................ Stock Market Investment .....Remisiers

8-3-2010, Choosing An Appropriate Affiliate Program

2010-03-08T21:32:00.001+08:00

6-3-2010, Choosing An Appropriate Affiliate Program

Posted by ? on Jan 25th, 2010·

This is a guest post by Annette Lode

Many affiliate marketers are either unsuccessful or only partially successful because they tend to lack focus. They go from one strategy to another without really taking the time to master anything. Most affiliate programs provide information on how to promote the product and they will give you the necessary tools such as, text links, banners and more. Choosing an appropriate affiliate program is going to be a challenge for beginners but it is possible, without too much stress involved.

The main and most important reason affiliate programs are excellent for beginners is you only need to concentrate on promoting and not making your product. This is your key to a very successful future indeed. Learning more about what an affiliate program can do for you and knowing how to go about choosing the most appropriate one for your needs is also just as important.

The internet is truly the greatest place to locate all of this type of information that anyone of you might need at some point in your life, for one thing or another. Many people are becoming more interested in learning the ropes of affiliate programs and why they are so very beneficial to any type of business. Keep you eyes open to any changes being made at all times so that you can remain on top of things no matter what.

Other ways to promote your affiliate link includes writing articles, commenting in online forums, creating pay-per-click campaigns etc. As you become more experienced in marketing you will make the necessary adjustments and start creating a wonderful income!

Once you begin seeing all of this hard earned money rolling in, you are going to be so pleasantly surprised, no doubts about that people.

The key to success in is first and foremost to know how to choose affiliate programs that you are interested in and then plan and stay focused. You do this by concentrating on one strategy for a period of time, at least a month or two. Find as many sources as possible about affiliate program and how to go about choosing the most appropriate one for your needs, you might even realize it is not that complex really.

Remember being patient is very important throughout all of this because giving up too quickly could really end up costing you tremendously at the end of it all, which none of you want right. Working hard and finding that inner strength is really what is going to get you far in the business world and it is what it is going to take to earn you the amount of money that you were first hoping for.

If it is not returning any income, then take a look at an alternative strategy and spend some time developing it. If it starts to work then take a look at ways of making it even better. Perhaps there are some mistakes being made that you did not first notice until now. It is important to understand all aspects of an , a little piece at a time.

About The Author

My name is Annette Lode.I am the arthor of this article.My job is as a full time Internet marketer where i teach other affiliate marketers how to run a successful business.

Learn more about me and my business by visiting my website http://www.easycash4life.com

Posted by Make Money Online at 1:02 AM 0 comments

8-3-2010, How to Benefit Using Text Links

2010-03-08T21:31:00.001+08:00

6-3-2010, How to Benefit Using Text Links

Anil Vij to me

www.onewaylinkexchange.net

Text Links

Text links are text objects that can link to an external
file, a web page, an FTP site, or even a prompt for e-mail.
The visible text of a hyperlink is called the ‘anchor text’
to the text link, and it is the most important factor that
helps secure a good position in the Search Engine Results
Page (SERP) and gain link popularity. Text links point
towards a specific page of a website that has been
optimized to target the Anchor text, as the keyword phrase.

The Logic Behind Text Links:

Since the main aim of most search engines is to detect
the number of text links or sites anchoring towards the
site and the inbound links in the site under consideration,
the inclusion of text links is very important. Search
engines consider every text link as a ‘vote’ to the
webpage linked ‘to’, by the webpage that has included the
text link. If link popularity had no role in Search engine
optimization, then web owners would choose to link to a
website that is truly representative of its contents,
unlike today’s practice, to gain popularity through text
links.

www.onewaylinkexchange.net

The Influence of Text Links

The anchor text used for inbound text links is one of the
most important factors employed for Search Engine
Optimization (SEO). Text links are so powerful that they
can earn web pages a comparatively high ranking even if
the keyword is not used anywhere in the page, including
headings. With sufficient votes from other webpages, the
page can even have a first page ranking. The role of text
links in SEO can be clearly illustrated by taking the
example of monster.com, which is the first site that
appears when searched for the keyword ‘Jobs’ in every
search engine, though the word ‘jobs’ has not appeared
even once in the site. If a site has inefficient onsite
optimization, it can still do well enough with good use of
text links.

The easiest and most cost effective way of optimizing a
search engine using text links is by choosing a
descriptive domain for the site as well as the folders
and files in the site, and giving a descriptive anchor
text for its text links, since descriptive keyword text
links benefit from a much higher Click-Through-Rate (CTR)
than non descriptive text links.

It is always recommended to use lesser graphic based text
links, since they cannot be read by search engines. Being
the most powerful SEO technique, text links should be
given a high priority in any SEO campaign.

www.onewaylinkexchange.net

I hope that you enjoyed reading this.

If you would like to read more information on
search engine optimization then please see my articles
at http://onewaylinkexchange.net/wordpress/

Best Regards,
Anil

PS. If you would like to join now just go to

http://onewaylinkexchange.net/members/order.php

, 2417 Jericho Turnpike Suite 124, Garden City, NY 11040, United States

8-3-2010, What Can One Way Links Do For You?

2010-03-08T21:30:00.001+08:00

14-2-2010, What Can One Way Links Do For You?

Posted by Make Money Online on February 15th, 2010

http://www.onewaylinkexchange.net/

What Can One Way Links Do For You?

With One Way Links you will expand your business through:

* Search Engine Optimization

* Improved Page Rank (important when search
engines determine which sites to display first!)

* Increased Link Popularity

Just go to http://onewaylinkexchange.net/

The great thing about One Way Links is that this is a
one-way relationship – Your Way! You only link other sites
to yours without having to reciprocate.

One Way Link Exchange has already done the hard work by
identifying a thousand other sites willing to link to
yours. These are sites that may take you months, or even
years to set up on your own.

Special Offer for Preferred Subscribers:

This is a limited time offer for preferred subscribers.
Linking other websites to yours is easy to do and
One Way Link Exchange will walk you through each step of
the way. You will be set up in a matter of minutes, and
best of all you can go into our website as often as you
like and update which sites are linked to your homepage
as new sites are registered each day!

Other services would charge 3 or 4 times of our monthly fee
and still would not provide your site with the amount
and quality of exposure that One Way Link Exchange does.

With One Way Link Exchange you will work smarter,
not harder!

http://www.onewaylinkexchange.net/

I hope that you enjoyed reading this.

If you would like to read more information on
search engine optimization then please see my articles at
http://onewaylinkexchange.net/wordpress/

Best Regards,
Anil

PS. If you would like to join now just go to

http://onewaylinkexchange.net/members/order.php

, 2417 Jericho Turnpike Suite 124, Garden City, NY 11040, United States

8-3-2010, Japan says it won't comply with possible tuna ban

2010-03-08T21:29:00.001+08:00

5-3-2010, Japan says it won't comply with possible tuna ban

Japan says it won't comply with possible tuna ban

TOKYO – Japan will not comply if a ban is imposed on international trade in Atlantic bluefin tuna, prized by Japanese for sushi, a senior official said after the United States threw its support behind the move ahead of a crucial vote.

"If worse comes to worst, Japan will inevitably have to lodge its reservations," Vice Fishery Minister Masahiko Yamada told a news conference Thursday.

His comments came a day after the United States threw its support behind the ban on the international trade in Atlantic bluefin tuna, which conservationists say risks extinction if current catch rates continue.

At a March 13-25 meeting in Qatar, 175 member countries of the Convention on International Trade in Endangered Species of Wild Fauna and Flora, or CITES, will vote on a proposal by Monaco to list the species under Appendix 1 of the convention. If the measure wins support from two-thirds of member nations, trade of the fish would be banned.

Environmentalists say that would significantly reduce the catch because 80 percent of all Atlantic bluefin ends up in Japan, where it is a key ingredient in sashimi and sushi. Fatty bluefin — called "o-toro" here — can go for as much as 2,000 yen ($22) a piece in high-end Tokyo restaurants.

But Japan may register a reservation on the ban, which in practical terms means it could engage in trade with any other nation that also files a reservation.

The impact of such a move remains unclear because it depends on how many other nations might also register reservations. But activists say it could seriously undermine any ban.

"If major fishing nations show the same position as the Japanese government, it will ruin the concept of the CITES treaty," said Wakao Hanaoka, an ocean campaigner with Greenpeace in Tokyo.

Bluefin tuna stocks in the Eastern Atlantic and Mediterranean have dropped by 60 percent between 1997 and 2007, a result of surging demand as well as illegal and underreported catches.

The upcoming CITES vote is starting to garner more attention in Japan, with TV programs saying a ban would make it much harder for Japanese to obtain the succulent red and pink tuna meat. Other tuna species, including the Pacific bluefin, bigeye and yellowfin, would not be affected by the ban.

Yamada said Japan is committed to protecting bluefin species. Tokyo believes that catch quotas, which have already been cut 40 percent this year to 14,900 tons (13,500 metric tons) by another body, the International Commission on the Conservation of Atlantic Tuna, should be sufficient.

But environmentalists say the quotas are widely ignored and are too high anyway.

The European Commission has proposed that EU governments commit to the ban, although there still appears to be some division. Greece, Malta, Spain and Italy — which have strong fisherman lobbies — have resisted steps to curtail the hunt for bluefin, but recently France signaled it would support a trade ban if its implementation were delayed.

8-3-2010, Signs of trouble for Nintendo's Wii sales

2010-03-08T21:28:00.001+08:00

Signs of trouble for Nintendo's Wii sales

he hit gaming console's days of dominating the video game landscape may soon be over. What's changed

2-2-2010, The greatest viral marketing idea of all time

2010-02-24T20:05:00.002+08:00

2-2-2010, The greatest viral marketing idea of all time

Posted by Make Money Online on February 2nd, 2010

“Discover how a top guru KICKED out the search engines, invented a REVOLUTIONARY way to market ANY product . . . then gave it away in an amazing FREE book – ending with the most STUNNING viral twist ever seen”

( And he DOESN’T even ask for your email address ! )

“The greatest viral marketing idea of all time”

… Lynn Terry, SelfStartersWeeklyTips.com

“The greatest breakthrough in internet
marketing for years”

… Will Edwards, whitedovebooks.co.uk

Meet the Guru who broke the rules

There are many Internet marketing gurus who promise to reveal their special secrets – in exchange for a hefty fee.

Not so with Harvey Segal of SuperTips fame.

He gives away his tips and secrets for free.

Like his SuperTips site where you will see his series of free and highly acclaimed SuperTips books.

You can even rebrand them with your affiliate links – all for free.

Harvey is also owner of the definitive information sites full of unrivalled free content
- The Ad Tracking Guide
- The ClickBank Guide

and the number one forum for ClickBank users with over 10,000 members

- ClickBank Success Forum

ClickBank – if you did not know – is the world’s largest provider of digital products.Harvey is regarded as the world’s top ClickBank expert and has participated in ClickBank’s European Advisory Board meetings in 2007 and 2008.

You can seek out the testimonials at his sites and see how the other top gurus rave about his free products.

And if you want to know how he makes money from free books and free content sites he even tells you – exactly – in the classic free ebook 101 SuperTips.

So what is this leading to ?

It’s to assure you that when he now offers his ultimate secret tip it WILL be free and of stunning value. No strings attached.

Now let Harvey take over the story.

In my ebook 101 SuperTips I described Tip 100 as

“The greatest SuperTip of all”

And it was – when I first wrote the book

As time went by I thought of more and more ways to develop Tip 100 with a collection of new ideas.

Until finally I found the unique twist which improved it by a quantum leap.

So I decided to put all my ideas in a book of its own – The Ultimate SuperTip.

** This book is free.

** I don’t even ask for your contact details, just go ahead and download it.

What’s in the book ?

	I don’t care what product you have.I will show you the VERY BEST strategy to promote itOne which will never fall prey to the latest passing fads or the whims of the search engines. - In fact you’ll see why I have said Goodbye to the search engines. - Even with this top ranking site. I’ll show you an actual product that I sell with this strategy and EXACTLY how I do it – every step of the way. Which means that you can simply copy my methods and repeat the same.
	I reveal the ingenious twist that takes this strategy into orbit.
	Ending with an astonishing viral idea – not to be missed.

Here’s what they are saying about this book

Unsolicited testimonials from real people with real web sites.

“The greatest viral marketing idea of all time”

I got an email last week from Harvey Segal about his new book, The Ultimate Supertip. I took a look at it, ended up reading it cover to cover – – and I was completely floored!Of course, it didn’t hit me until the very last chapter (you’ll see why when you read it), but when it did… I knew that Harvey’s book was quite simply the greatest viral marketing idea of all time… Lynn Terry, SelfStartersWeeklyTips.com

“Made me stare in amazement”

The neat, simple, yet brilliant ‘promotional tweaks’ made me stare in amazementAll the while, my brain was exploring new possibilities, storing away every little detail for future reference.And the biggest wallop is packed in the viral element – which allows YOU to profit massively from Harvey’s work

In short, this is a MUST-READ. For everyone. Anyone.

… Dr Mani, ezinemarketingcenter.com

“Pure genius”

Is it “pure genius”?That’s what some have called this internet strategy of saying goodbye to search engines, with a unique twist.Find out in detail how to promote any product or affiliate program without needing to keep up with secrets only search engine gurus claim to know (ever).

Don’t miss the viral tip, I have to admit it’s brilliant.

… Mark Idzik, revenuetools.com

“Bound to take the Internet by storm”

Harvey Segal has come up with a viral ebook that has so many new ideas and twists in it that it is just bound to take the Internet by storm.It is called ‘The Ultimate Supertip’ and it is not just an explanation of one of the most powerful principles of Internet marketing, but also a fully working practical demonstration!You can have this book for free – you don’t even have to give Harvey your email address – and then immediately give it away to your friends, subscribers, website visitors, maiden aunts, long-lost cousins and the really clever neat tricks that Harvey has built into it will start to make you money right away

… Martin Avis, kickstartdaily.com

“Everyone wins”

Harvey Segal has done something quite fascinating – a viral ebook that’s free, and the affiliate gets 100% of the sales on products inside – yet everyone wins.
… David Pankhurst, BigBizBlog.com

“I had to take a walk round my garden”

If you are thinking of expanding your internet activities this year, do read Harvey Segal’s book on viral marketing. There’s no charge for it but it packs a punch.When I read it I had to take a walk round my garden to think through the implications of his system and then write down some notes! I’m still not sure I’ve exploited all his tips effectively yet.? As I said, no charge.… William Charlwood, factsaboutadsense.com

“The amazing package”

The full potential your system has for promoting my various products is only just beginning to occur to me. Not to mention the amazing package of ebooks and tools you have thrown in.
… Peter Roe, MindWaves.co.uk

“So compelling, so mesmerizing”

Your ebook was so compelling, so mesmerizing, so “suspending of my rational thinking”, that I rushed to hit the button at the end… Terry Rayburn, graceforlife.com

“Simply astonishingly intelligent”

I read a lot of stuff on the Internet, especially about marketing. Some is great, but most is pretty average. However, yesterday I downloaded Harvey Segal’s “The Ultimate SuperTip” in which he reveals a few things I already knew and a couple of ideas that are simply astonishingly intelligent. (Wish I’d thought of them!).One of the most useful concepts he deals with … for me as an ebook seller … is the ability to rebrand PDF ebooks from an HTML file “on the fly”. And he even shows where you can get an unheard of 100% commission. And that’s genuine.… Robin Henry, dwave.com.au

“Magnificent content and …”

I call this sheer genius, brilliance. Here’s why:It was not only the magnificent content that floored me … or even the virtuoso viral touch or the XXX.What really made my jaw hit the floor was …YYY

… Case Stevens, anownsite.com

(You’ll see what XXX and YYY are at the end of the book).

“The greatest breakthrough in internet marketing for years”

The Ultimate Supertips e-Book contains Harvey’s complete and original system. But not only that, he also provides his very latest viral marketing idea completely free; hailed as the greatest breakthrough in internet marketing for years…. Will Edwards, whitedovebooks.co.uk

“Beyond amazement”

I always thought that perfection could not be improved on. Now you have proved me totally wrong, not once but twice. I’m beyond amazement. Thank you… Tim Spencer, create-an-income.com

Read what other people have said about The Ultimate SuperTip here

Download here – no sign up

That’s right.

I won’t capture your email address and chase you.

The Ultimate SuperTip is a Free PDF book.No sign up.

But … there’s something else I need to tell you.

Go to the download page now

Thanks

Harvey Segal

12-2-2020, Look To The East For The Tsunami Wave, Not Europe

2010-02-12T13:36:00.001+08:00

Look To The East For The Tsunami Wave, Not Europe - By Matthias Chang
FROM AROUND THE BLOGS

Friday, 12 February 2010 Super Admin

This will be one of my shortest articles as it is written as a RED ALERT.

When I send out Red Alerts, it is a dire warning and a call for immediate action to protect your wealth (if there is any remaining).
Of late, I have been reading articles (some of which I have posted to the website) suggesting that Greece would be the trigger for the 2nd wave of the Global Tsunami. Obviously, if Greece defaults and goes belly up, it will have a disastrous effect, but not in the way that I see it.

There may be some manipulated “flight to safety to US dollars” (which itself is a dumb thing to do) in the short run. How can dollar be a currency haven when its value is total junk – toilet paper!

Such so-called “flight to safety” is a reflection of the intensity of the on-going currency warfare, principally between the Dollar and the Euro and skirmishes between the Dollar and the Yuan. But, this manipulation by the US global banks would not last and will be exposed for what it is – a global scam.

Since July last year, policy makers and so-called experts have relied on economic recovery in Asia to spur global growth and the resumption of the good times. Such thinking reflects a muddle mind.

Every economy in Asia is export-orientated and the domestic economies are just too small to take up the drastic fall in exports. Following Bernanke’s reckless lead, they have all jumped on the band wagon of quantitative easing – the printing of massive fiat monies (electronically or otherwise). Inflation has soared!

In an earlier posting to my website, I have indicated that there is a weak link holding up the Asian economies, and it is not China.

It is Singapore - touted by her US financial masters as an island of prosperity and financial stability. This is one of the biggest hoax since the collapse of Lehman Bros.

Singapore’s ratio of debt to GDP is a whopping 99.2 percent.

But no one seems to be taking any notice. Why are they making so much fuss over Greece, when Singapore is worse off?

If Singapore goes belly up, forget about any substantial growth in Asia to spur global recovery. Anyone who knows about the way business is done in the ASEAN region knows too well that if Singapore defaults, Indonesia will be the first to sink, followed rapidly by Thailand and Malaysia. The contagion will then spread to the rest of Asia. China will not be able to put out the fire.

China will survive the turmoil, but barely.

This is my nightmare scenario. And the second Tsunami is coming.

When?

After the failure of Europe to solve the problems of Greece, Spain and Portugal!

But money can be made from this madness.

SHORT THE SINGAPORE DOLLARS AND GET YOUR FUNDS OUT BEFORE IT IS TOO LATE.

8-2-2010, Death of the Remisiers? Not yet

2010-02-08T15:09:00.003+08:00

Wednesday, February 04, 2009
Death of the Remisiers? Not yet
On the first day of the Chinese New Year (January 26), many remisiers (yours truly included) were rudely reminded that their days of "comfortable" living are numbered. In an article entitled "Competition hots up for online share trading", the Star newspaper has highlighted that zero (or, near zero) brokerage has finally arrived and the service of remisier may not be required. This story followed another equally depressing article from the Star, entitled "Remisiers turn to part-time jobs" which appeared during the Christmas holidays last year (on December 28).

I just like to share my thoughts on this matter. The first thing I like to say is that remisiers' income, like that of the stockbroking firms and stock exchange company (i.e. Bursa Malaysia), fluctuates & moves in tandem with the sentiment in the stock market. In the present bear market, when investors and traders are not more willing to take on more risk, the trading volume and remisiers' income would naturally decline. It is very normal and nothing to fret about.

Zero brokerage is a totally different thing. However, it must be noted that zero brokerage schemes offered so far are for a limited period. CIMB's Clicks Trader's promotion is valid from Jan 9 to March 8 only. The report did not mention about Kenanga's 2EC account, which is a negotiable trading account. As currently practiced in 2 branches in Petaling Jaya (up to February 17), Kenanga's 2EC account offers zero brokerage rate for the buy-side contract, but attracts normal brokerage rate for the sell-side contract. This effectively offers the clients a 50% discount to the normal brokerage rate. Certain terms & conditions apply, such as cash upfront, etc.

Zero brokerage rate is not sustainable. One of the first online broker to offer zero brokerage rate in US is Zecco and it is finding it very hard to make money. Clusterstock has this story about how Zecco is changing its current practices in order to survive (go here). A copy of the letter it sent to clients, informing them that it would no longer be so generous (emphasis are mine) is given below:

Dear Zecco Trading client,

I’m writing to tell you that as of March 1st, 2009, we’re increasing the minimum level of assets needed to earn 10 free trades per month to $25,000. We’re also adding a new way to get free trades: customers who make at least 25 total trades per month will also qualify for 10 free stock trades per month.

Additionally, as of March 1st, 2009, you’ll be able to earn $75 for each friend referred to Zecco Trading through our Zecco Friends program. You can use that cash to offset trade commissions or make new investments.

Why was this necessary now? Anyone who’s read a newspaper lately knows that the US and world economies have been hit hard over the past 4 months. As a result, some of the largest corporations in the world have had to cut costs and adjust to new business realities. With reduced retail trading volumes and lower interest rates, we at Zecco Trading simply could no longer provide free trades to as many people as we would like.

To quote Mark Twain who said "Rumors of my death have been greatly exaggerated!", I would assure one & all that remisiers will still be around. To be relevant, we remisiers must strive to improve our service to our customers.
Posted by Alex Lu at 2/04/2009 04:47:00 PM

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2010-01-27T17:58:00.001+08:00

27-1-2010, Asia stocks fall on China jitters, yen gains

On Wednesday January 27, 2010, 3:18 am EST

By Kevin Yao

SINGAPORE (Reuters) - Asian stocks fell for the ninth straight day on Wednesday on fears that China's heightened efforts to rein in soaring credit growth could hamper the global economic recovery.

European stocks were set to follow Asia lower, with financial spreadbetters expecting key indexes in Britain (FTSE:^FTSE - News), Germany (XETRA:^GDAXI - News) and France (Paris:^FCHI - News) to open as much as 0.6 percent lower, while U.S. stock futures were little changed.

Investors were cautious ahead of the conclusion of a two-day policy meeting by the U.S. Federal Reserve later in the day.

The meeting is expected to yield little in terms of a near-term policy shift. But traders will scour a Fed statement afterwards for clues on how much longer it may leave its ultra-low interest rates and easy money policy in place, and for updates on the health of the U.S. economy.

The meeting is taking place amid a fierce Senate debate over whether Chairman Ben Bernanke should be appointed for a second term, which has also weighed on investor confidence this week.

The euro fell to a nine-month low of 125.31 yen as investors continued to cut risky trades amid a host of unsettling factors.

Besides worries that Chinese imports may slow as policymakers try to keep the economy from overheating, investors have been plagued by worries about Greece's high debt levels and a proposal from the White House that could break up some huge investment banks, which could slash their profits.

Data on Tuesday showed U.S. consumer confidence in January hit its highest level in nearly a year and a half, but a closely watched housing index showed an unexpected decline in November prices, giving a mixed view of its economic recovery.

The MSCI index of Asia Pacific stocks outside Japan (^MIAPJ0000PUS - News) fell 1 percent on Wednesday, surrendering brief early gains. The index has lost around 9 percent in the past two weeks, nearing the 10 percent level that is typically used to define a stock market correction.

The index slid 2 percent on Tuesday to its lowest in two months after China implemented a rise in bank reserve requirements to curb loan growth.

China's largest bank, ICBC (HKSE:1398.HK - News), said on Wednesday it has stopped rolling over some loans after a surge in credit at the start of the year, in the latest evidence that banks may finally be heeding a government-directed clampdown.

Japan's Nikkei average (Osaka:^N225 - News) fell 0.7 percent to its lowest in five weeks, while South Korean stocks (KSE:^KS11 - News) shed 0.7 percent to a seven-week low with sentiment weighed by reports North and South Korean forces exchanged artillery fire.

Many investors had been pricing in a smoother and stronger economic rebound this year, which would justify higher share valuations.

Now that questions are growing about the pace and depth of a recovery, share prices are highly vulnerable to a correction, especially after many global indexes have rallied more than 60 percent from lows seen in March last year.

Tech shares, which helped lead the strong global equities rally over the last year, have been among the hardest hit by profit taking in recent sessions as investors fear demand for flat screen TVs and other gadgets may weaken if the global recovery stumbles.

In Seoul, LG Electronics Inc (066570.KS) fell almost 1.9 percent to an eight-week low after posting a weaker-than-expected quarterly net profit. Taiwan's tech-heavy index (Taiwan:^TWII - News) dropped 0.5 percent to a two-month closing low, after slumping 3.5 percent on Tuesday, on fears that China's tightening measures will curb the island's exports to the mainland.

Analysts believe much of the fears over China's tightening are overdone, saying Beijing will largely stick to a pro-growth stance even as it tries to head off inflation risks and boom-bust swings in the economy.

"It is highly unlikely, in my opinion, that Beijing will drive the economy into a growth recession just to contain inflation," Stephen Jen, managing director of macroeconomics and currencies at Bluegold Capital Management, said in a note.

Nevertheless, shares in Shanghai and Hong Kong remained under heavy pressure.

The Shanghai Composite Index (^SSEC - News) fell 1.1 percent, closing below the key psychological support level of 3,000 points for the first time since October, despite upbeat earnings estimates from two major banks. Hong Kong's Hang Seng index (HKSE:^HSI - News) lost 0.8 percent.

CURRENCIES

The yen (^JPY - News), seen as a safer haven in times of market turmoil, firmed broadly currencies as investors dumped high-risk assets. The U.S. dollar fell 0.4 percent to 89.25 yen, but rose 0.2 percent against a basket of major currencies.

However, the high-yielding Australian dollar rose to $0.9045 after fourth-quarter inflation rose faster than expected as the cost of housing, recreation and food all climbed.

The data set the stage for a fourth straight increase in interest rates by the central bank at a meeting next week.

Gold prices steadied near $1,100 an ounce, supported by consistent retail demand from Asia, while oil futures prices fell 10 cents to $74.62 a barrel.

(Reporting by Kevin Yao; Editing by Kim Coghill)

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2010-01-23T12:32:00.004+08:00

Bank curbs, political fallout slam Wall Street

On Friday January 22, 2010, 5:59 pm EST,By Ellis Mnyandu

NEW YORK (Reuters) - Stocks capped their worst three-day slide in 10 months on Friday on fears the White House's plan to curb bank risk-taking would cut profits, and tech shares slumped after Google Inc's disappointing results.

Uncertainty about the Senate's confirmation of Ben Bernanke for another term as the Federal Reserve's chairman also rattled investors in a week when political squabbles helped erase stocks' gains for 2010.

"Between uncertainty over Bernanke, Obama's bank regulation proposal and the election in Massachusetts, the market is like a cork in the water and the Democrats just hit the flush," said Jack Ablin, chief investment officer at Harris Private Bank in Chicago. "It looks like we're headed really low."

Since the Democrats lost their 60-vote hold in the Senate with the election of a Republican in Massachusetts on Tuesday, there is a growing sense among investors that political uncertainty has all but ended the rally that began in March.

Financials and technology shares endured the brunt of the selling, with JPMorgan (NYSE:JPM - News) off 3.4 percent at $39.16, Goldman Sachs (NYSE:GS - News) down 4.2 percent at $154.12 and Google sliding 5.7 to $550.01, a day after the Web search company posted quarterly revenue that missed some forecasts.

The Dow Jones industrial average (DJI:^DJI - News) dropped 216.90 points, or 2.09 percent, to 10,172.98. The Standard & Poor's 500 Index (^SPX - News) slid 24.72 points, or 2.21 percent, to 1,091.76. The Nasdaq Composite Index (Nasdaq:^IXIC - News) fell 60.41 points, or 2.67 percent, to 2,205.29.

U.S. President Barack Obama unveiled his bank proposals on Thursday, saying banks should no longer be allowed to own, sponsor or invest in hedge funds for proprietary profit. Proprietary trading -- when a firm uses its own money to make bets on markets -- has been a profit engine for some major banks.

The proposals must receive congressional approval.

For the week, the Dow dropped 4.1 percent, the S&P 500 lost 3.9 percent and the Nasdaq tumbled 3.6 percent. It was the worst week for the S&P 500 and Nasdaq since October and the worst week for the Dow since March.

Stocks hit session lows late in the day on news that Britain had raised its international terrorism threat level.

The S&P 500 registered its worst 3-day slide since March 2009, around the start of the recent rally that sent both the S&P 500 and the Dow to 15-month highs as recently as Tuesday.

The Dow and the S&P 500 are now off more than 2 percent year-to-date, while the Nasdaq has shed almost 3 percent.

The selling of the past three days left the market's technical picture looking bleak after major indexes sunk below key support levels and their 50-day moving averages, a move considered a bearish signal.

In another sign of how rattled investors were, the CBOE Volatility index (^VIX - News), a measure of Wall Street's sentiment, registered its biggest 3-day rise in nearly 3 years, increasing 55.4 percent.

Aside from worry about how the Obama proposals on banks, investors also fretted about China's efforts to prevent the world's third-largest economy from overheating.

Since China has led the nascent global economic recovery, any curbs it puts on lending threatens to slow demand that other economies rely on to spur their own growth.

Shares of multinationals and commodity-related companies also took a tumble, with Alcoa Inc (NYSE:AA - News) off 6 percent at $13.40, Caterpillar Inc (NYSE:CAT - News) down 4.6 percent at $54.25. The S&P materials index (^GSPM - News) declined 2.3 percent on the New York Stock Exchange.

On Nasdaq, Apple Inc (NasdaqGS:AAPL - News) was down 5.04 percent at $197.59, making it the biggest drag, followed by Google.

Other disappointing news on the technology front came from Advanced Micro Devices Inc (NYSE:AMD - News), which warned that sales in the first quarter of 2010 will be down. Its shares tumbled 12.4 percent to $7.88.

The semiconductor index (^SOXX - News) lost 5.3 percent.

Credit card company Capital One Financial Corp (NYSE:COF - News) tumbled 12.1 percent to $37.53, a day after warning it faced tightening profit margins on loans it makes.

Capital One and American Express Co (NYSE:AXP - News) reported higher-than-forecast fourth-quarter earnings on Thursday but expressed concern about the growth outlook for credit cards. AmEx shares were the Dow's top drag, falling 8.5 percent to $38.59.

Volume on the New York Stock Exchange was 1.49 billion shares, equal with last year's estimated daily average, while on the Nasdaq, about 2.80 billion shares traded, above last year's daily average of 2.28 billion.

Declining stocks outnumbered advancing ones on the NYSE by a ratio of 9 to 2, while declining stocks beat advancers on the Nasdaq by about 8 to 3.

(Additional reporting by Ryan Vlastelica; Editing by Kenneth Barry)

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2009-12-01T11:14:00.001+08:00

30-11-2009,Dollar dips as markets recover from Dubai shock 4:37 pm ET

NEW YORK – The safe-haven dollar mostly slipped Monday, with the euro rising back over $1.50, but managed to hold above 14-year yen lows as investors held their breaths on the Dubai debt crisis.

