2007-08-30
Bloomberg.com: Economy
Bloomberg.com: Economy: "U.S. Jobless Claims Rise for a Fifth Straight Week (Update3) By Bob Willis Enlarge Image/Details Aug. 30 (Bloomberg) -- First-time applications for jobless benefits unexpectedly increased for a fifth week, the longest streak since May last year, suggesting the housing recession and related turmoil in credit markets are costing jobs. Initial unemployment claims climbed by 9,000 to 334,000 in the week that ended Aug. 25, the highest level since April, the Labor Department said today in Washington. The four-week moving average, a less volatile measure, rose to 324,500 from 318,250. The deepest housing slump in 16 years is prompting builders and mortgage-lending companies such as American Home Mortgage Investment Corp. to fire workers. That may weigh on consumer spending, which accounts for more than two-thirds of the economy."
Stiglitz: U.S. Faces Economic Downturn: Financial News - Yahoo! Finance
Stiglitz: U.S. Faces Economic Downturn: Financial News - Yahoo! Finance: "Rising defaults on U.S. subprime mortgages have increased risks to the economy, with a worsening housing slump, credit problems and turbulence in global financial markets, said Stiglitz, a former World Bank chief economist who is here to attend a conference. Some 1.7 million Americans may lose their homes due to foreclosures and bankruptcy this year, piling further pressure on house prices, he said. Wages have stagnated although the U.S. gross domestic product was some 20 percent higher now from six years ago, he said. 'Mortgage payments are going up, house prices coming down, incomes are stagnating. It's not a pretty picture. So the dynamics could unravel more and where it stops, we can't be sure,' Stiglitz told reporters on the sidelines of the conference. 'We don't know how well the (U.S. Federal Reserve) will respond. The lack of transparency means we don't know how deep the problem is,' he said. 'The most likely outcome is that it will be a rather prolonged slowdown but not a recession.'"
SHORT-TERM FUNDING CRISIS CLAIMS LONDON FUND | By RODDY BOYD | Business News | Financial | Business and Money
SHORT-TERM FUNDING CRISIS CLAIMS LONDON FUND | By RODDY BOYD | Business News | Financial | Business and Money: "SHORT-TERM FUNDING CRISIS CLAIMS LONDON FUND By RODDY BOYD PrintEmailDigg ItRedditPermalinkStory Bottom August 30, 2007 -- The inability of finance companies to access short-term funding yesterday whacked another gilt-edged money manager whose asset-backed commercial paper program was unexpectedly downgraded. London-based Cheyne Capital began selling the assets underlying its $10 billion Cheyne Finance commercial paper program after Standard & Poor's on Tuesday knocked it down six notches. The blow to Cheyne's commercial paper program was stunning, as exactly two weeks ago S&P affirmed its triple-A rating."
Australian hedge-fund in trouble
 clipped from www.iht.com
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2007-08-27
The next credit crunch? -- chicagotribune.com
The next credit crunch? -- chicagotribune.com: "The next credit crunch? As home loan market tightens, mounting credit card debt could spur new crisis By Susan Chandler | Tribune staff reporter August 26, 2007 Now that the easy money in home mortgages is all but over, consumers may soon be caught in a financial squeeze with their credit cards. That's the worry among some economists and credit counselors as home lending has shifted abruptly into low gear this summer. That leaves homeowners owing big sums to Visa or MasterCard without an important escape hatch -- the ability to pay down the plastic by dashing off a check from their home equity line of credit or rolling the debt into a new, bigger mortgage. 'You're not going to be able to get that mortgage loan. You'll be stuck with the higher interest credit card debt,' warns Carl Steidtmann, chief economist with"
2007-08-21
Bank chief warns of German banking crisis - MarketWatch
Bank chief warns of German banking crisis - MarketWatch: "Bank CEO warns of German crisis By Steve Goldstein, MarketWatch Last Update: 11:13 AM ET Aug 21, 2007 PrintPrint EmailE-mail Subscribe to RSSSubscribe to RSS DisableDisable Live Quotes LONDON (MarketWatch) -- The chief executive of one of Germany's largest state-backed banks warned that foreigners were increasingly loath to extend credit to financial institutions in Europe's largest economy, which could spark a crisis. 'We sense reluctance on the part of foreign partners to extend credit to German banks,' WestLB CEO Alexander Stuhlmann told journalists on the sidelines of a bank event, according to wire service reports. 'If we have a banking crisis in Germany with other countries cutting us off, then other banks will also face difficulties.' His comments come days after a German lender, SachsenLB, said it required a credit line of 17.3 billion euros ($23.2 billion) because of the investments it had made in securities affected by the U.S. subprime mortgage crisis. IKB Deutsche Industriebank (DE:806330: news, chart, profile) required a similar bailout. Germany's finance minister, Peer Steinbrueck, was more optimistic, saying there are no signs of the German economy being affected. 'I believe those involved have the situation in hand,' he said. Meanwhile, a poll of insti"
