http://money.cnn.com/2007/08/10/markets/st...watch/index.htm
Markets sell off around the world as credit crisis intensifies; Wall Street set for more losses after Dow suffers second worst day of '07.
August 10 2007: 6:14 AM EDT
NEW YORK (CNNMoney.com) -- U.S. stocks are likely to take another beating Friday, as the spreading credit crisis roils markets around the world.
At 6:11 a.m. ET, Nasdaq and S&P futures were lower, with a comparison to fair value pointing to sharp decline for stocks at the open.
...
Stocks have been selling off globally, despite an injection of liquidity by central banks around the world. The European Central Bank pumped funds into European money markets for a second time Friday as banks rushed to secure cash. The ECB added about $131 billion into markets Thursday.
Other central banks, including the Federal Reserve, Bank of Japan and Bank of Canada, have also intervened in their respective markets, although on a lesser scale. The Fed pumped about $24 billion into cash markets on Thursday.
--------------------
I'm watching for a good price on
a used pickup truck, watering my vegi garden and fixing up my house, which is on a fixed rate with 50% more equity then debt.
In a few more weeks I'll be able to talk LSU football. Thank God.
Full Version: Stocks and lending
Common Ground Common Sense > Issues that Affect Our Lives > Job Market, Fiscal, and Economic Policies > Fiscal Policy
http://www.nytimes.com/2007/08/11/business/11fed.html
By LOUIS UCHITELLE
Published: August 11, 2007
Should the Federal Reserve help bail out billionaire hedge fund managers and millionaire traders — the very people who bought the risky mortgages that led to the current market panic?
That, in essence, is the question swirling around Ben S. Bernanke as he confronts the first crisis of his 18 months as Fed chairman.
There are no shortages of opinions, and some are being shouted. Jim Cramer, known for his histrionics on the CNBC financial news channel, angrily called for Mr. Bernanke to lower interest rates, something the Fed has resisted doing.
A week ago, Mr. Cramer charged that the Fed was “asleep” and that the chairman “has no idea how bad it is out there” in the markets. A video clip of his remarks has been viewed more than one million times on YouTube.
Lower interest rates would help operators of hedge funds and other money managers because the housing market presumably would strengthen as mortgage rates fell. A revived mortgage market would give the hedge fund operators and other holders of the risky securities a chance to sell them, which they are having trouble doing now in the current nervous market.
But others see a bigger danger for the economy in acting on the pleas of Mr. Cramer and others on Wall Street. Cutting interest rates to help the hedge funds would tend to encourage a resurgence of the very risky mortgage lending that has caused the current turmoil, rekindling the crisis.
The issue is often referred to as “moral hazard,” meaning that the risk-takers who brought on this panic would feel bailed out and would be more likely do it again — just as a young adult whose parents paid off a large credit card bill might feel free to run up a debt again.
By LOUIS UCHITELLE
Published: August 11, 2007
Should the Federal Reserve help bail out billionaire hedge fund managers and millionaire traders — the very people who bought the risky mortgages that led to the current market panic?
That, in essence, is the question swirling around Ben S. Bernanke as he confronts the first crisis of his 18 months as Fed chairman.
There are no shortages of opinions, and some are being shouted. Jim Cramer, known for his histrionics on the CNBC financial news channel, angrily called for Mr. Bernanke to lower interest rates, something the Fed has resisted doing.
A week ago, Mr. Cramer charged that the Fed was “asleep” and that the chairman “has no idea how bad it is out there” in the markets. A video clip of his remarks has been viewed more than one million times on YouTube.
Lower interest rates would help operators of hedge funds and other money managers because the housing market presumably would strengthen as mortgage rates fell. A revived mortgage market would give the hedge fund operators and other holders of the risky securities a chance to sell them, which they are having trouble doing now in the current nervous market.
But others see a bigger danger for the economy in acting on the pleas of Mr. Cramer and others on Wall Street. Cutting interest rates to help the hedge funds would tend to encourage a resurgence of the very risky mortgage lending that has caused the current turmoil, rekindling the crisis.
The issue is often referred to as “moral hazard,” meaning that the risk-takers who brought on this panic would feel bailed out and would be more likely do it again — just as a young adult whose parents paid off a large credit card bill might feel free to run up a debt again.
QUOTE
The issue is often referred to as “moral hazard,” meaning that the risk-takers who brought on this panic would feel bailed out and would be more likely do it again — just as a young adult whose parents paid off a large credit card bill might feel free to run up a debt again.
Exactly. I've already lived through one bail-out and we're probably all still paying for it. No more.
QUOTE(Indianhead @ Aug 11 2007, 03:31 PM) 
http://www.nytimes.com/2007/08/11/business/11fed.html
By LOUIS UCHITELLE
Published: August 11, 2007
Should the Federal Reserve help bail out billionaire hedge fund managers and millionaire traders — the very people who bought the risky mortgages that led to the current market panic?
That, in essence, is the question swirling around Ben S. Bernanke as he confronts the first crisis of his 18 months as Fed chairman.
There are no shortages of opinions, and some are being shouted. Jim Cramer, known for his histrionics on the CNBC financial news channel, angrily called for Mr. Bernanke to lower interest rates, something the Fed has resisted doing.
A week ago, Mr. Cramer charged that the Fed was “asleep” and that the chairman “has no idea how bad it is out there” in the markets. A video clip of his remarks has been viewed more than one million times on YouTube.
Lower interest rates would help operators of hedge funds and other money managers because the housing market presumably would strengthen as mortgage rates fell. A revived mortgage market would give the hedge fund operators and other holders of the risky securities a chance to sell them, which they are having trouble doing now in the current nervous market.
But others see a bigger danger for the economy in acting on the pleas of Mr. Cramer and others on Wall Street. Cutting interest rates to help the hedge funds would tend to encourage a resurgence of the very risky mortgage lending that has caused the current turmoil, rekindling the crisis.
The issue is often referred to as “moral hazard,” meaning that the risk-takers who brought on this panic would feel bailed out and would be more likely do it again — just as a young adult whose parents paid off a large credit card bill might feel free to run up a debt again.
By LOUIS UCHITELLE
Published: August 11, 2007
Should the Federal Reserve help bail out billionaire hedge fund managers and millionaire traders — the very people who bought the risky mortgages that led to the current market panic?
That, in essence, is the question swirling around Ben S. Bernanke as he confronts the first crisis of his 18 months as Fed chairman.
There are no shortages of opinions, and some are being shouted. Jim Cramer, known for his histrionics on the CNBC financial news channel, angrily called for Mr. Bernanke to lower interest rates, something the Fed has resisted doing.
A week ago, Mr. Cramer charged that the Fed was “asleep” and that the chairman “has no idea how bad it is out there” in the markets. A video clip of his remarks has been viewed more than one million times on YouTube.
Lower interest rates would help operators of hedge funds and other money managers because the housing market presumably would strengthen as mortgage rates fell. A revived mortgage market would give the hedge fund operators and other holders of the risky securities a chance to sell them, which they are having trouble doing now in the current nervous market.
But others see a bigger danger for the economy in acting on the pleas of Mr. Cramer and others on Wall Street. Cutting interest rates to help the hedge funds would tend to encourage a resurgence of the very risky mortgage lending that has caused the current turmoil, rekindling the crisis.
The issue is often referred to as “moral hazard,” meaning that the risk-takers who brought on this panic would feel bailed out and would be more likely do it again — just as a young adult whose parents paid off a large credit card bill might feel free to run up a debt again.
More focus on removing corruption and incompetence from all levels and sectors of Goverment
Operations, including the Military and Defense Department (especially secrete operations)would get more direct results in terms of improving the lives of the greatest number of Persons in the shortest length of time, rather than going after any targeted Persons or Groups. A Bottoms-Up Building
and Educating approach to Self-goverment, based on our own organismic Valuing of our own Management of Self-in-Situation, will tend to structure and energize the social system toward further
Emergent Evolution (As we individually look dimly forward, wondering if this is the Emergence of Emergence? Imagine how much better Life could be with even 20% reduction in corruption and incompetence?
Bernanke and the Feds have put a 38 billion dollar thumb on the scales. Free market or manipulated market? Refusing to swallow the financial medicine created by maniupulating the interest rates to "recover" the economy after the tech bubble burst is now blowing up in our face, sans its worshipped architect, Mr. Greenspan. The shakeout is shaping up to be extreme.
Keep out of the way of falling currency.......
lenal
Keep out of the way of falling currency.......
lenal
August 15, 2007 DJIA close: 12,861.47 -167.45 / -1.29%
Back to the future. Still to early, but investors who have
been expecting this are leaning in IMO...but I'd better see
if the hurricane season gets me first.
