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SPOT THE NEXT MADOFF IS OUR NEW PARLOUR GAME

Posted by Gilmour Poincaree on December 15, 2008

15.12.08

by Vicky Ward (*)

PUBLISHED BY ‘THE EVENING STANDARD’ (UK)

IT BEGAN with the names of corporate victims who had lived high on debt, such as Viacom CEO Sumner Redstone, casino king Sheldon Adelson and Lehman president Joe Gregory. They lost houses, planes or boats worth millions. Who knew they financed their mansions with debt?

Now it’s our turn. Friday’s unveiling of Bernie Madoff’s alleged $50 billion pyramid scheme is only the tip of the iceberg of lost fortunes emerging from the depths. Madoff’s fall has shaken this town to its core. The 70-year-old financier was lionised here. He gave millions to charity and made himself so hard to get to if you wanted to invest with him that his allure proved too tempting for many. The names of prominent locals whose fortunes have in all likelihood disappeared is long. “How could so many rich, smart people have been taken in?” people are frantically emailing each other. But they were.

So now we’re confronted with a new reality. With it comes a new kind of unpleasant gossip. Can they really afford their lifestyle? is the question being asked about you, about your friends and about your friends’ friends?

Everyone is looking for the smallest sign that you might be both a broker and a victim of the credit crunch. In other words, did you fall for a Madoff, did you over-extend? Were you too stupid to see what was clearly a conflict of interest in banks on Wall Street, too stupid to see the whole system was over-leveraged? People look to see if you are wearing the same dress over and over again. Do you entertain less? Has your jewellery changed? Are you drinking more?

As you eat and drink among so-called friends, bare acquaintances ask you baldly if you’ve heard that so-and-so has lost their house and by the way, how have you financed your own home? The subtext is clear: you might lose yours too.

This schadenfreude is dressed up as a more serious intellectual discussion about the anticipated social levelling or the day of reckoning for the nouveau riche in the wake of the recession. But really, all anyone wants to know is who made sage financial decisions and who didn’t. In other words, nul points if you were a mini Sheldon Adelson or invested with Madoff; a full 10 if you stayed away from the Vegas of the boom years.

(*) – Vicky Ward is a contributing editor at Vanity Fair.

CLICK HERE FOR THE ORIGINAL ARTICLE

PUBLISHED BY ‘THE EVENING STANDARD’ (UK)

Posted in BANKRUPTCIES - USA, ECONOMIC CONJUNCTURE, ECONOMY, ECONOMY - USA, FINANCIAL CRISIS - USA - 2008/2009, FINANCIAL MARKETS, RECESSION, REGULATIONS AND BUSINESS TRANSPARENCY, THE LAST DAYS OF GEORGE WALKER BUSH - 2008/Jan. 2009, USA | Leave a Comment »

THERE IS ONE SIMPLE WAY OUT OF THE MESS, GORDON: A STATE BANK (UK)

Posted by Gilmour Poincaree on December 15, 2008

15.12.08

by Jim O’Neill, chief economist at Goldman Sachs

PUBLISHED BY ‘THE EVENING STANDARD’ (UK)

BANKS have been vilified for excessive leverage and over-enthusiastic pursuit of short-term profits. The Go for it - as owners of Northern Rock, the PM and the Chancellor should use it or some other bank to start lending more broadlymarkets have given their verdict by rapidly reducing the equity value of virtually all banks. At the same time, these same vilified institutions are being noisily told by Chancellor Alistair Darling to lend to all and sundry, even though the cost of borrowing the money continues to be significantly elevated from the official rates that the Bank of England provides.

Meanwhile, a pressurised Financial Services Authority is much more actively watching banks to make sure they are not doing rash things.

How can banks be eager to lend in such circumstances – especially when the GDP prognosis, the best indicator of the likely return on their lending – is so poor? They obviously can’t.

It is, of course, true that the more reluctant banks are to lend, the worse the economic outlook will get, so something needs to be done to break the logjam. It would have been so much easier to stop if our policymakers, both monetary and fiscal, had reacted quicker to the signals a year ago but hindsight is a famously good friend.

One consequence of the present global financial crisis is that the Government might well need to create a state bank to provide capital that our major commercial banks cannot.

That is a proposition some might think ironic, coming from someone who is head of economics research for Goldman Sachs, an institution that might be defined by some as embodying the culture of bonus-driven, globalised financial capitalism.

Yet the UK is in an exceptional position: we have a weak housing market and banks that have lost their appetite and ability to lend, which is making the housing market worse, which in turn makes life harder for the banks.

It has contributed to the spread of weakness into all other parts of the domestic economy. Rising unemployment is following, which in turn is making the feedback loop even worse.

Against such a background, previous unthinkables become not only thinkable but possibly the wiser choice.

The global background matters here. It is now more than seven years since I wrote about the notion of the “BRIC” economies for the first time – the economies of Brazil, Russia, India and China.

We at Goldman’s believe these economies will be critical to the future of the world economy. Indeed, looking at 2009, if the world is to have any positive economic growth, it will primarily come from these countries.

Our latest global GDP forecast for 2009 is +1.2 per cent. We forecast growth in the “advanced economies” to be negative, meaning GDP will drop in all the developed economies. In the UK, a decline of somewhere close to two per cent is possible. In the BRIC economies, by contrast, we currently forecast GDP growth of around five per cent. Goldman Sachs CEO Lloyd Blankfein has re-confirmed our strategy of exploring opportunities to these economies.

Some of the success of the BRIC economies in recent years has involved, and will continue to involve, the role of their governments, so I am not sure why it should seem so odd that a more heightened role for governments elsewhere might be appropriate.

Indeed, the environment in which the so-called advanced nations, especially the US and the UK, now find themselves does require some fresh thinking, compared with most periods I have experienced as a banking economist in the past 27 years.

We are currently expecting the US economy to decline between 1.5 and two per cent next year; if we are correct, it will be the weakest for a long time. The drop in personal-consumption expenditure will be the weakest since the Second World War. Judging by last week’s universal data, including much of Europe and the UK, the picture in the near term is similarly bleak.

If we focus on the UK, one thing that seemed obvious to me during the Northern Rock crisis was that whatever the cause of the problems, nationalisation was the only remedy for it. For those involved in dragging the UK up from the poor-performing days of the late Sixties through the Seventies, the very phrase “nationalisation” invokes horror – understandably. Yet After months of discussion, Northern Rock was indeed nationalised, and has had its mortgage-lending business slowly wound down since.

An important point that has further influenced my thinking is that as a result of the repeated traumas in the UK and global financial systems since, depositors now have more faith in Northern Rock than probably any other recognised UK financial institution. I kick myself for being so stupid as not to have opened an account with them when you could.

Even more often, I find myself asking: “Why is Northern Rock not being used as a bank that will expand lending, at least to the UK housing market?” When I mention this to policymakers, I am usually told that under EU rules we can’t provide state aid. But exceptional times require exceptional measures.

The Government’s bold decision to offer to recapitalise most of the UK major banks will not necessarily stimulate lending. As the Government owns it, why not use Northern Rock – or some other bank, to start lending more broadly in those clear cases where “good companies”, small or large, can’t get capital from their deleveraging banks?

Of course, since the UK taxpayer has taken a stake in many banks, views about what our banks should be doing have become highly charged, frequently contradictory and emotional.

But the Government needs to use the mechanism it has at its disposal to interrupt the downward spiral. Using Northern Rock, the Post Office or nationalising another institution that touches the economy might be the way. It wouldn’t need to be permanent, though that might not be so crazy in any case. Almost definitely, it would end up with a decent return.