The 16-nation euro rose to $1.4993 in late New York trading from $1.4954 late Friday, earlier climbing as high as $1.5083. The British pound dipped to $1.6424 from $1.6479, while the dollar fetched 86.29 Japanese yen from 86.70 yen.

On Friday, the dollar briefly fell below 85 yen, its lowest level since July 1995 as debt problems afflicting Dubai shook up the banking sector. Japanese Finance Minister Hirohisa Fujii called the yen's surge "a very serious situation." He added that Tokyo will take action as needed, suggesting that Japan may work with the U.S. and Europe to try to calm foreign exchange markets.

On Monday, Bank of Japan Gov. Masaaki Shirakawa acknowledged Japan is in deflation and said he is carefully monitoring foreign exchange levels. The central bank is ready to take steps as needed to maintain financial market stability, he said, according to the Japanese Kyodo News agency.

Shirakawa and Prime Minister Yukio Hatoyama are expected to meet as early as tomorrow to discuss the "situation," according to Brown Brothers Harriman analysts.

Speculation that the Japanese government or central bank might intervene is helping keep the dollar above the yen lows from Friday, said UBS currency analyst Patrick Ley.

Meanwhile, conflicting signals out of the Middle East kept the dollar trading in a tight range. Last week, Dubai World, the main investment arm of Dubai, asked to defer payments on $60 billion of debt for six months. That triggered fears of a massive debt default touching off a crisis, said CMC Markets' Michael Hewson in a note to investors Monday. But a weekend statement from the United Arab Emirates, where Dubai is located, saying it would make extra money available to all banks in the country helped calm investors. Later on Monday, however, a Dubai finance official said the government would not guarantee the company's debts.

Meanwhile, preliminary figures showed tepid sales for U.S. retailers over Thanksgiving weekend, failing to reassure investors who are questioning whether consumers will spend enough to boost the economy.

In other late trading, the dollar dropped to 1.0570 Canadian dollars from 1.0623 Canadian dollars late Friday, and slipped to 1.0061 Swiss francs from 1.0065 francs.

The greenback was also lower against the New Zealand and Australian dollars.

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2009-12-01T11:00:00.002+08:00

30-11-2009 Monday,U.S. Subprime and now Dubai Subprime – More to Come?

Looking at how poorly Maxis stock price performs since it’s relisting in the local stock market, those who didn’t get it through the supposingly transparent IPO balloting and was sulking can now grin from ear to ear (didn’t I tell you so? *grin*). The stock didn’t get to touch RM6.00 a share (as I expected because at RM6.00 the stock would be trading at a whopping EPS of 20 times) and fortunately retailers didn’t chase the stock. As I’ve mentioned earlier the local stock market is probably already at its peak but most importantly Maxis is now a different animal. Faced with saturation in mobile telecommunication sector, investors need more than marketing talk to be convinced that it’s worth throwing more money investing the stock.

You may already know about this by now but the fact was retailers who applied for Maxis IPO via ATMs (automated teller machines) other than CIMB’s ATMs had pathetic low percentage of securing the shares. Hence if you wish to talk about transparency (in balloting) maybe this is a simple area to start investigating why the special preferences to CIMB, the banking company owned by none other than PM Najib’s brother which happened to be the main underwriter of Maxis IPO exercise. OK, let’s stop talking about Maxis IPO because there are more important issues that you should know.

The latest bombshell in the global financial market is definitely the crisis faced by once the mighty-booming Dubai. The United Arab Emirates’s investment and development engine, Dubai World, announced last week that it was seeking a six-month delay in paying creditors on nearly US$60 billion in debt. As a result Dubai’s stock exchange plunged more than 7 percent while share prices of Dubai World tumbled almost 15 percent when market opened early Monday (today). UAE’s central bank may did the right thing by instantly pledging to make funding available to all banks in the country (including foreign banking’s branches) but it didn’t promise any carrot to help Dubai World. This US$60 billion (some said US$90 billion or more) can potentially become the largest sovereign debt default since Argentina.

But why didn’t we see it coming? Actually I’ve written about this potential Dubai bubble some moons ago although I had refrained from exaggerate the matter. Dubai is one of the 7 Arab Emirates and the support thrown in by her brother, cash-rich Abu Dhabi, was sufficient to transform the country into a finance, real estate and trading hub of the middle-east. Unlike other cuntries in the region, oil contributes about 6% to Dubai’s US$80 billion economy. However when come to business Abu Dhabi made it clear to Dubai that it needs collaterals in return for financial helps and hence the Burj Dubai was one of the properties pledged to Abu Dhabi. On the surface Dubai continues to show off her tallest building, underwater hotels, indoor show skiing in the desert, most expensive hotel Burj Al Arab, Palm Islands and so on.

You see, Dubai has a population of only 1.5 million but only 20% are citizens while the remaining 80% are expatriates. Indian, Pakistani and Bangladeshi constitute to these so-called cheap labors in building the Dubai’s ambitious plan. Dubai has been ruled by Al Maktoum dynasty since 1833 and you don’t need to be genius to know what will happen when the current ruler happens to be the Prime Minister as well. The only difference from such monarchy-cum-dictator and Malaysian’s PM-cum-dictator is the former does not know what property bubble is until it burst. In Dubai, expatriates can purchase properties without much scrutiny or prove of financial capabilities as if they were buying vegetables from the bazaar. Properties were hot commodities and speculators (or rather gamblers) borrowed as much as possible from banks to maximize their units of ownership.

With rental of a studio unit fetching RM7,000 per month you don’t need to be a university graduate to bet your money on properties, including the labours coming from Indian, Pakistan or Bangladesh. You need to pay at least 6-months of rental downpayment, mind you. In fact if you’re working there as an expatriate and you did not borrow money from the bank to speculate the properties in Dubai, you would be laughed on (because of your stupidity). This is because you won’t get sued or thrown into prison if you can’t pay for the properties you bought. And now the bubble had burst, everyone sell like mad. Actually the bubble burst began about a year ago but it wasn’t reported as widely as the U.S. subprime crisis. Only those who were working there knew about the seriousness of the Dubai subprime.

So, supposingly big brother Abu Dhabi which has a whopping US$650 billion in wealth was to write a small cheque to settle little brother Dubai’s debt, won’t that solve the problem? But I supposed Abu Dhabi would not be so stupid as to pick up the bill without looking at the worthiness, brother or not. Why not you ask former PM Mahathir who was reportedly (Barry Wain) squandered RM100 billion under his 22-year iron-fist rule to help reduce the country’s current deficit? Get the idea? My goodness, Malaysia is so bankrupt that PM Najib has no choice but to implement GST (Goods and Services Tax) just to earn addition RM1 billion in tax revenue – at the expence of Average-Joes.

Anyway, the question is – would Dubai’s subprime crisis goes away tomorrow as if there’s nothing happens or would Abu Dhabi pick up the skeletons after it collapsed? Would there be similar subprime elsewhere waiting to explode before the U.S. economy can recovers? Some said Vietnam, Greece or even Russia may have fun in crafting their names as the next contributor in subprime crisis.

Other Articles That May Interest You …

* PKFZ’s RM12 Billion Scandal - Where’re the Sharks?
* More data coming, more volatility, lesser ammunition left
* Experience the Real Panic in Persian Gulf Slowdown
* Dubai Investment Group realized their mistake, finally
* Dubai World in Casino Business
* Malaysia’s Biggest Scandal – Business as Usual

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2009-12-01T10:55:00.004+08:00

30-11-2009, US retailing fears weigh on world markets

By PAN PYLAS, AP Business Writer Pan Pylas, Ap Business Writer – Mon Nov 30, 12:16 pm ET

LONDON – European and U.S. stock markets fell Monday amid concerns about the start of the Christmas shopping season in the U.S. and despite relief over the pledge from the United Arab Emirates' central bank to back lenders exposed to Dubai's debt problems.

In Europe, the FTSE 100 index of leading British shares closed down 55.05 points, or 1.1 percent, at 5,190.68 while Germany's DAX ended 59.66 points, or 1.1 percent, lower at 5,625.95. The CAC-40 in France was 41.30 points, or 1.1 percent, lower at 3,680.15.

Earlier, European stocks had steadied as concerns about the fallout from Dubai's debt woes were soothed by the UAE central bank pledge to stand behind local and foreign banks.

However, a renewed bout of selling on Wall Street prompted a late reverse — the Dow Jones industrial average was down 33.63 points, or 0.3 percent, at 10,276.29 around midday New York time while the broader Standard & Poor's 500 index fell 3.71 points, or 0.3 percent, to 1,087.78.

Analysts said the soft start to the week was due to some disappointment at the start of holiday shopping season in the U.S. after preliminary figures by ShopperTrak, a research firm that tracks more than 50,000 outlets, showed sales rose 0.5 percent on Friday.

"Admittedly last year, it was minus 10 percent but I was expecting a bit better than the figure posted," said David Buik, markets analyst at BGC Partners.

Retail sales are particularly important when assessing the outlook for the global economy — without the help of U.S. consumer spending, which accounts for around 70 percent of the U.S. economy, any global economic recovery will be modest.

Economic news will increasingly take center stage over the rest of the week, culminating in Friday's U.S. nonfarm payrolls report for November — the jobs data often sets the tone in markets for a week or two.

However, there are other important U.S. releases due, including the Institute for Supply Management's surveys into the services and manufacturing sectors.

If investors conclude that the U.S. economy is losing some steam, then that could well pave the way for an end of year bout of profit-taking following an eight-month bull run.

Last week's announcement from Dubai World, a government investment company with some $60 billion worth of debts, that it wanted to postpone forthcoming debt payments until May sent shockwaves around financial markets and a big retreat in stocks, particularly in Europe and Asia. The U.S. avoided much of the immediate fallout as traders were on holiday for Thanksgiving.

Those shockwaves were still evident in the emirates' stock markets Monday, where traders returned from the Eid holiday, but the central bank's reassurances steadied market confidence elsewhere.

"The statement by the UAE central bank over the weekend, where it committed itself to providing liquidity to banks, appears to have calmed any remaining nerves," said David Jones, chief market strategist at IG Index.

"Traders, for now at least, seem happy to take the view that this is a localized problem and not the start of Credit Crunch Part 2," he added.

Though the markets have managed to steady Monday, there are still concerns that Dubai's problems may be a harbinger of things to come, even though the announcement from the UAE central bank may minimize the risk of contagion.

"It is a warning sign that sovereign credit risks are likely to remain a problem — Ireland, Greece and Britain, for example — and the deterioration in budget deficits and debt/GDP ratios will remain a key feature for some time," said Neil Mackinnon, global strategist at VTB Capital.

If, and when, the Dubai concerns diminish, investors have a raft of economic news this week to digest, which could well be crucial in how markets end the year.

Earlier in Asia, nearly every market traded higher, with Japan's Nikkei 225 stock average climbing 264.03 points, or 2.9 percent, to 9,345.55. Hong Kong's Hang Seng added 687.00 points, or 3.3 percent, to 21,821.50 and South Korea's Kospi added 2 percent to 1,555.60. Both those markets tumbled nearly 5 percent on Friday.

Elsewhere, Shanghai's market climbed 3.2 percent, Australia's index was 2.8 percent higher and Taiwan's benchmark rose 1.2 percent.

Stocks in the UAE ended sharply lower though, with Abu Dhabi's main index down 8 percent and Dubai's closing more than 7 percent lower.

Elsewhere, oil prices steadied, with benchmark crude up 47 cents at $76.52 a barrel, while gold was steady at $1,174.30 an ounce.

The dollar fell 0.6 percent to 86.10 yen, while the euro was down 0.2 percent at $1.4982.
____

AP Business Writer Jeremiah Marquez in Hong Kong contributed to this report.

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2009-09-16T13:45:00.001+08:00

14-9-2009, AP Poll: A year later, worries linger on economy

By JIM KUHNHENN, Associated Press Writer Jim Kuhnhenn, Associated Press Writer – Mon Sep 14, 4:12 pm ET

WASHINGTON – One year after Wall Street teetered on the brink of collapse, seven out of 10 Americans lack confidence the federal government has taken safeguards to prevent another financial industry meltdown, according to a new Associated Press-GfK poll.

Even more — 80 percent — rate the condition of the economy as poor and a majority worry about their own ability to make ends meet. The pessimistic outlook sets the stage for President Barack Obama as he attempts to portray the financial sector as increasingly confident and stable and presses Congress to act on new banking regulations.

The public sentiment also poses a challenge to central elements of Obama's governing agenda. Half of those surveyed said deficit reduction should be a national priority over increased spending on health care, education or alternative energy.

"I know a lot of people who don't have health care and really can't afford it," said Judy Purkey, a 57-year-old grandmother from Morristown, Tenn., who has raised four grandchildren and is living on disability payments. But she added: "The economy is so bad. You've heard the expression getting blood out of a turnip? — Well, that's what's going on."

The president, in a CBS interview that aired Sunday on "60 Minutes," acknowledged the public's quandary.

"This is a very difficult economic environment. People are feeling anxious," he said. "And I think it is absolutely fair to say that people started feeling some sticker shock."

Still, Obama generally avoided public blame for the recession or the condition of the banking sector.

Only one out of five surveyed said Obama bore responsibility for the recession; 54 percent blamed former President George W. Bush and 19 percent blamed former President Bill Clinton.

Financial institutions, however, bore the brunt of the criticism — 79 percent of those surveyed said banks and lenders that made risky loans deserve quite a bit of the blame. Sixty-eight percent held the federal government responsible for not adequately regulating banks and 65 percent blamed borrowers who could not afford to repay loans.

In a glimmer of good news for the administration, 17 percent of those surveyed said the government's massive economic stimulus has improved the economy, a 10 percentage point increase over July. Nearly six out of 10, however, said they are not confident that $787 billion that Congress approved to lower taxes and inject spending into the economy will do any good.

The White House has been promoting the stimulus package as a job creator and job saver that has helped keep unemployment from rising above its current 9.7 percent level — the highest since 1983.

Michael Painter, a 38-year-old unemployed plumber from Orlando, Fla., said that while he believed that spending package would ultimately stimulate the economy, it had yet to help him or his laid-off wife and teenage daughter.

He said he approved of Obama's job performance so far, but not Congress'. "The people in Congress need to quit bickering about party issues and start worrying about people issues."

The Obama administration also has begun to portray the financial sector in more upbeat terms, eager to make the case that government interventions begun under then-President Bush and continued, altered or expanded under Obama have brought stability to the markets.

Obama plans to deliver a speech Monday — the anniversary of Lehman Brothers' bankruptcy — to outline the administration's achievements and press Congress to enact changes in bank regulations.

But the AP-GfK poll illustrates the difficulty he faces.

More Americans worry about facing big, unexpected medical expenses now than they did in July — up 7 percentage points to 68 percent among those polled. Likewise, more worry that the value of their stocks and retirement investments will drop — up 4 percentage points from July to 68 percent.

In October, then-President Bush pushed a $700 billion financial rescue package through Congress on the condition that only half could be spent without further congressional authority. Obama, upon becoming president in January, succeeded in getting the second amount released, despite growing apprehension among lawmakers about the wisdom of such a bailout.

Obama has repeatedly said that the rescue of the financial sector would be incomplete without a new regulatory regime that would prevent a recurrence of the crisis. Obama has sent the outlines of possible regulation to Congress. Key banking lawmakers in the House and Senate have promised Obama legislation by the end of the year, but there is vigorous debate over key elements of Obama's plan, including a new consumer finance protection agency and the designation of the Federal Reserve as the main overseer of large institutions that could pose risks to the system.

The survey of 1,001 adults with cell and landline telephones was conducted from Sept. 3-8. It had a margin of sampling error of plus or minus 3.1 percentage points.

___

AP Polling Director Trevor Tompson, News Survey Specialist Dennis Junius and writer Ann Sanner contributed to this report.

2009-02-06T08:16:00.002+08:00

5-2-2009, U.S. jobless claims surge to 26-year high

Thu Feb 5, 8:35 am ET

WASHINGTON (Reuters) – The number of U.S. workers filing new claims for unemployment benefits jumped to a 26-year high last week, according to government data on Thursday that pointed to a rapid deterioration in the economy.

In addition, the number of people staying on the benefit rolls hit a record high in the week ended January 24, showing the weak labor market has yet to hit bottom. On Friday, the Labor Department will issue the employment report for January, and analysts are expecting a drop of 525,000 payroll jobs.

The department said initial claims for state unemployment insurance benefits rose 35,000 to a seasonally adjusted 626,000 in the week ended January 31, the highest since the week ending October 30, 1982. The prior week's number was revised up to 591,000 from 588,000.

Analysts polled by Reuters had forecast 585,000 new claims.

The number of people staying on the benefits roll after drawing an initial week of aid surged by 20,000 to a record 4.788 million in the week ended January 24, the latest week for which the data is available, from 4.768 million the previous week.

The four-week moving average for new claims, considered to be a better gauge of underlying trends as it irons out week-to-week volatility, rose to 582,250, the highest reading since the week ending December 4, 1982.

(Reporting by Lucia Mutikani; Editing by Neil Stempleman)
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2009-01-29T17:52:00.001+08:00

29-1-2009, Long Recession Seen

Thursday, January 29, 2009

DAVOS, Switzerland, Jan 28 (Dispatches) – Confidence among heads of the world's top companies meeting in Davos has tumbled to a new low, with the prospect of a long recession torpedoing faith in corporate prospects.

The findings from a poll of more than 1,100 CEOs sets a grim backdrop to a four-day meeting of the world's business and political elite in the Swiss ski resort, which began on Wednesday.

Crisis-hit bankers are thin on the ground at the snow-covered mountain town but policymakers will be working behind the scenes ahead of a summit of the G20 group of big and emerging countries in April and a G8 summit in July. Russian Prime Minister Vladimir Putin and Chinese Premier Wen Jiabao will both address the meeting later on Wednesday to give their policy prescriptions for dealing with the worst economic crisis in 80 years.

The annual PricewaterhouseCoopers survey suggests the need for action is urgent, as a crisis that started in the banking system hammers revenues across all regions and industries.

Worldwide, just 21 percent of CEOs said they were very confident of growing revenue in the next 12 months, down from 50 percent a year ago.

Attendees are pictured during a pause at the WEF in Davos

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2009-01-29T09:58:00.001+08:00

28-1-2009, Congress passes economic package

Wednesday, January 28, 2009

The US House of Representatives has passed President Barack Obama's $825bn (£576bn) economic stimulus package.

A blend of tax cuts and investments, it must now be backed by the Senate.

With a slimmer Democratic majority there, Republican opposition may be greater, amid complaints the plan is too expensive and will not work.

Mr Obama has said his package, which he hopes to sign into law next month, would help create a favourable climate for American business to thrive.

The bill would cut taxes for people and businesses by $275bn, while pumping more than $540bn into a range of initiatives including road and bridge repair, increased unemployment benefits, investment in new technology and renovations to 10,000 schools.

It was passed by 244 votes to 189, but not one Republican voted for the plan.

Heated debate

Mr Obama has pledged to try to end partisan division in Washington, but the debate on how best to kick start the US economy has devolved into a bitter squabble along party lines, says the BBC's Richard Lister in Washington.

In a heated debate, a succession of Republicans in Congress have condemned the stimulus package as a wasteful government spending exercise that will do little to create jobs.

They promoted their own bill, focussing more on tax cuts, which they said would create more jobs for half the investment.

But this was a battle they could not win in Congress, where Democrats have a large majority.

It is slimmer in the Senate where Republicans could slow the bill's progress, but Democrats are confident they can get the measure through there, and they have set a target for mid-February to have the bill on Mr Obama's desk to be signed into law.

Failing to attract significant Republican support for the bill, our correspondent says, is a blow to Mr Obama's hopes of forging a new consensus in Washington, at this time of economic crisis.

Greater accountability

Mr Obama said earlier workers were looking for "bold and swift" action from leaders, and called on businesses to play their part in economic recovery by creating jobs in a "favourable climate" started by government.

"I am confident that we are going to get it passed," Mr Obama said.

The US "cannot afford inaction or delay", he said after meeting business leaders at the White House.

Laying the blame for the economic crisis partially on a "sense of irresponsibility" on Wall Street and the government in Washington DC, he said corporate America had to take responsibility for its workers, but that Washington needed to provide leadership with the stimulus plan.

The president has said most of the money in his package would be used "immediately", creating as many as 4m jobs - the vast majority in the private sector - and that there would be a greater measure of accountability.

Treasury Secretary Timothy Geithner, who was sworn in on Monday, has the task of trying to get the US economy back in shape.

Meanwhile, Mr Obama attended his first Pentagon session with the joint chiefs of staff on Wednesday, telling them the military had carried out its missions under enormous pressure, and pledging his support to the troops.

Mr Obama, who campaigned on a promise to end the war in Iraq responsibly and withdraw troops next year, said his administration faces tough decisions on Iraq and Afghanistan. (BBC)

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2009-01-29T09:45:00.002+08:00

28-1-2009, World growth worst for 60 years

Wednesday, January 28, 2009

World economic growth is set to fall to just 0.5% this year, its lowest rate since World War II, warns the International Monetary Fund (IMF).

In October, the IMF had predicted world output would increase by 2.2% in 2009.

It now projects the UK, which recently entered recession, will see its economy shrink by 2.8% next year, the worst contraction among advanced nations.

The IMF says financial markets remain under stress and the global economy has taken a "sharp turn for the worse".

In another gloomy view of the UK economy, the Institute for Fiscal Studies (IFS) said Britain would be saddled with government debt for more than 20 years.

IFS director Robert Chote warned that spending would have to be cut or taxes raised by more than planned to allow public finances to recover.

The predictions came as Pascal Lamy, the director general of the World Trade Organization, urged countries not to react to the global economic crisis by resorting to protectionism.

Speaking from the World Economic Forum in Davos, Mr Lamy said such a move would be "a big mistake".

'Virtual halt'

According to the IMF, the outcome of the economic slowdown has been to send global output and trade plummeting.

"We now expect the global economy to come to a virtual halt," said IMF chief economist Olivier Blanchard in a statement.

The IMF says that despite a number of policy moves, which have been carried out by many states, financial strains remain.

International co-operation is needed now to draw up new policy initiatives, and for capital injections to support "viable financial institutions".

Meanwhile, it predicts that the eurozone economy is poised to shrink by 2.0% in 2009 and the US economy by 1.6%.

Banking crisis

The report comes on the same day the International Labour Organization said that as many as 51 million jobs worldwide could be lost this year because of the global economic crisis.

It had been hoped that growth in developing nations would continue at a steady pace and help offset the recession in developed nations such as the US and UK.

But the seemingly endless crisis in the banking system has put paid to that notion.

Countries such as China are now struggling with a collapse in demand from their primary export markets.

Meanwhile, developed economies such as Japan, Spain, the US and UK are in recession, with new job losses being announced on a daily basis.

'Uncertainty'

The IMF says that growth in emerging and developing economies is expected to slow sharply, from 6.25% in 2008 to 3.25% in 2009.

It cites the main reasons for the drop as being falling export demand, lower commodity prices and much tighter external financing constraints.

The IMF points out that policy efforts to tackle the downturn so far - such as liquidity support, deposit insurance and recapitalisation - have been drawn up to address the immediate threats to financial stability.

However, it says that these emergency measures "have done little to resolve the uncertainty about the long-term solvency of financial institutions".

"The process of loss recognition and restructuring of bad loans is still incomplete," says the IMF's World Economic Outlook Update.

'Bad bank'

The IMF says future co-ordinated financial policies should concentrate on recognising the scale of financial institutions' losses and on providing public support to those institutions that are viable.

"Such policies should be supported by measures to resolve insolvent banks and set up public agencies to dispose of the bad debts, including possibly through a 'bad bank' approach, while safeguarding public resources."

The IMF says the global economy is projected to experience a gradual recovery in 2010, with growth picking up to 3%.

"However, the outlook is highly uncertain, and the timing and pace of the recovery depend critically on strong policy actions," it warns.

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2009-01-29T09:43:00.001+08:00

28-1-2009, Starbucks slashes jobs and stores

Wednesday, January 28, 2009

Coffeeshop giant Starbucks has announced it will cut around 6,700 jobs and shut 300 stores as it reported a 69% plunge in quarterly profit.

Starbucks has struggled as hard-up consumers are forgoing expensive lattes and frappucinos as the recession bites.

It said it made a net profit of of $64.3m in the 13 weeks to December 28, down from $208.1m a year ago.

Two-thirds of the store closures will be in the US and they come on top of the 661 closures announced in 2008.

Starbucks is the latest multinational company to announce massive layoffs.

Earlier on Wednesday, Boeing said it would cut 10,000 jobs.

'Leaner'

In a letter to employees, chairman and chief executive Howard Schultz said that the company was working hard to "navigate the deteriorating global economy".

"These decisions have been made to ensure the company is leaner and prepared to endure a worsening economic climate," he told staff.

"The financial crisis is affecting almost almost every company in the world."

Starbucks' revenue fell 6% to $2.6bn driven by 9% fall in sales in established coffee shops.

But Starbucks' problems are not just down to the economic downturn.

Mr Schultz has admitted that the firm over expanded, devaluing its upmarket image.

Starbucks has further been hit by the likes of McDonald's and Dunkin' Donuts greatly improving the quality of their own coffee, which is generally also cheaper. - BBC

2009-01-29T09:36:00.001+08:00

28-1-2009, Mass layoffs surge in 2008, continue at rapid pace

By CHRISTOPHER S. RUGABER, AP Economics Writer Christopher S. Rugaber, Ap Economics Writer – Wed Jan 28, 5:01 pm ET

WASHINGTON – Mass layoffs involving 50 or more workers increased sharply last year, and large job cuts appear to be accelerating in 2009 at a furious pace.

Boeing, Pfizer, Home Depot and other U.S. corporate titans have announced tens of thousands of job cuts this week alone.

The economy is likely to continue to shed jobs for the rest of this year, even if an economic stimulus bill pushed by President Barack Obama is approved, economists said.

The Labor Department reported Wednesday that 21,137 mass layoffs took place last year, up from 15,493 in 2007. That's the highest annual total since 2001, the last time the economy was in recession, and the second-highest since the department began tracking mass layoffs in 1995.

More than 2.1 million workers were fired as a result of last year's mass layoffs, the department said.

Large corporations continued to hemorrhage jobs Wednesday, as Boeing Co. said it would cut 5,500 positions, on top of 4,500 layoffs announced earlier this month. Airlines are ordering fewer planes as air travel declines due to the global economic slowdown.

Time Warner Inc.'s AOL division said Wednesday that it is cutting up to 700 jobs, or about 10 percent of the online unit's work force. IBM Corp., meanwhile, has cut thousands of jobs in its sales, software and hardware divisions in the past week, without announcing specific numbers.

Home Depot Inc., Pfizer Inc. and General Motors Corp. also have announced plans to lay off thousands of workers this week. Companies have announced more than 125,000 layoffs in January, according to an Associated Press tally.

The financial markets, meanwhile, rose Wednesday on news that the government may take additional steps to assist the nation's ailing banks. The Dow Jones Industrial average rose nearly 201 points, or about 2.5 percent, to 8,375.45.

Still, the current recession, which began in December 2007, likely will result in greater job losses than any downturn since the late 1950s, said Adam York, an economic analyst at Wachovia Corp.

Total employment will drop by 3.5 percent by the end of this year, a sharper decline than the 3.1 percent fall that took place during the steep 1981-1982 recession, York said. Employers cut 2.6 million jobs last year and will likely eliminate more than 2 million this year, he said.

One indication job cuts will continue is that some companies this week have said they will lay off workers without providing additional details.

Government contractor Halliburton Co. said it will reduce its work force, but didn't provide more information. And Target Corp. said it will cut 500 workers sometime later this year when it closes a distribution center.

President Barack Obama sought to use the mounting employment losses to ramp up support for his $825 billion economic stimulus package, which the House is expected to vote on later Wednesday.

"These businesses that are shedding jobs to stay afloat — they cannot afford inaction or delay," Obama said Wednesday. "The workers who are returning home to tell their husbands and wives and children that they no longer have a job, and all those who live in fear that theirs will be the next job cut, they need help now."

Meanwhile, the Federal Reserve acknowledged Wednesday that the economy is continuing to deteriorate and signaled it would use unconventional tools, such as buying longer-term Treasury securities, to cushion the fallout. Such a move could help drive down mortgage rates and provide help to the stricken housing market, economists said.

The Fed also kept the key interest rate it controls at nearly zero and said it would remain at that level for "some time."

Illustrating the worldwide pain being felt during the recession, the International Monetary Fund said Wednesday the global economy will grow by only 0.5 percent this year, the slowest since World War II and a sharp reduction from its projection of 2.2 percent growth in November.

The world economy is hamstrung by potential credit losses of $2.2 trillion stemming from U.S. mortgages and other loans, the IMF said.

"A sustained economic recovery will not be possible until the financial sector's functionality is restored and credit makers are unclogged," the IMF said.

The Labor Department said that, on a seasonally-adjusted basis, mass layoffs did drop slightly in December, to 2,275 from 2,328 in November. Mass layoffs are job cuts of 50 or more by a single employer.

But on a nonseasonally-adjusted basis, mass layoffs soared in December to 3,377, up from 2,167 a year earlier, costing 351,305 people their jobs. The government seasonally adjusts many economic indicators to smooth out fluctuations resulting from weather changes, holidays and other predictable factors.

Twelve industries reported record high levels of job losses, the Labor Department said, including construction, mining, manufacturing, transportation services and financial services.

On Tuesday, specialty glass company Corning Inc. said it would cut 3,500 jobs, or 13 percent of its work force, as demand slumped for glass used in flat-screen televisions and computers.

On Monday alone, roughly 40,000 more U.S. workers got the grim news, including 5,000 workers at heavy equipment maker Caterpillar Inc. Pharmaceutical giant Pfizer, which is buying rival drugmaker Wyeth in a $68 billion deal, and Sprint Nextel Corp., the country's third-largest wireless provider, each said they will slash 8,000 jobs.

The government will provide another snapshot of the labor market Thursday when it reports how many people filed first-time claims for jobless benefits last week.

Economists forecast that about 575,000 initial claims were filed, down from 589,000 the previous week. Last week's figure matched a 26-year high reached in November, though the labor force has grown by about half since then.

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2009-01-29T09:29:00.003+08:00

28-1-2009, Confidence evaporates, currency row brews at Davos

By Ben Hirschler and Jason Subler Ben Hirschler And Jason Subler – Wed Jan 28, 7:25 am ET

DAVOS, Switzerland (Reuters) – Confidence among the world's top company chiefs meeting in Davos has tumbled to a new low and a brewing currency row between the United States and China cast doubt on the political will to act in concert. Chinese Premier Wen Jiabao and Russian Prime Minister Vladimir Putin will both address business and political leaders in the Alpine ski resort later on Wednesday, to offer their remedies for the worst economic crisis in 80 years.

Business and political leaders here for the four-day World Economic Forum were extremely glum, saying there is no easy solution to the credit crisis that has torpedoed global growth and major government programs are needed.

"There are no silver bullets. My sense is 18 to 24 months of very tough economic environment," Maria Ramos, chief executive of Transnet, South Africa's rail and logistics company, told Reuters.