US average income below level of year 2000
 clipped from www.nytimes.com
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2007-08-20
Crisis Counsel - Wilbur Ross (2) - FORTUNE
Crisis Counsel - Wilbur Ross (2) - FORTUNE: "Now that we have identified the cause of the disease, how severe and how contagious is it? The present $200 billion of delinquencies will grow to $400 billion or $500 billion next year because $570 billion more low, teaser-rate mortgages will reset to market and consume more than 50% of the borrowers' income. Therefore most of the loans will be foreclosed or restructured. Probably 1.5 million to two million families will lose their homes. Meanwhile, few lenders will put mortgages on the foreclosed houses, so the prices will plummet. Despite these tragedies, total losses will probably be less than 1% of household wealth and only 2% to 3% of one year's GDP, so this is not Armageddon. However, even prime jumbo mortgages will be more expensive and more difficult to obtain."
Mortgage lender Countrywide begins lay-offs: report: Financial News - Yahoo! Finance
Mortgage lender Countrywide begins lay-offs: report: Financial News - Yahoo! Finance: "Reuters Mortgage lender Countrywide begins lay-offs: report Monday August 20, 3:23 am ET NEW YORK (Reuters) - Countrywide Financial Corp, which is trimming costs amid turbulent credit markets, began laying off staff involved in originating loans, according to a report on Monday in the Wall Street Journal's online edition, citing an internal e-mail. The job cuts occurred in the company's Full Spectrum lending unit, according to the Journal, which handles many home mortgages known as 'Alt-A,' or loans rated between prime and subprime and generally given to borrowers who do not provide documentation of income."
U.S. profit growth picture brightening: report: Financial News - Yahoo! Finance
U.S. profit growth picture brightening: report: Financial News - Yahoo! Finance: "Reuters U.S. profit growth picture brightening: report Monday August 20, 10:13 am ET NEW YORK (Reuters) - U.S. corporate profit growth estimates rose last week, with second-quarter earnings now projected to rise 8.4 percent from the year before compared with an estimate of 7.8 percent last week, according to Reuters Estimates. The quarter's profit growth picture has improved steadily since the beginning of the period back on April 1, when earnings were estimated to rise just 6 percent from the 2006 second quarter, Reuters Estimates said Monday. The projected growth rate combines the actual profit growth reported by the 451 components of the Standard & Poor's 500 index (^SPX - News) that had posted second-quarter results through Friday with the estimated growth for those companies still due to report. The strongest growth rates are being reported in the health care and technology sectors, up 14 percent and 13 percent respectively, Reuters Estimates said. A more forward-looking indicator of the profit scene is also improving. So far in August, of 918 companies offering some form of profit outlook, 26.8 percent were classified as positive versus 22.7 percent seen as negative, Reuters Estimates said. The positive-to-negative ratio, 1.18, is the highest since a 1.20 reading for October 2006 and"
2007-08-19
Consumer sentiment in August is weakest in a year - USATODAY.com
Consumer sentiment in August is weakest in a year - USATODAY.com: "Consumer sentiment in August is weakest in a year Posted 1d 18h ago | Comments 24 | Recommend 4 E-mail | Save | Print | Subscribe to stories like this Reuters logo NEW YORK (Reuters) — Consumer sentiment deteriorated in August to its weakest in a year as more expensive oil, declining home prices and turmoil in financial markets all hurt confidence. The Reuters/University of Michigan Surveys of Consumers said its preliminary reading on consumer sentiment in August was 83.3, well below a median forecast of 88.0 and a sharp fall from the previous month's final reading of 90.4. The data came just hours after the Federal Reserve cut its primary discount rate, or the rate the central bank charges commercial banks to borrow directly from it, by half a percentage point. The Fed said the downside risks to economic growth had increased 'appreciably.' The unexpectedly weak reading in consumer sentiment backed a view that volatile swings in financial markets, including a steep fall in share prices since mid July, are starting to dampen the mood of consumers. 'I would have to say that it is not a good sign, and it is showing how the contagion on Wall Street is starting to affect Main Street out there,' said George Lucas, senior investment strategist at Deutsche Bank in New York."