Back to the future. Still to early, but investors who have
been expecting this are leaning in IMO...but I'd better see
if the hurricane season gets me first.
Maybe this is why BusCo is beating the war drums.
If BushCo bombs Iran, you can be sure that the Strait of Hormuz will close, cutting off 25% of the world's oil.
Figure the remaining 75% to fetch about $300 a barrel.
Hmmm.
That means the world will need about three times as many dollars to buy that oil.
And guess who prints those dollars.
If BushCo bombs Iran, you can be sure that the Strait of Hormuz will close, cutting off 25% of the world's oil.
Figure the remaining 75% to fetch about $300 a barrel.
Hmmm.
That means the world will need about three times as many dollars to buy that oil.
And guess who prints those dollars.
Nov 15 4:04pm ET
DJIA
13,110.05 -120.96 / -0.91%
Tip for the month...Tyson Foods the chicken (and beef) giant of Springdale, Ark. and Syntoleum Corp. (Oklahoma) have a joint venture called Dynamic Fuels, which will open a biofuel plant in Geismar, La. (a blue-collar area of the chemical corridor along the Mississippi River between Baton Rouge and New Orleans). Tyson will provide animal fat and other agricultural by-products while Syntroleum will provide the technology to turn the "stuff" into biodiesel and jet fuel.
I don't know the breakout of which company or companies will profit the most...but it sounds like a good idea in these times of great fuel needs...coming from what has been waste. I read about it in the Advocate (the BR paper today).
DJIA
13,110.05 -120.96 / -0.91%
Tip for the month...Tyson Foods the chicken (and beef) giant of Springdale, Ark. and Syntoleum Corp. (Oklahoma) have a joint venture called Dynamic Fuels, which will open a biofuel plant in Geismar, La. (a blue-collar area of the chemical corridor along the Mississippi River between Baton Rouge and New Orleans). Tyson will provide animal fat and other agricultural by-products while Syntroleum will provide the technology to turn the "stuff" into biodiesel and jet fuel.
I don't know the breakout of which company or companies will profit the most...but it sounds like a good idea in these times of great fuel needs...coming from what has been waste. I read about it in the Advocate (the BR paper today).
http://money.cnn.com/2007/11/16/news/econo...sion=2007111610
$2 trillion lending crunch seen
Goldman Sachs economist says mounting credit losses
could force banks to significantly scale back their lending.
By Grace Wong, CNNMoney.com staff writer
November 16 2007: 10:21 AM EST
LONDON (CNNMoney.com) -- The mortgage wipeout could result in a $2 trillion cutback in lending and have dramatic implications for the U.S. economy, according to Wall Street investment bank Goldman Sachs.
The housing slump is expected to end up costing banks, hedge funds and other lenders an estimated $400 billion as defaults on home loans rise, according to Goldman economist Jan Hatzius.
A $400 billion loss is equal to just about 2.5 percent of U.S. stock market capitalization - or a bad day on Wall Street, he wrote in a commentary on Thursday.
But most stock investors don't react aggressively to capital losses the way banks and other lenders do. A bank that aims to maintain a capital ratio of 10 percent would need to shrink its balance sheet by $10 for every $1 in credit losses, the note said.
That means that if lenders end up suffering just half of the $400 billion in potential credit losses, they could be forced to reduce the amount they loan by $2 trillion. Such a drastic credit crunch could have dire consequences for the economy.
"Even if this occurs gradually, and even if there are some offsets from reduced credit demand and increased lending by other sectors, the drag on economic activity could be substantial," Hatzius wrote.
Wall Street banks and brokerages face pain on two fronts. They hold home loans, as well as securities backed by mortgages. Losses on these holdings are expected to deepen as falling housing prices trigger more defaults.
There are a number of factors that could lessen the lending shock, Hatzius noted. Regulators could encourage financial institutions to keep lending, even in times of stress. Some players could raise additional capital by selling stakes in themselves.
But the overall outlook is bleak, as pressure on lending is likely to raise the risk of "significant weakness" in economic activity, the note said.
$2 trillion lending crunch seen
Goldman Sachs economist says mounting credit losses
could force banks to significantly scale back their lending.
By Grace Wong, CNNMoney.com staff writer
November 16 2007: 10:21 AM EST
LONDON (CNNMoney.com) -- The mortgage wipeout could result in a $2 trillion cutback in lending and have dramatic implications for the U.S. economy, according to Wall Street investment bank Goldman Sachs.
The housing slump is expected to end up costing banks, hedge funds and other lenders an estimated $400 billion as defaults on home loans rise, according to Goldman economist Jan Hatzius.
A $400 billion loss is equal to just about 2.5 percent of U.S. stock market capitalization - or a bad day on Wall Street, he wrote in a commentary on Thursday.
But most stock investors don't react aggressively to capital losses the way banks and other lenders do. A bank that aims to maintain a capital ratio of 10 percent would need to shrink its balance sheet by $10 for every $1 in credit losses, the note said.
That means that if lenders end up suffering just half of the $400 billion in potential credit losses, they could be forced to reduce the amount they loan by $2 trillion. Such a drastic credit crunch could have dire consequences for the economy.
"Even if this occurs gradually, and even if there are some offsets from reduced credit demand and increased lending by other sectors, the drag on economic activity could be substantial," Hatzius wrote.
Wall Street banks and brokerages face pain on two fronts. They hold home loans, as well as securities backed by mortgages. Losses on these holdings are expected to deepen as falling housing prices trigger more defaults.
There are a number of factors that could lessen the lending shock, Hatzius noted. Regulators could encourage financial institutions to keep lending, even in times of stress. Some players could raise additional capital by selling stakes in themselves.
But the overall outlook is bleak, as pressure on lending is likely to raise the risk of "significant weakness" in economic activity, the note said.
http://www.reuters.com/article/hotStocksNe...lBrandChannel=0
Housing, dollar, oil on stocks' radar
Sun Nov 25, 2007 10:22am EST
By Cal Mankowski
NEW YORK (Reuters) - New data on a depressed housing sector figures large in a fairly heavy schedule of economic reports due this week, while the dollar and oil approach threshold levels that could prove unsettling.
"Investors are anxious to see any kind of bullish news because we sure haven't seen much lately," said Fred Dickson, market strategist and director of retail research at D.A. Davidson & Co. in Lake Oswego, Oregon.
Key concerns include whether the dollar falls through $1.50 against the euro and sets a new low, and whether oil hits $100 per barrel or higher, Dickson said. On Friday, U.S. crude oil for January delivery (CLF8: Quote, Profile, Research) settled at a record $98.18 a barrel, up almost 1 percent on the New York Mercantile Exchange.
Credit card groups will have reports on spending at the start of the Christmas shopping season for an early tip-off as to how the consumer is bearing up, Dickson noted.
------------
Coming reports this week:
Tuesday _ Oct. durable goods orders. Consumer confidence for November
Wednesday _ The Beige Book- business activity of the 12 Fed Reserve Bank Districts. Existing home sales,
Thursday _ Third Quarter GDP and the Core Personal Consumption Expenditures Price Index - showing economic growth and inflation.
Friday _ Personal income and spending data; and construction spending for October is due.
--------------
Despite the heavy calendar of economic releases and a small number of quarterly earnings reports, many analysts are saying concerns about the credit markets are paramount.
"The market's going to have its ear cocked for news about financial stress," said Michael Metz, chief investment strategist at Oppenheimer & Co in New York. "The market is not really dependent on economic or earnings news."
D.A. Davidson's Dickson notes that the stock market has been closely tracking the pricing of mortgage debt obligations since July.
--------------------------------------------------
The Europeans are also scurrying...
http://www.marketwatch.com/news/story/euro...28644C5B167D%7D
European Central Bank in move to calm markets
By Greg Robb, MarketWatch
Last Update: 12:24 PM ET Nov 25, 2007
WASHINGTON (MarketWatch) -- The European Central Bank has pledged to provide extra funds into the money markets this week and continuing through the beginning of 2008 in a move designed to ease mounting stress.
The central bank for the 13 countries that use the euro as their currency said it will "reinforce" its policy of providing more than usual liquidity "in the upcoming main refinancing operation as well as in the following ones for as long as it is needed and at least until after the end of the year."
The ECB has a regular refunding operation scheduled for Tuesday.
Analysts said stress in the money market intensified last week after a spate of negative news confirmed fears of widespread exposure of European financial institutions to the aftershocks of the collapse of the American mortgage market.