"Forty percent of the world's wealth was destroyed in last five quarters. It is an almost incomprehensible number," said Stephen Schwarzman, chairman of the leading private equity company Blackstone Group.

"Business will be very different." A PricewaterhouseCoopers poll of more than 1,100 CEOs set a grim backdrop. Just 21 percent of CEOs said they were very confident of growing revenue in the next 12 months, down from 50 percent a year ago.

Crisis-hit bankers are thin on the ground at the snow-covered mountain town, leaving policymakers to work behind the scenes on ways to fix the financial system, ahead of a summit of the G20 group of big and emerging countries in April and a G8 summit in July.

Ahead of Wen's speech, a row intensified over Beijing's exchange rate policy after new U.S. Treasury Secretary Timothy Geithner branded China a currency manipulator last week, using a term the previous administration deliberately avoided for years.

A Chinese diplomat said on Wednesday Washington had enough evidence to know China does not manipulate its exchange rate.

"I don't think it's fair all of a sudden to change the position of the U.S. government," the diplomat said in London, one of a number of European capitals Wen will visit after Davos.

Putin will meet privately with Wen in Davos to share ideas on how the two powers can cooperate on addressing economic problems. No top officials from the new Obama administration are here.

Russia's stance will also be closely scrutinized. His spokesman said Putin would reach out to investors, who have been shaken by the crisis gripping Russia's economy but he has previously blamed the United States for "infecting" others.

However, Moscow offered Washington an olive branch on Wednesday, halting a plan to counter a proposed U.S. missile defense shield by stationing its own missiles near Europe's borders, a Russian news agency quoted the military as saying.

DOOM AND GLOOM

Hopes for a short "V"-shaped recession appear to have evaporated with most business leaders expecting no more than a slow and gradual recovery over the next three years.

"The three-year view is a bit better but the bad news is it is not that much better," said Tony Poulter, global head of consulting at PwC.

Delegates in Davos were united in the view that an economic upturn is some way off.

Lars Thunnel, head of the International Finance Corporation, the private arm of the World Bank, said he expected economic malaise sparked by the credit crisis to linger.

Stephen Roach, Morgan Stanley's Asia chairman, agreed the next three years would be tough.

"The concept of a vigorous 'V'-shaped recovery is for business cycles of the past but not for this post-bubble, post-crisis business cycle. It is going to be a long slog in 2010, in 2011," he told Reuters.

That grim scenario has left sovereign fund Dubai International Capital wary of making big long-term investments even though it sees asset prices at reasonable levels.

"We're still very nervous about making some big bets -- we see the financial crisis getting worse. There's not going to be a magic wand solution to the problem," Chief Executive Sameer al-Ansari told Reuters.

PwC's Poulter said the situation had deteriorated significantly since September, following the collapse of Lehman Brothers and the sale of Merrill Lynch.

Back in September, only 46 percent of business leaders interviewed thought the banking crisis would affect them but by December that had risen to 67 percent.

Even this gloomy picture -- with confidence the lowest in the survey's seven-year history -- may be over-optimistic, given a slew of bad news since it was completed in early December.

(Reporting by Ben Hirschler; Writing by Mike Peacock; Editing by Richard Hubbard and Erica Billingham)

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2009-01-07T23:59:00.002+08:00

7-1-2009, CBO projects $1.2T deficit for 2009

WASHINGTON – The federal budget deficit will hit an unparalleled $1.2 trillion for the 2009 budget year, according to grim new Congressional Budget Office figures.

The CBO estimate released Wednesday also sees the economy shrinking by 2.2 percent this year and recovering only slightly in 2010, and the unemployment rate eclipsing 9 percent early next year unless the Obama administration steps in.

"The recession — which began about a year ago — will last well into 2009," the CBO report says.

The dismal figures come a day after President-elect Barack Obama warned of "trillion-dollar deficits for years to come."

CBO's figures don't account for the huge economic stimulus bill that Obama is expected to propose soon to try to jolt the economy. At the same time, they do not reflect the full cost of the Wall St. bailout.

The shrinking economy has led to a sharp drop in estimated tax revenues of $166 billion, which is largely responsible for the deficit, along with big outlays from the Wall St. bailout. The agency expects the bailout to cost $180 billion this year after taking into account the net value of the assets the government holds from financial institutions.

Obama and Congress are promising quick enactment of the economic recovery plan, which will blend up to $300 billion in tax cuts with big new spending programs and could cost up to $775 billion over the next few years.

The flood of red ink probably won't affect that measure but could crimp other items on Obama's agenda.

"Despite the record deficits facing us, our number one task is an economic recovery package," said House Budget Committee Chairman John Spratt Jr., D-S.C. "With Americans concerned about their jobs, their homes, their retirement, and their children's' future, our economic situation is so severe that stabilizing the economy must take precedence over short-term deficits."

The $1.19 trillion 2009 figure shatters the previous record of $455 billion, set only last year. It also represents more than 8 percent of the size of the economy, which is higher than the deficits of the 1980s. The 2009 budget year began last Oct. 1.

Senate GOP Leader Mitch McConnell of Kentucky called the budget figures "a stunning and sobering reminder that Congress must strengthen its efforts to be good stewards of the taxpayers' money."

CBO predicts the deficit will come under relative control within a few years, but such predictions depend on the expiration of President Bush's tax cuts at the end of next year and repayments from financial institutions that received bailout funds.

While expected, the deficit numbers will give lawmakers second thoughts about creating new spending programs without finding ways to pay for them. And it is likely to prompt a debate about whether tax increases are necessary after the economy recovers from the current recession.

On Tuesday, Obama issued his most serious remarks yet about the danger of big budget deficits and promised his administration will take steps to bring the tide of red ink under control.

"I'm going to be willing to make some very difficult choices in how we get a handle on this deficit," Obama said Tuesday.

Economists warn that large and sustained budget deficits put upward pressure on interest rates. In the short term, however, efforts to restrain the deficit could have a contracting effect on the economy.

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2009-01-07T18:05:00.002+08:00

7-1-2009, State unemployment claim systems overwhelmed

By RICHARD RICHTMYER, – Tue Jan 6, 10:00 pm ET

ALBANY, N.Y. – Electronic unemployment filing systems have crashed in at least three states in recent days amid an unprecedented crush of thousands of newly jobless Americans seeking benefits, and other states were adjusting their systems to avoid being next.

About 4.5 million Americans are collecting jobless benefits, a 26-year high, so the Web sites and phone systems now commonly used to file for benefits are being tested like never before.

Even those that are holding up under the strain are in many cases leaving filers on the line for hours, or kissing them off with an "all circuits are busy" message. Agencies have been scrambling to hire hundreds more workers to handle the calls.

Systems in New York, North Carolina and Ohio were shut down completely by technical glitches and heavy volume, and labor officials in several other states are reporting higher-than-normal use.

"Regardless of when you call, be prepared to wait and just hang on. Try not to get frustrated," said Howard Cosgrove, a spokesman for the Wisconsin Department of Workforce Development, which boosted its staff of telephone operators by 25 percent last month to cope with a phone system that has been overloaded for weeks. "We sympathize, we're on their side, we're doing our best to help them out."

The nation's unemployment rate in November zoomed to 6.7 percent, a 15-year high. Economists predict it will rise to 7 percent in December, with another 500,000 jobs probably cut last month. The government releases its monthly employment report on Friday.

Some states attribute the increase in call volume in part to an extension of federal emergency unemployment compensation from 13 weeks to 20 weeks in late November. More than 54,000 Pennsylvanians had exhausted their federal benefits after 13 weeks by the time that occurred, said David Smith, a spokesman for the Pennsylvania Department of Labor and Industry.

"It really was a perfect storm," he said.

New York's phone and Internet claims system started to buckle on Monday afternoon and was out of service completely for the first half of Tuesday while as many as 10,000 people per hour tried to get in, said Leo Rosales, a state Labor Department spokesman.

Although that was an unusually high number of calls, Rosales said it was a software glitch in an authentication system used to verify filers' identities that caused the system to crash.

"It's designed to handle this volume of calls, but the authentication process didn't work as it should have," he said. Rosales said the glitch that caused the shutdown has been fixed, and the agency doesn't expect any more problems.

About 256,000 people are collecting unemployment in New York, up from about 184,000 at this time last year.

North Carolina's Web site crashed twice this week under a rush of claims as that state set one-day records for both the amount of benefits paid and the number of transactions.

On Sunday and Monday, the number of North Carolinians trying to sign up online for new or continuing benefits was about triple what it was before the economic slowdown started, according to the state Employment Security Commission. That volume, together with a phone line problem, overwhelmed the agency's computers and prevented some people from filing claims.

The system was working again by Monday afternoon after the agency added another server and demand decreased, officials said.

"Right now, everything is back to normal," agency spokesman Larry Parker said.

Mark Turner, 39, of Raleigh said Tuesday that North Carolina's site had an easy setup when he started using the site after he was laid off in November.

But on Sunday, he couldn't logon to the site. "I basically gave up for the night at 10:30 after trying and not getting through," he said Tuesday. "Once you get on the site, you can be done in half a minute. Apparently that was too much."

Turner, who's since landed a temporary job, suggested the site separate people trying to get recertified and people signing up for the first time. "I think it's going to get worse before it gets better," he said.

Thousands were unable to get through to Ohio's unemployment hot line beginning Monday because of a crush of callers and technical problems, said Dennis Evans, spokesman for the state Department of Job and Family Services. He said the phone system was running normally again Tuesday afternoon, but the section of the state's Web site that enables people to make claims online remained down.

California has seen a record number of calls to an 800 number over the last few weeks.

"During this holiday period we've been averaging a record of more than 2 million call attempts a day, and it took more than 20 times before people could get through to our UI call centers," said Employment Development Department spokeswoman Patti Roberts.

That's about twice the one-day record of call attempts set in 2004 during an earlier recession, she said.

Callers to Michigan's main phone line handling applications for jobless benefits got an "all circuits are busy now" message Tuesday afternoon. Officials in Michigan, which had the nation's highest jobless rate at 9.6 percent in November, recently began urging applicants to seek benefits through a state Internet site instead. Michigan counted about 473,000 people as unemployed in November, up from about 370,000 a year ago.

Unemployment agencies from Kentucky to Alaska also are reporting long hold times for callers and slowdowns for those filing online because of higher volume.

Several states have added staff to their call centers to handle the surge, including Ohio, Oklahoma and Washington.

Pennsylvania has hired temporary workers and expanded the hours of its unemployment benefits hot line to accommodate a surge in the number of calls, going from 600 employees to more than 800. Officials hope to eventually have 1,100 workers answering calls.

New Mexico has extended call-center hours, upgraded the phone system and added 15 workers. Even so, "We still are receiving reports of people's inability to get through," said Carrie Moritomo, a spokeswoman for the state Department of Workforce Solutions.

In Kentucky, where claims rose to 40,400 in November from 23,400 a year earlier, a flood of new filers overwhelmed the state's unemployment Web site and phone lines on Monday, when more than 8,000 people filed initial claims, said Kim Brannock, a spokeswoman for the Kentucky Education Cabinet, which oversees the state unemployment office.

"People seem to feel like they have to file first thing Monday morning," she said. "They don't have to, but they feel that way. It's just overwhelming to the system."

___

Associated Press Writers Martha Waggoner in Raleigh, N.C., Tim Martin in Lansing, Mich., Brett Barrouquere in Louisville, Ky., Dinesh Ramde in Milwaukee, Martha Raffaele in Harrisburg, Pa., and Sue Major Holmes in Albuquerque, N.M., contributed to this report.

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2009-01-06T01:26:00.001+08:00

5-1-2009,Obama considering expanding jobless benefits: report

Mon Jan 5, 5:41 am ET

NEW YORK (Reuters) – President-elect Barack Obama and Congressional Democrats are considering a major expansion of government-assisted health care insurance and unemployment benefits as part of a two-year economic recovery program, The New York Times reported in its Sunday editions.

Proposals included extending unemployment compensation to part-time workers, subsidizing employers who must continue health insurance benefits temporarily for laid-off and retired employees and allowing workers who lose jobs that did not include insurance to apply for Medicaid, the Times said.

The proposals would be included with other economic measures like ramping up spending on infrastructure and other public works projects meant to stimulate job growth, the Times said.

Democratic aides said the House of Representatives is not expected to vote until next week at the earliest on any stimulus plan, with final action now unlikely before February, the newspaper reported.

Citing Obama advisers, the newspaper said the package, which could face resistance from Republicans and conservative Democrats, would cost at least $775 billion.

"This has really forced people to think outside the box," the Times quoted a House Appropriations Committee aide as saying, "because this is more money than anybody expected to be spending."

Obama is also likely to propose a tax credit of $500 for eligible individuals and $1,000 for couples, the newspaper said. Those earning too little to pay federal income tax would receive a check meant to offset Social Security retirement and Medicare payroll taxes.

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2009-01-06T00:58:00.003+08:00

5-1-2009, Mideast, Russia issues send oil above $47

By DIRK LAMMERS, AP Energy Writer Dirk Lammers, Ap Energy Writer – 23 mins ago

SIOUX FALLS, S.D. – Israel's ground offensive in Gaza and a dispute between Ukraine and Russia over gas imports pushed oil prices above $47 a barrel Monday, but some analysts say there's more than just unrest in the Middle East behind the rally.

Light, sweet crude for February delivery rose 92 cents to $47.26 a barrel on the New York Mercantile Exchange, after jumping $1.74 on Friday to settle at $46.34.

Phil Flynn, an analyst at Alaron Trading Corp. in Chicago, said there seems to be a mood change in the market and a belief that the economic doom and gloom has hit bottom.

"Would we really be concerned about these geopolitical issues as it relates to oil if we didn't think that the demand was going to improve somewhat in the coming year? Probably not," Flynn said.

Energy consultancy Cameron Hanover said some traders like to point to violence in the Middle East as a cause of higher oil prices, but the reality is slightly different.

"Any time that prices react by moving higher, in response to violence in the Middle East, particularly in non-oil producing countries like Israel or the Palestinian territories next door, it is a good sign that the market wants to move higher," the firm said in its Daily Energy Hedger report Monday.

Tensions were high in the Middle East as thousands of Israeli troops backed by tanks and helicopter gunships surrounded Gaza's largest city and fought Hamas militants at close range Sunday. The offensive moved from airstrikes to artillery shelling and ground fighting in a bid to stop Hamas rocket fire on southern Israel.

An Iranian Revolutionary Guard commander on Monday urged Islamic nations to use crude oil as a weapon to exert pressure on Western backers of Israel.

"That's not going to happen," Flynn said.

Russian gas monopoly Gazprom has cut off gas shipments to Ukraine since Thursday in a dispute over payments, and Ukraine has warned that European customers could see serious natural gas disruptions in about two weeks.

Gazprom has continued to send gas to Europe, which relies on it for a quarter of its gas. But 80 percent of the gas Gazprom sends west passes through the same pipelines that supply Ukraine, and over the past four days the pressure in the pipelines has dropped. Some European countries — including Bulgaria, the Czech Republic, Hungary, Poland and Romania — have reported a decline in supplies.

Prices were also buoyed by the "latest news from Nigeria that saboteurs had attacked and partly destroyed part of a pipeline," the analysts said.

Nigerian regional army chief Brig. Gen. Wuyep Rimtip said Saturday he did not know how severely the pipeline was damaged and suspected local youths rather than militants were responsible for the attack.

Nigeria's major militant group, the Movement for the Emancipation of the Niger Delta, declared a cease-fire in September, but has warned that attacks could resume if it is provoked.

Analysts at JBC Energy in Vienna, Austria, said in a research note that prices were supported by "increasing evidence that OPEC is adhering to its agreed production cuts and the announcement of the U.S. government to add more oil into its strategic reserves."

Iran's state television said OPEC countries have decided to hold an extraordinary meeting on falling oil prices in Kuwait in February. The report on Monday quoted Iran's OPEC governor Mohammad Ali Khatibi as saying the organization planned to bring forward the regular meeting in March because the "trend of oil prices" calls for holding a meeting a month earlier.

A Kuwaiti official told Platts that are no plans for Kuwait to host such a meeting, and OPEC ministers will likely wait to gather at their scheduled meeting in Vienna on March 15.

In London, February Brent crude rose 50 cents to $47.41 a barrel on the ICE Futures exchange.

In other Nymex trading, gasoline futures added 3.55 cents at $1.146 a gallon. Heating oil gained 4.2 cents at $1.5223 a gallon while natural gas for February delivery fell 6.3 cents to $5.908 per 1,000 cubic feet.

The national retail average price for a gallon of regular gas rose 1.4 cents to $1.672 a gallon overnight, according to auto club AAA, the Oil Price Information Service and Wright Express. That is about 8 cents a gallon below what it was a month ago and about $2.43 below where it was in July when prices peaked at $4.11 per gallon.

___

Associated Press writers George Jahn in Vienna, Austria, Alex Kennedy in Singapore and Adam Schreck in Dubai, United Arab Emirates, contributed to this report.

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2008-12-31T02:26:00.002+08:00

30-12-2009, December consumer confidence drops to all-time low

By ELLEN SIMON, AP Business Writer Ellen Simon, Ap Business Writer – 27 mins ago

NEW YORK – Consumer confidence hit an all-time low in December, dropping unexpectedly in the face of rising layoffs, in yet another sign that consumer spending is unlikely to pull the U.S. out of a yearlong recession any time soon.

Consumers have been nervous about spending for months — putting off big-ticket purchases, forgoing new clothes and choosing store brands at the grocery store — all of which may make this the worst holiday season for retailers in decades.

The Consumer Confidence Index measured by the Conference Board, a private research group, fell to 38 in December from a revised 44.7 in November. That is its lowest point since the group began compiling the index in 1967, and below the previous low of 38.8 in October. Economists surveyed by Thomson Reuters had expected the index to rise incrementally to 45.

"Deepening job insecurity and falling asset prices are outweighing any optimism consumers may have derived from falling gas prices," said Dana Saporta, U.S. economist at investment bank Dresdner Kleinwort.

The unemployment rate hit a 15-year high in November, and economists expect additional job losses in the first half of 2009. Those saying in the Conference Board survey that jobs are "hard to get" rose to 42 percent in December from 37.1 percent in November, when the unemployment rate stood at 6.7 percent.

Those claiming business conditions are "bad" increased to 46.0 percent in December from 40.6 percent in November. Consumer spending is likely to keep dropping well into next year, Saporta said, meaning the recession will last at least into the first half of 2009.

The conditions that began the recession persist, especially deflating home prices. A measure of October home prices dropped by the sharpest annual rate on record. The Standard & Poor's/Case-Shiller 20-city housing index fell by 18 percent from October 2007, the largest drop since its inception in 2000. The 10-city index tumbled 19.1 percent, its biggest decline in its 21-year history.

"The numbers are getting worse. And I think they will get quite a bit worse over the next two months because housing demand has plunged since the market went into turmoil," said Patrick Newport, an economist at IHS Global Insight.

Consumers have been whipsawed by home prices, the deteriorating job market and shrinking nest eggs. According to preliminary data from SpendingPulse, which tracks purchases paid for by credit cards, checks or cash, retail sales fell between 5.5 and 8 percent during the holiday season compared with last year. Excluding auto and gas sales, they fell 2 to 4 percent.

"This year is the roughest year we've had," said 35-year-old Anah Meeks, who was at Crabtree Valley Mall in north Raleigh, N.C., before Christmas mainly to get a picture of her 8-month-old son sitting on Santa's lap. "We were wondering how we were going to do it."

Meeks, who moved from Michigan in November after losing her job at a McDonald's Corp. restaurant, said she was buying her two older daughters one main present for the holidays and a few smaller items.

Major retailers are expected to report sharply lower sales than last year when they release those figures Jan. 8. Analysts expect a rash of store closings and bankruptcies from both retailers and their suppliers.

A number of stores didn't even make it to Christmas. Circuit City Stores Inc. filed for bankruptcy protection last month. It plans to keep operating, but toy seller KB Toys, which filed for bankruptcy earlier this month, is liquidating its stores and will shut down.

With credit tight and even steep discounts failing to spur spending from tapped-out consumers, economists are looking to government spending to restart the economy. Aides to President-elect Barack Obama are discussing a new stimulus package that could be as large as $775 billion.

Stocks rose despite the reading, taking heart after General Motors Corp.'s troubled financing arm received $5 billion of financing. The Dow Jones industrial average gained 141.53 to 8,625.46, while broader indexes also gained. The stock market has seen its worst year since Herbert Hoover was president, with the Dow down roughly 36 percent.

The Conference Board's Present Situation index, which measures how respondents feel about current business conditions and employment prospects, fell to 29.4 in December from 42.3 in November. It is now close to levels last seen after the 1990-1991 recession.

The current recession has deepened as companies have slashed jobs, curbed production and hoarded cash in the face of declining demand and frozen credit markets.

In 3M Co.'s quarterly update this month, Chairman and CEO George Buckley talked about how the company had closed 16 plants over the last year and a half, has been drawing down inventory and cutting capital spending.

"Is this healthy?" he said on the call. "All of us acknowledge we're collectively making the situation worse, but I think the first responsibility we have as leaders of companies is to make sure that we ensure the health and survival of our own companies first, not necessarily other people's companies, or, for that matter, the whole U.S. economy."

The Conference Board survey is based on a representative sample of 5,000 U.S. households. The cutoff date for December's preliminary results was Dec. 22.

___

Associated Press Writers J.W. Elphinstone in New York and Barbara Rodriguez in Raleigh, N.C., contributed to this report.

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2008-12-25T00:43:00.000+08:00

A Malaysian Christmas 2008 in High Definition (HD) 25-12-2008

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2008-12-25T00:21:00.002+08:00

24-12-2008, Jobless claims surge to 26-year high

WASHINGTON (Reuters) – The number of U.S. workers filing new claims for jobless benefits jumped by 30,000 to a 26-year peak last week, government data on Wednesday showed, as the country's year-long recession continued to chill the labor market.

Initial claims for state unemployment insurance benefits rose to a seasonally adjusted 586,000 in the week ended Dec 20 from a revised 556,000 the prior week, the Labor Department said. It was the highest since the week ended November 27, 1982, when initial claims rose 612,000.

Analysts polled by Reuters had forecast 560,000 new claims versus a previously reported count of 554,000 the week before.

A Labor Department official said there were no special factors influencing the data and no noticeable impact from severe winter weather in northern parts of the country.

The official also said a number of states had reported increasing layoffs in the auto industry, which has been hit hard by consumers cutting back on their spending in the face of rising unemployment and scarcer credit.

The four-week average of new jobless claims, a better gauge of underlying labor trends because it irons out week-to-week volatility, increased to 558,000 from 544,250 the week before. This was the highest reading since December 1982.

This measure has mounted steadily as the U.S. economy suffers from a credit crisis sparked by the housing slump, forcing lay-offs as firms slash costs to offset weaker income.

The number of people remaining on the benefits roll after drawing an initial week of aid declined by 17,000 to a less-then-forecast 4.370 million in the week ended December 13, the most recent week for which data is available. Analysts had estimated so-called continued claims would be 4.400 million.

(Reporting by Alister Bull; Editing by Chizu Nomiyama.)

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2008-12-24T09:59:00.000+08:00

24-12-2008, US recession gathers steam

Posted by admin Wednesday, 24 December 2008 08:49

# US GDP shrank an unrevised 0.5 per cent in 3rd quarter
# Reuters/U.Mich consumer survey 60.1 in Dec vs 55.3
# Existing home sales down record 8.6 per cent in November

US EXISTING home sales fell by a record amount last month as the recession picked up pace although a collapse in gasoline prices gave consumer sentiment a rare lift, data on Tuesday showed.

'The bottom line: Bah humbug. Recession, recession, recession,' said Ms Jennifer Lee, an economist with BMO Capital Markets in Toronto.

The solitary good news came from the Reuters/University of Michigan Surveys of Consumers, which rose to 60.1 in December from November's reading of 55.3 due to lower energy and retail prices after stores made radical markdowns to tempt shoppers.

This trend was expected to continue, with the report noting more consumers expect price declines than in any other survey since 1960, pointing toward deflation fears that have prompted the Federal Reserve to cut interest rates to almost zero.

The US recession began last December and data from the Commerce Department confirmed analyst expectations that output shrank at an annual rate of 0.5 per cent in the third quarter as consumption and investment slumped.

Conditions are expected to get much worse before they get better, with the economy predicted to shrink by as much as 6 per cent in the fourth quarter and keep declining for the next six months before a tepid recovery takes hold later in 2009.

'We are in the midst of the worst recession in the post-war period, even factoring in a massive stimulus program,' said Mr Nariman Behravesh, chief economist at IHS Global Insight.

President-elect Barack Obama is expected to unleash a massive government spending program when he takes office next month to reinforce the powerful policy boost from the Fed, which has also pumped over $1 trillion into credit markets.

The Richmond Federal Reserve's manufacturing survey echoed the gloom, falling to -55 in December from -38 the previous month. Its services sector survey declined 8 points to -30.

Housing is at the heart of the problem and existing home sales plunged a record 8.6 per cent in November to a 4.49 million-unit annual rate, while a separate new homes sales report showed they retreated at a slower 2.9 per cent pace.

The median existing home price fell 13.2 per cent on an annual basis, down for a fifth straight month to $181,300.

It was the largest drop since the current data series began in 1968 and probably the largest since the Great Depression, said Lawrence Yun, the chief economist for the National Association of Realtors.

Economists say falling house prices will improve affordability and help work off the overhang of unsold homes accumulated since the property market nosedived last year.

Inventories of new homes declined 7 per cent to 374,000 in November but actually increased 1.4 per cent for existing single family homes, to 3.550 million.

'Despite the overall softening in sales, there has been a solid trend of rising activity in California, Nevada, Arizona, and Florida, in areas where bargain hunters are taking advantage of substantially discounted prices,' said Ms Michelle Girard, analyst at RBS Greenwich Capital.

Separate weekly reports on chain store sales offered conflicting signs on holiday shopping activity.

The International Council of Shopping Centers and Goldman Sachs said their chain store sales index rose 2.6 per cent in the week ended Dec 20, although the year-on-year decline deepened to 0.6 per cent.

In contrast, the Johnson Redbook sales index showed a month-to-date decline of 1.1 per cent, with sales for the Dec 20 week 1 per cent below their year-ago level. -- REUTERS

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2008-12-24T09:58:00.000+08:00

24-12-2008, Support for 92 more banks

Posted by admin Wednesday, 24 December 2008 08:52

THE Treasury Department says it has provided an additional $4.7 billion (S$6.82 billion) to 92 banks as part of the government's $700 billion rescue of the financial system.

The department released a list of 49 banks that got final approval last Friday to receive $2.8 billion. It said an additional 43 banks received final approval on Tuesday, but those names will not be released until Monday.

Treasury also confirmed that it had given preliminary approval to American Express Co and CIT Group to receive support from the $700 billion bailout fund.

The money is being disbursed as part of the government's effort to buy stock in banks, to bolster their balance sheets and spur them to step up lending to fight the worst financial crisis to hit the country in seven decades.

But critics contend that many banks are not using the government funds for the purpose Congress intended.

An Associated Press survey of 21 banks that received at least $1 billion each in government support found that none of them would provide specific answers on how the money was used.

Credit card giant American Express said it had received preliminary approval for $3.39 billion in government money. And commercial finance company CIT Group said it had received approval to obtain $2.33 billion.

The Treasury confirmed that both companies had received preliminary approval for government support.

The final authorisation comes after lawyers draw up the documents needed to transfer the funds. Under the rescue legislation passed in October, Treasury has two business days after the final documents are signed to announce the actual release of the money.

In the list of banks released on Tuesday were 14 banks that do not have publicly traded stock. They were the first institutions in this category of banks to win government funds.

The Bush administration last Friday said it would lend $17.4 billion to General Motors and Chrysler LLC in an effort to buy them time to reorganize and avoid having to file for bankruptcy. GM and Chrysler had said they would run out of cash within weeks if they didn't get help.

Under the White House plan, the two companies must extract enough financial concessions from workers, dealers and other stakeholders by the end of March to show their long-term viability. But the biggest decisions about the industry's future have been left to President-elect Barack Obama.

Treasury Secretary Henry Paulson announced on Friday that with the decision to provide loans to the auto companies, the first half of the $700 billion bailout fund has been committed. He said Congress needed to approve the release of the final $350 billion.

House Financial Services Committee Chairman Barney Frank said on Monday he is preparing legislation to require that some of the bailout money be spent for specific purposes, such as stemming foreclosures and reducing mortgage rates.

Mr Frank is pushing to get the second half of the $700 billion rescue fund released next month, before Mr Obama is inaugurated.

Mr Frank's bill would impose tighter restrictions on the second $350 billion, such as requiring banks to report on their new lending every quarter and toughening limits on executive compensation.

Mr Frank said his legislation would also include a version of a plan, supported by Federal Deposit Insurance Corp Chairman Sheila Bair, to spend $24 billion to give lenders financial incentives to modify more loans and help more borrowers keep their homes. Ms Bair has estimated it could prevent 1.5 million foreclosures. -- AP

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2008-12-24T09:55:00.000+08:00

24-12-2008, More US housing woes

Posted by admin Wednesday, 24 December 2008 08:50

NEW US data on Tuesday showed more woes gripping the troubled housing sector and confirmed the economy is shrinking, as the IMF's top economist warned of a possible second Great Depression.

In Washington, the Commerce Department said new home sales slipped 2.9 per cent in the past month and 35.3 per cent from a year earlier to an annual pace of 407,000 in November. That was the lowest level since January 1991.

Sales of existing US homes slumped a further 8.6 percent, according to a separate report from the National Association of Realtors.

'The home sales market took another major negative hit in November, with sharp declines in new and existing home sales, declines which put further downward pressure on prices, and upward pressure on inventories,' said Mr Brian Bethune, economist at IHS Global Insight.

He said the situation indicates 'negative business cycle momentum (that) persists for an excruciating length of time'.

The reports coincided with data showing US economic activity contracted at a 0.5 per cent pace in the third quarter, an official estimate unrevised from last month.

The Commerce Department's final estimate on gross domestic product (GDP) for the July to September quarter is believed to mark the start of a steep downturn for the world's largest economy that intensified in the past few months.

'This report is largely old news,' said Mr John Ryding at RDQ Economics, who forecast fourth-quarter data out next month would be far bleaker.

'Given signs that the recession has deepened in the current quarter, we look for around a 6.0 per cent drop in real GDP,' he said.

Britain's economy also shrank by 0.6 per cent in the three months to September compared to the previous quarter, against a previous estimate of 0.5 per cent contraction, the Office for National Statistics said.

Meanwhile, the International Monetary Fund's top economist, Mr Olivier Blanchard, maintained that governments around the world should boost domestic demand in order to avoid another Great Depression similar to the global downturn that shook the world in the 1930s.

'Consumer and business confidence indexes have never fallen so far since they began. The coming months will be very bad,' Mr Blanchard said in an interview with the French newspaper Le Monde.

'It is imperative to stifle this loss of confidence, to restart household consumption, if we want to prevent this recession developing into a Great Depression,' he added.

Other economists offered sharply divergent views.