Critics might say it will cost the taxpayer ultimately or that the Government is not known for making better decisions than the private sector. The point, though, is that the Government would not face the same market issues that currently govern all private institutions trying to deliver at the same time, adding to the negative feedback loop we all fear. It might even be able to stop it.

That’s why I believe that a reliably financed lender might just be the key to the recovery from the current malaise we all want to see. Not such a strange idea, after all.

CLICK HERE FOR THE ORIGINAL ARTICLE

PUBLISHED BY ‘THE EVENING STANDARD’ (UK)

Posted in BANKING SYSTEMS, CENTRAL BANKS, ECONOMIC CONJUNCTURE, ECONOMY, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, INTERNATIONAL, MACROECONOMY, RECESSION, REGULATIONS AND BUSINESS TRANSPARENCY, THE FLOW OF INVESTMENTS, UNITED KINGDOM | Leave a Comment »

POUND CONTINUES FALL AGAINST EURO – Sterling has fallen to a fresh record low against the euro, while the value of the dollar has declined on talks about possible US rate cuts

Posted by Gilmour Poincaree on December 15, 2008

Monday, 15 December 2008

PUBLISHED BY ‘BBC NEWS’ (UK)

The pound touched a record low of 1.1084 euros, which made one euro worth 90.22p, before recovering slightly to 1.1196 euros.

Meanwhile, the dollar fell as analysts predicted the Federal Reserve would cut interest rates on Tuesday.

The dollar fell to $1.3662 against the euro and $1.5294 against sterling.

POUND STERLING v EURO: 15 December 2008

Sterling has now hit record lows against the euro for six trading days in a row.

“Sterling remains under pressure on continued UK economic weakness,” said Geoff Kendrick at UBS.

Bail-out factor

The dollar declined on Monday on worries over the strength of the US economy, and on the uncertainty surrounding the bail-out of US carmakers.

“An interim bail-out plan for US automakers by the Bush administration is certainly weighing on the dollar, with many being sceptical as to how the industry can cope in the longer term and instead thinking that letting the market take its course would be a preferred route,” said currency analyst James Hughes at CMC Markets.

The euro was supported by suggestions from European Central Bank officials that interest rates in the eurozone might not fall too much further.

Interest rates are at 2.5% in the eurozone, compared with 2% in the UK and 1% in the US.

CLICK HERE FOR THE ORIGINAL ARTICLE

PUBLISHED BY ‘BBC NEWS’ (UK)

Posted in BANKING SYSTEM - USA, BANKING SYSTEMS, CENTRAL BANKS, CURRENCIES, DOLLAR (USA), ECONOMIC CONJUNCTURE, ECONOMY, ECONOMY - USA, EURO, EUROPE, EUROPEAN CENTRAL BANK, FINANCIAL CRISIS - USA - 2008/2009, FINANCIAL CRISIS 2008/2009, INTERNATIONAL, POUND (Britain), RECESSION, THE LAST DAYS OF GEORGE WALKER BUSH - 2008/Jan. 2009, UNITED KINGDOM, USA | Leave a Comment »

SWISS BANK UBP: CLIENTS RISK MADOFF LOSSES

Posted by Gilmour Poincaree on December 15, 2008

December 15, 2008 – 12:57pm

by Alexander G. Higgins – Associated Press Writer

PUBLISHED BY ‘WTOP’ (USA)

GENEVA (AP) – Swiss bank Union Bancaire Privee indicated Monday it had hundreds of millions of dollars in client assets invested under the management of Bernard Madoff, who has been accused by U.S. authorities of investment fraud of at least $50 billion.

The Geneva bank, one of Switzerland’s largest, did not disclose a total amount invested in Bernard L. Madoff Investment Securities LLC, which collapsed Thursday after the arrest in New York of Madoff, but did say the exposure of its clients “represents less than 1 percent of the total assets under management of the bank.”

Earlier this year, the bank said it had 126.7 billion francs ($107.8 billion) in assets under management as of June 30. Less than 1 percent could still be just over $1 billion.

UBP’s announcement Monday follows weekend disclosures by Swiss banks Reichmuth & Co of Lucerne, Benedict Hentsch of Geneva and Neue Privat Bank of Zurich that they had millions of dollars worth of client assets at risk in the case.

UBP said its exposure was limited to client assets and that it had none of its own funds invested in the Madoff group.

“The bank’s financial robustness is of the highest order,” the Geneva-based bank said, adding that it has twice as much reserves as legally required.

Clients of the Hyposwiss Private Bank in Geneva have $150 million directly and indirectly invested in Madoff funds, the bank said Monday. And the Geneva money manager Genevalor Benbassat said it was still examining the investments it was managing but didn’t yet have a figure for the amount linked to Madoff.

The investment firm Horizon21 in Pfaeffikon near Zurich said it had exposure of $1 million.

Banque Benedict Hentsch & Cie SA, which said it was acting immediately to protect its clients’ interests, said Monday it had canceled its three-month merger with Fairfield Greenwich Group, a U.S. investment fund linked to Madoff.

“The founding shareholders of the bank have terminated their partnership with the Fairfield Greenwich Group,” Benedict Hentsch said a statement.

Benedict Hentsch, which linked with Fairfield Greenwich in September, disclosed Friday that it had 56 million Swiss francs ($47.5 million) of client assets at risk in the Madoff affair.

At the same time Fairfield Greenwich said it had 20 years of experience in working with Madoff and currently had $7.5 billion in investments linked to him, about half its total $14.1 billion under management.

Benedict Hentsch said its move to regain “its complete independence” is conditional upon approval by the Swiss Federal Banking Commission.

Reichmuth said it has 385 million Swiss francs ($327 million) at risk in the case, representing about 3.5 percent of the 11 billion francs under the bank’s management.

And Neue Privat Bank said it had invested about $5 million, less than 1 percent of the client assets it is managing, and a further $250,000 of its own assets in a certificate linked to Madoff.

Madoff, a former chairman of Nasdaq stock market, was arrested Thursday in New York hours after the collapse of Bernard L. Madoff Investment Securities LLC.

CLICK HERE FOR THE ORIGINAL ARTICLE

PUBLISHED BY ‘WTOP’ (USA)

Posted in BANKING SYSTEMS, CRIMINAL ACTIVITIES, ECONOMIC CONJUNCTURE, ECONOMY, ECONOMY - USA, FINANCIAL CRISIS - USA - 2008/2009, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, FINANCIAL SCAMS, FRAUD, INTERNATIONAL, RECESSION, STOCK MARKETS, SWITZERLAND, THE FLOW OF INVESTMENTS, THE LAST DAYS OF GEORGE WALKER BUSH - 2008/Jan. 2009, USA | Leave a Comment »

A TRUCK-ULENT DETROIT

Posted by Gilmour Poincaree on December 15, 2008

December 15, 2008

by Andrew Main, Business Editor – The Australian

PUBLISHED BY ‘THE AUSTRALIAN’

WERE you surprised on Friday to learn the $21 billion bailout of the US motor industry had been held up by the US Senate?

Me neither, any more than when we then learned that President George W.Bush subsequently said he was prepared to keep GM and Chrysler going at least until the end of the year.

But independent of how the rescue operation does end up being structured, it’s worth saying that the Republicans’ reluctance to throw money at Detroit deserves a fair bit more sympathy than the last time US legislators jacked up on a global issue, over the initial $US700 billion ($1.06 trillion) TARP bad debt rescue package.