European bond insurers appear to be the latest victims of the turmoil. A pair of French banks said they will invest about $1.5 billion in French-owned bond insurer CIFG Services.
And Swiss Re, the Zurich-based reinsurance giant, surprised analysts with a write-down of $1.07 billion in the value of derivatives backed by U.S. mortgage loans.
The ECB statement was seen as an effort to ease fears that money will not be available in the market. Facing many challenges to their balance sheets, banks have been hoarding cash and this, if taken too far, can freeze financial markets.
Markets have been under pressure since August, when worries that rising defaults in U.S. subprime mortgages caused financial markets to question the value of securities that consisted of pools of these loans and any derivative tied to mortgages.
This led banks to pull back from lending each other funds and markets only began to recover after the ECB and the Federal Reserve injected billions of dollars into the market.
There have been some improvements in markets over the past few months. For instance, the ECB has not added emergency funds since Sept. 6. But the tensions remained just below the surface and seem to be intensifying in recent days, analysts said.
"Global money markets appear to be crunching up again," said Andrew Cates, an economist at UBS.
"Much of the financial system is not working," agreed analysts at BNP Paribas in a research note Friday.
"A number of markets are closed, term finance is illiquid, sources of funding are shrinking, liquidity is thin and more demands are being placed on bank capital," BNP Paribas said.
The situation "calls out for monetary ease," said the BNP Paribas analysts.
(Greg Robb is a senior reporter for MarketWatch in Washington.)
CYA
Housing, dollar, oil on stocks' radar
Sun Nov 25, 2007 10:22am EST
By Cal Mankowski
NEW YORK (Reuters) - New data on a depressed housing sector figures large in a fairly heavy schedule of economic reports due this week, while the dollar and oil approach threshold levels that could prove unsettling.
"Investors are anxious to see any kind of bullish news because we sure haven't seen much lately," said Fred Dickson, market strategist and director of retail research at D.A. Davidson & Co. in Lake Oswego, Oregon.
Key concerns include whether the dollar falls through $1.50 against the euro and sets a new low, and whether oil hits $100 per barrel or higher, Dickson said. On Friday, U.S. crude oil for January delivery (CLF8: Quote, Profile, Research) settled at a record $98.18 a barrel, up almost 1 percent on the New York Mercantile Exchange.
Credit card groups will have reports on spending at the start of the Christmas shopping season for an early tip-off as to how the consumer is bearing up, Dickson noted.
------------
Coming reports this week:
Tuesday _ Oct. durable goods orders. Consumer confidence for November
Wednesday _ The Beige Book- business activity of the 12 Fed Reserve Bank Districts. Existing home sales,
Thursday _ Third Quarter GDP and the Core Personal Consumption Expenditures Price Index - showing economic growth and inflation.
Friday _ Personal income and spending data; and construction spending for October is due.
--------------
Despite the heavy calendar of economic releases and a small number of quarterly earnings reports, many analysts are saying concerns about the credit markets are paramount.
"The market's going to have its ear cocked for news about financial stress," said Michael Metz, chief investment strategist at Oppenheimer & Co in New York. "The market is not really dependent on economic or earnings news."
D.A. Davidson's Dickson notes that the stock market has been closely tracking the pricing of mortgage debt obligations since July.
--------------------------------------------------
The Europeans are also scurrying...
http://www.marketwatch.com/news/story/euro...28644C5B167D%7D
European Central Bank in move to calm markets
By Greg Robb, MarketWatch
Last Update: 12:24 PM ET Nov 25, 2007
WASHINGTON (MarketWatch) -- The European Central Bank has pledged to provide extra funds into the money markets this week and continuing through the beginning of 2008 in a move designed to ease mounting stress.
The central bank for the 13 countries that use the euro as their currency said it will "reinforce" its policy of providing more than usual liquidity "in the upcoming main refinancing operation as well as in the following ones for as long as it is needed and at least until after the end of the year."
The ECB has a regular refunding operation scheduled for Tuesday.
Analysts said stress in the money market intensified last week after a spate of negative news confirmed fears of widespread exposure of European financial institutions to the aftershocks of the collapse of the American mortgage market.
European bond insurers appear to be the latest victims of the turmoil. A pair of French banks said they will invest about $1.5 billion in French-owned bond insurer CIFG Services.
And Swiss Re, the Zurich-based reinsurance giant, surprised analysts with a write-down of $1.07 billion in the value of derivatives backed by U.S. mortgage loans.
The ECB statement was seen as an effort to ease fears that money will not be available in the market. Facing many challenges to their balance sheets, banks have been hoarding cash and this, if taken too far, can freeze financial markets.
Markets have been under pressure since August, when worries that rising defaults in U.S. subprime mortgages caused financial markets to question the value of securities that consisted of pools of these loans and any derivative tied to mortgages.
This led banks to pull back from lending each other funds and markets only began to recover after the ECB and the Federal Reserve injected billions of dollars into the market.
There have been some improvements in markets over the past few months. For instance, the ECB has not added emergency funds since Sept. 6. But the tensions remained just below the surface and seem to be intensifying in recent days, analysts said.
"Global money markets appear to be crunching up again," said Andrew Cates, an economist at UBS.
"Much of the financial system is not working," agreed analysts at BNP Paribas in a research note Friday.
"A number of markets are closed, term finance is illiquid, sources of funding are shrinking, liquidity is thin and more demands are being placed on bank capital," BNP Paribas said.
The situation "calls out for monetary ease," said the BNP Paribas analysts.
(Greg Robb is a senior reporter for MarketWatch in Washington.)
CYA
Well the reports are coming in...
http://business.timesonline.co.uk/tol/busi...icle2956516.ece
November 27, 2007
US consumer confidence at two-year low
US consumers turn gloomy amid market turmoil, rising gasoline prices and the likelihood of higher heating bills this winterFrom agencies
US consumer confidence sank for the fourth month in a row in November and to its lowest level in more than two years, according to figures released today.
Sentiment fell amid turmoil in the stock markets, rising gasoline prices and a likelihood of higher home heating bill this winter.
The Conference Board, a business research group, said its consumer confidence index fell to 87.3 points, from a revised 95.2 points in October.
The drop was much steeper than that expected by Wall Street analysts, who predicted a reading of 91.5.
The index is now at its lowest level since October 2005, when it stood at 85.2 points.
Driving the fall was the American public’s gloomy outlook. The forward-looking sub-index that measures expectations for the next six months
plunged in November to 68.7 points from 80.0 points in October.
Consumers anticipating business conditions to worsen increased to 16.7 per cent from 13.9 per cent. Those expecting them to improve declined
to 12.4 per cent from 14.0 per cent.
On present conditions, consumers claiming conditions are "good" decreased to 22.3 per cent from 23.2 per cent.
Those saying conditions are "bad" increased to 19.1 per cent from 16.6 per cent.
The outlook on the job market also dimmed, with 23.2 per cent saying jobs were "plentiful," down from 24.1 percent in October.
Looking ahead, consumers expected the US economic situation to deteriorate further, up 16.7 per cent from 13.9 per cent in October, and hiring to decline, 23.1 per cent against 20.2 per cent.
---------------------------
http://today.reuters.com/news/articleinves...EX-UPDATE-2.XML
US quarterly home price drop largest on record-S&P
Tue Nov 27, 2007 12:36pm ET
NEW YORK, Nov 27 (Reuters) - Prices of existing U.S. single-family homes in the third quarter slumped 4.5 percent from a year earlier, matching a record decline from the previous period as the housing downturn deepened, according to a national home price index on Tuesday.
The S&P/Case-Shiller National Home Price Index fell 1.7 percent from June, marking the largest quarterly decline in the index's 21-year history, S&P said in a statement.
Robert Shiller, a Yale University economist and co-developer of Standard and Poor's S&P/Case-Shiller Home Price Indices, on a Standard & Poor's teleconference following the release, said that at this point there is substantial concern and uncertainty about the outlook for the U.S. housing market.
"The downward momentum is looking impressive right now and at the very least ought to be a source of worry about the future for home prices," he said.
The futures market for the S&P Case-Shiller Composite Index is indicating home prices down another 5 percent in 2008, he said.
On the teleconference, titled "Current & Future State of U.S. Housing Market", Shiller said he is not able to predict the bottom for the U.S. housing market at this point of time.
http://business.timesonline.co.uk/tol/busi...icle2956516.ece
November 27, 2007
US consumer confidence at two-year low
US consumers turn gloomy amid market turmoil, rising gasoline prices and the likelihood of higher heating bills this winterFrom agencies
US consumer confidence sank for the fourth month in a row in November and to its lowest level in more than two years, according to figures released today.