'We are in a recession, not a depression - the worst of the losses will affect us over the next nine to 12 months, instead of the next nine to twelve years. This is partial consolation, but consolation nonetheless,' said Mr Adolfo Laurenti at US-based Mesirow Financial.

New data out in France offered some relief, showing that household consumption of manufactured goods - a key growth indicator - rallied 0.3 per cent last month after slumping in October.

'It is a first small Christmas present for the French economy,' said Mr Alexander Law, an economist at the Xerfi research center in Paris.

But elsewhere in Europe the news was more downbeat. Retail sales in Italy saw a 0.3 per cent decrease in October, Denmark's economy contracted 0.4 per cent in the third quarter and the Dutch economy had zero growth, official data showed.

Finland's unemployment rate rose to 6.0 per cent in November from 5.8 per cent in October and the Polish central bank cut its key lending rate by 75 basis points to 5.0 per cent in a bid to fend off a recession.

In Ukraine, thousands of people took to the streets for a union-led protest to demand higher wages and more social protection in the former Soviet republic, which has been hit hard by the global economic crisis.

The generally bleak news weighed on stock markets. Wall Street's Dow Jones Industrial Average fell 1.18 percent, the Nasdaq lost 0.71 per cent and the Standard & Poor's 500 declined 0.97 per cent.

European stock exchanges had mixed fortunes, with the London FTSE 100 index gaining 0.16 per cent. In Paris, the CAC 40 fell 0.73 per cent while the Frankfurt Dax lost 0.21 per cent.
In Asia, the Hong Kong stock market shed 2.8 per cent and Shanghai sank 4.55 per cent. - ST

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2008-12-24T09:47:00.003+08:00

24-12-2008, NYPD: Madoff investor commits suicide in office

NEW YORK – The founder of an investment fund that lost $1.4 billion with Bernard Madoff was discovered dead Tuesday after committing suicide at his Manhattan office, marking a grim turn in a scandal that has left investors around the world in financial ruin.

Rene-Thierry Magon de la Villehuchet, 65, was found sitting at his desk at about 8 a.m. with both wrists slashed, NYPD spokesman Paul Browne said. A box cutter was found on the floor along with a bottle of sleeping pills on his desk. No suicide note was found.

De la Villehuchet was one of several fund managers to be hit hard in Madoff's alleged $50 billion Ponzi scheme. Investment funds that lost big to Madoff are also facing backlash and investor lawsuits for not protecting their clients from the alleged fraud.

It is not immediately known what kind of scrutiny de la Villehuchet was facing over his Madoff losses through his Access International Advisors, located on Madison Avenue a couple blocks from Rockefeller Center.

But on Monday night, he told cleaning crews in his building that he wanted them out of his office by 7 p.m. because he was going to be working late.

Workers returned Tuesday morning and found the door locked. He was later discovered dead at his desk, with a garbage can placed near his body to apparently catch the blood, Browne said.

De la Villehuchet (pronounced veel-ou-SHAY) was a prominent investor who came from a long line of aristocratic Frenchmen, with the Magon part of his name referring to one of France's most powerful families.

The Magon name is even listed on the Arc de Triomphe in Paris, a world-famous monument that was commissioned by Napoleon in 1806.

His fund enlisted intermediaries with links to the cream of Europe's high society to garner clients. Among them was Philippe Junot, a French businessman and friend who is the former husband of Princess Caroline of Monaco, and Prince Michel of Yugoslavia.

De la Villehuchet, the former chairman and CEO of Credit Lyonnais Securities USA, was also known as a keen sailor who regularly participated in regattas and was a member of the New York Yacht Club.

He lived in an affluent suburb in Westchester County with his wife, Claudine. They have no children. There was no answer Tuesday at the family's two-story house.

"He's irreproachable," said Bill Rapavy, who was Access International's chief operating officer before founding his own firm in 2007.

De la Villehuchet's death came as swindled investors began looking for ways to possibly recoup their losses. A handful of lawsuits have already been filed, all claiming that the hedge funds failed to properly vet Madoff and overlooked some red flags that could have steered them away.

Guy Gurney, a British photographer living in Connecticut, was friends with de la Villehuchet. The two often sailed together and competed in a regatta in France in November.

"He was a very honorable man," Gurney said. "He was extraordinarily generous. He was an aristocrat but not a snob. He was a real person. When he was sailing, he was one of the boys."

The two were supposed to have dinner last Friday but Gurney called the day before to cancel because of the weather. But during the call, de la Villehuchet revealed he had been ensnared in Madoff scandal. "He sounded very subdued," Gurney said.

___

Associated Press Writers Rachel Beck and Joe Bel Bruno and the AP News Research Center in New York; Jim Fitzgerald in New Rochelle, N.Y.; and Joelle Diderich in Paris contributed to this report.

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2008-12-24T09:44:00.001+08:00

23-12-2008, Beware of Zombie Banks!

Posted Dec 23, 2008 08:30am EST by Sarah

What's keeping blogger and investor Paul Kedrosky up late at night? It's a Fear of what he calls "Zombie Banks,' or the next ticking time bomb in the world of finance.

The collapse of money markets and equities has unleashed a torrent of cash looking for new places to go. Big recipients have been certificates of desposit offered by small and regional banks. These banks have the same issues with real estate exposure of the big banks, but they're not getting any bailout money. So instead, they've been shoring up deposits by offering better CD rates than the big guys. And investors have been scouring the Web for the highest rates and snapping them up with little regard to the banks’ health. That's what FDIC insurance is for, right?

The danger is nothing less than a redux of the Savings and Loan crisis of the 1980s, Kedrosky says. Where are the regulators?

Click "more" to embed this segment.

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2008-12-22T10:29:00.002+08:00

22-12-2008, Malaysia scrambles to head off recession

Posted by admin
Monday, 22 December 2008 09:46

Data is trickling from across the country showing that factories are either not renewing the contracts of their workers or reducing the operating hours of their plants.

THE MALAYSIAN INSIDER
The R word may be used sparingly in public but the possibility of the economy sliding into negative territory next year is keeping government officials awake at night.

With economic indicators showing that the economy is slowing faster than expected and Malaysia's trade partners including the United States, China, Singapore and other Asean countries in a deeper hole than estimated, there is a growing sentiment in Putrajaya that it will be a major challenge to achieve next year's growth forecast of 3.5 per cent.

Indeed several banks and research houses believe that Malaysia's economic growth will be between 0.5 per cent and 2.0 per cent.

Morgan Stanley in its latest report said it expected growth to be 0.5 per cent, noting that latest figures showed that the country's trade surplus was narrowing.

Their gloomy forecast could be unhinged further if there are further shocks to the global economy and if Malaysia's RM7 billion stimulus package is not implemented by the first quarter of next year. A country is in technical recession is there is negative growth for two consecutive quarters.

Publicly, Prime Minister Datuk Seri Abdullah Ahmad Badawi, Finance Minister Datuk Seri Najib Razak and Second Finance Minister Tan Sri Nor Mohamed Yakcop have been leading the cheerleaders in pointing out the resilience of the economy, but they are preparing to unveil a strategic package of measures in February and are prepared to unleash another multibillion ringgit stimulus package if necessary.

Already, data is trickling from across the country showing that factories are either not renewing the contracts of their workers or reducing the operating hours of their plants.

This situation is evident in the electrical and electronics sector in Penang where orders for computer parts have been slow because of the soft demand in the US. Government officials are preparing for the worst, believing that unemployment figures could climb to be in the six figures, a historical high.

To date, government captured data only shows that 30,000 Malaysians have lost their jobs but the Human Resource Ministry believes that the number will spike by the first quarter of 2009 and have recently asked the Cabinet for an additional RM100 million to retrain retrenched workers.

At the same time, ministry officials have been asked to put together a package of initiatives to help middle-level management who could be displaced by next year and find work for the 120,000 new graduates.

The message to the ministry is simple: consider all options, including placing retrenched middle managers as tutors and lecturers in tertiary institutions.

A government official told The Malaysian Insider that worse case scenarios have been sketched by the Ministry of Finance and Economic Planning Unit.

"We still think that Malaysia will avoid going into a recession next year but nothing is being discounted. Much will depend on whether our trading partners sink further and the level of confidence in Malaysia.''

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2008-12-20T08:09:00.003+08:00

19-20-2008, Bush orders emergency bailout of the auto industry

By DEB RIECHMANN, Associated Press Writer Deb Riechmann, Associated Press Writer – 28 mins ago

WASHINGTON – Citing imminent danger to the national economy, President Bush ordered an emergency bailout of the U.S. auto industry Friday, offering $17.4 billion in rescue loans and demanding tough concessions from the deeply troubled carmakers and their workers.

Detroit's Big Three cheered the action and vowed to rebuild their once-mighty industry, though they acknowledged the road would be anything but smooth as they fight their way back from the brink of bankruptcy.

The autoworkers union complained the deal was too harsh on its members, while Bush's fellow Republicans in Congress said it was simply bad business to bail out yet another big industry.

Bush, who signed the massive $700 billion rescue for financial institutions only this fall, said he was reluctant to approve yet another government bailout of private business. But he said that allowing the massive auto industry to collapse in the middle of what is already a severe downturn "could send our suffering economy into a deeper and longer recession."

Speaking at the White House, he also said he didn't want to "leave the next president to confront the demise of a major American industry in his first days of office."

President-elect Barack Obama, who takes office a month from Saturday, praised the administration action but warned, "The auto companies must not squander this chance to reform bad management practices and begin the long-term restructuring that is absolutely necessary to save this critical industry and the millions of American jobs that depend on it."

Obama will be free to reopen the arrangement from the government's side if he chooses, and the head of the United Auto Workers said the union would be appealing to the new president and the strongly Democratic new Congress on that subject.

Obama, commenting in Chicago as he named more economic Cabinet members, was noncommittal on possible changes. But he said he would "make sure that when we see a final restructuring package that it's not just workers who are bearing the brunt."

Stock prices rallied on Wall Street after Bush's announcement but faded late in the day, and the Dow Jones industrials declined 25.88 points. GM shares, however, jumped 22.7 percent and Ford shares 3.9 percent. Chrysler is not publicly traded.

Some $13.4 billion of the rescue money will be available this month and next — $9.4 billion of it for General Motors Corp. and $4 billion for Chrysler LLC, the two auto giants that have said they could be facing bankruptcy soon without government help. GM is slated to receive the remaining $4 billion in loans after more money is released from the financial rescue account. Ford Motor Co. says it doesn't need federal cash now but would be badly damaged if one or both of the other two went under.

Under terms of the loans, the government will have the option of becoming a stockholder in the companies, much as it has with major banks, in effect partially nationalizing the industry. Bush said the companies' workers should agree to wage and work rules that are competitive with foreign automakers by the end of next year.

And he called for elimination of a "jobs bank" program — negotiated by the United Auto Workers and the companies — under which laid-off workers can receive about 95 percent of their pay and benefits for years. Early this month, the UAW agreed to suspend the program.

Underscoring the automakers' peril — and how close the bailout is cutting to the edge — GM Chief Financial Officer Ray Young said the company expects to have the first money from the government by Dec. 29, just in time to pay suppliers.

CEO Rick Wagoner said, "The timing was specifically aligned with the timing we said we needed in order to make our payments on a timely basis, so we're right on schedule there."

The deal also calls for two-thirds of the automakers' debts to be converted to stock in the companies.

Also, Chrysler, GM and Ford were to pay billions into UAW-administered trust funds that will take over paying health care bills for hundreds of thousands of retirees on Jan. 1, 2010. The trusts, called Voluntary Employees Beneficiary Associations, were to last at least 80 years.

But if half the cash is swapped for stock, the trusts might not last that long if the value of the shares declines. Swapping stock for cash payments helps the cash-starved companies, though, because they have more money to spend on operations.

Bondholders may be left with a take-it-or-leave it proposition with the government requiring them to exchange two-thirds of their holdings for stock. But they, too, could try to negotiate with the Obama administration, said Pete Hastings, an auto industry corporate bonds analyst with Morgan Keegan & Co. in Memphis, Tenn.

If they don't take the deal, GM could wind up in bankruptcy and the bondholders would get little or nothing, Hastings said.

Though auto stocks rose on Friday, the companies' stockholders aren't out of the woods.

Provisions in the bailout agreement will force GM to produce more shares, diluting the value of its stock several times over, said Efraim Levy, a senior auto industry analyst with Standard & Poor's.

There's no way the automakers will be profitable next year, said Levy. Things could be different in 2010 if the market rebounds and cost cuts kick in, he said.

Meanwhile, Treasury Secretary Henry Paulson said Friday that Congress should release the second $350 billion from the financial rescue fund that it approved in October to bail out huge financial institutions. Tapping the fund for the auto industry basically exhausts the first half of the $700 billion total.

If the carmakers fail to prove viability by March 31, they will be required to repay the loans, which they would find all but impossible. A firm will be deemed viable only if it can show positive cash flow and can fully repay the government loans.

Friday's rescue plan retains the idea of a "car czar" to make sure the companies are keeping their promises and moving toward long-term viability.

The short-term overseer will be Paulson. But the White House deputy chief of staff, Joel Kaplan, said that if the Obama team wants someone else installed to bridge the administrations, Bush is open to that.

The White House package is the lifeline desperately sought by U.S. automakers, who warned they were running out of money as the economy fell deeper into recession, car loans became scarce and consumers stopped shopping for their vehicles.

The carmakers have announced extended holiday shutdowns. Chrysler is closing all 30 of its North American manufacturing plants for four weeks because of slumping sales; Ford will shut 10 North American assembly plants for an extra week in January, and General Motors will temporarily close 20 factories — many for the entire month of January — to cut vehicle production.

Chrysler CEO Bob Nardelli said the initial injection of capital would help the company get through its cash crisis and give it a push toward eventually returning to profitability. He said Chrysler was committed to meeting the conditions set by Bush in exchange for the money.

Though Ford didn't seek short-term aid, company President and CEO Alan Mulally said, "The U.S. auto industry is highly interdependent, and a failure of one of our competitors would have a ripple effect that could jeopardize millions of jobs and further damage the already weakened U.S. economy."

House Republican leader John Boehner called the plan "regrettable." He said that granting loans for automakers was never the intention when Congress passed the $700 billion plan to rescue financial institutions and that the new plan "has failed both autoworkers and taxpayers."

Rep. Jeb Hensarling, R-Texas, chairman of the congressional oversight panel for the Wall Street rescue program, said a Chapter 11 bankruptcy reorganization, not loans rewarding decades of mismanagement, would have been a better decision.

Grover Norquist, president of the Americans for Tax Reform, sent a one-word letter to Bush that said in huge letters: "No."

___

AP Auto Writer Tom Krisher reported from Detroit. AP Writer Kimberly S. Johnson contributed from Detroit.

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2008-12-19T09:52:00.003+08:00

18-12-2008, Bush considering 'orderly' auto bankruptcy

WASHINGTON – The Bush administration is looking at "orderly" bankruptcy as a possible way to deal with the desperately ailing U.S. auto industry, the White House said Thursday as carmakers readied more plant closings and a half million new jobless claims underscored the deteriorating national economy.

With General Motors, Chrysler and the rest of Detroit anxiously awaiting a White House decision on billions of dollars in emergency federal loans, press secretary Dana Perino said it wasn't simply a choice between government rescue and the disastrous collapse of a major industry.

"There's an orderly way to do bankruptcies that provides for more of a soft landing," she said. "I think that's what we would be talking about."

President George W. Bush, asked about an auto bailout, said he hadn't decided what he would do but didn't want to leave a mess for Barack Obama who takes office a month from Saturday. A White House decision on helping the troubled automakers could come as early as Friday.

Bush, like Perino, spoke of the idea of bankruptcies orchestrated by the federal government as a possible way to go — without committing to it.

"Under normal circumstances, no question bankruptcy court is the best way to work through credit and debt and restructuring," he said during a speech and question-and-answer session at the American Enterprise Institute, a conservative Washington think tank. "These aren't normal circumstances. That's the problem."

Perino emphasized there were still several possible approaches to assisting the automakers, including short-term loans from the Treasury Department's $700 billion Wall Street bailout program.

The Big Three automakers said anew that bankruptcy wasn't the answer, as did an official of the United Auto Workers who called the idea unworkable and even dangerous. GM said a report that it and Chrysler had restarted talks to combine was untrue.

House Speaker Nancy Pelosi said on Capitol Hill that grim new unemployment data heightened the urgency for the administration "to prevent the imminent insolvency of the domestic auto industry."

The California Democrat said Bush has the legal authority to act now, and should attach the accountability standards that were included in a $14 billion House-passed and Bush-supported carmaker bailout that died in the Senate last week. That plan would have given the government, through a Bush-appointed "car czar," veto power over major business decisions at any auto company that received federal loans.

Pelosi spoke after the government announced that initial claims for unemployment benefits totaled a seasonally adjusted 554,000 last week.

The comments in Washington came a day after Chrysler LLC announced it was closing all its North American manufacturing plants for at least a month as it, General Motors Corp. and Ford Motor Co. await word on government action. General Motors also has been closing plants, and it and Chrysler have said they might not have enough money to pay their bills in a matter of weeks.

Separately, there were worries that GMAC LLC, which provides financing for GM vehicle and dealer loans along with home mortgages, could be forced to file for bankruptcy itself. GMAC was having trouble finding adequate support from its bondholders for a debt transaction that would allow it to become a bank holding company and gain eligibility for the $700 billion rescue package.

Prices of GM and Ford stocks fell sharply Thursday after the remarks out of the White House. Ford, unlike General Motors and Chrysler, is not seeking billions in federal bailout loans, but a collapse of the other two could hurt Ford as well.

Alan Reuther, the United Auto Workers' legislative director, said the union urged the administration during a meeting this week to follow the provisions included in the House-passed auto aid bill.

Congressional aides in both parties who have been closely following the discussions suggested the talk of bankruptcy could be a tactic to extract more hefty concessions from the companies and union in exchange for granting short-term loans from Treasury's financial industry rescue fund.

Perino said one factor preventing an announcement of action by the administration is that discussions continue with the various sides that would have to sign on to a managed bankruptcy — entities such as labor and equity holders in addition to the companies themselves.

A senior administration official said the talks between Bush officials and the Big Three and their stakeholders amount to information-gathering, not negotiating.

The White House has repeatedly emphasized its opposition to "disorderly bankruptcy" — presumably a Chapter 7 filing that would effectively shut down a company and require liquidation of assets. That has left on the table the possibility of forcing one or more automakers into a Chapter 11 bankruptcy, which allows a firm to keep operating while under a court's purview.

Harlan Platt, who teaches corporate turnarounds at Northeastern University in Boston, said the government may be waiting for an offer of an ownership stake in the companies, much as it received in return for capital plowed into banks. "You really have to ask the question: If this is good enough for Wall Street, why isn't it good enough for Detroit?" he said.

On Thursday, spokesmen for Chrysler, GM and Ford generally referred to their previous comments that bankruptcy was not a workable solution. The car companies argue that no one would buy a vehicle from a bankrupt company for fear that the company might not be around to honor warranties.

"We continue to work with the administration to find a solution to this liquidity crisis," said GM spokesman Tony Cervone.

Chrysler spokeswoman Shawn Morgan noted previous statements against bankruptcy by CEO Robert Nardelli. Financing for even a prepackaged bankruptcy would be difficult to get in the current tight credit market, Chrysler has said.

The National Automobile Dealers Association also spoke out against bankruptcy for car companies "in any way shape or form, orderly or disorderly, prepackaged or unpackaged, managed or unmanaged," said spokesman Bailey Wood.

Bush said the auto industry is "obviously very fragile" and he is worried about what an out-and-out collapse without Washington involvement "would do to the psychology" of the markets.

"There still is a lot of uncertainty," he said.

At the same time, the president said anew that he is worried about "putting good money after bad," meaning taxpayer dollars shouldn't be used to prop up companies that can't survive the long term.

He revealed one other consideration — that Obama will become president in just over a month.

"I thought about what it would be like for me to become president during this period. I believe that good policy is not to dump him a major catastrophe on his first day in office," Bush said.

___

Associated Press writers Julie Hirschfeld Davis and Ken Thomas in Washington, Tom Krisher in Detroit and Bree Fowler in New York contributed to this story.

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2008-12-18T02:50:00.002+08:00

17-12-2008, OPEC cuts record 2.2 million barrels a day

By GEORGE JAHN, Associated Press Writer George Jahn, Associated Press Writer – 2 mins ago

ORAN, Algeria – OPEC on Wednesday agreed to slash 2.2 million barrels from its daily production — its single largest cut ever — while bloc outsiders Russia and Azerbaijan announced their own cutbacks of hundreds of thousands of barrels from the market.

"I hope we surprised you," OPEC President Chekib Khelil said when asked whether the size of the cut would shock moribund oil markets into an upward trend. "If you're not surprised we need to so something about it."

And yet markets weren't impressed.

Crude oil sank to $40.20 after the announcement, a level not seen since the summer of 2004 and a clear sign investors are more worried that the world is heading for a long and painful recession in which energy use will continue to erode.

In just five months, crude has given up all of the price gains made over the past four years.

Making matters worse for OPEC, Moscow distanced itself from direct ties with the 13-nation producers' group, further dampening OPEC hopes of coordinated production cuts that might put a floor under crude prices.

OPEC said oil ministers of the 11 nations under the group's quota system agreed to take 4.2 million barrels a day off the market, but that includes two previous announced cuts that totaled 2 million barrels.

That leaves the new output reduction announced Wednesday at 2.2 million barrels, effective Jan. 1.

Still, even the record cut was unable to counterbalance consumers' concerns about the dismal world economy.

In the U.S., the world's largest crude consumer, the Federal Reserve's decision to slash its target interest rate to nearly zero buoyed global stock markets Tuesday and early Wednesday.

But the news on the U.S. economy is expected to get worse before it gets better. Businesses, which have already cut nearly 2 million jobs since January, keep laying off workers in the face of slumping demand.

The government reported Tuesday before the Fed rate announcement that home builders slashed production in November by 18.9 percent, the biggest drop in nearly a quarter century. That pushed activity down to a record low annual rate of 625,000 units as the woes in the property market, where the current economic troubles began, showed no signs of abating

Focusing on the shrinking oil market, OPEC noted in its statement that "crude volumes entering the market remain well in excess of actual demand."

"Moreover, the impact of the grave global economic downturn has led to a destruction of demand, resulting in unprecedented downward pressure being exerted on prices," it said.

The group said "if unchecked, prices could fall to levels which would place in jeopardy the investments required to guarantee adequate energy supplies in the medium to long term."

In addition to signaling that a major cut was in the offing in the days leading up to the Oran conference, OPEC ministers had expressed hope that Russia — the No. 2 producer after Saudi Arabia — would join in a significant cutback that would bolster prices.

Such support would be significant. Non-OPEC members Mexico, Norway and Russia last slashed production in the late 1990s, at a time oil was selling for about $10 a barrel.

But although Russian Deputy Premier Igor Sechin and Azeri Energy Minister Natik Aliev announced cutbacks of a total of more than 600,000 barrels a day, their commitments appeared largely symbolic.

The Russians indicated their reductions had already been implemented in November, while Azerbaijan's output had already been reduced by about a third due to production problems earlier this year.

Among those hoping for Moscow's support was oil powerhouse Saudi Arabia.

"We also hope that other producers who are not in OPEC will chip in for the purpose of bringing stability to the market," said Saudi oil minister Ali Naimi said, in a nod to Russia.

Sechin, in comments to The Associated Press, said "Russian oil companies have already made a decision to cut deliveries to the market ... approximately equivalent to 350,000 barrels per day." But he specified that his country's cuts had already been enacted ahead of the OPEC meeting.

Sechin did hold out the possibility of further reductions, saying Russia was ready to pare another 320,000 barrels a day "if we see the continuation of the current level of prices on the world oil markets."

But with Russian production falling, due in part to lagging investment, it was unclear whether some of the cuts enacted or proposed were simply a way of packaging Moscow's inability to keep up present output levels. Even before Sechin's comments, Russian output — now close to 10 million barrels a day — was expected to decline by 1 percent this year and by around 2 percent in 2009.

That — and the fact that Russia was announcing reductions already enacted — diminished the significance of its move.

Sechin's vague comments on further cooperation with OPEC — he mentioned plans for possible "permanent observer status" without specifying what that meant — also signaled Moscow's reluctance to trade its traditional independence for closer ties with the 13-nation producers' group.

Sechin did not rule out full membership eventually, but said, "We are not rushing." A member of the Russian delegation who asked for anonymity because he was not authorized to comment was blunter, saying his country had no interest in joining OPEC.

OPEC President Khelil sought to cast a positive light on the Russian moves, suggesting that while Russia might rethink membership it was a sovereign country that can "cut maybe more strongly or less strongly — or maybe (do) nothing."

"We cannot tell them, you know, what to cut, and how to cut, and when to cut. They have to make their own decision."

But the Russians "are probably going to change their minds in the future and become full members," he said.

Azerbaijan's Aliev said his country "will support the OPEC cuts," slashing up to 300,000 barrels a day from the country's output. That would be more than a third of total production for the country on the oil-rich Caspian Sea.

Still, Azerbaijan's proposed cuts may be involuntary. After an accident on the main BP pumping platform in October, oil industry analysts say the country's output has dropped to around 500,000 barrels a day — the level Aliev was proposing at Oran.

____

Associated Press writers Angela Charlton, Alfred de Montesquiou and Adam Schreck in Oran contributed to this report.

............................

2008-12-17T14:29:00.002+08:00

16-12-2008, Wall Street rallies on Fed's rate cut

Tuesday December 16, 5:46 pm ET, By Chuck Mikolajczak

NEW YORK (Reuters) - Stocks rallied on Tuesday after the Federal Reserve rewrote its playbook by slashing borrowing costs to a record low, even zero, and pledging more unconventional steps to fight the deepest recession in generations.

Banks led the charge higher, spurred both by the Fed's move to cap its target lending rate at a quarter percentage point and by a quarterly loss from Wall Street icon Goldman Sachs (NYSE:GS - News) that was not as gruesome as many feared. Goldman's stock gained more than 14 percent, outshining an 11 percent advance in the S&P 500's financial index (^GSPF - News).

Stocks were up modestly all day on optimism that the Fed, at its last meeting of 2008, might take dramatic measures to combat the credit crisis and global economic slowdown. But the rally caught fire right after the central bank released its statement in mid-afternoon, pushing the benchmark Standard & Poor's 500 index to its highest closing level since November 10 and driving each of the major U.S. stock indexes to their best one-day performance for the month.

"The rate cut was definitely more than a lot of people were expecting and that's really helping the market here. But the big takeaway here is Bernanke's going back out into the market and trying to loosen things up in credit," said Jocelynn Drake, market analyst at Schaeffer's Investment Research in Cincinnati, Ohio.

"We've got a Fed that's willing to really go the distance for the market right now."

The Dow Jones industrial average (DJI:^DJI - News) rose 359.61 points, or 4.20 percent, to 8,924.14. The Standard & Poor's 500 Index (^SPX - News) jumped 44.61 points, or 5.14 percent, to 913.18. The Nasdaq Composite Index (Nasdaq:^IXIC - News) climbed 81.55 points, or 5.41 percent, to 1,589.89.

Tuesday's advance marked the largest point and percentage gain for the Dow since November 24 and pushed the blue-chip Dow average up 1.1 percent for the month to date.

BANKS AND BUILDERS LOVE THE FED

In a unanimous vote, the Fed made a larger-than-expected cut to the benchmark federal funds rate by at least three-quarters of a percentage point to a target range of zero to 0.25 percent from its current 1 percent.

The U.S. central bank said that it will employ all available tools to promote the resumption of growth and preserve price stability.

Shares of Goldman Sachs (NYSE:GS - News) surged after the company reported its first quarterly loss since going public in 1999, but its results were not as dire as some had anticipated.

JPMorgan Chase & Co (NYSE:JPM - News) was the Dow's top performer, up 13 percent at $32.35, while Goldman Sachs' stock jumped 14.4 percent to $76 on the New York Stock Exchange.

Home builders' shares also jumped following the Fed's huge rate cut, which investors believe will help stimulate lending and home buying. The Dow Jones U.S. Home Construction Index (DJI:^DJUSHB - News) soared 11.2 percent.

The stock of luxury home builder Toll Brothers (NYSE:TOL - News)leaped 9.2 percent to $22.22, while shares of D.R. Horton Inc (NYSE:DHI - News), the largest U.S. home builder, gained 11 percent to $7.79.

BEST BUY GIVES TECH A GOOD DAY

Investor sentiment also improved after better-than-expected quarterly earnings from electronics retailer Best Buy (NYSE:BBY - News), which buoyed technology stocks. Companies such as Microsoft Corp (NasdaqGS:MSFT - News) and Intel (NasdaqGS:INTC - News), which draw significant revenues from consumer demand for electronic products, were among the Nasdaq's top advancers.

Best Buy's stock jumped almost 18 percent to $27.68 after its quarterly earnings beat estimates and the company revealed plans to offer employee buyouts and reduce store openings in an effort to combat reduced consumer spending.

Microsoft advanced 5.6 percent to $20.11, while Intel gained 7.2 percent to $15.64.

Shares of General Electric (NYSE:GE - News) rose 5.7 percent to $17.92 after the U.S. conglomerate issued guidance for the rest of 2008, but said that it will no longer be providing specific quarterly earnings-per-share guidance going forward.

Economic data earlier in the session continued to show effects of the recession, with U.S. consumer prices plunging at a record rate for a second straight month in November and housing starts tumbling to a record low.

Volume was low on the New York Stock Exchange, with about 1.54 billion shares changing hands, below last year's estimated daily average of roughly 1.90 billion. On Nasdaq, about 2.27 billion shares traded, above last year's daily average of 2.17 billion.

Advancing stocks outnumbered declining ones on the NYSE by a ratio of almost 6 to 1, while on the Nasdaq, seven stocks rose for every two that fell.

(Additional reporting by Leah Schnurr; Editing by Jan Paschal)

............................

2008-12-17T14:21:00.002+08:00

16-12-2008, Federal Reserve Establishes Target Range: 0 to 25 Basis Points

From ClusterStock.com, Dec. 16, 2008:

Forget the target rate! The Fed is establishing a range for federal funds, which will be zero to a quarter of a percent. Perhaps most importantly, they said that rates would be low for a very long time and that the Fed is focused on financial market stability and economic growth.

Prior to today's announcement, there had been a lot of debate that the Fed may actually be adopting a new approach, perhaps targeting a LIBOR rate or even a mortgage rate. But we never heard that they would be establishing a target range.

This wouldn't be the first time the Fed changed the objective of its open markets operations. Until the 1980s, the FOMC didn't target a specified level for the federal funds rate, aat all. It wasn't until 1994 that FOMC began announcing changes in its policy stance. And it didn't explicitly state its target rate until a year later. That FOMC statesment we all read shortly after each meeting wasn't published until 2000.

Here's the full statement:

The Federal Open Market Committee decided today to establish a target range for the federal funds rate of 0 to 1/4 percent.

Since the Committee's last meeting, labor market conditions have deteriorated, and the available data indicate that consumer spending, business investment, and industrial production have declined. Financial markets remain quite strained and credit conditions tight. Overall, the outlook for economic activity has weakened further.