In simple terms, why should the US taxpayer rescue an industry that has been fighting tooth and nail for decades not to move into the 21st century?

The main ostensible issues are about bringing down disproportionately high pay for Big Three car workers, but what’s just as important — particularly to president-elect Barack Obama — is modernising the products dramatically.

In the same way that George Bush senior notoriously announced at the Earth Summit in 1992 that “the American way of life is not negotiable”, the Detroit giants have been behaving for decades like the eccentric Corporal Klinger in the film and television series M.A.S.H.

In one episode Klinger spray-painted himself gold, dressed up as the Statue of Liberty and wrapped himself in the Stars and Stripes in a bid to be sent home from the Korean war as being mentally unstable. It didn’t work.

The big Detroit carmakers have been doing pretty much the same thing, building a perception in motorists’ minds that if they’re not driving something huge and locally made, then they’re letting the nation down. Cue old newsreel shots of American-made trucks helping to win World War II — over 50,000 6×6 trucks and 4WD jeeps went to help Stalin’s Russia, for instance.

But there’s a much more subtle game that’s been played for years by Detroit’s lobbyists in Washington: tax breaks for big vehicles.

Back in the 1970s, which is ironically when the first oil price shock occurred, the US income tax code was altered to give a break to small farmers and self-employed workers who needed a truck for work. Because there was a luxury car tax in place, now long gone, there was an immediate write-off allowable for any truck with a maximum gross weight of more than 6000 pounds (2720kg). The weight limit was set deliberately high to stop cheating by car manufacturers, since the only car you would find in the US that heavy is the President’s armoured limousine. That scale of vehicle is right at the top end of 4WD sizes in Australia.

The tax break got more generous as the years went by, not less, so that by 2003 you could get a year of purchase tax write-off of up to $US100,000, plus there was something called a “bonus deduction”; that climbed from 30 per cent to 50 per cent, and on top of that the whole cost of the vehicle could be written off over a generous five years.

It’s not quite a case of buyers being paid to own the giant SUV trucks, but it came close. Congress did a minor backflip in 2004 with the passage of the American Jobs Creation Act (honestly), cutting back the maximum initial write-off to $US25,000 but keeping the other two generous elements of the scheme. There’s other skulduggery in the cupboard, not least the fact that way back in the late 1970s light trucks and 4WDs were exempted from the legislative moves to improve US-made vehicles’ fuel consumption, and the fact that around 2005 the tax break for hybrid vehicles was pushed down (below $US2000) rather than up.

There’s also a strong piece of automotive folklore that Toyota fast-forwarded development of its Prius hybrid car because Washington had given Detroit a billion-dollar subsidy to get serious about hybrids. The chastened Detroit chiefs who last month got a huge shellacking for flying their corporate jets to Washington did make sure on their next visit that their industry’s most fuel-efficient new models were readily available for the politicians to look at, but the new models are clearly only just emerging from the development stage, unlike the Prius.

Obama has taken the view that there should be significant strings attached to any loan deal, most specifically requiring cars that are dramatically more environmentally friendly. Any economist will tell you, meanwhile, that the global capacity for car manufacturing has increased well past demand in recent years, mostly because of new factories in China and India, which invites the question of whether the US needs a car industry at all.

But one look at the unemployment, and thus electoral, consequences of a total Detroit shutdown will tell you that a compromise has to be on the way. Not if, but when.

But when it does come, the US legislators would be well advised to fix the tax rules to encourage more environmentally friendly vehicles. The industry likes to say it takes four years to develop a new model, yet there’s a fair chance that those new models have been designed already but not put on the production line. The makers certainly don’t have four years to play with — and maybe not even four months.

The most disgraceful canard of the lot from the Detroit spin industry has been that GM, Ford and Chrysler were building vehicles that US drivers wanted to buy. Looked at another way, the drivers wanted big SUVs because the tax laws had been fixed to favour them, plus of course the manufacturers enjoyed higher profit margins from making bigger easy-to-make trucks. Let’s not even speculate on who pushed for those tax breaks in the first place.

CLICK HERE FOR THE ORIGINAL ARTICLE

PUBLISHED BY ‘THE AUSTRALIAN’

Posted in AUTOMOTIVE INDUSTRY, BANKING SYSTEM - USA, BANKRUPTCIES - USA, CENTRAL BANKS, COMMERCE, COMMODITIES MARKET, CONSUMERS AND PSYCHOLOGICAL FACTORS, ECONOMIC CONJUNCTURE, ECONOMY, ECONOMY - USA, FINANCIAL CRISIS - USA - 2008/2009, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, INDUSTRIAL PRODUCTION - USA, INDUSTRIAL SUBSIDIES, INDUSTRIES - USA, MACROECONOMY, NATIONAL WORK FORCES, RECESSION, REGULATIONS AND BUSINESS TRANSPARENCY, STOCK MARKETS, THE FLOW OF INVESTMENTS, THE LAST DAYS OF GEORGE WALKER BUSH - 2008/Jan. 2009, THE WORK MARKET, THE WORKERS, USA | Leave a Comment »

U.S. BUSINESS JUST SHUTTING DOWN – EXPERT

Posted by Gilmour Poincaree on December 15, 2008

4:00AM Monday Dec 15, 2008

Associated Press

PUBLISHED BY ‘THE NEW ZEALAND HERALD’

WASHINGTON – Signs that the US recession will be long and severe mounted with a fresh round of bad economic news, including plunging sales from manufacturers to stores and falling prices that raise fears of dangerous deflation.

The widening economic troubles did put a lid on inflation. But they raised concerns about the opposite threat – the potential for a bout of deflation that could drag down incomes, clobber home prices even more and shrink corporate profits.

“Everything is going wrong in the fourth quarter,” said Mark Zandi, chief economist at Moody’s Economy.com. “We have collapses in consumer spending, housing and now investment. Business is just shutting down.”

The new batch of data Friday showed retail sales fell by 1.8 per cent in November, marking a record fifth straight monthly decline.

The weakness was led by another sharp drop in auto sales – the worst sales month for automakers in 26 years. After an auto bailout collapsed in Congress on Thursday night, the White House offered a partial reprieve on Friday for the Detroit Three, pledging temporary help to avoid a “disorderly bankruptcy” for one or more of them.

Treasury Department officials were discussing with the automakers what form that support would take. That gave Wall Street a lift, with the Dow Jones industrials rising about 65 points to close just under 8630.

The stock market has shown signs of settling down the past two weeks. While there’s still volatility, the terrifying lurches of several hundred points at a time have become rarer.

The Dow has closed between 8000 and 9000 for 15 trading sessions in a row.

And on two of the last three days, it has moved only double digits for the day, the first time that has happened since Lehman Brothers went bust in mid-September.

A second report from the Commerce Department showed that all stages of production – manufacturing, wholesale and retail – suffered a record drop in sales in October, the month the financial crisis hit with force.

Businesses trimmed their total inventories by the biggest amount in five years, which probably means more cuts in production and layoffs in the months ahead.

And a Labour Department report showed wholesale prices dropped 2.2 per cent in November, the fourth consecutive monthly decline. They had fallen 2.8 per cent in October, a record.

Wholesale prices have not fallen for such an extended stretch since the period between October 2001 and January 2002, when the country was struggling to emerge from the last recession.

The severity of the current recession, already the longest in a quarter-century, was raising the risk of a period of deflation for the first time in the United States since the Great Depression of the 1930s.

While falling prices for fuel and other products mean people have more to spend on other items, a prolonged stretch of price declines can escalate into falling wages as businesses are forced to slash production costs to compete for sales.