Sentiment fell amid turmoil in the stock markets, rising gasoline prices and a likelihood of higher home heating bill this winter.
The Conference Board, a business research group, said its consumer confidence index fell to 87.3 points, from a revised 95.2 points in October.
The drop was much steeper than that expected by Wall Street analysts, who predicted a reading of 91.5.
The index is now at its lowest level since October 2005, when it stood at 85.2 points.
Driving the fall was the American public’s gloomy outlook. The forward-looking sub-index that measures expectations for the next six months
plunged in November to 68.7 points from 80.0 points in October.
Consumers anticipating business conditions to worsen increased to 16.7 per cent from 13.9 per cent. Those expecting them to improve declined
to 12.4 per cent from 14.0 per cent.
On present conditions, consumers claiming conditions are "good" decreased to 22.3 per cent from 23.2 per cent.
Those saying conditions are "bad" increased to 19.1 per cent from 16.6 per cent.
The outlook on the job market also dimmed, with 23.2 per cent saying jobs were "plentiful," down from 24.1 percent in October.
Looking ahead, consumers expected the US economic situation to deteriorate further, up 16.7 per cent from 13.9 per cent in October, and hiring to decline, 23.1 per cent against 20.2 per cent.
---------------------------
http://today.reuters.com/news/articleinves...EX-UPDATE-2.XML
US quarterly home price drop largest on record-S&P
Tue Nov 27, 2007 12:36pm ET
NEW YORK, Nov 27 (Reuters) - Prices of existing U.S. single-family homes in the third quarter slumped 4.5 percent from a year earlier, matching a record decline from the previous period as the housing downturn deepened, according to a national home price index on Tuesday.
The S&P/Case-Shiller National Home Price Index fell 1.7 percent from June, marking the largest quarterly decline in the index's 21-year history, S&P said in a statement.
Robert Shiller, a Yale University economist and co-developer of Standard and Poor's S&P/Case-Shiller Home Price Indices, on a Standard & Poor's teleconference following the release, said that at this point there is substantial concern and uncertainty about the outlook for the U.S. housing market.
"The downward momentum is looking impressive right now and at the very least ought to be a source of worry about the future for home prices," he said.
The futures market for the S&P Case-Shiller Composite Index is indicating home prices down another 5 percent in 2008, he said.
On the teleconference, titled "Current & Future State of U.S. Housing Market", Shiller said he is not able to predict the bottom for the U.S. housing market at this point of time.
QUOTE(Indianhead @ Nov 27 2007, 11:35 AM)
NEW YORK, Nov 27 (Reuters) - Prices of existing U.S. single-family homes in the third quarter slumped 4.5 percent from a year earlier, matching a record decline from the previous period as the housing downturn deepened, according to a national home price index on Tuesday.
The S&P/Case-Shiller National Home Price Index fell 1.7 percent from June, marking the largest quarterly decline in the index's 21-year history, S&P said in a statement.
Robert Shiller, a Yale University economist and co-developer of Standard and Poor's S&P/Case-Shiller Home Price Indices, on a Standard & Poor's teleconference following the release, said that at this point there is substantial concern and uncertainty about the outlook for the U.S. housing market.
"The downward momentum is looking impressive right now and at the very least ought to be a source of worry about the future for home prices," he said.
The futures market for the S&P Case-Shiller Composite Index is indicating home prices down another 5 percent in 2008, he said.
On the teleconference, titled "Current & Future State of U.S. Housing Market", Shiller said he is not able to predict the bottom for the U.S. housing market at this point of time.
The S&P/Case-Shiller National Home Price Index fell 1.7 percent from June, marking the largest quarterly decline in the index's 21-year history, S&P said in a statement.
Robert Shiller, a Yale University economist and co-developer of Standard and Poor's S&P/Case-Shiller Home Price Indices, on a Standard & Poor's teleconference following the release, said that at this point there is substantial concern and uncertainty about the outlook for the U.S. housing market.
"The downward momentum is looking impressive right now and at the very least ought to be a source of worry about the future for home prices," he said.
The futures market for the S&P Case-Shiller Composite Index is indicating home prices down another 5 percent in 2008, he said.
On the teleconference, titled "Current & Future State of U.S. Housing Market", Shiller said he is not able to predict the bottom for the U.S. housing market at this point of time.
Well, after a run-up of nearly 200 percent in some areas, I think a sell-off is to be expected.
Don't you?
Or is it the end of the world?
QUOTE(jeffmoskin @ Nov 28 2007, 11:59 AM)
Well, after a run-up of nearly 200 percent in some areas, I think a sell-off is to be expected.
Don't you?
Or is it the end of the world?
Don't you?
Or is it the end of the world?
I expect a big correction...but things seem down the rabbit hole. Down is Up...
For instance the Beige Book comes out today and says 7of the 12
federal reserve (banks) districts saw their economy go down...the other
five were level, mixed or slightly up. You'd think that would put some brakes on
the market...but no...
It seems that since the numbers are bad, speculators think the fed will further
cut interest rates, and that will help the market so they ran down and drove it up 300 points today.
The numbers are definately bad, but the fed could react and pump more cheap money, so the
market rises? What am I missing here? Smells like a balloon to me...I'm steppin' back.
http://www.thestreet.com/s/beige-book-kohn...ml?puc=googlefi
The Federal Reserve delivered a double-dose of rate cut medicine to the markets Wednesday.
Hope for rate cuts to come spurred a strong stock market rally -- and the financial sector -- after a dovish morning speech by Fed Vice Chairman Donald Kohn and the Fed's beige book, released in the afternoon, depicted a buckling economy in need of support.
The beige book, which surveys economic conditions between meetings of the rate-setting Federal Open Market Committee, noted that in October through mid-November, seven of the Fed's 12 districts reported slower growth.
The report, combined with Kohn's comments that included concerns that recent credit market "turbulence" could "increase the possibility of further tightening in financial conditions for households and businesses," left the markets reassured the Fed will step in with deeper rate cuts that may help stave off a recession. Rate cut hopes also helped offset news of more bank writedowns, as Wells Fargo (WFC - Cramer's Take - Stockpickr), often considered conservative, revealed a $1.4 billion fourth-quarter hit on late Tuesday.
This beige book reported some new weaknesses in the U.S. economy. In particular, retail spending was "soft" in many districts, read the report, and most retailers "were expecting a slow holiday season." The housing situation remained dim, "keeping downward pressure on prices and construction activity."
That's not such a surprise, but the Fed noted that commercial real estate activity, which many economists have held up as an example of resilience in the economy, "showed signs of leveling off" in some areas. Banks exhibited lower levels of commercial and industrial loans.
...
QUOTE(Indianhead @ Nov 28 2007, 01:15 PM)
It seems that since the numbers are bad, speculators think the fed will further
cut interest rates, and that will help the market so they ran down and drove it up 300 points today.
cut interest rates, and that will help the market so they ran down and drove it up 300 points today.
Remember that there are 11 TRILLION AMERICAN DOLLARS floating around the world. They gotta go somewhere, and the financial markets are the simplest place because they can be put in or pulled out in a nanosecond. The fact that those excess petrodollars were BORROWED by some poor b*stard to "buy" an overpriced house he could ill afford complicates matters somewhat.
Still, the biggest threat to the market, the stability of the western world, and the health of (what is left of) the US economy is the loss of dollar hegemony to the Euro and the Yen.
I don't like being lied to about WMDs; I don't like America to act like a global thug.
But the fact that the last, largest reservoir of cheap oil on the planet is controlled by Anglo-American interests gives those trillions of dollars a reason for countries to keep them for reserves. Heaven help us if they change their minds.
QUOTE(jeffmoskin @ Nov 28 2007, 04:53 PM)
Remember that there are 11 TRILLION AMERICAN DOLLARS floating around the world. They gotta go somewhere, and the financial markets are the simplest place because they can be put in or pulled out in a nanosecond. The fact that those excess petrodollars were BORROWED by some poor b*stard to "buy" an overpriced house he could ill afford complicates matters somewhat.
Still, the biggest threat to the market, the stability of the western world, and the health of (what is left of) the US economy is the loss of dollar hegemony to the Euro and the Yen.
I don't like being lied to about WMDs; I don't like America to act like a global thug.
But the fact that the last, largest reservoir of cheap oil on the planet is controlled by Anglo-American interests gives those trillions of dollars a reason for countries to keep them for reserves. Heaven help us if they change their minds.
