $3 billion into the buyout fund Blackstone (nyse: BX - news - people ) last summer and injected $5 billion into investment bank Morgan Stanley (nyse: MS - news - people ) in the fall. The deals have raised the hackles of Western bankers and politicians, arousing anxiety over the threat that China could gain a dangerous level of sway in the U.S economy.
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Consumer confidence sinks lower
RBC Cash Index shows consumer confidence hurt by deteriorating jobs market, recession worries.
People's confidence in the economy sank even lower amid heightened fears about shrinking job opportunities and the possibility the country is falling into recession.
According to the RBC Cash Index, confidence dropped to a mark of 48.5 in early February, from 56.3 last month. The new reading was the worst since the index began in 2002 and surpassed the previous low reached in January.
The continued erosion in confidence comes despite the fact that Federal Reserve Chairman Ben Bernanke has gotten much more forceful in cutting interest rates to induce people to buy more and bolster the economy. The Fed slashed interest rates twice over the span of just eight days in January - its most aggressive rate reductions in two decades.
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People's confidence in the economy sank even lower amid heightened fears about shrinking job opportunities and the possibility the country is falling into recession.
According to the RBC Cash Index, confidence dropped to a mark of 48.5 in early February, from 56.3 last month. The new reading was the worst since the index began in 2002 and surpassed the previous low reached in January.
The continued erosion in confidence comes despite the fact that Federal Reserve Chairman Ben Bernanke has gotten much more forceful in cutting interest rates to induce people to buy more and bolster the economy. The Fed slashed interest rates twice over the span of just eight days in January - its most aggressive rate reductions in two decades.
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Buffett: Bank woes are "poetic justice"
The woes in the U.S. financial sector are "poetic justice" for bankers who designed and sold complex investments that have since gone sour, billionaire investor Warren Buffett said on Wednesday.
The head of the Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research) (BRKb.N: Quote, Profile, Research) group of companies also played down worries about a credit crunch by saying that recent interest rate cuts mean low-cost funds are readily available.
But he warned that the U.S. dollar will continue to slide unless the country can rein in its yawning trade deficit -- the "biggest factor" behind the decline. Still, he said, the U.S. economy will "do very well over time."
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The head of the Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research) (BRKb.N: Quote, Profile, Research) group of companies also played down worries about a credit crunch by saying that recent interest rate cuts mean low-cost funds are readily available.
But he warned that the U.S. dollar will continue to slide unless the country can rein in its yawning trade deficit -- the "biggest factor" behind the decline. Still, he said, the U.S. economy will "do very well over time."
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Thursday, February 7, 2008
Stimulus plan hits a Republican wall in the Senate
The proposed economic stimulus package, with an additional $44 billion in payouts, falls short in the Senate.
The fate of $600-$1,200 rebate checks for more than 100 million Americans is in limbo after Senate Democrats failed Wednesday to add $44 billion in help for the elderly, disabled veterans, the unemployed and big business to the House-passed economic aid package.
Republicans banded together to block the $205 billion plan from advancing Wednesday, leaving Democrats with a difficult choice either to quickly accept a House bill they have said is inadequate or risk being blamed for delaying a measure designed as a swift shot in the arm for the lagging economy.
The tally was 58-41 to end debate on the Senate measure, just short of the 60 votes Democrats would have needed to scale procedural hurdles and move the bill to a final vote. In a suspenseful showdown vote that capped days of partisan infighting and procedural jockeying, eight Republicans - four of them up for re-election this year - joined Democrats to back the plan, bucking GOP leaders and President Bush, who objected to the costly add-ons.
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The fate of $600-$1,200 rebate checks for more than 100 million Americans is in limbo after Senate Democrats failed Wednesday to add $44 billion in help for the elderly, disabled veterans, the unemployed and big business to the House-passed economic aid package.
Republicans banded together to block the $205 billion plan from advancing Wednesday, leaving Democrats with a difficult choice either to quickly accept a House bill they have said is inadequate or risk being blamed for delaying a measure designed as a swift shot in the arm for the lagging economy.
The tally was 58-41 to end debate on the Senate measure, just short of the 60 votes Democrats would have needed to scale procedural hurdles and move the bill to a final vote. In a suspenseful showdown vote that capped days of partisan infighting and procedural jockeying, eight Republicans - four of them up for re-election this year - joined Democrats to back the plan, bucking GOP leaders and President Bush, who objected to the costly add-ons.