Economists say the threat of deflation is remote but the risks are increasing as the downturn worsens, especially with Wall Street in upheaval and businesses and people having trouble getting loans.

“People are just scared at the moment with the financial markets locked up,” said David Wyss, chief economist at Standard & Poor’s in New York.

Wyss and other economists expect the Federal Reserve not only to cut rates sharply at the conclusion of its two-day meeting Tuesday, but also to signal other novel approaches it may employ to get credit into the system.

The Fed’s target for the federal funds rate, the interest that banks charge each other, is already at 1 per cent, tying the lowest level of the past 50 years.

The 1.8 per cent fall in retail sales in November was concentrated in bad results for automakers and a plunge in sales at petrol stations because of cheaper petrol.

Other businesses, such as department stores, posted modest sales increases.

But economists caution against reading too much into those gains, contending that the weak economy and continued layoffs will likely make this the weakest holiday shopping season for stores since the 1981-82 recession.

All the economy’s woes are expected to show up in a steep drop in overall activity during the current October-December quarter.

Some economists said the gross domestic product could fall by 5 per cent or more in the fourth quarter and keep falling next year.

Wyss said he expects the recession to end in June.

That would mean it had lasted for 18 months, which would be the longest downturn since World War II.

The current record is 16 months. Both the 1981-82 recession and the 1973-75 slump lasted that long.

CLICK HERE FOR THE ORIGINAL ARTICLE

PUBLISHED BY ‘THE NEW ZEALAND HERALD’

Posted in AGRICULTURE, BANKING SYSTEM - USA, BANKRUPTCIES - USA, COMMERCE, COMMODITIES MARKET, CONSUMERS AND PSYCHOLOGICAL FACTORS, DEFLATION, ECONOMIC CONJUNCTURE, ECONOMY, ECONOMY - USA, FARMING SUBSIDIES, FINANCIAL CRISIS - USA - 2008/2009, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, FOREIGN POLICIES - USA, FOREIGN WORK FORCE - LEGAL, GRAINS, HOUSING CRISIS - USA, INDUSTRIAL PRODUCTION - USA, INDUSTRIES - USA, MACROECONOMY, NATIONAL WORK FORCES, PETROL, RECESSION, REGULATIONS AND BUSINESS TRANSPARENCY, STOCK MARKETS, THE FLOW OF INVESTMENTS, THE LAST DAYS OF GEORGE WALKER BUSH - 2008/Jan. 2009, THE WORK MARKET, THE WORKERS, USA | Leave a Comment »

OVERLOOKED SOLUTION TO CREDIT CRUNCH

Posted by Gilmour Poincaree on December 15, 2008

December 15, 2008

by Christopher Joye (*) – The Australian

PUBLISHED BY ‘THE AUSTRALIAN’

THE most fundamental lesson of the global credit crisis has been that the financial system had too much leverage, particularly the household sector, which in many advanced economies had assumed unsustainably high levels of mortgage debt. But surprisingly, that there has been little comment about the most salient solution: equity.

For hundreds of years listed companies have been able to seamlessly issue both debt and equity to finance their spending. Yet apart from recent innovations pioneered in Australia, households have never been able to source both debt and equity finance when buying their homes. This extreme reliance on debt has propagated huge problems, particularly in the US and Britain where the conjunction of flawed institutional frameworks and poor lending standards exacerbated the debt binge.

According to Fujitsu Consulting, the average home owner’s mortgage debt represents 57 per cent of the value of their property. The typical first time buyer’s mortgage accounts for over 70 per cent. Some gear up to an incredible 95 per cent or more. In today’s fickle markets, companies with that much leverage would be crucified. Yet this debt is secured against what is, in fact, a very risky asset. Our empirical research indicates that an individual home with all of its economic idiosyncrasies is about six times riskier than a diversified national property index. Indeed, the risk of an individual property is more akin to that of shares.

The experience of the past 12 months has reinforced the fact that single family homes can suffer serious price falls even though most have avoided this fate.

Make no mistake: residential property is very safe if you get access to a diversified portfolio. An Australian house price index proxies for more than $3.3 trillion worth of assets but the index’s incredibly low volatility is a mirage for the individual home owner who assumes a far higher probability of loss and has about 60 per cent of their wealth invested in this asset.

In 2003 I was the principal author of a report commissioned by the Prime Minister’s Home Ownership Task Force that presented a solution to the high levels of household debt that triggered the global credit crisis: the development of private markets in equity finance. Under our proposal, households would get access to zero-interest rate, shared equity home loans in exchange for trading away a small portion of the risks and returns of home ownership to outside investors. By doing so, they could cut their monthly mortgage interest repayments by 30 per cent or more while reducing their vulnerability to adverse economic shocks (think 2008-09). Importantly, they also retain complete control of their homes; they choose when to sell, what renovations to make, and at what point in the contract’s maximum 25-year term they wish to repay it.

Investors, such as super funds, get extremely low-cost, highly enhanced and very long-dated exposures to what has, during the past three decades (including the recent calamity) been the largest and best performing of all investment classes: residential real estate. Historically, investors have only been able to access highly concentrated, risky development-style holdings comprising small parcels of properties that incur heinous transaction costs of about 12.5 per cent. By investing in a portfolio of thousands of shared equity interests, super funds could avoid all of these costs and secure the low risk diversification that they have never had before. Independent actuarial analysis suggests that about 15 to 30 per cent of all super fund capital should, in theory, be allocated to housing, in part because its returns are so unrelated to the performance of other investments. Compare the 50 per cent plus losses in shares and listed property trusts in the past year with the fact that the RP Data-Rismark Australian House Price Index has tapered by only -0.8 per cent.

The former secretary of the Treasury and now head of super fund adviser Mercer, Tony Cole, said: “We find the case for institutional investment in (shared equity) compelling. Historically, residential real estate displayed a negative correlation with commercial property markets and a low correlation with the share market, providing diversification benefits in a multi-asset class portfolio.” Actual returns to Australian-shared equity portfolios during the past one-to-two years have validated this investment case.

Some commentators have made hyperbolic predictions of precipitous house price falls but they have been relentlessly wrong. The tremendous improvements in affordability delivered by the Reserve Bank’s reversal of its monetary policy settings, combined with the shortage of homes in this country, will likely ensure that this continues to be the case.

Following the 2003 task force’s recommendations, Bendigo & Adelaide Bank in conjunction with Rismark International launched the world’s first private-sector, mass-market shared equity finance program in which the lender participates in both the capital gains and wears the losses associated with home ownership without charging any interest. Hundreds of Australian families have bought their first home or cut their monthly mortgage costs by 30per cent or more as a consequence. Since then the initiative has won industry awards and public praise. Kevin Rudd even canvassed it as one solution in the housing strategy paper that he launched before last year’s election.

The task force recommendations and the Australian experience have been explicitly used as a guide for billions of dollars of government investment in shared equity initiatives in Britain and New Zealand. I have been invited by the Rockefeller and MacArthur foundations to show the new Obama administration how they can apply the Australian model to ease their housing woes.

Leading academics including Edward Glaeser at Harvard, Barry Nalebuff at Yale, Luigi Zingales at the University of Chicago and Joshua Gans at Melbourne University are calling on governments to help borrowers swap a portion of their mortgage debt for shared equity-style instruments.

The Rudd Government guaranteed bank debt and injected $8 billion into the securitisation market but it should address the fundamental problem of the mix of debt and equity on household balance sheets. The Opposition has declared its support. The South Australian, West Australian and Tasmanian governments have committed more than $500 million to underwriting public shared equity initiatives. But there remains a critical role for the commonwealth to play. Asymmetrical policy that only benefits the banks and conventional mortgage providers does not achieve this aim.