Still, the biggest threat to the market, the stability of the western world, and the health of (what is left of) the US economy is the loss of dollar hegemony to the Euro and the Yen.
I don't like being lied to about WMDs; I don't like America to act like a global thug.
But the fact that the last, largest reservoir of cheap oil on the planet is controlled by Anglo-American interests gives those trillions of dollars a reason for countries to keep them for reserves. Heaven help us if they change their minds.
Yup...that's probably why China wants dollars still...and wants them worth something...so far...
until they get all the US plants built in China to provide all the stuff the oil countries want...
then you nationalize all the factories...call in the US debt...and throw the monkey in the wrench.
Or maybe not....
What do you make of this?
Is China going to take over the world, or is China just an overseas branch of US Global Domination, Incorporated?
"...More than 50 percent of exports from China in the first nine months of this year were shipped from factories with foreign ownership, according to Chinese government and European Union statistics. The customs value of these exports when they leave Chinese ports does not take into account the value of materials, technology or design from abroad..."
http://www.nytimes.com/2007/11/28/business...agewanted=print
Is China going to take over the world, or is China just an overseas branch of US Global Domination, Incorporated?
"...More than 50 percent of exports from China in the first nine months of this year were shipped from factories with foreign ownership, according to Chinese government and European Union statistics. The customs value of these exports when they leave Chinese ports does not take into account the value of materials, technology or design from abroad..."
http://www.nytimes.com/2007/11/28/business...agewanted=print
I recently bought a motorcycle helmet...advertised as made in the USA...
the tag inside said the padding was made in China. You can't avoid
it anymore. The entire Dow Jones Industrials are based on Chinese
companies, or American companies that have invested in or built
factories in China. Our jets have engines made in China...Motorola
radios are about to be made in China and will be used by cops and
soldiers. Yet we can't dock our ships because they are offended by
Congress honoring the Dali Lama. It's a marraige made in Hell.
It's the Bush Years...and the waning of The American Empire.
the tag inside said the padding was made in China. You can't avoid
it anymore. The entire Dow Jones Industrials are based on Chinese
companies, or American companies that have invested in or built
factories in China. Our jets have engines made in China...Motorola
radios are about to be made in China and will be used by cops and
soldiers. Yet we can't dock our ships because they are offended by
Congress honoring the Dali Lama. It's a marraige made in Hell.
It's the Bush Years...and the waning of The American Empire.
QUOTE(Indianhead @ Nov 30 2007, 03:48 PM)
It's a marriage made in Hell.
It's the Bush Years...and the waning of The American Empire.
It's the Bush Years...and the waning of The American Empire.
Don't be so quick to bury the empire.
The world is addicted to oil.
American companies CONTROL that oil.
American dollars are needed to BUY that oil.
America prints those dollars (in America, no less) for very little money.
American troops and American mercenaries will kill you if you get in the way.
I'm not saying I like what CheneyCo did to get us into Iraq; I'm just saying that CheneyCo has 250,000 pairs of boots on the last remaining "elephant" field on the planet.
I hope you are right. I hope the dollar stays the currency
and we can continue to afford to field the best.
and we can continue to afford to field the best.
QUOTE(Indianhead @ Dec 1 2007, 10:45 PM)
I hope you are right. I hope the dollar stays the currency
and we can continue to afford to field the best.
and we can continue to afford to field the best.
I hope I am wrong.
I hope that the western world decides to form a "basket of currencies" approach to world trade. Why should the Europeans have to pay for their Chinese DVD players with the sweat of their brow when the FED can simply print more greenbacks?
It isn't fair, and I've learned that when things aren't fair for a long enough time, the sh*t eventually will hit the fan.
Resulting in World War.
QUOTE(jeffmoskin @ Dec 2 2007, 05:33 PM)
I hope I am wrong.
I hope that the western world decides to form a "basket of currencies" approach to world trade. Why should the Europeans have to pay for their Chinese DVD players with the sweat of their brow when the FED can simply print more greenbacks?
It isn't fair, and I've learned that when things aren't fair for a long enough time, the sh*t eventually will hit the fan.
Resulting in World War.
I hope that the western world decides to form a "basket of currencies" approach to world trade. Why should the Europeans have to pay for their Chinese DVD players with the sweat of their brow when the FED can simply print more greenbacks?
It isn't fair, and I've learned that when things aren't fair for a long enough time, the sh*t eventually will hit the fan.
Resulting in World War.
I might have said New World Order...probably with war(s) involved.
http://www.nytimes.com/2007/12/12/business...&ei=5087%0A
Fed Leads Drive to Strengthen Bank System
By FLOYD NORRIS and VIKAS BAJAJ
Published: December 12, 2007
A day after the Federal Reserve disappointed investors with a modest cut in interest rates, central banks in North America and Europe announced on Wednesday the most aggressive infusion of capital into the banking system since the terrorist attacks of September 2001.
Stocks initially surged around the world when the coordinated move was announced by the central banks, though markets in the United States gave up nearly all those early gains in afternoon trading. The action is being led by the Fed, which this month will lend $64 billion itself and through banks in Europe, and includes the backing of the Bank of Canada, the European Central Bank, the Bank of England and the Swiss National Bank.
The injection of new capital into the market suggests that policy makers are increasingly concerned about the stability of the credit markets, which have seized up again in the last couple of weeks after they overcame an earlier bout of panic in August and September. Economists and market specialists say policy makers are trying to reassure bankers that they will stand firm as the lender of last resort.
---------------
The last play of a failed economic system...one last prop-up...one last play...
those who want to use theatrics to convince the rest of us, are played out...
are you buying?
Fed Leads Drive to Strengthen Bank System
By FLOYD NORRIS and VIKAS BAJAJ
Published: December 12, 2007
A day after the Federal Reserve disappointed investors with a modest cut in interest rates, central banks in North America and Europe announced on Wednesday the most aggressive infusion of capital into the banking system since the terrorist attacks of September 2001.
Stocks initially surged around the world when the coordinated move was announced by the central banks, though markets in the United States gave up nearly all those early gains in afternoon trading. The action is being led by the Fed, which this month will lend $64 billion itself and through banks in Europe, and includes the backing of the Bank of Canada, the European Central Bank, the Bank of England and the Swiss National Bank.
The injection of new capital into the market suggests that policy makers are increasingly concerned about the stability of the credit markets, which have seized up again in the last couple of weeks after they overcame an earlier bout of panic in August and September. Economists and market specialists say policy makers are trying to reassure bankers that they will stand firm as the lender of last resort.
---------------
The last play of a failed economic system...one last prop-up...one last play...
those who want to use theatrics to convince the rest of us, are played out...
are you buying?
QUOTE(Indianhead @ Dec 12 2007, 05:17 PM)
The last play of a failed economic system...one last prop-up...one last play...
those who want to use theatrics to convince the rest of us, are played out...
are you buying?
those who want to use theatrics to convince the rest of us, are played out...
are you buying?
Well, it's the only game in town. For better or for worse, the international consortium of central bankers run the world. And the FED is the leader of the pack. So, they are pouring money into the system. Perhaps if they had not been so quick to kneel down at the altar of ideological free market capitalism, we might not have gotten into this mess.
But BushCo is pure ideology.
And pure Bushsh*t
http://www.nytimes.com/2007/12/13/business...f=worldbusiness
Central Bankers to Lend Billions in Credit Crisis
By VIKAS BAJAJ and FLOYD NORRIS
Published: December 13, 2007
A day after the Federal Reserve disappointed investors with a modest cut in interest rates, central banks in North America and Europe on Wednesday announced the most aggressive infusion of capital into the banking system since the terrorist attacks of September 2001.
Most market specialists and economists welcomed the effort but concluded that it would probably have only limited success in addressing broader problems in the global economy and the credit markets.
In response, stocks initially surged in New York, but most of the early gains dissipated in afternoon trading as the market moved wildly up and down through the day.
...
The coordinated action is being led by the Fed, which will lend $40 billion this month. The European Central Bank, the Bank of England, the Swiss National Bank and the Bank of Canada will lend $50.2 billion this month and next.
...
The Standard & Poor’s 500-stock index fell 2.5 percent on Tuesday; it closed up 0.61 percent, at 1,486.59 on Wednesday. The Dow Jones industrial average closed up 41.13 points, or 0.31 percent, at 13,473.90. Rising oil prices, which surged more than $4 a barrel, to $94.39, also played a role in stock market gyrations.
...
But with markets increasingly uncertain about the quality of banks’ holdings, lending between banks has slowed and become more expensive. Banks are also less likely to extend loans because they need to hold more capital on their books.