Meanwhile, inflationary pressures have diminished appreciably. In light of the declines in the prices of energy and other commodities and the weaker prospects for economic activity, the Committee expects inflation to moderate further in coming quarters.

The Federal Reserve will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability. In particular, the Committee anticipates that weak economic conditions are likely to warrant exceptionally low levels of the federal funds rate for some time.

The focus of the Committee's policy going forward will be to support the functioning of financial markets and stimulate the economy through open market operations and other measures that sustain the size of the Federal Reserve's balance sheet at a high level. As previously announced, over the next few quarters the Federal Reserve will purchase large quantities of agency debt and mortgage-backed securities to provide support to the mortgage and housing markets, and it stands ready to expand its purchases of agency debt and mortgage-backed securities as conditions warrant. The Committee is also evaluating the potential benefits of purchasing longer-term Treasury securities. Early next year, the Federal Reserve will also implement the Term Asset-Backed Securities Loan Facility to facilitate the extension of credit to households and small businesses. The Federal Reserve will continue to consider ways of using its balance sheet to further support credit markets and economic activity.

Voting for the FOMC monetary policy action were: Ben S. Bernanke, Chairman; Christine M. Cumming; Elizabeth A. Duke; Richard W. Fisher; Donald L. Kohn; Randall S. Kroszner; Sandra Pianalto; Charles I. Plosser; Gary H. Stern; and Kevin M. Warsh.

In a related action, the Board of Governors unanimously approved a 75-basis-point decrease in the discount rate to 1/2 percent. In taking this action, the Board approved the requests submitted by the Boards of Directors of the Federal Reserve Banks of New York, Cleveland, Richmond, Atlanta, Minneapolis, and San Francisco. The Board also established interest rates on required and excess reserve balances of 1/4 percent.

See Also: Bernie Madoff's Victims: The Slideshow

............................

2008-12-16T16:48:00.001+08:00

12-12-2008, $14B auto bailout dies in Senate

WASHINGTON – A bailout-weary Congress killed a $14 billion package to aid struggling U.S. automakers Thursday night after a partisan dispute over union wage cuts derailed a last-ditch effort to revive the emergency aid before year's end.

Republicans, breaking sharply with President George W. Bush as his term draws to a close, refused to back federal aid for Detroit's beleaguered Big Three without a guarantee that the United Auto Workers would agree by the end of next year to wage cuts to bring their pay into line with U.S. plants of Japanese carmakers. The UAW refused to do so before its current contract with the automakers expires in 2011.

The breakdown left the fate of the auto industry — and the 3 million jobs it touches — in limbo at a time of growing economic turmoil. General Motors Corp. and Chrysler LLC have said they could be weeks from collapse. Ford Motor Co. says it does not need federal help now, but its survival is far from certain.

Democratic leaders called on Bush to immediately tap the $700 billion Wall Street bailout fund for emergency aid to the auto industry.

Majority Leader Harry Reid, D-Nev., called the bill's collapse "a loss for the country," adding: "I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight."

GM said in a statement it was "deeply disappointed" that the bipartisan agreement faltered. "We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis," the company said. Chrysler, too, said it "will continue to pursue a workable solution to help ensure the future viability of the company."

The White House said it was evaluating its options in light of the breakdown on Capitol Hill.

"It's disappointing that Congress failed to act tonight," Deputy Press Secretary Tony Fratto said in a statement. "We think the legislation we negotiated provided an opportunity to use funds already appropriated for automakers and presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds only go to firms whose stakeholders were prepared to make difficult decisions to become viable."

That bill — the product of a hard-fought negotiation between congressional Democrats and the Bush White House — was virtually dead on arrival in the Senate, where Republicans said it was too weak in its demands on the car companies and contained unacceptable environmental mandates for the Big Three.

Thursday's implosion followed yet another set of marathon negotiations at the Capitol — this time involving labor, the auto industry and lawmakers. The group came close to agreement, but it stalled over the UAW's refusal to agree to the wage concessions.

"We were about three words away from a deal," said Sen. Bob Corker of Tennessee, the GOP's point man in the negotiations, referring to any date in 2009 on which the UAW would accept wage cuts.

The Senate rejected the bailout 52-35 on a procedural vote — well short of the 60 required — after the talks fell apart. Just 10 Republicans joined 40 Democrats and two independents in backing it. Three Democrats sided with 31 Republicans in opposition. Reid also voted "no" for procedural reasons.

Congress is not scheduled to return for legislative work until early January.

Some Senate Democrats joined Republicans in turning against the House-passed bill — despite increasingly urgent expressions of support from the White House and President-elect Barack Obama for quick action to spare the economy the added pain of a potential automaker collapse.

"In the midst of already deep and troubling economic times, we are about to add to that by walking away," said Sen. Chris Dodd, D-Conn., the Banking Committee chairman who led negotiations on the package.

Alan Reuther, the UAW's legislative director, declined comment to reporters as he left a meeting room during negotiations. The union had no immediate reaction to the bailout's defeat.

The stunning disintegration was eerily reminiscent of the defeat of the $700 billion Wall Street bailout in the House, which sent the Dow tumbling and lawmakers back to the drawing board to draft a new agreement to rescue financial institutions and halt a broader economic meltdown. That measure ultimately passed and was signed by Bush.

It wasn't immediately clear, however, how the auto aid measure might be resurrected, with Congress now set to depart for the year.

Democratic House Speaker Nancy Pelosi called Senate Republicans' refusal to support the White House-negotiated bill irresponsible and urged the Bush administration and the Federal Reserve to provide short-term relief for the automakers. "That is the only viable option available at this time," she said.

Congressional Republicans have been in open revolt against Bush over the auto bailout. Senate Minority Leader Mitch McConnell of Kentucky joined other GOP lawmakers Thursday in announcing his opposition to the White House-backed bill, which passed the House on Wednesday. He and other Republicans insisted that the carmakers restructure their debt and bring wages and benefits in line with those paid by Toyota, Honda and Nissan in the United States.

Hourly wages for UAW workers at GM factories are about equal to those paid by Toyota Motor Corp. at its older U.S. factories, according to the companies. GM says the average UAW laborer makes $29.78 per hour, while Toyota says it pays about $30 per hour. But the unionized factories have far higher benefit costs.

GM says its total hourly labor costs are now $69, including wages, pensions and health care for active workers, plus the pension and health care costs of more than 432,000 retirees and spouses. Toyota says its total costs are around $48. The Japanese automaker has far fewer retirees and its pension and health care benefits are not as rich as those paid to UAW workers.

Republicans also bitterly opposed tougher environmental rules carmakers would have to meet as part of the House-passed version of the rescue package, and the Senate dropped them from its plan.

The House-passed bill would have created a Bush-appointed overseer to dole out the money. At the same time, carmakers would have been compelled to return the aid if the "car czar" decided the carmakers hadn't done enough to restructure by spring.

The House approved its plan late Wednesday on a vote of 237-170.

A pair of polls released Thursday indicated that the public is dubious about the rescue plan.

Just 39 percent said it would be right to spend billions in loans to keep GM, Ford and Chrysler in business, according to a poll by the nonpartisan Pew Research Center. Just 45 percent of Democrats and 31 percent of Republicans supported the idea.

In a separate Marist College poll, 48 percent said they oppose federal loans for the struggling automakers while 41 percent approved.

___

Associated Press writers David Espo and Alan Fram in Washington and Kimberly S. Johnson in Detroit contributed to this report.

............................

2008-12-16T16:44:00.002+08:00

11-12-2008, Energy agency sees fall in 2008 global oil demand

PARIS – The International Energy Agency said Thursday that global oil demand will shrink this year for the first time in a quarter-century as rich nations fall into recession and growth slows in the developing world.

The Paris-based agency, which represents the interests of 28 oil-importing nations, also cut its forecast for global demand next year, saying a rebound in demand depends on economic recovery in the second half of 2009.

The IEA cut its forecast for global oil demand this year by 350,000 barrels a day to 85.8 million barrels a day, down 0.2 percent from 2007.

"The global demand contraction expected in 2008 will be the first since 1983," the agency said in its monthly oil market report.

The IEA slashed its forecast for oil demand in developed nations in the 30-country Organization for Economic Cooperation and Development by 290,000 barrels a day this year and 210,000 barrels a day in 2009.

Demand in non-OECD countries will rise 3.9 percent this year and 2.9 percent in 2009, the IEA said, slightly slower than its forecast in its report for November. It said the predicted cuts were linked to the economic slowdown and revised data in Asian countries like Malaysia, Taiwan and Thailand.

Global oil demand will increase 0.5 percent next year to 86.3 million barrels a day, the IEA said, but it added that this forecast assumes that the plunge in OECD economic growth will bottom out next year and recover in the second half of 2009. The International Monetary Fund has made a similar estimate.

Separate figures for the month of October likewise showed steep falls. The agency said demand in its North American member states fell 8.3 percent in October, while in OECD states in Europe the decline was only 0.9 percent.

Oil prices edged higher Thursday in Asia with investors hoping for a significant OPEC production cut next week to underpin prices.

Light, sweet crude for January delivery was up 59 cents to $44.11 a barrel in electronic trading on the New York Mercantile Exchange by midafternoon in Singapore.

............................

2008-12-16T16:39:00.001+08:00

15-12-2008, Fed eyes record low interest rates to battle deflation

WASHINGTON (AFP) – Federal Reserve policymakers were expected to lower key rates close to zero Tuesday in the latest effort to battle a crippling credit crunch and stave off deflation, analysts said.

But with the economic mired in recession and low rates ineffective in stimulating activity, the central bank headed by Ben Bernanke will likely look at a range of exceptional actions to get credit flowing again.

The central bank's Federal Open Market Committee (FOMC) was expected to cut its base lending rate from the current level of 1.0 percent, even if the move would be largely symbolic.

The meeting opened Monday and was set to conclude Tuesday around 1915 GMT.

Many analysts are anticipating a half-point cut, which still would be an all-time low for the rate.

"It would be surprising if the Fed were to do anything other than cut the funds rate by 50 basis points," said Ian Shepherdson at High Frequency Economics.

"We think the case for cutting even further is very strong but Mr. Bernanke and his colleagues may want to keep something in reserve."

Futures market trading suggests a strong likelihood of a cut in the federal funds rate to as low as 0.25 percent, which would represent a sharp cut of three-fourths of a point.

But the Fed's low rates have not yet filtered into many consumer and business loans, and the central bank is likely to expand its arsenal of extraordinary actions to break the global credit crunch and avert a crippling deflationary spiral, say analysts.

"With all of its rate-cutting ammunition effectively spent -- it is possible the funds rate could be cut to zero, but we believe this would cause undue strain in the money markets -- the Fed will likely focus its efforts on unconventional policy options in its efforts to stabilize the economy and the financial markets," said Joseph LaVorgna, chief US economist at Deutsche Bank, who sees a half-point cut.

More significant may be what the Fed says and does besides moving the funds rate target.

The Fed is using a tool employed by Japan in the 1990s that economists call quantitative easing -- which means the central bank is effectively "printing money" to pump it into the system and stimulate lending.

Analysts say Bernanke and other Fed members have not explicitly acknowledged the technique but will likely be forced to do so some time soon.

Complicating the Fed's task is a growing expectation of falling prices that could set off a deflationary spiral hard to counter.

The extraordinary actions on the bond market underscore the conundrum for the central bank.

Yields on some short-term Treasury bills became negative for the first time -- meaning investors are willing to give up a bit of their capital for the safety of US government debt in view of a deflation threat.

At the same time, the Treasury in the past week issued 30 billion dollars in bills at a rate of zero percent, highlighting the same fears.

The effective federal funds rate on the futures market has fallen near zero as well -- as low as 0.0625 percent -- despite the Fed target of 1.0 percent, because of the exceptional amounts of liquidity being pumped into the system.

"The Fed basically lost control of the rate after the Lehman Brothers failure on September 15," said Jeremy Siegel, a University of Pennsylvania economist and adviser to Rittenhouse Asset Management.

"With the effective real market rate now at zero, what difference does a cut make?" said John Mauldin, president of Millennium Wave Advisors.

"I hope they do the right thing and go ahead and cut at least 75 basis points, if not more. That would stop the speculation and let them move on to quantitative easing and other allied policies."

Wells Fargo economist Eugenio Aleman said the Fed must publicly address speculation in the media about its actions, including some reports that it would seek to target mortgage rates at 4.5 percent, which he said is causing potential home buyers to wait for such efforts.

"This speculation is plain and simply delaying a recovery in the US housing market," Aleman said.

"This speculation has a similar effect to the speculation that the government is going to come to the rescue of all of those who made terrible investment decisions; it is just making things worse."

............................

2008-12-12T16:35:00.001+08:00

12-12-2008, $14B auto bailout dies in Senate

By JULIE HIRSCHFELD DAVIS and KEN THOMAS, Associated Press

WASHINGTON – A bailout-weary Congress killed a $14 billion package to aid struggling U.S. automakers Thursday night after a partisan dispute over union wage cuts derailed a last-ditch effort to revive the emergency aid before year's end.

Republicans, breaking sharply with President George W. Bush as his term draws to a close, refused to back federal aid for Detroit's beleaguered Big Three without a guarantee that the United Auto Workers would agree by the end of next year to wage cuts to bring their pay into line with U.S. plants of Japanese carmakers. The UAW refused to do so before its current contract with the automakers expires in 2011.

The breakdown left the fate of the auto industry — and the 3 million jobs it touches — in limbo at a time of growing economic turmoil. General Motors Corp. and Chrysler LLC have said they could be weeks from collapse. Ford Motor Co. says it does not need federal help now, but its survival is far from certain.

Democratic leaders called on Bush to immediately tap the $700 billion Wall Street bailout fund for emergency aid to the auto industry.

Majority Leader Harry Reid, D-Nev., called the bill's collapse "a loss for the country," adding: "I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight."

GM said in a statement it was "deeply disappointed" that the bipartisan agreement faltered. "We will assess all of our options to continue our restructuring and to obtain the means to weather the current economic crisis," the company said. Chrysler, too, said it "will continue to pursue a workable solution to help ensure the future viability of the company."

The White House said it was evaluating its options in light of the breakdown on Capitol Hill.

"It's disappointing that Congress failed to act tonight," Deputy Press Secretary Tony Fratto said in a statement. "We think the legislation we negotiated provided an opportunity to use funds already appropriated for automakers and presented the best chance to avoid a disorderly bankruptcy while ensuring taxpayer funds only go to firms whose stakeholders were prepared to make difficult decisions to become viable."

That bill — the product of a hard-fought negotiation between congressional Democrats and the Bush White House — was virtually dead on arrival in the Senate, where Republicans said it was too weak in its demands on the car companies and contained unacceptable environmental mandates for the Big Three.

Thursday's implosion followed yet another set of marathon negotiations at the Capitol — this time involving labor, the auto industry and lawmakers. The group came close to agreement, but it stalled over the UAW's refusal to agree to the wage concessions.

"We were about three words away from a deal," said Sen. Bob Corker of Tennessee, the GOP's point man in the negotiations, referring to any date in 2009 on which the UAW would accept wage cuts.

The Senate rejected the bailout 52-35 on a procedural vote — well short of the 60 required — after the talks fell apart. Just 10 Republicans joined 40 Democrats and two independents in backing it. Three Democrats sided with 31 Republicans in opposition. Reid also voted "no" for procedural reasons.

Congress is not scheduled to return for legislative work until early January.

Some Senate Democrats joined Republicans in turning against the House-passed bill — despite increasingly urgent expressions of support from the White House and President-elect Barack Obama for quick action to spare the economy the added pain of a potential automaker collapse.

"In the midst of already deep and troubling economic times, we are about to add to that by walking away," said Sen. Chris Dodd, D-Conn., the Banking Committee chairman who led negotiations on the package.

Alan Reuther, the UAW's legislative director, declined comment to reporters as he left a meeting room during negotiations. The union had no immediate reaction to the bailout's defeat.

The stunning disintegration was eerily reminiscent of the defeat of the $700 billion Wall Street bailout in the House, which sent the Dow tumbling and lawmakers back to the drawing board to draft a new agreement to rescue financial institutions and halt a broader economic meltdown. That measure ultimately passed and was signed by Bush.

It wasn't immediately clear, however, how the auto aid measure might be resurrected, with Congress now set to depart for the year.

Democratic House Speaker Nancy Pelosi called Senate Republicans' refusal to support the White House-negotiated bill irresponsible and urged the Bush administration and the Federal Reserve to provide short-term relief for the automakers. "That is the only viable option available at this time," she said.

Congressional Republicans have been in open revolt against Bush over the auto bailout. Senate Minority Leader Mitch McConnell of Kentucky joined other GOP lawmakers Thursday in announcing his opposition to the White House-backed bill, which passed the House on Wednesday. He and other Republicans insisted that the carmakers restructure their debt and bring wages and benefits in line with those paid by Toyota, Honda and Nissan in the United States.

Hourly wages for UAW workers at GM factories are about equal to those paid by Toyota Motor Corp. at its older U.S. factories, according to the companies. GM says the average UAW laborer makes $29.78 per hour, while Toyota says it pays about $30 per hour. But the unionized factories have far higher benefit costs.

GM says its total hourly labor costs are now $69, including wages, pensions and health care for active workers, plus the pension and health care costs of more than 432,000 retirees and spouses. Toyota says its total costs are around $48. The Japanese automaker has far fewer retirees and its pension and health care benefits are not as rich as those paid to UAW workers.

Republicans also bitterly opposed tougher environmental rules carmakers would have to meet as part of the House-passed version of the rescue package, and the Senate dropped them from its plan.

The House-passed bill would have created a Bush-appointed overseer to dole out the money. At the same time, carmakers would have been compelled to return the aid if the "car czar" decided the carmakers hadn't done enough to restructure by spring.

The House approved its plan late Wednesday on a vote of 237-170.

A pair of polls released Thursday indicated that the public is dubious about the rescue plan.

Just 39 percent said it would be right to spend billions in loans to keep GM, Ford and Chrysler in business, according to a poll by the nonpartisan Pew Research Center. Just 45 percent of Democrats and 31 percent of Republicans supported the idea.

In a separate Marist College poll, 48 percent said they oppose federal loans for the struggling automakers while 41 percent approved.

___

Associated Press writers David Espo and Alan Fram in Washington and Kimberly S. Johnson in Detroit contributed to this report.

............................

2008-11-22T13:06:00.002+08:00

22-11-2008, Multinationals in Penang preparing for the worst

Posted by kasee , Saturday, 22 November 2008 10:30

By Christina Chin, The Star

GEORGE TOWN: US-based multinational companies (MNCs) in Penang are adopting various cost-cutting measures as they brace for the anticipated impact from the global meltdown.

Federation of Malaysian Manufacturers northern branch chairman Datuk O.K. Lee said several factories have shortened their working days from five to four days.

“Some have frozen employment while others have shut down operations for Christmas and New Year,” he said, adding that a few companies are quietly offering a voluntary separation scheme.

A check revealed that at least two electronic giants here – Agilent Technologies and Jabil Circuit – will shut down their factories in Bayan Lepas for Christmas and New Year.

Employees have been asked to take their annual leave for about a week because of a drop in product demand.

“The global directive is a two-week shutdown but individual plants need not follow strictly. I think precautionary measures like these should be able to help cushion the impact,” said an executive of one of the affected factories.

“Most of my colleagues are happy to go on a break first before we ponder over the future,” she said, adding that the last time the multinational company had a year-end shutdown was during the last economic slowdown.

A Jabil employee said the company’s shutdown would take place from Dec 24-30.

“Usually, our Christmas break is one or two days only.”

An ASE spokesman said the company was shutting down for four days in November and December while a Fairchild Semiconductor employee said the factory would be closed from Nov 21-24.

Between 35% and 50% of the MNCs here have their headquarters in the United States and over 60% of the products made are US-bound, according to an industry insider.

“We are experiencing low export demand. Some MNCs are taking the opportunity to conduct their usual attrition exercise,” he said, noting that the first and second quarters of next year is expected to be “very soft”.

Commenting on the impact of the global credit crunch on the country’s technological sector, US ambassador to Malaysia James Keith said it was “very difficult to predict”.

“The global picture is dark. Even for the United States, we cannot make a prediction (of what’s going to happen). Obviously with slower global flows, bilateral trade will also fall.

“Every company is under pressure to reduce costs. We all have to tighten our belts. The United States has not seen such a situation in a quarter of a century.

“Companies would rather look at measures to reduce cost than lay off employees so hopefully the Federal Government can help us,” he said, adding that the United States was committed to ensuring a “sense of confidence” in Malaysia.

“But there must be give and take in bilateral trade. That is why we hope to conclude the final rounds of negotiations over the Free Trade Agreement soon.”

“US companies are always looking to reduce cost. No doubt this year, Malaysia has been getting many contracts but the future will depend on the decisions made today,” he said, adding that every country has to continuously re-evaluate itself to attract investors.

He was speaking at a press conference after the American Malaysian Chamber of Commerce Penang annual summit with Chief Minister Lim Guan Eng yesterday.

............................

2008-11-20T01:12:00.003+08:00

19-11-2008, Market falls on auto bailout woes

Wednesday November 19, 11:09 am ET, Reuters ,By Ellis Mnyandu

NEW YORK (Reuters) - U.S. stocks fell on Wednesday as fears about the diminishing prospects for a U.S. auto industry rescue grew, offsetting some gains in defensive stocks like drugs.

Shares of General Motors (NYSE:GM - News) declined nearly 13 percent to $2.69, while Ford (NYSE:F - News) slid more than 11 percent as investors worried there may be no swift action from Congress as it winds down its session.

The fears about the fate of the U.S. automakers, including Chrysler, are what a possible bankruptcy may unleash on the overall economy.

"There's insecurity with the bailout. The plight of GM, Chrysler and Ford," said Alan Lancz, president of Alan B. Lancz & Associates Inc, an investment advisory firm in Toledo, Ohio. "There's just no catalyst to buy stocks and for the kind of confidence we need for the market to have any sustainable progress."

The Dow Jones industrial average (DJI:^DJI - News) shed 74.87 points, or 0.83 percent, to 8,354.58. The Standard & Poor's 500 Index (^SPX - News) declined 9.81 points, or 1.14 percent, to 849.31. The Nasdaq Composite Index (Nasdaq:^IXIC - News) fell 12.41 points, or 0.84 percent, to 1,470.86.

With stocks struggling to shake off the gloom that has sent benchmark indexes to their lowest levels since 2003, investors' growing anxiety sent two-year U.S. Treasury yields to a five-year low in search of safe-haven government debt.

Besides auto stocks, financials also took a big beating, with Citigroup (NYSE:C - News) , sliding more than 3 percent.

U.S. auto executives from GM, Ford and Chrysler warned Congress on Tuesday that their industry was teetering on the brink of disaster as they pleaded for a $25 billion aid package despite political opposition to another multibillion-dollar government bailout.

Investors snapped up such defensive stocks as McDonald's Corp (NYSE:MCD - News) , up 2 percent, Coca-Cola Co (NYSE:KO - News) , up 2.3 percent, and drug company Merck (NYSE:MRK - News) , up about 1 percent.

Defensive plays rose on hopes that despite a slumping economy companies including fast-food chain McDonald's would still be able to sustain business. McDonald's shares jumped to $57.64 on the New York Stock Exchange, while those of beverage company Coca-Cola rose to $44.33.

Shares of Merck, a drug maker, rose to $26.31. Shares of energy companies also underpinned the broader market.

But among the top drags, Citigroup declined to $8.10 on the NYSE, where it hit a session low $7.75 -- its lowest level in 13 years as investors fretted about further fallout for the financial sector from the mortgage crisis.

(Reporting by Ellis Mnyandu; Editing by Kenneth Barry)

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2008-11-20T01:09:00.001+08:00

19-11-2008, US STOCKS-Market tumbles 3 pct on auto, economic woes

Wed Nov 19, 2008 11:50am

NEW YORK, Nov 19 (Reuters) - U.S. stocks slid further on Wednesday, sending the benchmark S&P 500 .SPX and Nasdaq down more than 3 percent, as the dimming prospects for a U.S. auto industry rescue and concerns about the deepening economic slump rattled investors.

The S&P 500 -- pinned at its lowest levels in more than 5 years by sliding financial shares -- fell below its bear-market closing low that was set late last month.

The Dow Jones industrial average .DJI was down 190.84 points, or 2.27 percent, at 8,233.91. The Standard & Poor's 500 Index .SPX was down 26.18 points, or 3.05 percent, at 832.94. The Nasdaq Composite Index .IXIC was down 48.04 points, or 3.24 percent, at 1,435.23. (Reporting by Ellis Mnyandu; Editing by Kenneth Barry)

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2008-11-18T01:15:00.001+08:00

17-11-2008, Calm Before Storm

Deputy Minister of Finance Kong Cho Ha tried to hide the signs of an imminent economic storm. He told the parliament that the Malaysian economy is not facing a recession, but expanding more slowly.

Kong said the economy is predicted to expand by 3.5 percent in 2009 following additional measures tabled as a "policy response" towards the global economic crisis by the government on Nov 4. This is a bit too presumptuous. The impact of the global economic crisis on our local economy is difficult to predict. Even US and Europe are still trying to gauge the bottom pit of the crisis through their gut feel.

Major economies in East Asia have sounded the alarm bell. Recently, China announced a stimulus package worth USD586 billion. According to Reuters, Japan has slipped into recession when its economy contracted by 0.1%. France is closing behind. South Korea has announced pay freeze for all government staff and a 5% budget cut for all public and non-profit agencies it help fund.

While, US is expecting an escalation of foreclosures another potentially huge problem is brewing - mounting credit card debts. This is also one of our teething concerns. Financial institutions are getting too promiscuous trying to lure more people to sign up for credit cards. Over the last two years, the number of credit cards issued has grown exponentially. More than 2.8 million cards are issued annually.

Malaysia's credit debt stands at nearly RM30 billion. Almost half of credit card users pay the minimum amount of 5 percent of outstanding balance. The number of bankruptcy cases due to credit card debts is increasing since 2005.

This global financial crisis coupled with our own internal problems are expected to hurt the local economy. Already a number of companies, both local and multinationals, are not creating new positions. Retired employees are not being replaced and employment contracts are not being renewed. As many as 100,000 young graduates are expected to join the workforce next year. Unemployment will soar.

Most of us are not aware of the "policy response" announced by the government. If we do, the policy obviously has very little impact in changing general perception about the economy. Many are expected to focus on essentials and save for rainy days. There will be many such days ahead.
This government must do the right thing. Next, I will focus on some steps which can be taken by Finance Minister and incoming Prime Minister Najib Razak to help steer us to the right path.
Posted by Khoo Kay Peng at 9:06 PM

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2008-11-18T00:38:00.002+08:00

17-11-2008, Americans uneasy over bailout for automakers

By Matthew Bigg Matthew Bigg – 19 mins ago

ATLANTA (Reuters) – As Congress debates legislation to help struggling automakers on Monday, many Americans said they were uneasy with the plan, arguing that while it may save jobs, it would reward companies for pursuing bad business practices.

In interviews from New York to Los Angeles, everyday Americans said the proposed $25 billion rescue plan was unfair and said it would make it harder to reform U.S. automakers.

"They need to restructure. If they get bailed out they are not going to do it," said Eric Smith, a paint contractor interviewed in Chamblee, Georgia, on the outskirts of Atlanta.

Democrats crafted the plan to help General Motors Corp, Ford Motor Co and Chrysler LLC, and hope to pass it during a post-election session of Congress starting on Monday.

The three companies, whose gas-guzzling vehicles have been losing market share to Japanese rivals for years, are lobbying for the money to help them restructure and survive the economic downturn.

The stakes rose on Friday, when Goldman Sachs suspended its rating on GM and said the automaker needs at least $22 billion in aid. Goldman also said it would be difficult for Chrysler to survive without help.

All three companies said Chapter 11 bankruptcy restructuring was not an option.

In interviews, many people said all of the options facing the automakers had drawbacks, including the proposed bailout.

"If they don't do it, a lot of people are going to lose their jobs," said Kevin Austin, 36, while fixing a car in a mechanic shop in Atlanta.

"But every big company is getting a bailout and the little people don't," he said.

The automakers are a symbol of industrial muscle in the world's richest country and their financial straits are seen as a sign of the trouble facing the U.S. economy as a whole.

Even so, the bailout is unpopular with many conservatives and others who say in a capitalist society businesses must stand or fall with a minimum of government interference. On Sunday, Arizona Republican Sen. Jon Kyl told Fox News American taxpayers should not be burdened with bailing out the auto industry.

"It's like nature's law: Only the fit survive," said John Berrotto, 50, a security director in New York who drives a Lexus and said he does not support the idea of a bailout. "Sometimes companies just don't make it," he said.

DOUBTS

In Los Angeles, which hosts the Los Angeles Auto Show this week, many people said they doubted a bailout was the best course of action. Some said it might be better for the companies to go bankrupt. Others said the industry could not survive long-term and that the bailout would be throwing good money after bad.

"I'm not sure they (the automakers) can be salvaged. Part of me says that if Honda and Toyota can make better cars in the U.S. with American workers, so be it," said Tom Reiter, who was interviewed in Los Angeles and drives a 2001 Jaguar XJ he said was a "big gas guzzler."

Scott Porter, a 34-year-old attorney, drives a 1996 Honda Accord, which he said he chose for its reliability. He said he opposed the bailout but might be willing to consider it if it was done the right way.

"Everybody is trying to claim they're poor. Everybody wants a handout. This (financial trouble) is something that's been a long time coming," Porter said in downtown Los Angeles.

"I don't see why it's a massive emergency all of a sudden," Porter said, adding that many other sectors were also in trouble.

Asked about claims by U.S. automakers that they could not make a profit manufacturing small cars, he said: "If you can't make a profit then you are going to go bankrupt."

(Reporting by Matthew Bigg; Additional reporting by Dan Whitcomb in Los Angeles and Rebekah Kebede in New York; Editing by Eddie Evans)

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2008-11-18T00:33:00.002+08:00

17-11-2008, Stocks sink on economic worry, Citi job cuts

By Ellis Mnyandu Ellis Mnyandu – 1 hr 1 min ago

NEW YORK (Reuters) – Stocks slid on Monday after Citigroup Inc. (C.N) said it planned more than 50,000 job cuts and Japan, the world's second-largest economy, slid into recession, adding to a bleaker global economic and profit outlook.

Shares of Citigroup, a Dow component, fell 5 percent, and the S&P financial index (.GSPF) shed 4 percent. Investors also sold off technology, one of the sectors seen as vulnerable to a global downturn and reduced business spending.

According to a survey of professional forecasters by the Philadelphia Federal Reserve Bank the United States, the U.S. economy entered recession in April that will last for 14 months.

"The market has correctly forecast the recession that we are in," Ernie Ankrim, chief investment strategist for Russell Investment Group in Tacoma, Washington, said. "The news of job cuts is one more indication that the economy is in a very difficult shape right now."

The Dow Jones industrial average (.DJI) slid 217.44 points, or 2.56 percent, to 8,279.87. The Standard & Poor's 500 Index (.SPX) tumbled 21.31 points, or 2.44 percent, to 851.98. The Nasdaq Composite Index (.IXIC) plunged 31.22 points, or 2.06 percent, to 1,485.63.