(*) – Christopher Joye wrote the 2003 Prime Minister’s Home Ownership Task Force report and is the chief executive of Rismark.

CLICK HERE FOR THE ORIGINAL ARTICLE

PUBLISHED BY ‘THE AUSTRALIAN’

Posted in AUSTRALIA, BANKING SYSTEMS, CENTRAL BANKS, ECONOMIC CONJUNCTURE, ECONOMY, ECONOMY - USA, FINANCIAL CRISIS - USA - 2008/2009, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, INTERNATIONAL, RECESSION, REGULATIONS AND BUSINESS TRANSPARENCY, STOCK MARKETS, THE FLOW OF INVESTMENTS, UNITED KINGDOM, USA | Leave a Comment »

CHINA TO INCREASE SUPPLY OF MONEY TO BOOST ECONOMY

Posted by Gilmour Poincaree on December 15, 2008

December 14, 2008

PUBLISHED BY ‘THE BOSTON GLOBE’ (USA)

BEIJING—China said it plans to increase the amount of money circulating in its economy next year in a new effort to spur consumer spending and shield the country from a global downturn.

Saturday’s announcement by the country’s State Council, or Cabinet, comes on the heels of a multibillion-dollar economic stimulus package announced last month that calls for injecting more government money into the economy through spending on construction and other projects.

There are mounting signs that China’s economic slowdown is sharper and deeper than expected. Exports fell in November for the first time in seven years and the industry minister warned Friday that worse was to come.

China will increase its money supply by 17 percent next year, the Cabinet said in a statement on its Web site. It said that would be 3 to 4 percentage points above the total growth of economic output and consumer prices.

Increasing the supply of money is aimed at stimulating domestic economic activity and spending by making more credit available to encourage consumers and companies to borrow.

“We must strengthen the role of the financial sector in supporting economic growth by better implementing an active fiscal policy and moderately easing monetary policy,” the Cabinet statement said.

The growth rate of China’s money supply slipped this year as business activity and bank lending slowed.

The growth in China’s broadest measure of money supply shrank from 16 percent in August to 15 percent in November, according to the central bank. That measure, known as M2, includes cash and bank deposits.

The Cabinet also decided to increase by 100 billion yuan ($14.6 billion) the amount of loans for the country’s policy banks this year and suspend and reduce the sale of some central bank securities, the statement said.

The central bank has been draining billions of dollars from the economy every month to reduce pressure for prices to rise as revenues from China’s booming export industries flood through the economy.

The government said it would stop sales of three-year central bank notes and reduce sales of one-year and three-month bank notes, but gave no other details.

With economic growth forecast at 9 percent and inflation at about 6 percent this year, China’s money supply growth has just kept pace with growth in commercial activity. With both growth and inflation forecast to be lower in 2009, the planned expansion in money supply should be much larger than is needed to maintain commercial activity.

China’s industry minister Li Yizhong said Friday that the government will spend 15 billion yuan ($2.2 billion) to subsidize loans to companies to improve technology and cut energy use. Li said Beijing might buy surplus steel to help producers as demand plummets, as well as cut taxes to spur auto and real estate sales.

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PUBLISHED BY ‘THE BOSTON GLOBE’ (USA)

Posted in BANKING SYSTEMS, CENTRAL BANKS, CHINA, ECONOMIC CONJUNCTURE, ECONOMY, INTERNATIONAL, RECESSION, YUAM RENMIMBI (China) | Leave a Comment »

WHITE HOUSE SHIFT ON COAL-MINING RULES ANGERS ENVIRONMENTALISTS

Posted by Gilmour Poincaree on December 15, 2008

Published: December 3, 2008

by Robert Pear and Felicity Barringer

PUBLISHED BY ‘THE INTERNATIONAL HERALD TRIBUNE’ (USA)

WASHINGTON: The White House has approved a final rule that will make it easier for coal companies to dump rock and dirt from mountaintop mining operations into nearby streams and valleys.

The rule is one of the most contentious of all the regulations emerging from the White House in President George W. Bush’s last weeks in office.

James Connaughton, chairman of the White House Council on Environmental Quality, confirmed in an interview Tuesday that the rule had been approved by the White House Office of Management and Budget. That clears the way for publication in the Federal Register, the last stage in the rule-making process.

Stephen Johnson, administrator of the Environmental Protection Agency, concurred in the rule, first proposed nearly five years ago by the Interior Department, which regulates coal mining.

In a letter to Interior Secretary Dirk Kempthorne, dated Tuesday, Johnson said the rule had been revised to protect fish, wildlife and streams. Mining activities must comply with water quality standards established by the federal government and the states, Johnson said.

But a coalition of environmental groups said the rule would accelerate “the destruction of mountains, forests and streams throughout Appalachia.”

Edward Hopkins, a policy analyst at the Sierra Club, said: “The EPA’s own scientists have concluded that dumping mining waste into streams devastates downstream water quality.”

Bush has boasted of his efforts to cooperate with President-elect Barack Obama to ensure a smooth transition, but the administration is rushing to complete work on regulations to which Obama and his advisers object. The rules deal with air pollution, auto safety, abortion and workers’ exposure to toxic chemicals, among other issues.

The National Mining Association, a trade group, welcomed the rule, saying it could end years of uncertainty that had put jobs and production in jeopardy.

“This is unmistakably a fire sale of epic size for coal and the entire fossil fuel industry, with flagrant disregard for human health, the environment or the rule of law,” said Vickie Patton, deputy general counsel of the Environmental Defense Fund.

The Environmental Protection Agency is trying to finish work on a rule that would make it easier for utilities to put coal-fired generating stations near national parks. It is working on another rule that would allow utility companies to modify coal-fired power plants and increase their emissions without installing new pollution-control equipment.

Joan Mulhern, a lawyer at Earthjustice, an environmental group, denounced the mining regulation.

“With less than two months left in power,” Mulhern said, “the Bush administration is determined to cement its legacy as having the worst environmental record in history.”

At issue, she said, is a type of mining in which “coal companies blast the tops off mountains to reach the seams of coal and then push the rubble into the adjacent valleys, burying miles of streams.”

Administration officials rejected the criticism.

“This rule strengthens protections for streams,” said Peter Mali, a spokesman for the Interior Department office that wrote the regulation. “Federal law allows coal mine waste to be placed in streams, and the rule tightens restrictions as to when, where and how those discharges can occur.”

Governor Steven Beshear of Kentucky and Governor Phil Bredesen of Tennessee, both Democrats, had urged the Bush administration not to approve the rule. Beshear said he feared that it would lead to an increase in pollution of “Kentucky’s beautiful natural resources.”

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PUBLISHED BY ‘THE INTERNATIONAL HERALD TRIBUNE’ (USA)

Posted in COAL, COMMERCE, COMMODITIES MARKET, ECONOMIC CONJUNCTURE, ECONOMY, ECONOMY - USA, ENVIRONMENT, FINANCIAL CRISIS - USA - 2008/2009, FINANCIAL CRISIS 2008/2009, INDUSTRIAL PRODUCTION - USA, INDUSTRIES - USA, MINING INDUSTRIES, RECESSION, REGULATIONS AND BUSINESS TRANSPARENCY, THE FLOW OF INVESTMENTS, THE LAST DAYS OF GEORGE WALKER BUSH - 2008/Jan. 2009, USA | Leave a Comment »

BUSH SNEAKS LAWS TO UNDERMINE OBAMA

Posted by Gilmour Poincaree on December 15, 2008

Sunday 14 December 2008 (16 Dhul Hijjah 1429)

Paul Harris – The Observer

PUBLISHED BY ‘ARAB NEWS’ (Saudi Atabia)

After spending eight years at the helm of one of the most ideologically driven administrations in American history, George W. Bush is ending his presidency in characteristically aggressive fashion, with a swath of controversial measures designed to reward supporters and enrage opponents. By the time he vacates the White House, he will have issued a record number of so-called “midnight regulations” — so called because of the stealthy way they appear on the rule books — to undermine the administration of Barack Obama, many of which could take years to undo.