How Missed Signs Contributed to a Mortgage Meltdown - New York Times
How Missed Signs Contributed to a Mortgage Meltdown - New York Times: "How Missed Signs Contributed to a Mortgage Meltdown
By NELSON D. SCHWARTZ and VIKAS BAJAJ Published: August 19, 2007 All through last year, Jim Melcher saw the signs of a rapidly deteriorating American housing market — riskier mortgages, rising delinquencies and more homes falling into foreclosure. And with $100 million in assets at his hedge fund, Balestra Capital, he was in a position to do something about it.
So in October, as mortgage-backed bonds were still flying high, he bet $10 million that these bonds would plunge in value, using complex derivatives available to any institutional investor. As his gamble began to pay off in the first months of 2007, Mr. Melcher, a money manager based in New York, plowed the profits into ever bigger wagers that the mortgage crisis would worsen further, eventually risking some $60 million of the fund’s money.
“We saw the opportunity of a lifetime, and since then events have unfolded on schedule,” he said. Mr. Melcher’s flagship fund has since doubled in value, even as this summer’s market turmoil cost other investors billions, forced the closing of several major hedge funds and pushed the stock market down 7 percent since mid-July. This week, Mr. Melcher is heading to Paris for a vacation with his wife.
The extent of the turmoil has stunned much of Wall Street, but as Mr. Melcher’s case makes clear, there were ample warning signs that a financial time bomb in the form of subprime mortgages was ticking quietly for months, if not years.
As far back as 2001, advocates for low-income homeowners had argued that mortgage providers were making loans to borrowers without regard to their ability to repay. Many could not even scrape together the money for a down payment and were being approved with little or no documentation of their income or assets.
By NELSON D. SCHWARTZ and VIKAS BAJAJ Published: August 19, 2007 All through last year, Jim Melcher saw the signs of a rapidly deteriorating American housing market — riskier mortgages, rising delinquencies and more homes falling into foreclosure. And with $100 million in assets at his hedge fund, Balestra Capital, he was in a position to do something about it.
So in October, as mortgage-backed bonds were still flying high, he bet $10 million that these bonds would plunge in value, using complex derivatives available to any institutional investor. As his gamble began to pay off in the first months of 2007, Mr. Melcher, a money manager based in New York, plowed the profits into ever bigger wagers that the mortgage crisis would worsen further, eventually risking some $60 million of the fund’s money.
“We saw the opportunity of a lifetime, and since then events have unfolded on schedule,” he said. Mr. Melcher’s flagship fund has since doubled in value, even as this summer’s market turmoil cost other investors billions, forced the closing of several major hedge funds and pushed the stock market down 7 percent since mid-July. This week, Mr. Melcher is heading to Paris for a vacation with his wife.
The extent of the turmoil has stunned much of Wall Street, but as Mr. Melcher’s case makes clear, there were ample warning signs that a financial time bomb in the form of subprime mortgages was ticking quietly for months, if not years.
As far back as 2001, advocates for low-income homeowners had argued that mortgage providers were making loans to borrowers without regard to their ability to repay. Many could not even scrape together the money for a down payment and were being approved with little or no documentation of their income or assets.