Microsoft (MSFT.O) shares fell about 3 percent, making the stock a top drag on Nasdaq. Shares of Apple Inc (AAPL.O) fell nearly 2 percent.

The news from Japan marked another big blow to investors' sentiment, along with the failure of this weekend's meeting of the world's 20 largest economies to come up with new stimulus measures for the world economy.

Citigroup shares dropped to $9.02 on the New York Stock Exchange, as shares of Microsoft dropped to $19.43 on Nasdaq.

Apple shares fell to $99.92.

News of Japan sliding into its first recession in seven years in the third quarter followed last week's news that the Euro zone had also entered recession.

Monday's economic reports included data that showed a key manufacturing gauge in New York state tumbled in November to yet another record low.

Wachovia Capital Markets cut its 2009 operating earnings estimate on the Standard and Poor's 500 Index (.SPX) to $78.30 per share from $86 per share, citing deterioration in global growth prospects.

(Editing by Kenneth Barry)

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2008-11-17T14:34:00.002+08:00

17-11-2008, Oil falls below $56 as Japan slips into recession

By ALEX KENNEDY, Associated Press Writer Alex Kennedy, Associated Press Writer – 1 hr 37 mins ago

SINGAPORE – Oil prices fell below $56 a barrel Monday in Asia as news that Japan fell into recession highlighted investor fears of a global economic slowdown that will hurt crude demand.

Light, sweet crude for December delivery was down $1.29 to $55.75 a barrel in electronic trading on the New York Mercantile Exchange by midday in Singapore. The contract fell $1.20 Friday to settle at $57.04.

Japan, the world's second-largest economy, said Monday it slid into a recession for the first time since 2001 after gross domestic product contracted at an annual pace of 0.4 percent in the third quarter after a shrinking 3.7 percent in the second quarter. Japan now joins the 15-nation euro-zone in a recession, defined as two straight quarters of GDP contraction.

"Markets are very worried about the international economic outlook, about oil consumption," said David Moore, a commodity strategist at Commonwealth Bank of Australia in Sydney. "As data is released in the U.S., Europe and other countries, investors get a reminder of the economic problems in the developed world."

Oil prices have tumbled about 62 percent since peaking at nearly $150 a barrel in mid-July.

Comments Sunday from OPEC President Chakib Khelil, downplaying the possibility that the group could cut production at a meeting this month, also weighed on prices.

On Saturday, Iran called on the Organization of Petroleum Exporting Countries to reduce output quotas by up to 1.5 million barrels a day a meeting later this month. But Khelil said OPEC, which accounts for about 40 percent of world crude supply, hasn't yet fully enforced previous quotas and the group needs more data before it decides to cut production.

Iran's call for more cuts is "a wish," Khelil said. OPEC, which cut quotas 1.5 million barrels a day last month, plans to meet on Dec. 17.

"The short-term trend for oil prices is possibly still to the downside," Moore said. "But as the OPEC cuts start to take surplus out of the market, this tightening will eventually give support to the oil price."

A stronger U.S. dollar also helped push oil prices down. Investors often buy oil futures as a hedge against inflation and a weaker dollar and sell when the dollar gains.

The euro fell to $1.2570 Monday from 1.2602 on Friday while the dollar was steady at 97.22 yen.

"The firm U.S. dollar is certainly a factor in why the oil price is lower," Moore said.

In other Nymex trading, gasoline futures fell 1.91 cents to $1.22 a gallon. Heating oil dropped 2.47 cents to $1.81 a gallon while natural gas for December delivery rose 5.6 cents to fetch $6.37 per 1,000 cubic feet.

In London, December Brent crude fell 89 cents to $53.35 on the ICE Futures exchange.

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2008-11-15T20:09:00.003+08:00

14-11-2008, Don't Try to Time the Market, Either

Posted Nov 14, 2008 01:27pm EST by Henry Blodget in Investing, Recession

We asked finance professor Kenneth French whether he had softened his stance on the wisdom of investing in index funds given that global stock markets have plummeted 40% this year (taking index funds with them). Wouldn't market timing be a better strategy?

Of course not, says French, who is the Carl E. and Catherine M. Heidt Professor of Finance at the Tuck School of Business at Dartmouth. The only thing you can be sure of about market-timing is that most people who try it lose. French is also the director of investment strategy at the phenomenally successful Dimensional Fund Advisors.

If you can't handle the current volatility (and who would blame you if you can't), the smart answer is to shift your portfolio allocation more toward cash and bonds and less toward equities... and keep it there. Just don't try to leap in and out of stocks to catch the latest market moves, because it's a mug's game.

Click here for part one of my discussion with French about why it's not a stock picker's market.

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14-11-2008, What a Week: Scary Headlines, Wild Market Swings

Posted Nov 14, 2008 10:21am EST by Aaron Task in Investing, Recession

The stock market got off to a rough start Friday as Asian markets had a relatively tepid response to Thursday's Dow reversal and October retail sales produced the worst drop on record.

Meanwhile, traders continue to debate whether Thursday's snapback marked a successful "retest" of the October low.

In the accompanying video, Henry and I debate whether the whole "retest" concept holds up to scrutiny. He's a skeptic while I'm a believer in technical analysis, if only because so many traders watch these indicators they can become self-fulfilling, as discussed here.

Furthermore, a recent study by Merrill Lynch's David Rosenberg showed the following:

* Every market trough since 1932 was accompanied by a successful "retest."
* The average bounce from the initial low produced a gain of 16% in 35 days.
* The average bottoming phase — "trough to interim-high and then to the retest of the low," typically lasts 70 days, Rosenberg determined.

Of course, Rosenberg only focused on market troughs, which means there's probably 100s of other occasions when "retests" fail, and the market makes a lower low.

Beyond the technical mubo-jumbo, the bigger issue is what the market action says about the state of investor psychology, which is also difficult to quantify (and can be measured many different ways).

Clearly there's a lot of fear among individual investors, judging by mutual fund data, and market bottoms tend to occur when headlines are the scariest, as they have been this week. In addition to dismal retail sales data, Friday alone brought news of big layoffs at Sun Microsystems and Citigroup, and a huge earnings drop at J.C. Penney.

But the eagerness of "everybody" to be a contrarian bull suggests sentiment isn't really so negative after all, meaning this week's retest will likely ultimately get moved out of Rosenberg's study group and into the "failed" category.

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2008-11-15T20:04:00.002+08:00

14-11-2008, U.S. stocks, oil fall on dismal economic outlook

Fri Nov 14, 2008 4:26pm EST

* U.S. stocks slide as weak economic data sparks retreat

* Bonds gain on record drop in October U.S. retail sales

* Oil falls 2 percent as euro zone enters recession (Adds close of U.S. markets)

By Herbert Lash

NEW YORK, Nov 14 (Reuters) - U.S. stocks and crude oil fell on Friday as data showing much of Europe in recession, along with a record drop in U.S. retail sales in October, prompted risk aversion amid a deteriorating global economic outlook.

Gold futures surged more than 5 percent in heavy buying ahead of a Group of 20 summit meeting in Washington starting on Saturday, but breakthroughs are not expected in efforts to subdue a credit crisis that has rocked the world's markets.

The price of U.S. and euro zone government debt rose, as did the U.S. dollar and the yen against the euro, as investors took cover in less-risky assets.

"People are going to wait on the sidelines and see what comes out of (the G20 meeting) before they start to take a view with respect to what's going on next week," said Robert Blake, senior currency strategist at State Street Global Markets in Boston.

"Generally speaking, we would be hesitant to say this is the bottom for sentiment," he said.

Data on Friday showed the 15-nation euro zone has fallen into its first recession since the currency bloc was created in 1999.

A late-day rally fizzled on Wall Street, sending stocks down for the fourth time this week and stripping away more than half of the gains from Thursday's big rally.

The Dow Jones industrial average .DJI slid 337.15 points, or 3.82 percent, at 8,498.10, the Standard & Poor's 500 Index .SPX fell 37.98 points, or 4.17 percent, at 873.31. The Nasdaq Composite Index .IXIC lost 79.85 points, or 5.00 percent, at 1,516.85.

For the week, the Dow fell 5 percent, the S&P 500 shed 6.2 percent and the Nasdaq lost 7.9 percent.

European shares managed to close higher, but pared gains as the report of a whopping 2.8 percent drop in U.S. retail sales in October spooked investors, who also were unnerved by more signs of bleak holiday sales.

Two key U.S. retailers, department store operator J.C. Penney (JCP.N: Quote, Profile, Research, Stock Buzz) and teen apparel seller Abercrombie & Fitch Co (ANF.N: Quote, Profile, Research, Stock Buzz), warned of worsening results ahead as shoppers rein in spending. They both reported lower quarterly profits and said soft conditions would extend into next year.

"We started the day in an equity rally but the driving force remains risk-aversion and deleveraging," said Cyril Beuzit, head of interest rate strategy at BNP Paribas in London. Bonds will perform well through year-end, he said. Continued...

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2008-11-15T19:58:00.002+08:00

14-11-2008, Wall St sells off as consumers snap wallets shut

Fri Nov 14, 2008 4:35pm ESTjavascript:void(0)

* Record drop in Oct retail sales raises economic worries * Drumbeat of data signals more downside for stocks * World leaders gathered in Washington for crisis talks * Dow drops 3.8 pct, S&P 500 down 4.2, Nasdaq off 5 pct

By Kristina Cooke

NEW YORK, Nov 14 (Reuters) - U.S. stocks fell on Friday after a record drop in retail sales last month heightened fears that American consumers' reluctance to spend will push the economy into an even deeper downturn than currently expected.

An attempt at a rally in the last hour of trading fell apart, leaving the market unable to build on Thursday's dramatic rebound as more negative economic and corporate data painted a bleak picture.

It was another harrowing week for Wall Street, with sizable declines in four out of five sessions, even as world leaders headed to Washington to address the worst financial crisis in 80 years. For the week, the benchmark S&P 500 lost 6.16 percent.

Retail sales dropped 2.8 percent in October as consumers cut back amid recession fears, a government report showed. Consumer spending is a key driver for U.S. economic growth and corporate profits. For details, see [ID:nN14423234].

Adding to the grim mood, J.C. Penney (JCP.N: Quote, Profile, Research, Stock Buzz), the department store operator, and Abercrombie & Fitch (ANF.N: Quote, Profile, Research, Stock Buzz), a clothing retailer for teens and young adults, gave disappointing outlooks and said shoppers look like they will be reining in spending this holiday season.

The retail sales number "was abysmal, and guidance from retailers like J.C. Penney and Abercrombie was pretty bleak," said Michael James, senior trader at regional investment bank Wedbush Morgan in Los Angeles.

"Without the participation from the retail sector, you're not going to be able to get much sustainability to any rally," he added.

The Dow Jones industrial average .DJI dropped 337.94 points, or 3.82 percent, to 8,497.31, while the Standard & Poor's 500 Index .SPX slid 38.00 points, or 4.17 percent, to 873.29. The Nasdaq Composite Index .IXIC fell 79.85 points, or 5.00 percent, to end at 1,516.85.

For the week, the Dow lost 4.99 percent, while the Nasdaq skidded 7.92 percent.

The looming Nov. 15 deadline for hedge fund redemption calls -- a key date for investors to pull their money out of hedge funds -- added to the selling, analysts said.

Dow component Boeing (BA.N: Quote, Profile, Research, Stock Buzz) fell 4.9 percent to $41.04 after the aircraft maker and U.S. defense contractor delayed its latest version of its 747 jumbo jet by several months.

J.C. Penney and Abercrombie & Fitch shares slid after they forecast profit for the current quarter sharply lower than estimates. Continued...

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2008-11-14T10:56:00.001+08:00

US STOCKS-Bargain hunters lift Dow 553 points, S&P up 7 pct

Thu Nov 13, 2008 5:39pm EST, By Leah Schnurr

NEW YORK, Nov 13 (Reuters) - U.S. stocks surged on Thursday and broke a three-day losing streak after the S&P 500 and Nasdaq touched new five-year lows earlier in the session, prompting investors to put aside worries about the flagging economy and scoop up wilted shares at fire-sale prices.

Capping off a volatile session, energy stocks led the market higher alongside a recovery in oil prices CLc1 as OPEC looked ready to cut production again. Chevron (CVX.N: Quote, Profile, Research, Stock Buzz) and Exxon Mobil (XOM.N: Quote, Profile, Research, Stock Buzz) gave the Dow its biggest lift, while oil rose over 5 percent above $59 a barrel in post-settlement trading.

But analysts said news about the economy was still grim, after Intel Corp (INTC.O: Quote, Profile, Research, Stock Buzz) slashed its revenue outlook, underscoring concerns that the ailing global economy is hurting technology spending by businesses and consumers.

At one point during Thursday's session, the S&P 500 fell below its Oct. 10 closing low to its lowest since March 2003, a key technical breach that traders said suggested the market could find short-term support. The Dow industrials briefly fell below 8,000, while both the S&P 500 and Nasdaq fell through their 2008 lows set in October.

"The fundamental news right now is just dreadful," said Phil Orlando, chief equity market strategist at Federated Investors in New York, adding that the market "ended up blowing through the support level we thought we had established at the bottom of the market on Oct. 10."

Orlando said there was nothing fundamental to account for the afternoon surge, noting that "technically, some folks thought they needed to put money to work."

The Dow Jones industrial average .DJI jumped 552.59 points, or 6.67 percent, to 8,835.25. The Standard & Poor's 500 Index .SPX surged 58.99 points, or 6.92 percent, to 911.29. The Nasdaq Composite Index .IXIC climbed 97.49 points, or 6.50 percent, to 1,596.70.

The three major U.S. indexes swung in a wide band from high to low, with the S&P 500 traveling 94.32 points from its session low at 818.69 to intraday peak at 913.01, while the Dow industrials covered 911.17 points and the Nasdaq moved 168.16 points.

Chevron jumped 12.5 percent to $75.71, while Exxon rose 9.4 percent to $75.41. An S&P index of energy companies .GSPE soared 11.1 percent.

Intel reversed an earlier decline and rose 6.7 percent to close at $14.43 on the Nasdaq, spurring other big-cap technology shares to shift gears and push higher. Continued...

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2008-11-13T00:01:00.002+08:00

12-11-2008, Oil hits 20-month low on demand fears, stocks

By Christopher Johnson Christopher Johnson – 40 mins ago

LONDON (Reuters) – Oil fell almost 4 percent to nearly $57 a barrel on Wednesday, its lowest for 20 months, on expectations of weaker energy demand and as global stock markets headed downwards.

The fall in oil prices prompted OPEC officials to say they might decide to cut oil production further in an attempt to adjust the balance between oil output and demand.

U.S. crude for December delivery hit a low of $57.04, down $2.29 and its lowest point since March 20, 2007, before rallying to around $57.59 by 10 a.m. EST.

London Brent crude shed $1.61 to $54.10 a barrel.

The bearish tone was set by the International Energy Agency, which said a slowing world economy may force it to cut further its forecast for oil demand growth when it releases its latest monthly report on Thursday.

Turmoil in the world's financial markets has already led the IEA, which advises many of the biggest economies on energy policy, to cut its assumption for 2008 world oil demand growth to the lowest rate in 15 years at just 440,000 barrels per day.

The head of the IEA said on Wednesday the agency had to take into account the changing view of the global economy.

"We are likely to cut demand ... because the IMF changed its projections on the world economy very dramatically," Nobuo Tanaka told Reuters.

The IEA statement reinforced fears among traders and analysts that the ferocity of the recession sweeping through many of the world's biggest economies has not yet been fully factored into projections for oil demand.

OPEC RESPONSE

Gloom over the state of the economy was underlined by a lower opening on Wall Street, where the Dow Jones industrial average slipped 1.95 percent or almost 170 points to 8,524.47 by 9:45 a.m. EST.

"Fear global recession is worsening day by day is driving this market down," said Rob Laughlin, senior oil analyst at MF Global. "Demand for oil is deteriorating week by week."

He said crude oil prices could well head down toward $50 before finding a floor, something that could spur the Organization of the Petroleum Exporting Countries into further trimming oil production.

OPEC President Chakib Khelil said on Wednesday OPEC could decide to make a further cut in oil supply before its scheduled meeting next month in Oran, Algeria if prices continue to slide.

"Probably OPEC will not have a choice but to take another decision in Oran, if not before Oran, if the prices continue their decline in the market," he told Reuters.

OPEC agreed last month to cut production by 1.5 million bpd from November 1 after the sharp fall in oil prices.

Oil demand forecasts are in the process of being adjusted in the light of new economic data.

In a research note, Credit Suisse added the U.S. Department of Energy would probably cut its one-year U.S. WTI crude price forecast when its publishes its Short Term Energy Outlook on Thursday.

Frederic Lasserre, an analyst at Societe Generale in Paris, said stock markets rather than supply and demand fundamentals would probably tell the oil market where the floor would be.

"The signal is going to come from equity markets," he said. "There is an extremely high correlation between equities and commodities."

U.S. weekly oil inventory data was expected to show an 800,000-barrel rise in crude stocks last week as demand continues to slow, a Reuters poll of analysts found.

The data will be released on Thursday, a day later than usual due to the U.S. Veterans' Day holiday on Tuesday.

(Additional reporting by Barbara Lewis in London and Sambit Mohanty in Singapore)

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2008-11-12T15:47:00.002+08:00

10-11-2008, Government provides record aid package to AIG

By JEANNINE AVERSA, AP Economics Writer Jeannine Aversa, Ap Economics Writer – Mon Nov 10, 1:31 pm ET

WASHINGTON – In a record bailout of a private company, the government on Monday provided a new $150 billion financial-rescue package to troubled insurance giant American International Group, including $40 billion for partial ownership.

The action, announced by the Federal Reserve and the Treasury Department, was taken as it became increasingly clear that an original financial lifeline thrown to AIG in September would be insufficient to stabilize the teetering company. All told, the moves boost aid to the company to more than $150 billion. Fed officials, however, expressed confidence that the money would be repaid to taxpayers.

The $40 billion infusion comes from the recently enacted $700 billion financial bailout package. The government is buying preferred shares of AIG stock, giving taxpayers an ownership stake in the company. In turn, restrictions will be placed on executive compensation at the firm.

As part of the new arrangement, the Federal Reserve is reducing a $85 billion loan it had made available to AIG to $60 billion. The Fed also is replacing a separate $37.8 billion loan to the insurance company with a $52.5 billion aid package.

The actions were needed to "keep the company strong and facilitate its ability to complete its restructuring process successfully," the Federal Reserve said.

And that would be good for the fragile U.S. economy, said White House press secretary Dana Perino.

The new package "will allow AIG to continue to restructure themselves in a way that will not hurt the overall economy. AIG is a large, interconnected firm," she said.

If the company were to fail, it would wreak havoc on the country's already ailing economic health, Treasury Secretary Henry Paulson and Fed Chairman Ben Bernanke determined back in September when the government first moved to help AIG, Perino said.

Shares of AIG added 32 cents, or 15.2 percent, to $2.43 in early-afternoon trading. The company's stock has traded between $1.25 and $62.30 in the past year.

It marked the first time money from the $700 billion bailout package Congress enacted last month has gone to any company other than a bank.

Struggling U.S. auto companies — General Motors Corp., Ford Motor Co. and Chrysler — have been pressing the government for more financial assistance. The money would be on top of the $25 billion in loans that Congress passed in September to help retool auto plants to build more fuel-efficient vehicles.

The Treasury Department, which is overseeing the bailout program, has promised to inject $250 billion into banks in return for partial ownership. The original notion behind the bailout package was to help financial institutions lend money more freely again, one of the main reasons the economy is in danger of getting stuck in a long and painful recession.

Until Monday, all of AIG's bailout relief was coming from the Fed.

The Fed, earlier this year, said it would loan a total of $123 billion to AIG. The insurance company was later allowed to access another $20.9 billion through the Fed's "commercial paper" program. That's where the Fed is buying mounds of companies' short-term debt often used for crucial day-to-day expenses, such as payrolls and supplies.

Monday's restructuring provides AIG with easier terms on the original Fed loan. The new package reduces the interest rate AIG will pay and will extend the loan term to five years from two, reducing the need for AIG to sell off business lines and other assets at firesale prices to repay the government.

Under the new $52.5 billion package, the loans will last for six years. Through two new facilities, the Fed will fund the purchase of both residential mortgage-backed securities from AIG's portfolio, and collateralized debt obligations, which are complex financial instruments that combine various slices of debt.

By taking these troubled assets off AIG's balance sheet, it should take stress off the company, giving it more breathing room and helping to prevent future losses, Fed officials said. The Fed doesn't believe it will suffer losses because it is hopeful the market for such distressed investments will recover as the economy and financial markets rebound.

AIG reported Monday that continued financial market turmoil resulted in a large third-quarter loss.

The New York-based company said it lost $24.47 billion, or $9.05 per share, after a profit of $3.09 billion, or $1.19 per share, a year ago.

Results included pretax losses of $18.31 billion tied to the declining value of AIG's investment portfolio. They also were hurt by catastrophe losses and charges related to restructuring.

Excluding items, operating losses totaled $3.42 per share — missing analysts' average loss estimate of 90 cents per share, according to Thomson Reuters.

In early October AIG said it would sell certain business units to pay off the $85 billion Fed loan. The company, however, said it plans to retain its U.S. property-and-casualty and foreign general insurance businesses. It also plans to keep an ownership interest in its foreign life-insurance operations.

AIG is a colossus on Wall Street and financial districts worldwide, with operations in more than 130 countries and $1 trillion in assets on its balance sheet.

Besides life, property and other insurance offerings, AIG provides asset-management services and airplane leases. Its myriad businesses are also linked to mutual funds, annuities and other retirement products held by millions of ordinary Americans.

But perhaps the biggest concern about AIG is the dizzying array of complex financial instruments it structured for commercial banks, investment banks and hedge funds around the globe — many of which were directly or indirectly linked to the value of U.S. mortgages.

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2008-11-10T00:25:00.003+08:00

8-11-2008, Jobless ranks hit 10 million, most in 25 years

By JEANNINE AVERSA, AP Economics Writer Jeannine Aversa, Ap Economics Writer – Sat Nov 8, 7:08 am ET

WASHINGTON – The nation's jobless ranks zoomed past 10 million last month, the most in a quarter-century, as piles of pink slips shut factory gates and office doors to 240,000 more Americans with the holidays nearing. Politicians and economists agreed on a painful bottom line: It's only going to get worse.

The unemployment rate soared to a 14-year high of 6.5 percent, the government said Friday, up from 6.1 percent just a month earlier. And there was more grim news from U.S. automakers: Ford Motor Co. and General Motors Corp., American giants struggling to survive, each reported big losses and figured to be announcing even more job cuts before long.

Regulators, meanwhile, shut down Houston-based Franklin Bank and Security Pacific Bank in Los Angeles on Friday, bringing the number of failures of federally insured banks this year to 19.

The Federal Deposit Insurance Corp. was appointed receiver of Franklin Bank, which had $5.1 billion in assets and $3.7 billion in deposits as of Sept. 30, and of Security Pacific Bank, with $561.1 million in assets and $450.1 million in deposits as of Oct. 17.

Barack Obama, in his first news conference as president-elect, said the nation was facing the economic challenge of a lifetime but expressed confidence he could deal with it.

"Immediately after I become president, I'm going to confront this economic crisis head on by taking all necessary steps to ease the credit crisis, help hardworking families, and restore growth and prosperity," he said after meeting with economic advisers in Chicago. "I'm confident a new president can have an enormous impact."

Wall Street revived somewhat after two days of big losses. The Dow Jones industrials rose 248 points.

Still, the Labor Department's unemployment report provided stark evidence that the economy's health was deteriorating at an alarmingly rapid pace. The jobless rate was 4.8 percent just one year ago.

About 10.1 million people were unemployed in October, the most since the fall of 1983. More people have jobs now, since the population has grown, but it's still a staggering jobless figure. With employers slashing jobs every month so far this year, some 1.2 million positions have disappeared, over half in the past three months alone.

Like Obama, President Bush expressed confidence that things would get better: "Our economy has overcome great challenges before, and we can be confident that it will do so again."

But economists were much less upbeat than politicians.

"There is no light at the end of the tunnel, and the outlook is pitch black," said Richard Yamarone, economist at Argus Research.

And Bernard Baumohl, chief global economist at the Economic Outlook Group, said the report "depicts an economy still in free fall and without a safety net anywhere in sight."

All the economy's woes — a housing collapse, mounting foreclosures, hard-to-get credit and financial market upheaval — will confront Obama when he assumes office in January. Unemployment is expected to keep rising during his first year in office, while record budget deficits will crimp his domestic agenda.

October's jobless rate was the highest since March 1994 and now has surpassed the 6.3 percent 2003 high after the most recent recession. The government also said job losses were worse than first reported for the preceding two months, 284,000 rather than 159,000 in September and 127,000 rather than 73,000 in August.

Many economists believe the unemployment rate will climb to 8 percent or 8.5 percent by the end of next year before slowly drifting downward. Some think unemployment could even hit 10 or 11 percent — if an auto company should fail.

In any case, the rate is likely to move higher even if the economy is on somewhat stronger footing by the middle of next year as some hope. That's because companies won't be inclined to ramp up hiring until they feel certain that a recovery has staying power.

Joshua Shapiro, chief economist at consulting firm MFR Inc., said another reason the unemployment rate can keep climbing — even after a recession is over — is because people tend to flock back to the labor market when they sense their job prospects might be better. "It takes (people) awhile to figure out, 'Hey, there's jobs out there,'" Shapiro said.

In the 1980-1982 recession — considered the worst since the Great Depression in terms of unemployment — the jobless rate rose as high as 10.8 percent in late 1982 just as the recession ended, before inching down.

Friday's report was worse than analysts had expected. They had been forecasting a jobless rate of 6.3 percent with payrolls falling about 200,000.

Factories, including auto makers, construction companies, especially home builders, retailers, mortgage bankers, securities firms, hotels and motels and educational services, all cut jobs. As did temporary help firms — a barometer of future hiring. All those losses more than swamped the few gains elsewhere, including in the government, health care and in accounting and bookkeeping.

Private companies cut 263,000 jobs, the most since the country was beginning to emerge from the 2001 recession. It marked the 11th straight month of such reductions.

The grim numbers spurred calls from Democrats on Capitol Hill to provide fresh relief. House Speaker Nancy Pelosi said Democrats, in a lame-duck session later this month, will push to enact another economic stimulus package of around $100 billion, possibly including provisions to create jobs through big public works projects.

Obama said if the session doesn't bring passage, the measure will be his first priority as president in January.

He has called for about $175 billion in new stimulus spending, including money for roads, bridges and aid to hard-pressed states. He wants a rebate of $500 for individuals, $1,000 for families and a new $3,000 tax credit for businesses for each new job created.

Workers with jobs saw only modest wages gains in October. Average hourly earnings rose to $18.21, a 0.2 percent increase from the previous month. Over the past year, wages have grown 3.5 percent, but paychecks aren't stretching far because high food, energy and other prices have propelled overall inflation at a faster pace.

The economy has lost its footing in just a few months. It contracted at a 0.3 percent pace in the July-September quarter, signaling the onset of a likely recession. It was the worst showing since the 2001 recession, and reflected a massive pullback by consumers.

As consumers watch jobs disappear, they'll probably retrench even further, spelling more trouble. Analysts say the economy is still shrinking in the current October-December quarter and will contract further in the first quarter of next year. All that more than fulfills a classic definition of a recession: two straight quarters of contracting economic activity.

"The U.S. recession is deepening," said Michael Gregory, economist at BMO Capital Markets Economics. The final quarter of this year is getting off to a "particularly ugly" start.

___

AP Economics Writer Christopher S. Rugaber contributed to this report.

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2008-11-08T01:18:00.002+08:00

7-11-2008, Jobless rate bolts to 14-year high of 6.5 percent

By JEANNINE AVERSA, AP Economics Writer Jeannine Aversa, Ap Economics Writer – 1 hr 21 mins ago, 7-11-2008

WASHINGTON – The nation's unemployment rate bolted to a 14-year high of 6.5 percent in October as another 240,000 jobs were cut, far worse than economists expected and stark proof the economy is deteriorating at an alarmingly rapid pace.

The new snapshot, released Friday by the Labor Department, showed the crucial jobs market quickly eroding. The jobless rate zoomed to 6.5 percent in October from 6.1 percent in September, matching the rate in March 1994.

Unemployment has now surpassed the high seen after the last recession in 2001. The jobless rate peaked at 6.3 percent in June 2003.

October's decline marked the 10th straight month of payroll reductions, and government revisions showed that job losses in August and September turned out to be much deeper. Employers cut 127,000 positions in August, compared with 73,000 previously reported. A whopping 284,000 jobs were axed in September, compared with the 159,000 jobs first reported.

So far this year, a staggering 1.2 million jobs have disappeared. Over half of the decrease occurred in the past three months alone.

Although the unemployment report was worse than expected, and Ford Motor Co. reported dismal third-quarter results and announced plans to cut more than 2,000 additional white-collar jobs, Wall Street investors appeared to take it all in stride. The Dow Jones industrial average was up more than 190 points in morning trading.

About 10.1 million people were unemployed in October, an increase of 2.8 million over the past year. A year ago, the unemployment rate stood at 4.8 percent.

President Bush said the dismal employment figures reflect "the difficult challenges confronting the economy" and urged the country to have patience, saying a flurry of unprecedented government measures — including a $700 billion financial bailout package — will take time to work.

"I understand that Americans deeply concerned about the challenges facing our economy, but our economy has overcome great challenges before, and we can be confident that it will do so again," Bush said.

The employment market is much weaker than economists expected. They were forecasting the unemployment rate to climb to 6.3 percent in October and for payrolls to fall by around 200,000.

"The U.S. recession is deepening," said Michael Gregory, economist at BMO Capital Markets Economics. The final quarter of this year is getting off to a "particularly ugly" start, he said.

Job losses were widespread, reflecting the mounting carnage from a trio of crises — housing, credit and financial.

Factories cut 90,000 jobs, the most since July 2003. Construction companies got rid of 49,000 jobs with heavy losses in home building. Retailers cut payrolls by 38,000. Professional and business services reduced employment by 45,000. Financial activities cut 24,000 jobs, with heavy losses in mortgage banking and at securities firms. Leisure and hospitality axed 16,000 positions.

All those losses more than swamped some gains elsewhere, including in the government, as well as in education and health care.

Racing to assemble his new Democratic Cabinet, President-elect Barack Obama will huddle with economic advisers later on Friday. His team has been in close contact with the Bush administration to pave the way for a smooth hand-off of power.

All the economy's woes — a housing collapse, mounting foreclosures, hard-to-get credit and financial market upheaval — will confront Obama when he assumes office early next year. And, the employment situation is likely to get worse.

Many expect the jobless rate to climb to 8 percent, possibly higher, next year. In the 1980-1982 recession, the unemployment rate rose as high as 10.8 percent before inching down.

The grim numbers spurred calls from Democrats on Capitol Hill to provide fresh relief. House Speaker Nancy Pelosi said Democrats, in a lame-duck session later this month, will push to enact another round of economic stimulus of around $100 billion, possibly including provisions to create jobs through big public works projects.