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China's 'investments' a threat to U.S.
Several congressional Democrats and academics on Thursday will warn that investment by China's government-run funds carries national security risks.
Sens. Evan Bayh, D-Ind., James Webb, D-Va., and Sherrod Brown, D-Ohio, as well as Rep. Marcy Kaptur, D-Ohio, will testify before the U.S.-China Economic and Security Review Commission, a congressional advisory panel, beginning at 9:00 am.
The bipartisan commission, whose members are appointed by the White House and congressional leaders, is holding a full-day hearing on the national security implications of the funds, known as sovereign wealth funds.
Sovereign wealth funds from Middle Eastern and Asian countries, including China, have taken a much higher profile in recent months after investing almost $30 billion in several ailing financial services firms, including Citigroup Inc. and Merrill Lynch & Co. Norway, Russia, Canada and the state of Alaska also run similar funds.
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Sens. Evan Bayh, D-Ind., James Webb, D-Va., and Sherrod Brown, D-Ohio, as well as Rep. Marcy Kaptur, D-Ohio, will testify before the U.S.-China Economic and Security Review Commission, a congressional advisory panel, beginning at 9:00 am.
The bipartisan commission, whose members are appointed by the White House and congressional leaders, is holding a full-day hearing on the national security implications of the funds, known as sovereign wealth funds.
Sovereign wealth funds from Middle Eastern and Asian countries, including China, have taken a much higher profile in recent months after investing almost $30 billion in several ailing financial services firms, including Citigroup Inc. and Merrill Lynch & Co. Norway, Russia, Canada and the state of Alaska also run similar funds.
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Pending Home Resales in U.S. Fell 1.5% in December
The number of Americans signing contracts to buy previously owned homes fell in December for a second straight month, signaling the worst housing slump in 25 years will persist well into 2008.
The National Association of Realtors' index of signed purchase agreements decreased 1.5 percent to 85.9, the group said today. The drop follows a revised 3 percent decline for November that was larger than previously reported.
Today's report reinforces concern that the housing recession will linger as foreclosures add to a glut of unsold homes. The housing slump is weighing on the job market and consumer spending, putting pressure on Federal Reserve policy makers to lowering interest rates further to keep the economy out of a recession.
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The National Association of Realtors' index of signed purchase agreements decreased 1.5 percent to 85.9, the group said today. The drop follows a revised 3 percent decline for November that was larger than previously reported.
Today's report reinforces concern that the housing recession will linger as foreclosures add to a glut of unsold homes. The housing slump is weighing on the job market and consumer spending, putting pressure on Federal Reserve policy makers to lowering interest rates further to keep the economy out of a recession.
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Mortgage servicers helped 545,000 subprime homeowners in second half of 2007
U.S. mortgage servicers helped 545,000 subprime borrowers stay in their homes in the second half of last year by modifying loans or setting up repayment plans, according to a revised industry survey.
Hope Now, a Washington, D.C.-based coalition of mortgage servicers, trade groups and credit counselors, said the report released Wednesday updates figures announced last month to include December data. The group said in January that servicers had helped 370,000 subprime borrowers in the same time period.
"The message is that as the year progressed, more and more borrowers were being helped either through repayment plans or modifications," Bill Longbrake, the Financial Services Roundtable's senior policy adviser and the report's author, said in a telephone interview.
Federal bank regulators in recent weeks have amplified calls for the mortgage industry to modify more loans to stem foreclosures and keep struggling borrowers from losing their homes in the subprime crisis and the worst housing slump in a quarter century.
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Hope Now, a Washington, D.C.-based coalition of mortgage servicers, trade groups and credit counselors, said the report released Wednesday updates figures announced last month to include December data. The group said in January that servicers had helped 370,000 subprime borrowers in the same time period.
"The message is that as the year progressed, more and more borrowers were being helped either through repayment plans or modifications," Bill Longbrake, the Financial Services Roundtable's senior policy adviser and the report's author, said in a telephone interview.
Federal bank regulators in recent weeks have amplified calls for the mortgage industry to modify more loans to stem foreclosures and keep struggling borrowers from losing their homes in the subprime crisis and the worst housing slump in a quarter century.