2007-08-18
Russia to help China oust the USA from Eurasia - Pravda.Ru
Russia to help China oust the USA from Eurasia - Pravda.Ru: "It was China, which preserved Russia's integrity during the US triumph in 1991-1993: the dismembered Russia would deprive China of the strategic back area. In its struggle for Russia, China will inevitably try to put an end to USA's expansion attempts towards the Far East of Russia. One may expect Chinese politicians making statements about the USA's threat to Russia: China and the USA will most likely commence negotiations about the division of the spheres of influence in the Far Eastern region. When the USSR collapsed in 1991, China was left alone face to face with the USA. The conflict potential of relations between the USA and China has been growing nonstop since then. One may say that the USA has been involved in the conflict with China from 2003, although it is a financial and economic struggle so far. The war of the American and Chinese economies may be toughened by 2009 with US-placed embargoes. China might exercise its military potential in return with a view to demoralize the West. China has been trying to restrain and oust the USA from Eurasia with a threat to destroy the US dollar as the global measure of value."
Article - A Chinese `Invasion` - News From Russia
Article - A Chinese `Invasion` - News From Russia: "23 September 2003 21:14 A Chinese `Invasion` Russia's latest census has produced a bombshell result: over the past decade, the Chinese have emerged as the fastest growing ethnic minority in Russia. While official data of the October 2002 census will be published only next month, preliminary figures leaked to the press show that Russia's Chinese population has grown from just over 5,000 in the late 1980s to 3.26 million today. This makes the Chinese the fourth biggest ethnic group in this country after Russians (104.1 million), Tatars (7.2 million) and Ukrainians (5.1 million) - all indigenous inhabitants of Russia. More than three-fourths of Chinese immigrants have settled down in Siberia and the Far East. The census results lend chilling reality to Russia's age-old nightmare of a Chinese takeover of the Asian part of Russia. Eighteen million Russians scattered across the India-size expanse of the Far East and Siberia face 250 million Chinese cramped across a common border in China's northern provinces. In the past the huge Chinese demographic pressure was contained by a tightly sealed barbed-wire border, but when the Soviet Union collapsed the 4,300-km Russian-Chinese border was thrown open to bilateral trade. Chinese traders poured in to sell clothes and other necessities to Russians struggling with a deep economic crisis and take back to China Russian timber,"
Russia and China have a good relationship
 clipped from www.reuters.com
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Bloomberg.com: Japan
Bloomberg.com: Japan: "Japan's Stocks Have Worst Post-Bubble Week; Nintendo Plunges By Patrick Rial and Makiko Suzuki Enlarge Image A man walks past an electronic stocks board in Tokyo. Aug. 17 (Bloomberg) -- Japanese stocks plunged, sending the Topix index to its biggest weekly drop since the end of the asset inflation `bubble' of the 1980s. The Nikkei 225 Stock Average had its worst daily performance since the Sept. 11, 2001, terrorist attacks. Nintendo Co. fell by its daily limit, after the yen rose to the strongest in a year against the dollar as investors unwound so- called carry trade bets on high-yielding assets funded by yen loans. Toyota Motor Corp. dropped the most in six years."
FT.com / Companies / Financial services - Buy-out firms still on the hunt for funds
FT.com / Companies / Financial services - Buy-out firms still on the hunt for funds: "Buy-out firms still on the hunt for funds By Martin Arnold in London Published: August 16 2007 20:09 | Last updated: August 16 2007 20:09 Kohlberg Kravis Roberts, PAI Partners and Carlyle Group are among more than 50 private-equity firms seeking to raise at least $52bn of European leveraged buy-out funds, as they shrug off recent difficulties in credit markets. Several auctions of large companies that were expected to attract bids from private equity have been postponed, such as Cadbury’s sale of its Schweppes business in the US and Virgin Media’s auction of itself."