Underscoring the banks’ problems, Wachovia and Bank of America said Wednesday that loan losses were rising and profits would fall further in coming months.
The difference between what banks pay to borrow and what the Treasury pays has widened from less than half a percentage point in the spring to more than 2.2 percentage points Tuesday. It fell slightly yesterday after the central banks’ announcement, but policy makers, by stepping into the breach and lending directly to banks, are hoping to reduce that premium much further.
The Fed will do so through an auction process it has not used before. It will ask banks to bid the interest rate they are willing to pay for loans totaling $40 billion, split in two equal parts, with the first auction beginning Monday.
The process is expected to result in a rate that is lower than the discount rate at which the Fed lends money to banks, backed by the same collateral as will be required in the auctions. The discount rate was lowered to 4.75 percent on Tuesday, from 5 percent.
During the credit crisis, few banks have voluntarily borrowed at the discount rate because it was seen as a sign of weakness. Policy makers say they will be releasing auction results so that the participants know only which Federal Reserve bank made the loans, not which commercial bank borrowed the money. Based on the results of its first two auctions, the Fed plans two more auctions of an unspecified size in January.
In part, said Larry A. Goldstone, president of Thornburg Mortgage, a lender based in Santa Fe, N.M., the process “will give the Fed some idea of what the cost of money needs to be in order to get the banks to borrow.”
...
Still, several analysts contended that the plan might raise more doubts about whether even bigger problems loomed. “It smacks of panic,” Barry Ritholtz wrote on his widely read economics blog, the Big Picture, “and suggests the Fed is very worried.”
-------------------------------------------
Auction money? Don't tell anyone who bought it? Why don't they just print it and give it away?
I better go buy a wheelbarrow to replace my wallet for grocery shopping.
Central Bankers to Lend Billions in Credit Crisis
By VIKAS BAJAJ and FLOYD NORRIS
Published: December 13, 2007
A day after the Federal Reserve disappointed investors with a modest cut in interest rates, central banks in North America and Europe on Wednesday announced the most aggressive infusion of capital into the banking system since the terrorist attacks of September 2001.
Most market specialists and economists welcomed the effort but concluded that it would probably have only limited success in addressing broader problems in the global economy and the credit markets.
In response, stocks initially surged in New York, but most of the early gains dissipated in afternoon trading as the market moved wildly up and down through the day.
...
The coordinated action is being led by the Fed, which will lend $40 billion this month. The European Central Bank, the Bank of England, the Swiss National Bank and the Bank of Canada will lend $50.2 billion this month and next.
...
The Standard & Poor’s 500-stock index fell 2.5 percent on Tuesday; it closed up 0.61 percent, at 1,486.59 on Wednesday. The Dow Jones industrial average closed up 41.13 points, or 0.31 percent, at 13,473.90. Rising oil prices, which surged more than $4 a barrel, to $94.39, also played a role in stock market gyrations.
...
But with markets increasingly uncertain about the quality of banks’ holdings, lending between banks has slowed and become more expensive. Banks are also less likely to extend loans because they need to hold more capital on their books.
Underscoring the banks’ problems, Wachovia and Bank of America said Wednesday that loan losses were rising and profits would fall further in coming months.
The difference between what banks pay to borrow and what the Treasury pays has widened from less than half a percentage point in the spring to more than 2.2 percentage points Tuesday. It fell slightly yesterday after the central banks’ announcement, but policy makers, by stepping into the breach and lending directly to banks, are hoping to reduce that premium much further.
The Fed will do so through an auction process it has not used before. It will ask banks to bid the interest rate they are willing to pay for loans totaling $40 billion, split in two equal parts, with the first auction beginning Monday.
The process is expected to result in a rate that is lower than the discount rate at which the Fed lends money to banks, backed by the same collateral as will be required in the auctions. The discount rate was lowered to 4.75 percent on Tuesday, from 5 percent.
During the credit crisis, few banks have voluntarily borrowed at the discount rate because it was seen as a sign of weakness. Policy makers say they will be releasing auction results so that the participants know only which Federal Reserve bank made the loans, not which commercial bank borrowed the money. Based on the results of its first two auctions, the Fed plans two more auctions of an unspecified size in January.
In part, said Larry A. Goldstone, president of Thornburg Mortgage, a lender based in Santa Fe, N.M., the process “will give the Fed some idea of what the cost of money needs to be in order to get the banks to borrow.”
...
Still, several analysts contended that the plan might raise more doubts about whether even bigger problems loomed. “It smacks of panic,” Barry Ritholtz wrote on his widely read economics blog, the Big Picture, “and suggests the Fed is very worried.”
-------------------------------------------
Auction money? Don't tell anyone who bought it? Why don't they just print it and give it away?
I better go buy a wheelbarrow to replace my wallet for grocery shopping.
http://www.washingtonpost.com/wp-dyn/conte...7121401522.html
What Bankers Fear
By David Ignatius
Sunday, December 16, 2007; Page B07
When airport rescue crews are worried that a damaged plane may have a crash landing, they sometimes spread the runway with foam to reduce the probability of fire on impact. That's what the Federal Reserve and other central banks are doing in pumping liquidity into severely damaged financial markets.
Make no mistake: The central bankers' announcement Wednesday of a new coordinated effort to pump cash into the global financial system is a sign of their nervousness. The global credit squeeze that began last summer still hasn't run its course, and the central bankers fear that the stressed financial system could pull the world economy into a deep recession.
Thus the bankers' decision to shower the system with money, through a new system of auctions that will allow banks to borrow more cheaply than they can through the commercial interbank market. What's unusual is that five leading central banks agreed to act as a joint rescue committee.
The aim isn't so much to prevent a downturn -- the bankers aren't sure that's possible, or even desirable -- as to mitigate its effects. Fed officials have decided that they need to let the adjustment happen in financial markets, with prices of mortgage-backed securities and other assets falling to levels that will allow the markets to clear.
"Helicopters start dropping bundles of cash," read the headline on a column by Martin Wolf in Thursday's Financial Times. This image of free money recalls the facetious prescription of John Maynard Keynes that to get money in circulation again during the Great Depression, the government could simply bury it underground and encourage unemployed workers to dig it up. This time the bankers won't even have to dig.
Fed officials want to avoid two mistakes made in past financial crises. They don't want to be overly harsh, as banking authorities were after the real estate collapse that hit New England in the early 1990s. Back then, regulators forced banks to clean up their balance sheets by selling off assets in a falling market, which made the downward cycle even worse.
The Fed also wants to avoid being overly tolerant, as Japanese authorities were during that country's long-running financial crisis. The Japanese banks were allowed to keep bad loans on their books, in the hope that they could gradually grow their way out of the crisis. Instead, this lenient policy simply delayed the day of reckoning.
What scares the central bankers now is the evaporation of trust from the system. Banks don't believe each other's numbers; since nobody knows the real value of some of the mortgage-backed securities everyone is holding, they assume the worst. They start hoarding cash as a buffer against their own losses and because they're nervous about lending to anyone else.
That's what bankers mean when they talk about lack of liquidity. It isn't so much a shortage of cash as an unwillingness to make it available to others. It was Keynes, again, who coined the term "liquidity preference" to describe a situation in which even high rates of return couldn't persuade frightened investors to commit their cash.
"The basic problem is that banks don't trust each other. They can't get financing, so they don't lend, and this can cause spillover into the larger economy," explains Ted Truman, a senior fellow at the Peterson Institute in Washington and the Fed's former top international economist.
A fresh portrait of this stressed system appeared last week in the latest quarterly report by the Bank of International Settlements. The report noted that net issuance of certain mortgage-backed securities fell to $3 billion in September, compared with $30 billion or more a month in 2005 and 2006. Borrowing in general declined sharply, with the net issuance of bonds and notes in the third quarter less than half that of the previous quarter.
What does this market feel like for players at ground zero? I asked the head of one of the leading hedge funds how he had traded his portfolio Wednesday, the day the joint rescue package was announced. He answered that he had stayed out of the market because he wasn't sure what to do. Trades that looked sensible at 10 a.m. would have turned out to be mistakes by noon.
"If someone would take me out of all my positions, long and short, I'd do it," he said. This is the financial market equivalent of saying you want to start over. Six months into the credit crunch, that's the way many exhausted players are feeling. The markets will have to sink a good deal more, alas, before the vultures arrive to carry off the debris and the process of rebuilding can start.
The writer is co-host ofPostGlobal, an online discussion of international issues. His e-mail address isdavidignatius@washpost.com.
----------------------------------------
As strange as this may sound...the realization of the problem's depth encourages me...it is the start of correcting it.