Dozens of new rules have already been introduced which critics say will diminish worker safety, pollute the environment, promote gun use and curtail abortion rights. Many rules promote the interests of large industries, such as coal mining or energy, which have energetically supported Bush during his two terms as president. More are expected this week. America’s attention is focused on the fate of the beleaguered car industry, still seeking backing in Washington for a multibillion-dollar bailout. But behind the scenes, the “midnight” rules are being rushed through with little fanfare and minimal media attention. None of them would be likely to appeal to the incoming Obama team. The regulations cover a vast policy area, ranging from health care to car safety to civil liberties. Many are focused on the environment and seek to ease regulations that limit pollution or restrict harmful industrial practices, such as dumping strip-mining waste.

The Bush moves have outraged many watchdog groups. “The regulations we have seen so far have been pretty bad,” said Matt Madia, a regulatory policy analyst at OMB Watch. “The effects of all this are going to be severe.”

Bush can pass the rules because of a loophole in US law allowing him to put last-minute regulations into the Code of Federal Regulations, rules that have the same force as law. He can carry out many of his political aims without needing to force new laws through Congress. Outgoing presidents often use the loophole in their last weeks in office, but Bush has done this far more than Bill Clinton or his father, George H. W. Bush. He is on track to issue more “midnight regulations” than any other previous president.

Many of these are radical and appear to pay off big business allies of the Republican Party. One rule will make it easier for coal companies to dump debris from strip mining into valleys and streams. The process is part of an environmentally damaging technique known as “mountain-top removal mining.” It involves literally removing the top of a mountain to excavate a coal seam and pouring the debris into a valley, which is then filled up with rock. The new rule will make that dumping easier.

Another midnight regulation will allow power companies to build coal-fired power stations nearer to national parks. Yet another regulation will allow coal-fired stations to increase their emissions without installing new anti-pollution equipment.

The Environmental Defense Fund has called the moves a “fire sale of epic size for coal.” Other environmental groups agree. “The only motivation for some of these rules is to benefit the business interests that the Bush administration has served,” said Ed Hopkins, a director of environmental quality at the Sierra Club. A case in point would seem to be a rule that opens up millions of acres of land to oil shale extraction, which environmental groups say is highly pollutant.

There is a long list of other new regulations that have gone on to the books. One lengthens the number of hours that truck drivers can drive without rest. Another surrenders government control of rerouting the rail transport of hazardous materials around densely populated areas and gives it to the rail companies.

One more chips away at the protection of endangered species. Gun control is also weakened by allowing loaded and concealed guns to be carried in national parks. Abortion rights are hit by allowing health-care workers to cite religious or moral grounds for opting out of carrying out certain medical procedures.

A common theme is shifting regulation of industry from government to the industries themselves, essentially promoting self-regulation. One rule transfers assessment of the impact of ocean fishing away from federal inspectors to advisory groups linked to the fishing industry. Another allows factory farms to self-regulate disposal of pollutant runoff.

The White House denies it is sabotaging the new administration. It says many of the moves have been openly flagged for months. The spate of rules is going to be hard for Obama to quickly overcome. By issuing them early in the “lame duck” period of office, the Bush administration has mostly dodged 30- or 60-day time limits that would have made undoing them relatively straightforward.

Obama’s team will have to go through a more lengthy process of reversing them, as it is forced to open them to a period of public consulting. That means that undoing the damage could take months or even years, especially if corporations go to the courts to prevent changes.

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PUBLISHED BY ‘ARAB NEWS’ (Saudi Atabia)

Posted in BANKING SYSTEM - USA, BANKRUPTCIES - USA, BARACK HUSSEIN OBAMA -(DEC. 2008/JAN. 2009), ECONOMIC CONJUNCTURE, ECONOMY, ECONOMY - USA, ENVIRONMENT, FINANCIAL CRISIS - USA - 2008/2009, FINANCIAL CRISIS 2008/2009, FOREIGN POLICIES, HOUSING CRISIS - USA, INDUSTRIAL PRODUCTION - USA, INDUSTRIES - USA, INTERNATIONAL RELATIONS, RECESSION, REGULATIONS AND BUSINESS TRANSPARENCY, THE LAST DAYS OF GEORGE WALKER BUSH - 2008/Jan. 2009, USA | Leave a Comment »

FORD, HONDA, WATERS, INSTEEL ARE BIG MOVERS

Posted by Gilmour Poincaree on December 15, 2008

12/12/2008, 5:15 p.m. EST

The Associated Press

PUBLISHED BY ‘SYRACUSE.COM’ (USA)

NEW YORK (AP) — Stocks that moved substantially or traded heavily Friday on the New York Stock Exchange and the Nasdaq Stock Market:

NYSE

HB Fuller Co., down 8 cents at $13.97

The paint and specialty chemicals maker said sales recently turned sharply lower, and it expects to report quarterly profit below estimates.

Kansas City Southern, down $1.35 at $17.58

The railroad operator cut its sales and profit estimates for the fourth quarter as the failing economy is cutting into shipping volumes.

Honda Motor Co., down $1.07 at $21.93

The Japanese automaker will again reduce vehicle production in North America amid waning demand, but won’t cut jobs.

Fairchild Semiconductor International Inc., up 47 cents at $4.11

Shares rose, even as the chipmaker cut its fiscal fourth-quarter sales forecast and will cut 1,100 jobs, or 12 percent of its work force.

Waters Corp., down $4.67 at $37.21

The maker of analytical instruments cut its fourth-quarter profit and sales forecasts due to a stronger dollar and the global economic slump.

Stanley Works, down 90 cents at $31.40

An analyst downgraded shares a day after the tool maker announced layoffs and cut its 2008 forecast below expectations.

Ford Motor Co., up 14 cents at $3.04

Though the Senate rejected a proposed $14 billion bailout for the auto industry, the White House said it might step in to help.

NASDAQ

Insteel Industries Inc., down 75 cents at $11.25

A drop in orders is expected to cause a fiscal fourth-quarter loss, the maker of steel wire reinforcing products said.

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PUBLISHED BY ‘SYRACUSE.COM’ (USA)

Posted in AUTOMOTIVE INDUSTRY, COMMERCE, COMMODITIES MARKET, ECONOMIC CONJUNCTURE, ECONOMY, ECONOMY - USA, FINANCIAL CRISIS - USA - 2008/2009, FINANCIAL CRISIS 2008/2009, INDUSTRIAL PRODUCTION, INDUSTRIAL PRODUCTION - USA, INDUSTRIES, INDUSTRIES - USA, METALS INDUSTRY, RECESSION, STOCK MARKETS, THE FLOW OF INVESTMENTS, THE LAST DAYS OF GEORGE WALKER BUSH - 2008/Jan. 2009, THE WORK MARKET, USA | Leave a Comment »

SLOWDOWN YES, BUT NO RECESSION, SAYS KREMLIN

Posted by Gilmour Poincaree on December 15, 2008

4:00AM Monday Dec 15, 2008

Associated Press

PUBLISHED BY ‘NEW ZEALAND HERALD’

MOSCOW – A top Russian economic official has claimed the country is in a recession. Not so fast, the Kremlin quickly countered.