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"Euros Accepted" signs pop up in New York City
In the latest example that the U.S. dollar just ain't what it used to be, some shops in New York City have begun accepting euros and other foreign currency as payment for merchandise.
"We had decided that money is money and we'll take it and just do the exchange whenever we can with our bank," Robert Chu, owner of East Village Wines, told Reuters television.
The increasingly weak U.S. dollar, once considered the king among currencies, has brought waves of European tourists to New York with money to burn and looking to take advantage of hugely favorable exchange rates.
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"We had decided that money is money and we'll take it and just do the exchange whenever we can with our bank," Robert Chu, owner of East Village Wines, told Reuters television.
The increasingly weak U.S. dollar, once considered the king among currencies, has brought waves of European tourists to New York with money to burn and looking to take advantage of hugely favorable exchange rates.
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Wal-Mart's distress signal
The world's largest retailer leads a parade of sales misses in January, indicating trouble in the U.S. economy.
U.S. retailers are on track to report their slowest monthly sales growth in five years, which would further cement fears that American consumers are buckling under the weight of a slowing economy.
Leading the way is No. 1 retailer Wal-Mart Stores Inc., (WMT, Fortune 500) which on Thursday reported a big miss in its January same-store sales, or sales at stores open at least a year. Same-store sales is a key measure of performance in the retail industry.
Wal-Mart partly blamed its soft sales on poor gift card redemptions, but one retail analyst wasn't buying that explanation.
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U.S. retailers are on track to report their slowest monthly sales growth in five years, which would further cement fears that American consumers are buckling under the weight of a slowing economy.
Leading the way is No. 1 retailer Wal-Mart Stores Inc., (WMT, Fortune 500) which on Thursday reported a big miss in its January same-store sales, or sales at stores open at least a year. Same-store sales is a key measure of performance in the retail industry.
Wal-Mart partly blamed its soft sales on poor gift card redemptions, but one retail analyst wasn't buying that explanation.
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Wednesday, February 6, 2008
Vote near in Senate showdown over economy
Senate Democrats want $200 billion stimulus plan. House version would cost $150 billion. Key issues include aid to seniors and unemployed.
Amid growing fears that a recession is imminent, the Senate is poised for a showdown over politically contentious proposals intended to spur the economy.
The Senate is debating changes to a bipartisan bill that was brokered by the Bush administration and House leaders. It was approved overwhelmingly by the House late last month.
A vote could come as early as Wednesday afternoon.
The goal of the legislation is to stimulate the flagging economy by putting cash in the hands of consumers while giving businesses financial incentives to invest in plants and equipment and create jobs.
The House bill brought out an unusual display of cooperation between Republicans and Democrats. But the Senate debate, as many observers had predicted, has gotten heated. The front-running White House hopefuls - Democratic Sens. Hillary Clinton and Barack Obama and Republican Sen. John McCain - are all expected to cast votes.
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Amid growing fears that a recession is imminent, the Senate is poised for a showdown over politically contentious proposals intended to spur the economy.
The Senate is debating changes to a bipartisan bill that was brokered by the Bush administration and House leaders. It was approved overwhelmingly by the House late last month.
A vote could come as early as Wednesday afternoon.
The goal of the legislation is to stimulate the flagging economy by putting cash in the hands of consumers while giving businesses financial incentives to invest in plants and equipment and create jobs.
The House bill brought out an unusual display of cooperation between Republicans and Democrats. But the Senate debate, as many observers had predicted, has gotten heated. The front-running White House hopefuls - Democratic Sens. Hillary Clinton and Barack Obama and Republican Sen. John McCain - are all expected to cast votes.
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Study: Rebates to be applied to debts
Consumer survey says that many Americans would use tax rebate funds from a Washington stimulus package to help repay what they owe.
Americans who would receive a tax rebate under Washington's proposed economic stimulus legislation are most likely to use their rebate money to pay down debt, according to a consumer survey.
The UBS Securities-commissioned survey released by the International Council of Shopping Centers, Inc. found that 43% of the 1,000 surveyed Americans would pay off debt, while 26% said they would save the money and only 24% said they would spend it.
"Consumers see this tax rebate program similar to earlier ones and will act in a similar fashion using the lion's share of the rebate money for debt relief," said Michael P. Niemira, chief economist and director of research for ICSC in a statement.