Countrywide Financial facing deposit withdrawals
 clipped from www.latimes.com
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Faith in credit fading during crunch - Los Angeles Times
Faith in credit fading during crunch - Los Angeles Times: "Even if the current trouble had taken a more traditional form, however, there is still a problem with credit crises that make them particularly difficult to deal with: Unlike the cash in your pocket, credit is in more than one place at a time. The act of giving or accepting it is almost entirely an act of faith. The quality is illustrated in a famous line from Frank Capra's 'It's a Wonderful Life' in which banker George Bailey (played by Jimmy Stewart) confronts an angry customer demanding his money, saying it is in Bailey's bank. 'Your money's not in the bank,' Bailey replies. 'It's in Mr. Smith's house.' 'There isn't enough money in the world to finance every transaction that occurs in a day, so you have to have faith or confidence you'll be paid when you're told you'll be paid,' said author and financial markets expert Peter L. Bernstein. That is precisely the faith that a growing number of people do not seem to have in the type of credit at the center of the current trouble: securities backed by mortgages, especially those backed by sub-prime mortgages (lent to people with less than strong credit histories). Hundreds of people crowded offices of Calabasas-based Countrywide Financial Corp., the biggest U.S. mortgage company, in Laguna Niguel, Pasadena"
2007-08-17
Who is doing Yen carry trade?
This chart shows Dow Jones Industrial Average and CurrencyShares Japanese Yen Trust which is actually YEN-USD exchange rate. The chart is intra-day at August 17,2007. The two graphs are inverted and follow each other very closely. The Yen carry-trade happens in real-time. Thus it's unlikely that private Japanese persons are doing the carry trade.
 clipped from portal.eqonline.fi
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Bloomberg.com: Currencies
Bloomberg.com: Currencies: "Dollar Falls Versus Euro After Surprise Fed Discount Rate Cut By Min Zeng Enlarge Image U.S. ten dollar bills and 10 Euro notes Aug. 17 (Bloomberg) -- The dollar fell versus the euro and pound for the first time this week after the Federal Reserve reduced its discount lending rate to prevent credit market losses from slowing the economy. The dollar weakened against 14 of 16 major currencies as a reduction in borrowing costs dims the allure of U.S. assets. The decline today trimmed the dollar's weekly advance as investors had sought safety in the currency after a global rout of credit markets. U.S. and European stocks rallied. ``The Fed has taken the first step to calm down the market and restore investors' confidence,'' said Tom Fitzpatrick, global head of currency strategy at Citigroup Global Markets Inc. in New York. ``The dollar is getting a double-whammy. A reduction in interest rates makes it less attractive. The safe-haven flow into the dollar also flooded out.'' The dollar fell 0.5 percent to $1.3494 per euro at 11:13 a.m. in New York, from $1.3426 yesterday. The U.S. currency also decreased 0.2 percent to $1.9859 per pound and 0.2 percent to 113.66 yen. The decline today trimmed the dollar's weekly gain to 1.4 percent against the euro and 1.9 percent versus the pound."
FT.com / Companies / Financial services - Fannie Mae predicts more turmoil
FT.com / Companies / Financial services - Fannie Mae predicts more turmoil: "Fannie Mae predicts more turmoil By James Politi in New York Published: August 16 2007 19:33 | Last updated: August 17 2007 01:52 Fannie Mae, the largest US home lender, on Thursday predicted further turmoil in the housing market, and warned that its credit loss ratio would increase this year. “Market factors that we believe will have a significant effect on our credit loss ratio primarily include lack of job stability or growth, declines in home prices and increases in interest rates,” Fannie Mae said as it filed its delayed annual report with US regulators. Fannie Mae said its credit loss ratio, which had already risen to 2.7 basis points of its total book in 2006, would likely move into its historical range of between four and six basis points this year. Fannie Mae reported $4.1bn in net income for 2006, down 36 per cent on 2005. Diluted earnings per share were $3.65. But Wall Street investors seemed comforted by Fannie Mae’s outlook, pushing the home lender’s shares up 6.2 per cent to close at $65.28. “Though the housing market continues to cool in 2007 and the credit environment remains challenging, I believe Fannie Mae is well situated for the future,” said Daniel Mudd, chief executive."