Deputy Economics Minister Andrei Klepach confirmed what analysts have been saying for some time – that Russia’s oil-fuelled economy has deteriorated much more rapidly than expected.

“A recession has started already,” he told reporters in comments carried on Russian news agencies and confirmed by his office. “And I’m afraid it won’t be over in two quarters.”

Hours later, the Kremlin issued a rebuttal.

“The use of the word ‘recession’ was inappropriate, because there is no recession that we see and nor will there be in the foreseeable future,” said Dmitry Peskov, a spokesman for Prime Minister Vladimir Putin.

“There is no reason to speak about recession. We would rather speak about decline in growth.”

Plummeting oil prices and choked credit markets have reversed Russia’s eight-year economic boom, sending the economy into its worst crisis in a decade. But the Kremlin has been cagey about the situation, prohibiting the use of alarmist language on state-run television and laying the blame for its woes squarely at the feet of the United States, where the subprime mortgage-based bonds that triggered the global financial crisis originated.

But plunging world demand for oil and metals has sent shockwaves through Russia’s economy, triggering mass layoffs and shutdowns in production at big industrial plants and other sectors. Stock markets have shed some 70 per cent of their value since the start of the year, and roughly US$1 trillion ($1.8 trillion) since their May peaks.

Klepach did not provide figures for the current quarter, but said the country had witnessed a dramatic drop in industrial production and the economy as a whole from October onwards.

He said also Russia would miss its economic growth targets for this year.

A common definition of recession is two straight quarters of negative growth.

The Federal Statistics Service said Russia’s economy grew by 6.2 per cent in the third quarter, the slowest rate in three years.

Vladimir Osakovsky, an economist at UnicreditAton in Moscow, said the fourth quarter would see a drastic deterioration of growth.

“It is possible that we might see zero growth or below that,” he said.

Putin, who spoke a few hours after Klepach at a meeting of the Eurasian Economic Committee, delivered a more positive note, noting that the economy would grow at 6 per cent this year, implying an expansion in the fourth quarter.

He did, however, note rising unemployment.

“In October, the number of unemployed in Russia reached 4.6 million,” Putin was quoted as saying by Interfax. “This is an alarming situation. We do not see changes for the better so far.”

Putin also said the Government would do everything in its power to prevent sharp fluctuations in the ruble – an increasingly uphill task amid plunging oil prices and huge capital outflows.

The Government has allowed the ruble to weaken by 5 per cent in the last month against its currency basket, comprising the dollar and the euro.

Economists say the Central Bank should allow the ruble to depreciate sharply.

Since August, Russia has spent more than US$150 billion of its huge foreign currency reserves, much of that in defending the flagging ruble.

Standard & Poor’s downgraded its sovereign ratings last week – the first drop for Russia in a decade.

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PUBLISHED BY ‘NEW ZEALAND HERALD’

Posted in BANKING SYSTEMS, CENTRAL BANKS, COMMERCE, COMMODITIES MARKET, ECONOMIC CONJUNCTURE, ECONOMY, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, INDUSTRIAL PRODUCTION, INDUSTRIES, INTERNATIONAL, PETROL, RECESSION, RUSSIA, THE FLOW OF INVESTMENTS, THE WORK MARKET, THE WORKERS | Leave a Comment »

WORLD MARKETS EYE RECOVERY

Posted by Gilmour Poincaree on December 15, 2008

Dec 14 2008 17:07

Agence France Presse

PUBLISHED BY ‘NEWS24.COM’ (South Africa)

New York – After a catastrophic year in which Wall Street lost five years of gains, investors worldwide are looking for a possible market bottom but remain cautious in the face of a deep economic crisis.

Global markets are assessing the damage of a calamitous year that has sapped 40 percent or more from many stock market indexes.

As of December 12, the broad-market Standard & Poor’s 500 index was down a stunning 40%, but has been as much as 52% below its all-time peak in October 2007, marking the worst bear market since 1931, according to S&P.

The Dow Jones Industrial Average of 30 blue chips has lost 34.9% and the Nasdaq composite has fallen 41.9%.

Other markets around the world have fared worse including the Paris CAC 40 (down 42.7%) and Japan’s Nikkei (46.2%), while London’s FTSE has tumbled 33.7%).

Art Hogan, analyst at Jefferies, said the year saw devastation on a historic scale.

“It’s literally as bad as the market can get, in every shape or form: losses of jobs, economy, devastation in equities and residential real estate,” he said.

The market also witnessed “devastation in brand-name firms being thrown out of the way like Bear Stearns and Merrill Lynch and AIG and Freddie Mac and Fannie Mae.”

Because of the unprecedented losses, Hogan said the feeling is that “next year has got to be better.”

Investors bruised by the worst losses in decades are trying to determine whether the worst is over or if what seems like a rebound will end up being a “sucker rally.”

Large margin for error

Sam Stovall, an equity strategist at S&P, said he sees a likely recovery from oversold conditions in 2009.

“There is a good chance that we could be seeing a bit of recovery next year but I still think what I would call a range-bound recovery,” he said.

Lewis Alexander, chief economist at Citigroup, pointed out that “given the forces at work in the global economy, however, any forecast must entail an unusually large margin for error.”

Alexander said the problems are compounded by the so-called “negative feedback loop” – falling share prices mean falling wealth, dampening consumer spending and investment, leading to job cuts and lower output that reinforce the cycle.

“Since their peak over the summer, global equity markets have lost about $25 trillion in value. This represents about 40% of global GDP,” or gross domestic product.

Wall Street and many other markets have slid to their lowest levels since the bear market of 2002-2003. The Dow index has essentially pulled back to its levels of a decade ago.

Things could still get worse. But many analysts are banking on a “bottom” that will allow markets to recover even if the economy is still sputtering.

“It might be that the 40% decline over the past year has already factored in much of the bad news already,” said Paul Nolte, analyst at Hinsdale Investments.

“Unfortunately stocks won’t be waiting for the economy and will rise anticipating the end of the worst,” he said in a note to clients.

Fred Dickson, equity strategist at DA Davidson, said market sentiment may be recovering from its depths, helped by the vast array of actions by the Federal Reserve and US government and its counterparts around the world seeking to jolt life back into the moribund economy.

Meltdown not over

Dickson said the market “may have seen its psychological low point back on October 15″ before the bulk of rescue efforts were announced, but that investors may not yet be out of the woods.

“We believe an optimistic estimate would be that the economy bottoms out next summer,” Dickson said.

“We don’t see the market as being ready to lift off into the next big bull market. Stock prices continue to be very attractively priced, but could become more even attractively priced if the economy suddenly takes another big dip.”

Yet there is no shortage of doomsayers arguing that the meltdown is not over.

Bennet Sedacca of Atlantic Advisors said he believes things will get much worse due to a dysfunctional financial system.

“The problem as I see it is that unless the (US) Treasury wants to back the entire credit market, we are simply delaying the inevitable failures that are to come,” he said.

Sedacca said he sees “investable levels” coming with the S&P 500 “yet another 40% to 50% lower.”

Bill Gross, a respected bond fund manager, also argues for caution.

“Stocks are cheap when valued within the context of a financed-based economy once dominated by leverage, cheap financing, and even lower corporate tax rates,” he said.