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Americans who would receive a tax rebate under Washington's proposed economic stimulus legislation are most likely to use their rebate money to pay down debt, according to a consumer survey.
The UBS Securities-commissioned survey released by the International Council of Shopping Centers, Inc. found that 43% of the 1,000 surveyed Americans would pay off debt, while 26% said they would save the money and only 24% said they would spend it.
"Consumers see this tax rebate program similar to earlier ones and will act in a similar fashion using the lion's share of the rebate money for debt relief," said Michael P. Niemira, chief economist and director of research for ICSC in a statement.
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Mindteck acquires U.S. firm for $21 mln
Software firm Mindteck (India) Ltd on Wednesday said it had acquired U.S.-based Infotech Consulting for $21 million.
Software services firm Infotech had estimated annual revenues of $31 million as on December 31, 2007 and employs more than 250 people, Mindteck said in a statement.
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Software services firm Infotech had estimated annual revenues of $31 million as on December 31, 2007 and employs more than 250 people, Mindteck said in a statement.
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Recession is here - economists
A weak report about the services sector has caused some experts to declare that the economy has already entered downturn.
A growing number of top economists believe that the U.S. economy has now toppled into recession.
Alarm bells were set off Tuesday by a grim report on service businesses, which make up the majority of the U.S. economy.
The Institute of Supply Management said that activity in the service sector declined for the first time in nearly five years. This report also indicated that employers are cutting staff.
The survey covers the retail, transportation and health care industries as well as hard hit areas such as finance, real estate and construction.
Some economists argued that the normally low-profile ISM services reading, coupled with the government's report Friday showing the first monthly net loss in jobs in more than four years, is proof that recession is now a reality.
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A growing number of top economists believe that the U.S. economy has now toppled into recession.
Alarm bells were set off Tuesday by a grim report on service businesses, which make up the majority of the U.S. economy.
The Institute of Supply Management said that activity in the service sector declined for the first time in nearly five years. This report also indicated that employers are cutting staff.
The survey covers the retail, transportation and health care industries as well as hard hit areas such as finance, real estate and construction.
Some economists argued that the normally low-profile ISM services reading, coupled with the government's report Friday showing the first monthly net loss in jobs in more than four years, is proof that recession is now a reality.
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Worst figures since 9/11 renew recession fears
The weakest performance registered by America's service sector since the aftermath of the 9/11 terrorist attacks caused fresh recession fears last night and another day of frenzied selling in the financial markets in New York.
By mid-afternoon more than 300 points had been wiped off the Dow Jones industrial average, while shares in London dropped by 2%, with the FTSE 100 down 158.2 points at 5868.0.
In a shock to Wall Street, the monthly snapshot of the non-manufacturing wing of the US economy showed a precipitous drop in activity last month, despite two cuts in interest rates from the Federal Reserve.
Some analysts said that the scale of the decline in the service sector, if backed up by other evidence over the coming days, might lead the Fed into another emergency cut in the cost of borrowing before its next scheduled meeting in March. The central bank cut rates by 0.75 points on January 21, only eight days before a regular meeting at which it announced a further 0.5 point reduction to 3%.
Jeffrey Lacker, president of the Richmond Federal Reserve bank, said that further easing of policy might be necessary as he warned of the risk of a "mild recession" for the world's biggest economy this year. "The prominence of downside risks means that further easing ultimately may be warranted."
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By mid-afternoon more than 300 points had been wiped off the Dow Jones industrial average, while shares in London dropped by 2%, with the FTSE 100 down 158.2 points at 5868.0.
In a shock to Wall Street, the monthly snapshot of the non-manufacturing wing of the US economy showed a precipitous drop in activity last month, despite two cuts in interest rates from the Federal Reserve.
Some analysts said that the scale of the decline in the service sector, if backed up by other evidence over the coming days, might lead the Fed into another emergency cut in the cost of borrowing before its next scheduled meeting in March. The central bank cut rates by 0.75 points on January 21, only eight days before a regular meeting at which it announced a further 0.5 point reduction to 3%.
Jeffrey Lacker, president of the Richmond Federal Reserve bank, said that further easing of policy might be necessary as he warned of the risk of a "mild recession" for the world's biggest economy this year. "The prominence of downside risks means that further easing ultimately may be warranted."
Read Complete Story
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