What Bankers Fear
By David Ignatius
Sunday, December 16, 2007; Page B07
When airport rescue crews are worried that a damaged plane may have a crash landing, they sometimes spread the runway with foam to reduce the probability of fire on impact. That's what the Federal Reserve and other central banks are doing in pumping liquidity into severely damaged financial markets.
Make no mistake: The central bankers' announcement Wednesday of a new coordinated effort to pump cash into the global financial system is a sign of their nervousness. The global credit squeeze that began last summer still hasn't run its course, and the central bankers fear that the stressed financial system could pull the world economy into a deep recession.
Thus the bankers' decision to shower the system with money, through a new system of auctions that will allow banks to borrow more cheaply than they can through the commercial interbank market. What's unusual is that five leading central banks agreed to act as a joint rescue committee.
The aim isn't so much to prevent a downturn -- the bankers aren't sure that's possible, or even desirable -- as to mitigate its effects. Fed officials have decided that they need to let the adjustment happen in financial markets, with prices of mortgage-backed securities and other assets falling to levels that will allow the markets to clear.
"Helicopters start dropping bundles of cash," read the headline on a column by Martin Wolf in Thursday's Financial Times. This image of free money recalls the facetious prescription of John Maynard Keynes that to get money in circulation again during the Great Depression, the government could simply bury it underground and encourage unemployed workers to dig it up. This time the bankers won't even have to dig.
Fed officials want to avoid two mistakes made in past financial crises. They don't want to be overly harsh, as banking authorities were after the real estate collapse that hit New England in the early 1990s. Back then, regulators forced banks to clean up their balance sheets by selling off assets in a falling market, which made the downward cycle even worse.
The Fed also wants to avoid being overly tolerant, as Japanese authorities were during that country's long-running financial crisis. The Japanese banks were allowed to keep bad loans on their books, in the hope that they could gradually grow their way out of the crisis. Instead, this lenient policy simply delayed the day of reckoning.
What scares the central bankers now is the evaporation of trust from the system. Banks don't believe each other's numbers; since nobody knows the real value of some of the mortgage-backed securities everyone is holding, they assume the worst. They start hoarding cash as a buffer against their own losses and because they're nervous about lending to anyone else.
That's what bankers mean when they talk about lack of liquidity. It isn't so much a shortage of cash as an unwillingness to make it available to others. It was Keynes, again, who coined the term "liquidity preference" to describe a situation in which even high rates of return couldn't persuade frightened investors to commit their cash.
"The basic problem is that banks don't trust each other. They can't get financing, so they don't lend, and this can cause spillover into the larger economy," explains Ted Truman, a senior fellow at the Peterson Institute in Washington and the Fed's former top international economist.
A fresh portrait of this stressed system appeared last week in the latest quarterly report by the Bank of International Settlements. The report noted that net issuance of certain mortgage-backed securities fell to $3 billion in September, compared with $30 billion or more a month in 2005 and 2006. Borrowing in general declined sharply, with the net issuance of bonds and notes in the third quarter less than half that of the previous quarter.
What does this market feel like for players at ground zero? I asked the head of one of the leading hedge funds how he had traded his portfolio Wednesday, the day the joint rescue package was announced. He answered that he had stayed out of the market because he wasn't sure what to do. Trades that looked sensible at 10 a.m. would have turned out to be mistakes by noon.
"If someone would take me out of all my positions, long and short, I'd do it," he said. This is the financial market equivalent of saying you want to start over. Six months into the credit crunch, that's the way many exhausted players are feeling. The markets will have to sink a good deal more, alas, before the vultures arrive to carry off the debris and the process of rebuilding can start.
The writer is co-host ofPostGlobal, an online discussion of international issues. His e-mail address isdavidignatius@washpost.com.
----------------------------------------
As strange as this may sound...the realization of the problem's depth encourages me...it is the start of correcting it.
http://www.nytimes.com/2007/12/14/opinion/14krugman.html?hp
Op-Ed Columnist
After the Money’s Gone
By PAUL KRUGMAN
Published: December 14, 2007
On Wednesday, the Federal Reserve announced plans to lend $40 billion to banks. By my count, it’s the fourth high-profile attempt to rescue the financial system since things started falling apart about five months ago. Maybe this one will do the trick, but I wouldn’t count on it.
Reactions From Around the Web In past financial crises — the stock market crash of 1987, the aftermath of Russia’s default in 1998 — the Fed has been able to wave its magic wand and make market turmoil disappear. But this time the magic isn’t working.
Why not? Because the problem with the markets isn’t just a lack of liquidity — there’s also a fundamental problem of solvency.
Let me explain the difference with a hypothetical example.
Suppose that there’s a nasty rumor about the First Bank of Pottersville: people say that the bank made a huge loan to the president’s brother-in-law, who squandered the money on a failed business venture.
Even if the rumor is false, it can break the bank. If everyone, believing that the bank is about to go bust, demands their money out at the same time, the bank would have to raise cash by selling off assets at fire-sale prices — and it may indeed go bust even though it didn’t really make that bum loan.
And because loss of confidence can be a self-fulfilling prophecy, even depositors who don’t believe the rumor would join in the bank run, trying to get their money out while they can.
But the Fed can come to the rescue. If the rumor is false, the bank has enough assets to cover its debts; all it lacks is liquidity — the ability to raise cash on short notice. And the Fed can solve that problem by giving the bank a temporary loan, tiding it over until things calm down.
Matters are very different, however, if the rumor is true: the bank really did make a big bad loan. Then the problem isn’t how to restore confidence; it’s how to deal with the fact that the bank is really, truly insolvent, that is, busted.
My story about a basically sound bank beset by a crisis of confidence, which can be rescued with a temporary loan from the Fed, is more or less what happened to the financial system as a whole in 1998. Russia’s default led to the collapse of the giant hedge fund Long Term Capital Management, and for a few weeks there was panic in the markets.
But when all was said and done, not that much money had been lost; a temporary expansion of credit by the Fed gave everyone time to regain their nerve, and the crisis soon passed.
In August, the Fed tried again to do what it did in 1998, and at first it seemed to work. But then the crisis of confidence came back, worse than ever. And the reason is that this time the financial system — both banks and, probably even more important, nonbank financial institutions — made a lot of loans that are likely to go very, very bad.
It’s easy to get lost in the details of subprime mortgages, resets, collateralized debt obligations, and so on. But there are two important facts that may give you a sense of just how big the problem is.
First, we had an enormous housing bubble in the middle of this decade. To restore a historically normal ratio of housing prices to rents or incomes, average home prices would have to fall about 30 percent from their current levels.
Second, there was a tremendous amount of borrowing into the bubble, as new home buyers purchased houses with little or no money down, and as people who already owned houses refinanced their mortgages as a way of converting rising home prices into cash.
As home prices come back down to earth, many of these borrowers will find themselves with negative equity — owing more than their houses are worth. Negative equity, in turn, often leads to foreclosures and big losses for lenders.
And the numbers are huge. The financial blog Calculated Risk, using data from First American CoreLogic, estimates that if home prices fall 20 percent there will be 13.7 million homeowners with negative equity. If prices fall 30 percent, that number would rise to more than 20 million.
That translates into a lot of losses, and explains why liquidity has dried up. What’s going on in the markets isn’t an irrational panic. It’s a wholly rational panic, because there’s a lot of bad debt out there, and you don’t know how much of that bad debt is held by the guy who wants to borrow your money.
How will it all end? Markets won’t start functioning normally until investors are reasonably sure that they know where the bodies — I mean, the bad debts —are buried. And that probably won’t happen until house prices have finished falling and financial institutions have come clean about all their losses. All of this will probably take years.
Meanwhile, anyone who expects the Fed or anyone else to come up with a plan that makes this financial crisis just go away will be sorely disappointed.
Op-Ed Columnist
After the Money’s Gone
By PAUL KRUGMAN
Published: December 14, 2007
On Wednesday, the Federal Reserve announced plans to lend $40 billion to banks. By my count, it’s the fourth high-profile attempt to rescue the financial system since things started falling apart about five months ago. Maybe this one will do the trick, but I wouldn’t count on it.
Reactions From Around the Web In past financial crises — the stock market crash of 1987, the aftermath of Russia’s default in 1998 — the Fed has been able to wave its magic wand and make market turmoil disappear. But this time the magic isn’t working.
Why not? Because the problem with the markets isn’t just a lack of liquidity — there’s also a fundamental problem of solvency.
Let me explain the difference with a hypothetical example.