White House press secretary Dana Perino appeared to suggest that additional action may not be needed.

"Today's employment numbers are a stark reminder of how critical it is we keep focused on utilizing the tools we now have to return our country to the strong job creation we had in recent years," Perino said. "We know what the main problems are tight credit and housing markets and we have the tools to solve them."

Workers with jobs saw only modest wages gains. Average hourly earnings rose to $18.21 in October, a 0.2 percent increase from the previous month. Over the past year, wages have grown 3.5 percent, but paychecks aren't stretching that far because high food, energy and other prices has propelled overall inflation at a faster pace.

To prevent the country from sinking into a deep and painful recession, the Federal Reserve last week ratcheted down interest rates to 1 percent and left the door open to further reductions.

The economy has lost its footing in just a few months. It contracted at a 0.3 percent pace in the July-September quarter, signaling the onset of a likely recession. It was the worst showing since 2001 recession, and reflected a massive pullback by consumers.

As U.S. consumers watch jobs disappear, they'll probably retrench even further, spelling more trouble for the sinking economy.

That's why analysts predict the economy is still shrinking in the current October-December quarter and will contract further in the first quarter of next year. All that more than fulfills a classic definition of a recession: two straight quarters of contracting economic activity.

___

Associated Press Writer Jennifer Loven contributed to this report.

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2008-11-08T00:51:00.001+08:00

7-11-2008, Hedge-Fund-Stress-Making-Mess-of-Bottom-Picking-Efforts

Posted Nov 07, 2008 10:32am EST by Aaron Task in Investing,

After two days of severe declines, stock stabilized globally Friday and at least in the early going in the U.S. But the past 48 hours have brought stark reminders of the dark days of September and October, including fears of forced selling by hedge funds.

Redemptions, rumors and losses continue to dog some of the biggest hedge funds, The Wall Street Journal reports, including:

* Ken Griffin's $16B Citadel, whose main fund is down nearly 40% this year. The firm denies rumors it is receiving collateral calls from its lenders, who confirmed that denial, the WSJ reports.
* Redemptions ranging from 6% to 33% of total assets have hit big funds, including Icahn Partners (which manages $7 billion), Highbridge Capital ($17B), Och-Ziff Capital ($28B), Plainfield Asset Management ($5B), Trafalgar Asset Management ($3B) and Blue Mountain Capital ($5B).

No tears are being shed for these hedge funds but redemptions -- i.e., investors asking for the money back -- means hedge funds have to sell assets, which can hurt performance further, leading to more redemptions, and so on.

This downward spiral in the hedge fund community, which had $1.5 trillion under management in early 2007, is one big reason for the continued downward pressure on the market.

The size and scope of hedge fund loses and redemptions - and the potential for more to come -- is a major wrinkle in the "market is cheap" mantra being repeated so often lately, including by some legendary investors.

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2008-11-07T23:49:00.004+08:00

Let It Bleed: Dow Sheds 443 as Credit Crunch Fears Resurface

Posted Nov 06, 2008 04:35pm EST by Aaron Task in Investing, Recession, Banking

Always in a hurry, I never stop to worry,

Don't you see the time flashin' by.

Honey, got no money,

I'm all sixes and sevens and nines.

Say now, baby, I'm the rank outsider,

You can be my partner in crime.

The Rolling Stones' "Tumbling Dice" is an apt theme song for the market Thursday, both because stocks tumbled again and because the market has become even more of a crap-shoot than normal.

"Stock picking means nothing now," comments money manager and blogger Howard Lindzon. "This is a casino all about timing so while it looks fun, it's dumb."

Stupid is as stupid does.

On Thursday, the Dow fell over 443 points to 8696 while the S&P lost 5% and the Nasdaq shed 4.3%. After rallying 18% in six trading days, the S&P has tumbled nearly 10% in the past two, its worst two-day decline since 1987, according to Bloomberg.

The most commonly cited catalyst for Thursday's swoon were:

* More grim economic news, including surging jobless claims and weak October retail sales.
* Rate cuts by the ECB and Bank of England, which put a bid in the dollar which, in turn, weighed on commodities and producers like ExxonMobil and Rio Vale.
* Weak guidance from Cisco, Toyota Motor and News Corp., as reported earlier.

While Cisco shares held up better than the broad market, Toyota and News Corp. each tumbled more than 16%.

Beyond huge moves for those "blue-chip" companies, many traders focused on the debacle at Las Vegas Sands, which plummeted 34% after issuing a "going concern" warning and said it may default on its debt.

A large third-quarter loss by Blackstone, Moody's downgrade of Ambac's debt to one-notch above junk status (what are they waiting for?), National City's $2.1 billion loss and Wells Fargo's planned $10 billion public offering (pant pant) served as further reminders the credit crunch isn't over.

After a few days of bright sunshine, the dark days of September and October suddenly don't seem so long ago.

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2008-10-25T09:42:00.002+08:00

24-10-2008, What a Week: More Pain, No Bottom In Sight

Posted Oct 24, 2008 05:11pm EDT by Aaron Task in Investing, Recession

To get a sense of how wild and dramatic the swings on Wall Street have been this week, think about this: It was just one week ago that Warren Buffett said "buy stocks."

Buffett, known as the "Oracle of Omaha," was very specific about not calling a short-term bottom, which is fortunate considering the Dow fell 5.4% this week, while the S&P lost 6.8%, and the Nasdaq tumbled 9.3%.

Wild Swings, But No Crash

While the overall trend was certainly down, the market didn't move in a straight line. Amid reports of forced selling by hedge funds, the wild swings created nerve-wracking and gut-wrenching action - for pros and retail investors alike.

Seemingly anything can and did happen this week, although fears of an outright crash on Friday proved misplaced. The Dow fell more than 300 points but that felt relatively tame, which tells you something about how dramatic the recent weeks have been.

We Have Not Hit Bottom

Although many industry observers are waiting for a bottoming out of the markets, there’s no way to know what’s next. Many traders believe the market will go back to its lows of 2002 – around Dow 7400 – before this decline ends.

Another way to tell a bottom is near: When people stop asking "what should I buy?" and start wondering "what should I sell?" - or just tune out the market altogether.

So although it’s stressful to watch your 401(k) bob up and down, patience remains the order of the day for those who are truly in it for the long haul.

"Watch and wait for a more constructive market," is the advice from one trader. "We continue to do little [trading]. Anything can happen here. There's no blueprint [and] everybody's guessing."

Week In Review

Here's a recap:

* Monday: Buffett's public display of optimism, and similar comments from other market seers, helped produce big gains. The Dow jumped 413 points as stress in the credit markets eased and talk of more government stimulus encouraged buyers. But Monday's rally proved to be the exception in yet another week where the sellers ruled.
* Tuesday: The Dow gave back about half of Monday's gains as traders focused on corporate earnings in the "weaker than expected" column from a number of players, including Caterpillar, Texas Instruments, Lockheed Martin, Freeport-McMoRan.
* Wednesday: Tuesday's slide proved to be a mere warm-up as the Dow lost 514 points, the S&P tumbled 6.1% and the Nasdaq shed 4.8%. The across-the-board decline was triggered by general concern about a global recession and specific worries about emerging markets like Argentina and Pakistan. Such macro concerns overshadowed earnings and guidance from, among others, Apple and Yahoo!
* Thursday: was in some the week's most dramatic, and confusing, session: The Dow traded in a 550-point range and swung wildly before closing up 2%. The S&P also rallied but the Nasdaq fell even as Amazon.com overcame a big early decline to close higher, despite its very cautious guidance.

Your Tax Dollars At Work

Congressional hearings on the crisis provided background music to this week's market gyrations. Wednesday brought a focus on the failure of rating agencies while Thursday's session with former regulators featured an extremely rare event: Alan Greenspan admitted mistakes were made.

While the dog and pony show played on in Congress, current government regulators here and abroad continued to take action to try and stem the decline, including:

* A $540 billion pledge by the Fed to bolster money market funds.
* $7.7 billion of government support, via the Treasury's TARP plan, for PNC's acquisition of National City.
* Reports Treasury may take stakes in insurance companies, much as it did last week with the nation's biggest banks. (Insurers like MetLife and Hartford Financial were big winners Friday on the news.)
* The IMF is preparing financial aid for Iceland, Hungary and the Ukraine.
* Korea's government pledged $130 billion to shore up its banks.

"More [government] action right now is akin to trying to stitch a throat wound with razor blades," is how one trader summed up the government's response.

A grim image for sure, but somehow appropriate for a market that keeps getting bloodier.

What to Watch For Next Week

The Fed is scheduled to meet Oct. 29 and rumors of a half-point rate cut are currently making headlines. Recent history has shown the government's preference to take action over the weekend, so investors and analysts will be watching closely even before U.S. markets open on Monday.

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2008-10-25T00:44:00.002+08:00

24-10-2008, Stocks, oil, gold tank on growing recession fears

Friday October 24, 11:09 am ET
By Patrick Rizzo and Ellen Simon, Associated Press Writers
Stock market rout spreads around the world as recession worries turn to dismay

NEW YORK (AP) -- Stock markets around the world plummeted Friday and oil prices plunged to their lowest in more than a year. Even gold, the traditional safe haven in times of panic, fell sharply.

The common denominator was growing fears that governments, central banks and finance ministers seem powerless to stop the deepening of a global recession that will slam corporate earnings and lead to deep job losses around the world.

The Dow Jones industrial average dropped more than 330 points in morning trading. Before the open of New York trading, Dow futures had dropped 550 points, triggering a temporary trading halt in stock futures contracts in an effort to slow the decline. If the Dow drops 1,100 points before 2 p.m. the New York Stock Exchange would be forced to use "circuit breakers" that could lead to temporarily shutting the market, something it hasn't done since 1997.

"This is beyond volatile: It is chaotic," Carl Weinberg, chief economist at High Frequency Economics wrote in note to clients. "This is the kind of day when the central banks step into the market with an 'unexpected' interest rate move to calm things down."

Treasury Secretary Henry Paulson is monitoring the markets and staying in close touch with market participants, a spokeswoman said.

Oil fell sharply and traded near $63 a barrel amid weakening global demand for crude -- despite a decision by the OPEC cartel to cut production quotas by 1.5 million barrels a day from next month.

The dollar plunged below 93 yen, a 13-year low. Gold fell as low as $681 an ounce, its lowest since January last year.

It was already a black Friday overseas. Japan's Nikkei stock average dropped 9.6 percent. Germany's benchmark DAX index plunged as much as 10.8 percent, France's CAC40 slid 10 percent and Britain's FTSE 100 shed 8.7 percent.

"We are getting used to wild swings in the markets, but today's moves verge on the bizarre," said Julian Jessop, chief international economist at Capital Economics.

The only good news was the 5.5 percent increase in September existing home sales. Median home prices, however, dropped to $191,600, down 9 percent from a year ago.

The U.K.'s third quarter gross domestic product fell 0.5 percent, with the steepest decrease in 18 years putting the country on the brink of recession. Shares of Japan's Sony sank more than 14 percent when it slashed its earnings forecast for the fiscal year. In Germany, Daimler's stock dropped 11.4 percent in morning trading; it reported lower third-quarter earnings and abandoned its 2008 profit and revenue guidance.

Emerging market economies and currencies are coming under extreme pressure. Investors are pulling money out of countries in Eastern Europe, Latin America and Asia on fears vulnerable countries will not only be hit hard by the financial crisis but may also default on debt.

Hong Kong's Hang Seng index fell 8.3 percent and markets in India, Thailand, Indonesia and the Philippines were also down sharply.

Brazilian stocks slumped for the fourth straight day, with the Ibovespa index down 3.9 percent in midday trading. Mexico's benchmark index was down 6 percent.

"Periods of panic punctuated by occasional calm appears to be the manner of things for now," said Daragh Maher, a strategist at Calyon Corporate and Investment Bank in London.

Investors around the world seemingly have become more convinced the global economy is on the brink of a long and painful recession, if it's not already in one.

Over the past few weeks, governments have taken unprecedented steps to thaw frozen credit markets and avert the downturn. But while there are signs that credit markets are beginning to thaw -- rates banks charge each other for short-term loans have been falling in recent days -- the outlook from companies reporting earnings are almost universally cautious about their prospects going forward.

That means companies will be reluctant to buy new equipment or hire new workers. U.S. unemployment claims, already well into recession territory, are rising even faster than expected. Economists warn the worst is yet to come.

On Thursday, the government said new applications for unemployment insurance rose 15,000 last week to a seasonally adjusted 478,000, above analysts' estimates of 470,000. Jobless claims above 400,000 are considered a sign of recession.

Goldman Sachs, Chrysler and Xerox all announced they were cutting workers by the thousands, adding to the woes of an economy beset by tighter credit and wobbly banks. Chrysler said it would cut about 5,000 salaried workers, one quarter of the company's 18,500-person white collar work force.

PNC Financial Services said it is acquiring National City bank for $5.8 billion and planned to receive $7.7 billion in capital from the federal government as part of its $700 billion financial rescue plan.

The White House, in unusually stark language, acknowledged Thursday the economy is going through what spokeswoman Dana Perino called a "rough ride."

"We expect our GDP (gross domestic product) number next week not to be a good one and the next quarter to be tough as well," Perino said.

The Commerce Department will release its first estimate of third-quarter economic performance Oct. 30, and Wall Street analysts project it will show the economy contracted by 0.5 percent, according to Thomson/IFR.

Many economists expect the decline to continue into the current quarter and the first three months of 2009, if not longer. The classic definition of a recession is at least two consecutive quarters of negative growth.

Former Federal Reserve Chairman Alan Greenspan, testifying before a House committee, said he could not see "how we can avoid a significant rise in layoffs and unemployment."

The apparently universal gloomy outlook was feeding the selling.

The Standard & Poor's 500 was down 33.29, or 3.6 percent, to 874.82. Sam Stovall, S&P's chief investment strategist, put a 700 target on the index, saying S&P's equity analysts expect operating results for the 500 large companies to decline 10 percent in 2008.

Associated Press writers Stevenson Jacobs in New York, Louis Watt and Carlo Piovano in London and Martin Crutsinger, Christopher S. Rugaber and Marcy Gordon in Washington contributed to this report.

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2008-10-24T22:03:00.003+08:00

24-10-2008, Stocks dive on belief global recession is at hand

By TIM PARADIS, AP Business Writer Tim Paradis, Ap Business Writer – 3 mins ago

NEW YORK – Wall Street joined world stock markets in a precipitous plunge Friday, with the Dow Jones industrials dropping more than 400 points in the opening minutes of trading. The growing belief that the world will suffer a punishing economic recession has investors furiously dumping stocks.

The massive decline was caused by increasingly grim news from overseas. In Japan, shares of Sony sank more than 14 percent after it slashed its earnings forecast for the fiscal year. In Germany, Daimler's stock dropped 11.4 percent in morning trading after it reported lower third-quarter earnings and abandoned its 2008 profit and revenue guidance.

Japan's Nikkei stock average fell a staggering 9.60 percent. In Europe, Germany's benchmark DAX index was down 10.76 percent, France's CAC40 dropped 10 percent while Britain's FTSE 100 sank 8.67 percent after the government said its gross domestic product fell 0.5 percent in the third quarter, putting the country on the brink of recession.

The dour outlook convinced investors that the world economy is headed for a long and severe downturn despite a raft of government rescue efforts aimed at pulling the financial system from the brink. It also indicated that the tremors caused by the global credit crisis may have only begun to be felt in their true scope and magnitude.

"There's a lot of panic out there today," said Scott Fullman, director of derivatives investment strategy for WJB Capital Group in New York. "People have been saying that we're in a recession. This is the realization."

Fearing more carnage in world equity markets, big hedge funds and other institutional investors have been pulling out their money en masse in a bid to reduce risk and raise cash — a process known as deleveraging that only intensifies the selling. Meanwhile, individual investors that have seen their holdings decimated in recent weeks have been yanking money out of mutual funds, adding to the downward pressure on markets.

"I think it would be natural to make an assumption that there are some funds in trouble and that we may see some funds shut down," Fullman said.

In the first minutes of trading, the Dow rose fell 417.67, or 4.81 percent, to 8,273.58.

Broader stock indicators also fell. The S&P 500 index fell 50.26, or 5.53 percent, to 857.85, and the Nasdaq composite index fell 86.75, or 5.41 percent, to 1,517.16.

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2008-10-24T21:37:00.003+08:00

24-10-2008, World stocks dive to 5-year lows

By Mike Dolan and Jeremy Gaunt Mike Dolan And Jeremy Gaunt – 1 hr 24 mins ago

LONDON (Reuters) – Global stock markets plunged again on Friday to their lowest in five years and major currency rates gyrated wildly on intense concern about a worldwide recession, corporate damage and fragile emerging markets.

Wall Street stock index futures, pointing to large U.S. losses later, were frozen on and off as they fell as much as rules allow in one day.

European shares lost more than 8 percent and Japan's Nikkei tumbled almost 10 percent.

The dollar and yen -- considered among the safer currencies -- surged to multi-year highs against European currencies such as the euro and sterling as investors repatriated investments in search of shelter and speculation of global interest rate cuts weakened those currencies with the highest rates now.

Japan's huge external surpluses and already rock bottom interest rates saw the yen outperform, with the dollar/yen exchange rate losing more than six percent at one point to a 13-year low of 90.95 yen.

The disorderly nature of the moves, which catapulted one-month dollar/yen implied volatility up to 20 percentage points higher at one point on Friday to as high as 45 percent, fueled speculation about Group of Seven central bank intervention to stabilize markets.

"The scale of the recent currency moves will most likely rekindle intervention talks," said Audrey Childe-Freeman, currency strategist at Brown Brothers Harriman. "The question here is: have recent moves been excessive? The answer is yes."

MSCI's all-country world index was down 3.8 percent at five-year lows and its emerging market benchmark down almost 7 percent.

The emerging market stock index has now lost more than 15 percent this week and has wiped out all its massive gains from the last four years.

"Equities have crashed. There is a fear the credit crunch has swung from banks to sovereign nations and there is a belief there is only a matter of time before countries start going bust and defaulting on debt," said Jim Wood-Smith, head of research at Williams de Broe.

"There is a flight to the two perceived safe currencies to the dollar and the yen. There is a state of general panic. We are in a self feeding bear market with all news deemed to be bad news," added Wood-Smith.

Although interbank lending rates remained steady on Friday, the stress in the wider credit market intensified.

The investment grade Markit iTraxx Europe index, which measures debt default risks, clocked its biggest one-day rise ever of almost 20 percent to new records.

The financial crisis has now spread far beyond the banking sector, with electronics maker Sony Corp and U.S. online retailer Amazon.com Inc cutting their forecasts in the face of weakening consumer demand.

South Korea led the decline on Friday with shares falling 11 percent, leading to a brokerage industry group asking its members to stop selling shares to save the country from more losses.

In Europe, the FTSEurofirst 300 index was down 7.2 percent having earlier hit its lowest level since mid-2003.

"All of the major developed economies are either in recession or slipping into recession currently and the growth rates in emerging economies are slowing very significantly as well," said Darren Winder, strategist at Cazenove in London.

"People are finding it very hard at the moment to get any confidence about what the forces for recovery can be.

Earlier, Japan's Nikkei slid 9.6 percent or 811.90 points to 7,649.08, a 5-1/2 year closing low. The benchmark lost 12 percent in the week and has fallen 50 percent so far this year.

DOLLAR, YEN SOAR

The dollar hit two year highs versus a basket of currencies and the euro, and sterling hit a six-year low, reflecting heavy dollar repatriation.

The euro was down 3 percent at $1.2595. Sterling lost 4.5 percent to $1.5580.

"Its extreme risk aversion and deleveraging of risky assets ... and we are seeing safe-haven flows into dollar and yen," said Lee Hardman, currency economist at BTM-UFJ.

Oil slid another $3 a barrel on Friday as gloom about a global economic downturn that is sapping fuel demand took the steam out of an OPEC agreement to cut output.

Ministers of the Organization of the Petroleum Exporting Countries agreed at an emergency meeting in Vienna to take 1.5 million barrels a day of crude, about 5 percent of its supply, off the world market.

But traders said OPEC's action might not be enough to halt a slide that has seen oil drop from a record $147 a barrel in July.

"Already we've seen demand destruction of 2 million barrels per day. I'm not convinced this cut will be enough to stop the slide." said Rob Laughlin, at broker MF Global. Euro zone government bond prices leapt higher. Two-year bond yields were 16 basis points lower at 2.606 percent and 10-year yields lost 9 basis points to 3.698 percent.

(Additional reporting by Rebekah Curtis, Joanne Frearson, Veronica Brown, Jane Merrimanm; editing by Chris Pizzey)

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2008-10-24T21:33:00.003+08:00

24-10-2008, Oil falls nearly $5 as OPEC cut fails to halt slide

By Jane Merriman Jane Merriman – 1 hr 12 mins ago

LONDON (Reuters) – Oil slid nearly $5 a barrel on Friday as gloom about a global economic downturn that is sapping fuel demand took the steam out of an OPEC agreement to cut output.

Ministers of the Organization of the Petroleum Exporting Countries agreed at an emergency meeting in Vienna to take 1.5 million barrels a day of crude, about 5 percent of its supply, off the world market.

U.S. light crude for December delivery traded down $4.80 at $63.04 a barrel. Earlier it touched $62.85, its lowest since May 2007.

It has fallen $42 a barrel in a month.

London Brent crude was down $4.42 at $61.50.

Saudia Arabia's Oil Minister Ali al-Naimi said the group had agreed the output reduction with effect from November1.

Traders said OPEC's action might not be enough to arrest a slide that has seen oil down more than 50 percent from a record $147 a barrel in July.

"Already we've seen demand destruction of 2 million barrels per day. I'm not convinced this cut will be enough to stop the slide." said Rob Laughlin, at broker MF Global.

"We need to see what they plan on doing later this year."

NERVOUS MARKETS

Oil has plunged as the credit crisis hits economic growth and oil demand in the United States, the world's biggest energy consumer, and other industrial countries.

"We believe this week will mark the start of a new quota reduction cycle by OPEC and it will continue through 2009," Deutsche Bank analyst Michael Lewis said in a note.

"However, we believe production cuts will not rescue the oil price," he said. "We target WTI (U.S.) crude oil prices hitting $50 a barrel next year."

Analysts polled by Reuters had expected OPEC to reduce output by between 1 million and 1.5 million barrels per day.

The International Energy Agency, which advises industrialized consumer countries, was critical of OPEC's cut.

"It's not a helpful decision because markets are quite nervous," Eduardo Lopez, senior analyst at the IEA's oil market division said.

Investors across financial markets are increasingly pessimistic about the world economy, illustrated by sharp falls in European and Asian stocks on Friday, led by around a 10 percent drop in Japan's Nikkei average (.N225).

Britain's economy, for example, contracted by 0.5 percent in the third quarter of 2008, evidence that recession is on the way.

Even gold, a traditional safe haven, was down nearly 5 percent, pressured by a surge in the U.S. dollar as investors moved into cash.

(Additional reporting by David Sheppard in London and Fayen Wong in Perth; editing by James Jukwey)

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2008-10-24T10:22:00.004+08:00

24-20-2008, Greenspan denies blame for crisis, admits 'flaw'

By MARTIN CRUTSINGER and MARCY GORDON, Associated Press

WASHINGTON – Badgered by lawmakers, former Federal Reserve Chairman Alan Greenspan denied the nation's economic crisis was his fault on Thursday but conceded the meltdown had revealed a flaw in a lifetime of economic thinking and left him in a "state of shocked disbelief."

Greenspan, who stepped down in 2006, called the banking and housing chaos a "once-in-a-century credit tsunami" that led to a breakdown in how the free market system functions. And he warned that things would get worse before they get better, with rising unemployment and no stabilization in housing prices for "many months."

Gloomy economic reports backed him up. New jobless claims soared to just under 500,000 for last week, and Goldman Sachs, Chrysler and Xerox all said they were cutting thousands more workers. On Wall Street, the Dow Jones industrials bounced erratically all day before finishing up 172 points — after a two-day drop of nearly 750.

The financial crisis even prompted the Republican Greenspan, a staunch believer in free markets, to propose that government consider tougher regulations, including requiring financial firms that package mortgages into securities to keep a portion as a check on quality.

He said other regulatory changes should be considered, too, in such areas as fraud.

Also looking for solutions, another banking regulator told Congress the government was working on a loan-guarantee plan that could help many homeowners escape foreclosure as part of the $700 billion bailout legislation. That plan is being discussed by the Treasury Department and the Federal Deposit Insurance Corp., said FDIC Chairman Sheila Bair, who is pushing the idea.

Greenspan's interrogation by the House Oversight Committee was a far cry from his 18 1/2 years as Fed chairman, when he presided over the longest economic boom in the country's history. He was viewed as a free-market icon on Wall Street and held in respect bordering on awe by most members of Congress.

Not now. At an often contentious four-hour hearing, Greenspan, former Treasury Secretary John Snow and Securities and Exchange Commission Chairman Christopher Cox were repeatedly accused by Democrats on the committee of pursuing an anti-regulation agenda that set the stage for the biggest financial crisis in 70 years.

"The list of regulatory mistakes and misjudgments is long," panel chairman Henry Waxman declared.

Greenspan, 82, acknowledged under questioning that he had made a "mistake" in believing that banks, operating in their own self-interest, would do what was necessary to protect their shareholders and institutions. Greenspan called that "a flaw in the model ... that defines how the world works."

He acknowledged that he had also been wrong in rejecting fears that the five-year housing boom was turning into an unsustainable speculative bubble that could harm the economy when it burst. Greenspan maintained during that period that home prices were unlikely to post a significant decline nationally because housing was a local market.

He said Thursday that he held to that belief because until the current housing slump there had never been such a significant decline in prices nationwide. He said the current financial crisis had "turned out to be much broader than anything that I could have imagined."

Greenspan's much-anticipated appearance before the House panel came as the Senate Banking Committee held its own hearing on what the government is doing now to get out of the mess.

Assistant Treasury Secretary Neel Kashkari, who is overseeing the $700 billion financial rescue effort that passed Congress on Oct. 3, said the administration was not only working to get federal purchases of bank stock started quickly but also the program to mop up troubled mortgage-related assets. He also said the government was working to make sure that directives in the legislation to help struggling homeowners avoid foreclosure were being addressed.

Kashkari said the plan could include setting standards that banks should follow for reworking mortgages to make them more affordable. He said the administration was considering a recommendation to provide government loan guarantees to cover the reworked mortgages to make the program more attractive to banks.

"We are passionate about doing everything we can to avoid preventable foreclosures," Kashkari told the committee.

The FDIC's Bair told the same Senate panel that the government needs to do more to help tens of thousands of people avoid foreclosure.

She said the FDIC was working "closely and creatively" with the Treasury Department to come up with a plan.

Greenspan was asked to defend a variety of actions he took as Federal Reserve chairman — resisting recommendations to use the Fed's powers to crack down on subprime mortgages, for one. And opposing efforts to impose regulations on derivatives, the complex financial instruments that include credit default swaps, which have also figured prominently in the current crisis.

He said that outside of credit default swaps, the bulk of financial derivatives had not caused major problems. He said the boom in subprime lending occurred because of the huge demand for investment opportunities in a global economy, and he blamed the crash on a failure by investors to properly assess the risks from such mortgages, which went to borrowers with weak credit.

As for firms that package mortgages into securities, he said, "As much as I would prefer it otherwise, in this financial environment I see no choice but to require that all securitizers retain a meaningful part of the securities they issue."

On the billions of dollars of losses suffered by financial institutions because of their investments in subprime mortgages, Greenspan said he had been shocked by the failure of banking officials to protect their shareholders from their bad loan decisions.

"A critical pillar to market competition and free markets did break down," Greenspan said. "I still do not fully understand why it happened."

SEC Chairman Cox told the House panel that "somewhere in this terrible mess, laws were broken." And Snow said that lawmakers should have responded more quickly to his pleas for stronger regulation for mortgage giants Fannie Mae and Freddie Mac, which were taken over by the government last month.

In the meantime, Kashkari, the Treasury official overseeing the bailout program, said there has been much progress, resulting in "numerous signs of improvement in our markets and in the confidence in our financial institutions." Still, he cautioned, "the markets remain fragile."

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2008-10-11T09:48:00.002+08:00

10-10-2008, Stocks end worst week mixed after wild session

By TIM PARADIS, AP Business Writer

NEW YORK - Wall Street capped one of its worst weeks ever with a wild session Friday that saw the Dow Jones industrials gyrate within a 1,000 point range before closing with a relatively mild loss and the Nasdaq composite index actually ending with a modest advance. Investors were still agonizing over frozen credit markets, but seven days of massive losses and the possibility of further government support for the markets tempted some investors late in the session.

The Dow lost 128 points, giving the blue chips an eight-day loss of just under 2,400, or 22.1 percent. The average had its worst week on record in both point and percentage terms. The Standard & Poor's 500 index, the indicator most watched by market professionals, posted its worst weekly run since 1933.

The latest loss also means the Dow is down 40.3 percent since reaching a record high close of 14,164.53 a year ago, on Oct. 9, 2007. The S&P 500, which reached its high of 1,565.15 the same day, is down 42.5 percent.

Investors suffered a paper loss for the day of about $100 billion, as measured by the Dow Jones Wilshire 5000 index. For the week, investors lost $2.4 trillion, and over the past year, the losses have piled up to $8.4 trillion.

But there were signs Friday that some investors believe the market is near a bottom. On Thursday, selling accelerated in the last hour of trading. The Dow was down 221 points at 3 p.m. but closed down 679 points an hour later. On Friday, the Dow was down 468 points at 3 but rocketed 790 points and was up 322 points just after 3:30. It then sold off but closed down only 128.

And the Russell 2000 index, which tracks the movements of smaller company stocks, had a 4.66 percent gain Friday; small-cap stocks are often first on investors' shopping lists when they think a market turnaround is at hand.

"Nobody wants to miss the bottom," said Anton Schutz, president of Mendon Capital Advisors, who said of the Dow's performance, "I view it as a victory that we only finished down 100."

Some investors may have been placing bets ahead of the weekend meeting of officials from the Group of Seven nations, who gathered in Washington to discuss the economic meltdown. One of the potential remedies expected to be reviewed at the meeting is for governments to guarantee lending among banks.

"Everyone is hoping for really good news that can invigorate some buying and break this credit freeze, but your guess is as good as mine as to whether that will happen. I think people are desperate for action," said Jon Biele, head of capital markets at Cowen & Co. "It truly is remarkable to watch what's happening."

Still, Friday's widely mixed finish was proof that Wall Street still has a long list of troubles, and trading is likely to remain volatile when the market reopens on Monday.

"This kind of volatility in the market tells you that there are huge disagreements among investors about what the fundamentals are, about what the outlook is," said Ethan Harris, managing director and chief U.S. economist at Barclays PLC.

The hair-trigger mentality of the market — a reflection of the intense anxiety on the Street — was evident from the opening bell. The Dow fell 696 points in the first 15 minutes, recovered to gain more than 100 before that first hour was over and then turned sharply lower again. It spent much of the session with a deficit between 300 points and 500 points, regaining some ground and then falling again — until the last hour, when the average had swings spanning hundreds of points that took the Dow up as much as 322.