“That world, however, is in our past, not our future. More regulation, lower leverage, higher taxes, and a lack of entrepreneurial testosterone are what we must get used to.”

CLICK HERE FOR THE ORIGINAL ARTICLE

PUBLISHED BY ‘NEWS24.COM’ (South Africa)

Posted in ECONOMIC CONJUNCTURE, ECONOMY, ECONOMY - USA, FINANCIAL CRISIS - USA - 2008/2009, FINANCIAL CRISIS 2008/2009, FINANCIAL MARKETS, RECESSION, REGULATIONS AND BUSINESS TRANSPARENCY, STATE TARIFFS, THE FLOW OF INVESTMENTS, THE LAST DAYS OF GEORGE WALKER BUSH - 2008/Jan. 2009, USA | Leave a Comment »

ENDANGERED ANIMALS PUBLICLY CUT UP FOR MUTHI (South Africa)

Posted by Gilmour Poincaree on December 15, 2008

December 14 2008 at 01:48PM

by Mike Cadman

This article was originally published on page 1 of the Sunday Independent on December 14, 2008

PUBLISHED BY ‘IOL’ (South Africa)

Illegal trading in protected and threatened animals, including leopards and cheetahs, is openly taking place at CAPE PANGOLINthe Mai Mai traditional medicines market in central Johannesburg – but the authorities are doing nothing to stop it.

This week at least seven full leopard skins and three cheetah pelts were on display, but traders said they were not aware that they were required to have permits to possess and sell the skins.

Smaller sections of leopard, cheetah and serval skin, for use in capes, headbands and other adornments, were available at the market.

Skins and body parts of at least 40 other species of mammals, birds, reptiles and marine life, some of them endangered, including Cape pangolin, African rock python, honey badger, crocodile, hippo, giraffe and spotted eagle owl are also available. Vulture body parts and feathers, and vervet monkey skins and hands, are also often sold at the market.

The Mai Mai market is a traditional medicines market and many of the traders are traditional healers. Some animal parts are used as medicine to cure physical ailments and others to enhance spiritual wellbeing or for supernatural purposes. Leopard and cheetah skins are widely worn in South Africa by traditionalists and by royal families and other people of status.

“This leopard skin comes from Zambia and its price is R7 500,” a trader who did not want to give her name, working in shop 141 at the market, said. “This one is R6 000; it comes from Botswana.”

She said the cheetah skin displayed in the shop came from KwaZulu-Natal and was for sale for R6 500.

Another trader, working at shop 131, said the several leopard skins and a cheetah skin CHEETAHhanging from the eaves outside came from KwaZulu-Natal.

Both leopards and cheetahs are listed in appendix 1 of the Convention on Trade in Endangered Species of Flora and Fauna (Cites), which is intended to impose strict regulations on trade in these species. Permits are required to hunt these animals or sell their skins.

Many of the other species on sale at the market are protected by environmental legislation.

Though the market is administered by the Metropolitan Trading Company, which is owned by the Johannesburg Metropolitan Council, the company does not monitor the legality of the trade at the market.

“We look to [the] council to deal with issues around wildlife to determine whether or not people are complying with regulations and whether they are authorised to be in possession of particular skins and other animal products,” said Nhlanhla Makgoba, the communications and marketing manager for the Metropolitan Trading Company.

Makgoba said she believed that the council’s environmental health division monitored the trade, but Nkosinathi Nkabinda, a spokesperson for the city’s department of health, said this was not the case, but claimed that the Gauteng department of agriculture, conservation and the environment was the responsible authority.

A spokesperson for the department said it was attempting to deal with illegal trading in wildlife at Mai Mai but the matter was “very sensitive”.

“The use of animals in traditional medicine is a very sensitive issue among certain communities and we have an ongoing programme aimed at educating people about environmental laws,” said Sizwe Matshikiza. “We will not be able to change attitudes overnight.”

Animal Rights Africa said nothing had been done to enforce environmental SLAIN LEOPARDregulations.

“It’s clear that government conservation agencies are not acting in the interests of conservation and wildlife. It’s ironic that South Africa has chosen the leopard as a logo to promote the 2010 soccer World Cup but we do little to offer the species protection.”

CLICK HERE FOR THE ORIGINAL ARTICLE

PUBLISHED BY ‘IOL’ (South Africa)

Posted in ANIMIST RELIGIONS, COMMERCE, COMMODITIES MARKET, ECONOMIC CONJUNCTURE, ECONOMY, ENVIRONMENT, FINANCIAL CRISIS 2008/2009, GARMENT INDUSTRIES, INDUSTRIES, INTERNATIONAL, JUDICIARY SYSTEMS, MEAT, RECESSION, REGULATIONS AND BUSINESS TRANSPARENCY, SOUTH AFRICA | Leave a Comment »

ZIM PASSES LAW; MDC SAYS NO (Zimbabwe)

Posted by Gilmour Poincaree on December 15, 2008

14/12/2008 17:11 – (SA)

Reuters

PUBLISHED BY ‘NEWS24.COM’ (South Africa)

Harare – Zimbabwe has published a draft constitutional law to create a unity government, but the opposition MDC on Sunday vowed to block the proposed changes until its demands for equitable power-sharing are met.

President Robert Mugabe and MDC leader Morgan Tsvangirai agreed to form a unity government in September, but the deal has stalled over disagreements on the control of key ministries.

The state-run Sunday Mail reported that the constitutional amendment bill – creating the office of prime minister for Tsvangirai – had been published on Saturday. The MDC immediately rejected the move, saying it had not been consulted.

“This was done unilaterally by (the ruling party) ZANU-PF,” MDC spokesman Nelson Chamisa told Reuters.

“The gazetting was supposed to have been done after consultations.”

He said the MDC had not seen the published Bill to establish whether it conforms with the draft agreed by the two parties during talks held in South Africa last month.

Concerns must be addressed first.

Chamisa said the MDC wanted its concerns on the allocation of ministerial posts and provincial governorships addressed before the constitutional amendments could be dealt with.

“What we are saying is that these political issues will stand in the way of the legal process. We need to clear the political issues first before moving on to the constitution,” Chamisa said.

On Saturday, state media quoted Justice Minister Patrick Chinamasa as saying Mugabe could call fresh elections if the opposition-dominated parliament fails to pass constitutional changes for the unity government.

Tsvangirai’s MDC won 100 seats in the 210-member lower house of parliament in a March poll as ZANU-PF lost its majority for the first time since 1980, garnering 99 seats. The balance is held by a smaller faction of the MDC, led by Arthur Mutambara.

Tsvangirai beat Mugabe in a presidential poll held concurrently, but fell short of the necessary votes to avoid a run-off poll which the 84-year-old veteran leader won after Tsvangirai pulled out of the race citing violence.

The second vote was widely condemned and Mugabe has come under renewed Western pressure to step down in the face of a cholera outbreak that has killed nearly 800 people, worsening the plight of Zimbabweans grappling with an economic meltdown blamed on government mismanagement.

Mugabe’s government says the cholera outbreak is a calculated attack by former colonial ruler Britain and the United States which have used “biological warfare” to create an excuse to mobilise military action against Zimbabwe.

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PUBLISHED BY ‘NEWS24.COM’ (South Africa)

Posted in ECONOMIC CONJUNCTURE, ENGLAND, FINANCIAL CRISIS - USA - 2008/2009, FINANCIAL CRISIS 2008/2009, FOREIGN POLICIES, FOREIGN POLICIES - USA, INTERNATIONAL, INTERNATIONAL RELATIONS, RECESSION, USA, ZIMBABWE | Leave a Comment »