Suppose that there’s a nasty rumor about the First Bank of Pottersville: people say that the bank made a huge loan to the president’s brother-in-law, who squandered the money on a failed business venture.
Even if the rumor is false, it can break the bank. If everyone, believing that the bank is about to go bust, demands their money out at the same time, the bank would have to raise cash by selling off assets at fire-sale prices — and it may indeed go bust even though it didn’t really make that bum loan.
And because loss of confidence can be a self-fulfilling prophecy, even depositors who don’t believe the rumor would join in the bank run, trying to get their money out while they can.
But the Fed can come to the rescue. If the rumor is false, the bank has enough assets to cover its debts; all it lacks is liquidity — the ability to raise cash on short notice. And the Fed can solve that problem by giving the bank a temporary loan, tiding it over until things calm down.
Matters are very different, however, if the rumor is true: the bank really did make a big bad loan. Then the problem isn’t how to restore confidence; it’s how to deal with the fact that the bank is really, truly insolvent, that is, busted.
My story about a basically sound bank beset by a crisis of confidence, which can be rescued with a temporary loan from the Fed, is more or less what happened to the financial system as a whole in 1998. Russia’s default led to the collapse of the giant hedge fund Long Term Capital Management, and for a few weeks there was panic in the markets.
But when all was said and done, not that much money had been lost; a temporary expansion of credit by the Fed gave everyone time to regain their nerve, and the crisis soon passed.
In August, the Fed tried again to do what it did in 1998, and at first it seemed to work. But then the crisis of confidence came back, worse than ever. And the reason is that this time the financial system — both banks and, probably even more important, nonbank financial institutions — made a lot of loans that are likely to go very, very bad.
It’s easy to get lost in the details of subprime mortgages, resets, collateralized debt obligations, and so on. But there are two important facts that may give you a sense of just how big the problem is.
First, we had an enormous housing bubble in the middle of this decade. To restore a historically normal ratio of housing prices to rents or incomes, average home prices would have to fall about 30 percent from their current levels.
Second, there was a tremendous amount of borrowing into the bubble, as new home buyers purchased houses with little or no money down, and as people who already owned houses refinanced their mortgages as a way of converting rising home prices into cash.
As home prices come back down to earth, many of these borrowers will find themselves with negative equity — owing more than their houses are worth. Negative equity, in turn, often leads to foreclosures and big losses for lenders.
And the numbers are huge. The financial blog Calculated Risk, using data from First American CoreLogic, estimates that if home prices fall 20 percent there will be 13.7 million homeowners with negative equity. If prices fall 30 percent, that number would rise to more than 20 million.
That translates into a lot of losses, and explains why liquidity has dried up. What’s going on in the markets isn’t an irrational panic. It’s a wholly rational panic, because there’s a lot of bad debt out there, and you don’t know how much of that bad debt is held by the guy who wants to borrow your money.
How will it all end? Markets won’t start functioning normally until investors are reasonably sure that they know where the bodies — I mean, the bad debts —are buried. And that probably won’t happen until house prices have finished falling and financial institutions have come clean about all their losses. All of this will probably take years.
Meanwhile, anyone who expects the Fed or anyone else to come up with a plan that makes this financial crisis just go away will be sorely disappointed.
http://business.timesonline.co.uk/tol/busi...icle3055820.ece
...
The G20 – attended by finance ministers and central bank chiefs of the big industrial countries (America, Japan, Germany, Britain, France, Italy and Canada) but also by Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey and the European Union – is fairly new on the scene, having first met only eight years ago.
...
When the G20 met in South Africa last month, one source of comfort was that, while growth prospects in the advanced economies were being hit by the credit crisis, the emerging markets, led by China and India, were sailing on regardless.
That, however, may not last, according to a new assessment by the Standard Chartered bank. It thinks a downturn in global investment will chip away at China’s sky-high growth, 11% at present, reducing it to 9.5% next year and 8.2% in 2009.
“While policymakers in Bei-jing currently worry about overheating at home and are busy coming up with measures to cool things down, the medium term looks increasingly likely to present them with a much more difficult challenge: a slowdown in China’s biggest source of demand,” said Stephen Green, Standard Chartered’s China economist.
“We think there is a rising risk of China getting hit harder than the consensus currently assumes,” he said.
For many countries, even these slower growth rates in prospect in China remain a source of wonderment. But when even China is being affected, the inference is clear: the consequences of the credit crisis have much further to run.
The central-bank cavalry may have arrived but the battle is far from won.
------------------
I would note that China's growth is the platform that has the stock markets holding up to this point. Major purchases have been heavily weighted toward China. If Western demand for Chinese products slumps...so will their ability to provide profits for western investors.
...
The G20 – attended by finance ministers and central bank chiefs of the big industrial countries (America, Japan, Germany, Britain, France, Italy and Canada) but also by Australia, Brazil, China, India, Indonesia, Mexico, Russia, Saudi Arabia, South Africa, South Korea, Turkey and the European Union – is fairly new on the scene, having first met only eight years ago.
...
When the G20 met in South Africa last month, one source of comfort was that, while growth prospects in the advanced economies were being hit by the credit crisis, the emerging markets, led by China and India, were sailing on regardless.
That, however, may not last, according to a new assessment by the Standard Chartered bank. It thinks a downturn in global investment will chip away at China’s sky-high growth, 11% at present, reducing it to 9.5% next year and 8.2% in 2009.
“While policymakers in Bei-jing currently worry about overheating at home and are busy coming up with measures to cool things down, the medium term looks increasingly likely to present them with a much more difficult challenge: a slowdown in China’s biggest source of demand,” said Stephen Green, Standard Chartered’s China economist.
“We think there is a rising risk of China getting hit harder than the consensus currently assumes,” he said.
For many countries, even these slower growth rates in prospect in China remain a source of wonderment. But when even China is being affected, the inference is clear: the consequences of the credit crisis have much further to run.
The central-bank cavalry may have arrived but the battle is far from won.
------------------
I would note that China's growth is the platform that has the stock markets holding up to this point. Major purchases have been heavily weighted toward China. If Western demand for Chinese products slumps...so will their ability to provide profits for western investors.
Dow Jones Industrial Average
12,589.07 -238.42 / -1.86%
Jan 8 4:03pm ET †
12,589.07 -238.42 / -1.86%
Jan 8 4:03pm ET †
Dow Jones Industrial Average
12,853.09 +117.78 / +0.92%
Jan 10 4:03pm ET †
Amazing ride...n'cest pas?
Hold on.....................
12,853.09 +117.78 / +0.92%
Jan 10 4:03pm ET †
Amazing ride...n'cest pas?
Hold on.....................
...it's coming...
Dow Jones Industrial Average
12,606.30 -246.79 / -1.92%
Jan 11 4:04pm ET †
--------------------------
If my prediction that the DJIA hits 12,000 at the end of this month,
despite all the adjustments by the fed since I made it, (I adjusted
that to the end of the first quarter) even I'll be shocked.
--------------------------
http://money.cnn.com/news/
Countrywide rescue: $4 billion
2:29pm: In a widely expected move, Bank of America steps in to buy one of the lenders hardest hit by the mortgage crisis. (more)
Trade deficit widest in 14 months
9:00am: Jumps 9.3% in November; Commerce Department says oil imports, weak dollar contributed to the $63.1 billion deficit. (more)
Commerce secretary upbeat on economy(????????????????)
12:59pm: Carlos Gutierrez says some indicators still strong, despite some talk that a recession is near or already here. (more)
Merrill may write down $15 billion
8:36am: Broker expected to take staggering loss on bad mortgage bets when it posts results next week, paper reports. (more)
Dow Jones Industrial Average
12,606.30 -246.79 / -1.92%
Jan 11 4:04pm ET †
--------------------------
If my prediction that the DJIA hits 12,000 at the end of this month,
despite all the adjustments by the fed since I made it, (I adjusted
that to the end of the first quarter) even I'll be shocked.
--------------------------
http://money.cnn.com/news/
Countrywide rescue: $4 billion
2:29pm: In a widely expected move, Bank of America steps in to buy one of the lenders hardest hit by the mortgage crisis. (more)
Trade deficit widest in 14 months
9:00am: Jumps 9.3% in November; Commerce Department says oil imports, weak dollar contributed to the $63.1 billion deficit. (more)
Commerce secretary upbeat on economy(????????????????)
12:59pm: Carlos Gutierrez says some indicators still strong, despite some talk that a recession is near or already here. (more)
Merrill may write down $15 billion
8:36am: Broker expected to take staggering loss on bad mortgage bets when it posts results next week, paper reports. (more)
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