Investors have shuddered the past month over a credit market that remains frozen, posing a threat to the economy by making it harder and costlier for businesses and consumers to get a loan. But Friday's gainers included financial stocks, the ones most decimated by the credit crisis.

Harris said policymakers likely will continue to do what is needed to revive the credit markets. Actions taken so far by central banks, among them the Federal Reserve, have included increased lending and interest rate cuts.

"The deeper problem is not the stock market drop but the freezing up of the credit markets and that's the root problem and they have to keep applying the antifreeze until it works," Harris said.

The major indexes' sharp swings Friday were likely exacerbated by the computer-driven "buy" and "sell" orders that kicked in when prices fell far enough.

"Fear has been running rampant all over the Street. Fear and greed, that's what rules the Street. I think the carcass has been stripped to the bone," said Dave Henderson, a floor trader on the New York Stock Exchange for Raven Securities Corp. "The mood, it swings with the market. When we went positive, the euphoria down there was awesome. It's like at a football game."

The Dow fell 128.00, or 1.49 percent, to 8,451.49. At its low point Friday, the Dow was down 696.68 at 7,882.51, some 600 points above its low in Wall Street's last bear market, 7,286.27, reached Oct. 9, 2002. It crossed the line between gains and losses 32 times during the session.

Its close was the lowest since April 25, 2003.

Market index stats again told how horrific the run has been on Wall Street:

• The Dow lost 1,874.19 points, or 18.2 percent, during the week. Its dismal performance outdid the week that ended July 22, 1933, which saw a 17 percent drop — and back then, during the Great Depression, there were six trading days in a week.

• The Dow has fallen for eight straight sessions — the longest losing streak since the eight days of declines following the Sept. 11, 2001, terror attacks, when the blue chips lost 1,038.12, or 10.8 percent.

• It's been the worst run for the Dow since the nearly two-year bear market that ended in December 1974 when the Dow lost 45 percent.

• Since hitting their record highs a year ago, the Dow has lost 5,713 points, or 40.3 percent, while the S&P 500 is off 665.90 points, or 42.5 percent.

Beyond the Dow, broader stock indicators were mixed Friday.

The S&P 500 index fell 10.70 or 1.18 percent, to 899.22. The 18.2 percent drop for the week was the S&P's steepest decline since the week ending May 21, 1933; its worst loss was in 1929, when it fell 19.9 percent. The index lost 200.01 points for the week.

The Nasdaq composite index rose 4.39, or 0.27 percent, to 1,649.51. For the week, the Nasdaq lost 297.88, or 15.3 percent.

The Russell 2000 rose 23.28, or 4.66 percent, to 522.48. For the week, the Russell fell 96.92, or 15.64 percent.

Decliners led advancers 2-to-1 on the New York Stock Exhange, where consolidated volume came to a record 11.2 billion shares, compared with 8.14 billion traded Thursday.

Most major central banks around the world slashed interest rates this week after continuing problems in the credit market triggered concerns that banks will run out of money. Analysts have described the mood on trading floors this week as panicked at times, with investors bailing out of investments on fears there is no end in sight to the financial carnage.

A stream of selling forced exchanges in Austria, Russia and Indonesia to suspend trading, and those that remained opened were hammered. The rout in Australian markets caused traders there to call it "Black Friday."

European stocks sank Friday, with Britain's FTSE-100 falling 8.85 percent, German's DAX declining 7.01 percent, and France's CAC-40 ending down 7.73 percent. In Asia, the collapse of Japan's Yamato Life Insurance caused already nervous investors to pull even more money out of the market — the Nikkei 225 fell 9.6 percent.

An index considered to be Wall Street's fear gauge reached record highs on Friday in another sign of massive investor anxiety. The Chicago Board Options Exchange Volatility Index, known as the VIX, rose to an all-time intraday high of 76.94 Friday. The VIX, which usually trades under 50, tracks options activity for the companies that make up the S&P 500.

Still, prospects of further government help and, perhaps, attractive prices helped parts of the financial sector show signs of life. Big national banks were among the gainers, including Bank of America Corp., which rose $1.24, or 6.3 percent, to $20.87. Some smaller banks also rose, including Fifth Third Bank Corp., which advanced 67 cents, or 6.9 percent, to $10.40.

Not all financials enjoyed a bounce, however. Morgan Stanley Inc. fell $2.77, or 22 percent, to $9.68 as investors worried that even with a major investment from Japan's Mitsubishi UFJ Financial Group the company was still facing troubles. Meanwhile, Goldman Sachs Group Inc. fell $12.55, or 12 percent, to $88.80.

Financials were most prominent among the stocks that rose in the S&P 500, though technology stocks generally advanced. Apple Inc. rose $8.06, or 9.1 percent, to $96.80, while eBay Inc. rose 77 cents, or 4.8 percent, to $16.73.

Investors appeared unfazed by final results arriving in afternoon trading from an auction Friday that set the price of debt issued by now bankrupt Lehman Brothers Holdings Inc. at 8.625 cents on the dollar, down from a preliminary estimate of 9.75 cents.

The auction was for credit default swaps, which are contracts used to insure against the default of financial instruments like bonds and corporate debt. Traded in a $60 trillion, unregulated market, many of the instruments have fallen sharply because of their ties to bad mortgage debt. Those big losses and nervousness about who holds what CDS has made financial institutions hesitant to lend to one another. The auction could help the market determine which companies are most at risk from CDS losses.

___

AP Business Writers Joe Bel Bruno, Sara Lepro, Madlen Read and Dan Strumpf in New York contributed to this report.

2008-10-11T09:42:00.001+08:00

10-10-2008, US banks keep pressure on SEC to deal with shorts

By Rachelle Younglai

WASHINGTON, Oct 10 (Reuters) - U.S. banks have asked the Securities and Exchange Commission to reinstate a short sale ban on financial stocks as the volatility on Wall Street showed no signs of letting up on Friday.

The American Bankers Association "requested that the SEC closely monitor the situation and, as appropriate, reinstate the emergency order or issue a temporary interim rule banning short selling in financial stocks," Sally Miller, an ABA senior vice president said on Friday. The ABA represents banks of all sizes.

The SEC, Nasdaq and the New York Stock Exchange are considering the idea of a temporary ban on short selling a particular stock if the stock falls by more than a certain percentage, according to one source briefed on the matter. A draft proposal has been circulated, the source said, but details are still in flux and nothing has been formally submitted to the SEC.

SEC spokesman John Nester declined comment on the proposal being considered by the exchanges.

"Commission staff may consider additional steps as necessary to protect the integrity and quality of the securities markets and strengthen investor confidence," Nester said.

The SEC short-selling ban, which prohibited investors from making bearish bets on more than 950 companies with business in financial services took effect on Sept. 19 and expired at midnight on Wednesday. The ban was designed to expire three days after Congress passed a $700 billion bailout plan aimed at easing frozen credit markets and helping to restore investor confidence.

The legislation was expected to help calm markets, but global stocks have dropped precipitously as more banks have collapsed. Continued...

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2008-10-10T09:33:00.003+08:00

10-10-2008, Stocks tumble after late sell-off

By TIM PARADIS, AP Business Writer 1 hour, 37 minutes ago

NEW YORK - Stocks plunged Thursday, sending the Dow Jones industrial average down 679 points — more than 7 percent — to its lowest level in five years. Stocks took a nosedive after a major credit-rating agency said it might cut its rating on General Motors and Ford, further rattling investors already fretting over the impact of tight credit on the economy.

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The Standard & Poor's 500 index also fell more than 7 percent.

The declines came on the one-year anniversary of the closing highs of the Dow and the S&P. The Dow has lost 5,585 points, or 39.4 percent, since closing at 14,164.53 on Oct. 9, 2007. It's the worst run for the Dow since the nearly two-year bear market that ended in December 1974 when the Dow lost 45 percent. The S&P 500, meanwhile, is off 655 points, or 41.9 percent, since recording its high of 1,565.15.

U.S. stock market paper losses totaled $872 billion Thursday and the value of shares over all has tumbled a stunning $8.33 trillion since last year's high. That's based on figures measured by the Dow Jones Wilshire 5000 Composite Index, which tracks 5,000 U.S.-based companies' stocks and represents almost all stocks traded in America.

Thursday's sell-off came as Standard & Poor's Ratings Services put General Motors Corp. and its finance affiliate GMAC LLC under review to see if its rating should be cut. The action means there is a 50 percent chance that S&P will lower GM's and GMAC's ratings in the next three months. GM has been struggling with weak car sales in North America.

S&P also put Ford Motor Co. on credit watch negative. The ratings agency said that GM and Ford have adequate liquidity now, but that could change in 2009.

GM, one of the 30 stocks that make up the Dow industrials, fell $2.15, or 31 percent, to $4.76, while Ford fell 58 cents, or 22 percent, to $2.08.

"The story is getting to be like that movie 'Groundhog Day,'" said Arthur Hogan, chief market analyst at Jefferies & Co. He pointed to the still-frozen credit markets, and Libor, the bank-to-bank lending rate that remains stubbornly high despite interest rate cuts this week by the Federal Reserve and other major central banks.

"Until that starts coming down, you'll be hard-pressed to find anyone getting excited about stocks," Hogan said. "Everything we're seeing is historic. The problem is historic, the solutions are historic, and unfortunately, the sell-off is historic. It's not the kind of history you want to be making."

The Dow ended the day at its lows, finishing down 678.91, or 7.3 percent, at 8,579.19. The blue chips hadn't closed below 9,000 since June 30, 2003, and haven't closed at this level since May 21, 2003.

The Dow's 2,271-point tumble over the last seven sessions is its steepest seven-day point drop ever. Its seven-day percentage decline of 20.9 percent is the largest since the seven-day plunge ending Oct. 26, 1987, when the Dow lost 23.8 percent. That sell-off included Black Monday, the Oct. 19, 1987 market crash that saw the Dow fall nearly 23 percent in a single day.

Broader stock indicators also tumbled Thursday. The S&P 500 fell 75.02, or 7.6 percent, to 909.92, while the Nasdaq composite index fell 95.21, or 5.5 percent, to 1,645.12.

The Russell 2000 index of smaller companies fell 47.37, or 8.7 percent, to 499.20.

A wave of fear about the economy sent stocks lower in the final two hours of trading after a volatile morning in which major indicators like the Dow and the S&P 500 index bobbed up and down. The Nasdaq, with a bevy of tech stocks, spent much of the session higher but eventually declined as the sell-off intensified. Still, its losses were less severe because of the relatively modest drops in names like Intel Corp. and Microsoft Corp.

On the New York Stock Exchange, declining issues came to nearly 3,000, while fewer than 250 advanced.

The sluggishness in the credit markets that triggered much of the heavy selling in markets around the world since mid-September appeared little changed Thursday following days of efforts by the Federal Reserve and other central banks to resuscitate lending.

Libor, the bank lending benchmark, for three-month dollar loans rose to 4.75 percent from 4.52 percent on Wednesday. That signals that banks remain hesitant to make loans for fear they won't be paid back.

The Fed and other leading central banks this week lowered key interest rates to help unclog the credit markets and promote lending to help the global economy. While a rate cut can take up to a year to work its way through the economy, the move was aimed as a boost to investor sentiment.

"We're stuck in a morass and I think it's going to take quite some time to come out of it," said Stephen Carl, principal and head of equity trading at The Williams Capital Group.

Demand remained high for short-term Treasurys, a refuge for investors willing to trade modest returns to protect their money. The yield on the three-month Treasury bill, which moves opposite its price, fell to 0.58 percent from 0.63 percent late Wednesday. Longer-term debt prices fell, with the yield on the 10-year note rising to 3.79 percent from 3.65 percent late Wednesday.

Investors across markets were mulling a plan being considered by the Bush administration to invest in hobbled U.S. banks as a way to stabilize the financial sector. The $700 billion rescue package signed into law last week allows the Treasury Department to inject fresh capital into financial institutions and obtain ownership shares in return.

Britain rolled out a similar plan, though no U.K. bank has received any investments. In Iceland, the government now has control of the country's three major banks as it struggles to contain the troubles there.

Wall Street is also looking for any effects of short selling now that a three-week ban imposed by regulators has expired. Short selling is a technique in which investors borrow shares in a company from a broker and sell them, hoping to buy them back later at a lower price. Essentially, it's a bet that a stock's price will fall. Short sellers can lose money if they have to repurchase the stock after it has risen.

Some analysts believe the unprecedented ban on short selling — an effort to bolster investor confidence — did more harm than good at a time of historic market volatility. They contend that short sellers help the market rally by covering their bets and creating demand for stocks.

"I think the market's way oversold. But I can't stand in the way of this falling knife — I'd get sliced open," said Phil Orlando, chief equity market strategist at Federated Investors. "Investors are just saying, get me out at any price."

He also said that with the short-selling rule back in play, hedge funds might be shorting again to make up for their forced liquidations.

Energy names were among the biggest decliners as the price of oil fell and investors worried about a slowing economy. Exxon Mobil Corp. fell $9, or 12 percent, to $68, while Chevron Corp. fell $9.10, or 12 percent, to $64.

Light, sweet crude fell $1.81 to settle at $86.62 a barrel on the New York Mercantile Exchange, the lowest closing price since October last year.

Health insurer WellPoint Inc. fell $3.94, or 9.7 percent, to $36.50, while insurer and investment manager Lincoln National Corp. fell $9.66, or 35 percent, to $18.31.

The tech sector saw less selling than other parts of the market after IBM Corp. affirmed its forecast.

IBM fell $1.55, or 1.7 percent, to $89. Meanwhile, Intel fell 65 cents, or 4 percent, to $15.60 and Microsoft fell 71 cents, or 3.1 percent, to $22.30.

Consolidated trading volume on the NYSE came to 8.14 billion consolidated shares compared with 8.54 billion traded Wednesday.

In Asia, Japan's Nikkei 225 closed down 0.50 percent while the Hang Seng added 3.31 percent. In Europe, Britain's FTSE-100 fell 1.21 percent, Germany's DAX fell 2.53 percent, and France's CAC-40 declined 1.55 percent.

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2008-09-25T00:15:00.002+08:00

23-9-2008, Dire warnings fail to sway senators on big bailout

By JEANNINE AVERSA, AP Economics Writer Tue Sep 23, 7:25 PM ET

WASHINGTON - Refusing to be pushed, Republicans and Democrats alike rebuffed dire warnings Tuesday from the government's top economic officials of recession, layoffs and foreclosed homes if Congress doesn't quickly approve the administration's emergency $700 billion financial bailout plan.

Congressional leaders still predicted passage — with significant changes — but Wall Street's nerves were hardly soothed. The Dow Jones industrials sank 161 points and now are off more than 500 this week after initially surging on the bailout announcement last week.

Deepening market trouble was just one piece of the economic havoc that Federal Reserve Chairman Ben Bernanke and Treasury Secretary Henry Paulson told senators would ensue if Congress lags in acting on the administration's proposal to rescue tottering financial institutions.

"I share the outrage that people have," Paulson said. "It's embarrassing to look at this. I think it's embarrassing to the United States of America. There is a lot of blame to go around."

But without the bailout plan, Paulson and Bernanke sketched out a dire scenario for senators at a contentious daylong hearing: Neither businesses nor consumers would be able to borrow money, and the world's largest economy would grind to a virtual halt.

In public and in private meetings, both Democrats and Republicans said big changes are needed, presaging a difficult road ahead for the measure.

The legislation the administration is promoting would allow the government to buy bad mortgages and other rotten assets held by troubled banks and financial institutions. Getting those debts off their books should bolster those companies' balance sheets, making them more inclined to lend and easing one of the biggest choke points in the credit crisis. If the plan works, it should help lift a major weight off the national economy that is already sputtering.

Democrats were determined to wrest concessions from the administration on domestic spending and middle-class economic aid. And they said Republicans had to share in the politically tricky task of pushing through a financial bailout six weeks before the elections at a time when millions of everyday Americans are economically strapped.

"It's their problem. It's their bill. And they're going to have to figure out if they can support it," House Speaker Nancy Pelosi, D-Calif., said of Republicans.

"Nobody wants to have to do this," agreed Rep. John Boehner of Ohio, the Republican leader. He said he was hopeful of a quick agreement, despite withering criticism from conservative GOP lawmakers who recoiled at the prospect of federal intervention.

Sen. Jim Bunning, R-Ky., said, "This massive bailout is not a solution. It is financial socialism and it's un-American."

Separately, law enforcement officials said the FBI had begun investigating four institutions whose collapse helped trigger the financial crisis.

The FBI is looking at potential fraud by mortgage giants Fannie Mae and Freddie Mac, Lehman Brothers Holdings Inc. and insurer American International Group Inc., said two officials, speaking on condition of anonymity because of the sensitivity of the investigations. The inquiries, still in preliminary stages, will focus on the financial institutions and the people who ran them, one senior law enforcement official said.

As for the bailout plan, both parties' presidential candidates joined fellow senators in insisting on alterations in the administration's drastic prescription.

Democrats and Republicans alike demanded that the bailout limit pay packages for executives of companies helped by the rescue.

"Clipping executive compensation is easy right now — everybody wants it," said Rep. Jack Kingston, R-Ga.

Democrats also were pushing proposals to let the government take some type of stake in the companies that it helps. The administration has balked at that, fearing it would discourage financial companies from getting the help they need through the bailout, thereby blunting the plan's effectiveness.

Democrats also want to let judges rewrite mortgages to lower bankrupt homeowners' monthly payments, another demand the administration is resisting.

Both Sens. Chris Dodd, D-Conn., chairman of the Banking Committee, and the panel's top-ranking Republican, Richard Shelby of Alabama, said significant changes are needed before the rescue plan can be passed. "We have got to look at some alternatives," Shelby said.

Getting the action right is key, Dodd said: "There is no second act to this." He later spoke disparagingly of the administration's proposal. "What they have sent us is not acceptable," he told reporters.

Bernanke's remarks about the risk of recession came in response to a question from Dodd, who seemed eager to hear a strong rationale for lawmakers to act swiftly on the administration's unprecedented request.

"The financial markets are in quite fragile condition, and I think absent a plan they will get worse," Bernanke said.

Ominously, he added, "I believe if the credit markets are not functioning, that jobs will be lost, that our credit rate will rise, more houses will be foreclosed upon, GDP will contract, that the economy will just not be able to recover in a normal, healthy way."

GDP is a measure of growth, and a decline correlates with a recession.

Across the Capitol complex, Vice President Dick Cheney and President Bush's top advisers met privately with restive House Republicans, some of whom emerged from the session unpersuaded.

"Just because God created the world in seven days doesn't mean we have to pass this bill in seven days," said Rep. Joe Barton, R-Texas.

Added Rep. Darrell Issa, R-Calif., "I am emphatically against it."

Paulson, seated next to Bernanke at the Senate hearing, objected strongly when Chuck Schumer, D-N.Y., asked if $150 billion might be enough to get the program started, with a promise of more to come.

That would be a "grave mistake," and would fail to give the markets the confidence they needed to rebound, Paulson responded.

Rep. Barney Frank, D-Mass., the Financial Services Committee chairman who is leading talks with Paulson on the plan, also called phasing in the bailout "highly unlikely."

Paulson was asked repeatedly why taxpayers should accept the burdens of a bailout.

"You worry about taxpayers being on the hook?" he replied at one point. "Guess what — they're already on the hook." Paulson suggested that the fallout from the credit crisis would hit almost everyone in the pocketbook unless forceful action was taken. Moreover, the flawed and outdated regulatory system, which didn't catch abuses, needs to be overhauled, he said.

In New York, meanwhile, Bush was telling the U.N. General Assembly that the United States was taking "bold steps" to prevent an economic calamity that would be sure to have major effects around the world.

One of the tricky issues confronting policymakers is how to price the distressed assets that the government would ultimately buy.

Bernanke suggested buying the assets at a "hold-to-maturity" price, which would be based on an estimate of what the securities would eventually be worth as payments came in over the years.

"If the Treasury bids for and then buys assets at a price close to the hold-to-maturity price, there will be substantial benefits," Bernanke said. "First, banks will have a basis for valuing those assets and will not have to use fire-sale prices. Their capital will not be unreasonably marked down."

In contrast, if banks use existing "mark-to-market" rules that require them to value the holdings at what similar securities have recently sold for — in some cases pennies on the dollar — it could make the whole bailout futile because it would hurt many banks' balance sheets, causing some to fail. "This creates something of a vicious circle," he said.

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Associated Press Writers Julie Hirschfeld Davis and Martin Crutsinger contributed to this report

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2008-09-25T00:06:00.002+08:00

23-9-2008, What billionaires say about the Wall Street crisis
A Lehman Brothers trader hears that the bank is a victim of the financial crisis (AP

By Andrew Farrell

How will John Catsimatidis -- a US supermarket billionaire, New York mayoral hopeful and the 215th wealthiest person in America -- know when the crisis on Wall Street is over?

"The situation is going to get better when you feel good about buying Citigroup stock," he says. "Right now, nobody feels good about buying it."
www.forbes.com

With all the turmoil on Wall Street these days, it's easy to get spooked. Miles of newsprint, endless talking heads, pandering candidates and economists quoted up the wazoo -- all with opinions, most of them differing.

One group you haven't heard a lot from, though, are America's richest people -- some of the savviest entrepreneurs and financiers on the planet. To get some insight into one of the most unpredictable periods in the history of Wall Street, we asked a handful of these billionaires to tell us about the economic indicators they're watching and what they think will happen next.

Don Marron, former chief executive of PaineWebber and founder of investment firm Lightyear Capital, has his eye on asset sales from troubled banks. In the coming months, Marron, says they'll be an important gauge of how the economy is faring and how Wall Street is recovering.

"You have a number of situations here, notably one company in bankruptcy, where a certain set of assets have to be liquidated, and the market hasn't been tested on these," says Marron. "As a potential buyer, I would want to wait until we see these sales actually take place, and I think others would too."

Will investment banks ever post those eye-popping profits again? "I think it will be a long time getting back there," says Sam Wyly, who knows something about finance from his hedge fund Maverick Capital.

"One thing that I noticed about two years ago was that financial sector of the American economy had grown to percentages that were greatly disproportionate to history," he said. "The financing part of the economy grew much more than the part that was making and selling something. It will be shrinking at least for a while."

Stabilising US home prices will be a crucial part of the healing process since it will bolster the value of troubled mortgage securities. When does the housing market bottom? Catsimatidis, who has extensive real estate holdings in the New York area, says, "Home prices stabilise when they equal the cost of actually building of home plus the cost of the land plus a premium for location."

Billionaire entrepreneur George Lindemann, the 262nd wealthiest person in America with a fortune of $1.8 billion, says we'll see values stabilise much more quickly in some areas than others. "I think that's a regional issue and not a national issue. Houston, for instance, is strong as hell. No vacant jobs, prices are going up and building is continuing."

A year ago, Lehman Brothers shares traded for over $60 each. Now they're virtually worthless. Do the problems that totaled the once-mighty Lehman spread to other companies and industries?

"Any company that is built around the need to add debt is in trouble," says Mark Cuban, owner of the Dallas Mavericks basketball team and founder of HDNet. He has a net worth of $2.6 billion. "The process of deleveraging is industry agnostic. If I had the time, I would be researching every company that needs renewable and expandable debt to survive and would short the sh*t out of it."

One thing that's clear is that despite the turmoil of the times, successful businesspeople have no shortage of ideas where to invest. The Atlanta Journal-Constitution reported that one of Warren Buffett's subsidiary companies bought a corporate furnishings division from Aaron Rents.

Wyly, a billionaire who is not on The Forbes 400, advises to invest in areas you know are "rock solid." The author of 1,000 Dollars and An Idea likes companies like energy giant BP. He points to its investments in renewable energy, low price-earning multiple and management team.

As they say, buy when there's blood on the streets. But that raises another question: Who's to blame for the recent torrent?

Mike Bloomberg casts a wide net. The mayor of New York, former Wall Streeter, and founder of financial services company Bloomberg (which made him the 8th richest person in America with a net worth of $20 billion) told reporters last week that, "You can’t just blame the banks, you also can blame the people that took out mortgages ... We were brought up that you first had to put some savings together and then enjoy. But this whole society has gotten to the fact that we’re a ‘now, give it to me today’ kind of society. I think regulation has not been adequate.

"There’s no one person to blame other than all of us," he added.

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2008-09-25T00:00:00.000+08:00

24-8-2008, Are you ready for this downcycle?
Wednesday September 24, 2008

The five phases of stock market cycles and where we are now

AS a result of the recent financial crisis in companies like Fannie Mae and Freddie Mac, Lehman Brothers as well as AIG, investors have been wondering whether there will be more companies affected by this crisis.

George Soros, in his book published in the early 2008 titled The New Paradigm for Financial Markets: The Credit Crisis of 2008 and What It Means, said that “ .... the current crisis is not merely the bursting of the housing bubble. It is bigger than the periodic financial crises we have experienced in our lifetime.”

According to him, we should expect the current situation to get worse before it can get better.

Hence, investors need to prepare themselves for this downturn. Even though nobody will know exactly when the market will recover again, we must be ready when the market moves.

In order to do that, we need to understand stock market cycles and where we are now.

Stock market cycles can be divided into five phases €“ expansion, settlement, contraction, crisis and recovery.

During expansion, the overall stock market sentiment will be bullish with higher stock market volume and prices.

In every market rally, there is always a main theme. For example, the bull market in 2007 was mainly attributed to positive sentiment in the plantation sector.

During this period, we should buy stocks in the sectors that benefit from the rally. If your portfolio owned a lot of plantation stocks last year, you would benefit from the overall market rally last year. Hence, we should pick stocks that follow the market theme.

Then it will enter into settlement for some profit-taking activities. If the overall market sentiment remains bullish, it will resume its uptrend.

The bullish trend will reach a period where reality can no longer sustain the exaggerated expectations. Then the market will enter into contraction where long-term investors get very uncomfortable with the market situation.

In this period, we should sell poor fundamental stocks as well as stocks in sectors which will be seriously affected in a downtrending market.

There are still some short-term traders who may enter the market at this stage as they believe it may rebound later.

However, when the market drops further, it will enter into crisis where long-term investors as well as short-term traders are selling stocks.

Our market is currently in this phase where long-term investors as well as short-term traders are not willing to commit themselves. This is given the unsettling of the US financial crisis in companies like Lehman Brothers and AIG.

Despite the US government’s plan to rescue banks, not many analysts or fund managers are convinced that we have seen the worst.

Soros applied the theory of reflexivity to explain the current crisis.

According to him, the market participants’ misjudgements and misconceptions affect the stock market prices.

He said that later, these biased perceptions would affect both prices and the fundamentals that those prices are supposed to reflect.

When a market drops in prices, it creates fear. As a result of this fear factor, prices will drop further and later cause panic selling as the fundamentals will also be affected by lower prices. Then it will turn the investors’ perception into reality.

Soros called this a two-way reflexivity connection between perception and reality, which can give rise to initially self-reinforcing but later self-defeating.

Hence, in every stock market cycle, regardless of any stock market, while it may take a long time to reach its peak, when it drops, the drop will accelerate and be followed by panic selling.

At present, most investors will be eager to know when our market will enter into the recovery phase where the market will start to recover. It will be a mammoth job to predict the market bottom.

Nevertheless, we should consider buying some stocks whenever the market experiences panic selling like the recent global market crash on the fallout of Lehman Brothers and AIG.

According to Lauren C. Templeton and Scott Phillips in their book on Investing the Templeton Way, investors need to buy stocks whenever the market experiences panic selling.

They that we should take advantage of problems that are exaggerated in the minds of sellers because of the sellers’ near-term focus.

Even though they agree that buying into crisis may affect your portfolio performance, you will gain in the long term.

However, you need to make sure that you have enough cash to average down your purchases.

# Ooi Kok Hwa is an investment adviser licensed by Securities Commission and managing partner of MRR Consulting.

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2008-09-24T23:53:00.002+08:00

24-8-2008, FBI probes companies in meltdown(updated)
Wednesday September 24, 2008 MYT 4:01:19 PM

WASHINGTON: The FBI is investigating four major U.S. financial institutions whose collapse helped trigger a $700 billion bailout plan by the Bush administration, The Associated Press has learned.

Two law enforcement officials said Tuesday the FBI is looking at potential fraud by mortgage finance giants Fannie Mae and Freddie Mac, and insurer American International Group Inc.

Additionally, a senior law enforcement official said Lehman Brothers Holdings Inc. also is under investigation.

The inquiries will focus on the financial institutions and the individuals that ran them, the senior law enforcement official said.

The law enforcement officials spoke on condition of anonymity because the investigations are ongoing and are in the very early stages.

Officials said the new inquiries bring to 26 the number of corporate lenders under investigation over the past year.

Spokesmen for AIG, Fannie Mae and Freddie Mac did not immediately return calls for comment Tuesday evening.

A Lehman spokesman did not have an immediate comment.

Just last week, FBI Director Robert Mueller put the number of large financial firms under investigation at 24.

He did not name any of the companies under investigation but said the FBI also was looking at whether any of them have misrepresented their assets.

Over the past year as the housing market cratered, the FBI has opened a wide-ranging probe of companies across the financial services industry, from mortgage lenders to investment banks that bundle home loans into securities sold to investors.

Mueller has previously said the FBI's hunt for culprits in the U.S. subprime mortgage crisis focused on accounting fraud, insider trading, and failure to disclose the value of mortgage-related securities and other investments.

The investigations revealed Tuesday come as lawmakers began considering whether to approve emergency legislation that would give the government broad power to buy up devalued assets from troubled financial firms.

The bailout proposed by the Bush administration is aimed at helping unlock credit and stabilize badly shaken markets in the United States and around the globe.

In the past two weeks, the government has taken over Fannie Mae and Freddie Mac, the two biggest U.S. mortgage companies, with a bailout plan that could require the Treasury Department to put up as much as $100 billion for each of them over time if needed to keep them afloat as mortgage losses mount.

Last week, the Federal Reserve provided an emergency $85 billion loan to AIG, which teetered on the brink of bankruptcy.

Lehman Brothers was forced to file for bankruptcy after attempts to engineer a private rescue fell apart.

All the companies were laid low from bad bets on complex mortgage-related securities.

Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben Bernanke made the joint decision last week that the only way to stop the carnage was to deal with the root cause of all the troubles, billions of dollars of bad mortgage debt sitting on the books of major financial companies.

This debt has triggered the worst credit crisis in decades, causing credit markets to essentially freeze up despite the fact that the Fed joined with major central banks around the world to pump billions of dollars of reserves into the financial system.

Additionally, the FBI is investigating failed bank IndyMac Bancorp Inc. for possible fraud. Countrywide Financial Corp., formerly the largest U.S. mortgage lender and now owned by Bank of America Corp., is also under scrutiny. - AP

Earlier report

WASHINGTON: The FBI is investigating four major U.S. financial institutions whose collapse helped trigger a US$700 billion bailout plan by the Bush administration.

Two law enforcement officials said the FBI is looking at potential fraud by mortgage finance giants Fannie Mae and Freddie Mac, Lehman Brothers Holdings Inc., and insurer American International Group Inc.

A senior law enforcement official says the inquiries, still in preliminary stages, will focus on the financial institutions and the individuals that ran them.

Officials say the new inquiries brings the number of corporate lenders under investigation over the last year to 26.

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