FT.com / In depth - Central banks’ dilemma over information deficit
FT.com / In depth - Central banks’ dilemma over information deficit: "Central banks’ dilemma over information deficit By Krishna Guha and Eoin Callan in Washington Published: August 16 2007 20:32 | Last updated: August 16 2007 20:32 At the heart of the turmoil in financial markets, central bankers believe, is an information problem that has magnified the consequences of what appears to be a credit problem in securities backed by US subprime mortgages. Underlying credit quality remains good in most of the US economy – including the prime mortgage market. Policymakers believe that this should limit the extent of any pull-back from lending. They believe that markets are paralysed by lack of information as to the ultimate size and distribution of losses – which has contributed to a sudden drying up of liquidity in the three-month interbank and commercial paper markets. The information problem has two components. First, investors do not know where the losses from subprime – which Ben Bernanke, the US Federal Reserve chairman, suggested last month could be up to $100bn – lie. Second, they have lost confidence in their ability to value complex structured credit products that include some exposure to subprime bundled up with exposure to other underlying assets. “Investors are facing enormous uncertainty on the likely size and distribution of financial"
Consumers could bear psychological brunt of Countrywide fallout - MarketWatch
Consumers could bear psychological brunt of Countrywide fallout - MarketWatch: "Mortgage group says psychological effect alone could sink consumers By Amy Hoak, MarketWatch Last Update: 5:43 PM ET Aug 16, 2007 PrintPrint EmailE-mail Subscribe to RSSSubscribe to RSS DisableDisable Live Quotes CHICAGO (MarketWatch) -- There's more at stake in Countrywide's health than the future of the company -- if it isn't able to keep making loans, the psychological impact of the loss would be felt directly by consumers, participants in a California Association of Mortgage Brokers news conference said on Thursday. 'The consumer will feel that there is no loan availability if companies like Countrywide can't keep their doors open. This isn't some small company that decided to start up yesterday that had a risky business plan. This is America's leading lender,' said Ed Craine, the public relations chairman of the group. 'The credit crunch is working its way through the whole market, taking companies we've see"
2007-08-16
US Housing starts statistics
 clipped from www.reuters.com
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WRAPUP 2-US construction, factory activity show declines | News | Market News | Reuters
WRAPUP 2-US construction, factory activity show declines | News | Market News | Reuters: "WRAPUP 2-US construction, factory activity show declines Thu Aug 16, 2007 1:13PM EDT Email | Print | Digg | Reprints | Single Page | Recommend (0) [-] Text [+] Market News Construction stocks fall on credit fears Apple shares fall 7 percent amid market declines Gold, silver tumble on weak equities, credit woes More Business & Investing News... Featured Broker sponsored link Money Center Power. Price. Service. No Compromises. (Adds Philly Fed report, fresh comment) By Herbert Lash NEW YORK, Aug 16 (Reuters) - Groundbreaking on new homes slid to the slowest pace in more than 10 years in the United States during July and factory activity in the Mid-Atlantic region stagnated in August, government reports showed on Thursday. The slack economic data deepened Wall Street's recent malaise, with the Philly Fed report extending steep losses on U.S. stock markets and triggering downside trading curbs on the New York Stock Exchange. The blue-chip Dow Jones industrial average has now fallen more than 10 percent from its record closing high in July. In another sign of a slowdown, the number of U.S. workers seeking jobless benefits rose in the latest week, although the weekly figure is prone to fluctuations. Housing starts, however, followed the longer-term trend of the declining "
Bloomberg.com: Worldwide
Bloomberg.com: Worldwide: "U.S. Homebuilder Confidence Declined to 16-Year Low (Update2) By Shobhana Chandra Aug. 15 (Bloomberg) -- Confidence among U.S. homebuilders fell more than forecast in August to the lowest since 1991, as cancellations and more restrictions on lending took a toll. The National Association of Home Builders/Wells Fargo index of builder confidence declined to 22, from 24 in July, the Washington-based association said today. A reading below 50 means most respondents view conditions as poor. The gauge has decreased for six consecutive months. Mounting defaults on subprime mortgages are extending a slump in home building that is already the worst in 16 years, forcing real estate companies to slash prices and offer more incentives to buyers. Declines in residential construction will weigh on the economy until 2008, economists said."
Bloomberg.com: Worldwide
Bloomberg.com: Worldwide: "Rams Home Loans Fails to Refinance $5 Billion of Debt (Update8) By Laura Cochrane Enlarge Image A branch of RAMS Home Loans Group in Sydney Aug. 16 (Bloomberg) -- Australia's Rams Home Loans Group Ltd. failed to refinance A$6.17 billion ($5 billion) of short- term U.S. loans, forcing the lender to seek emergency funding. Rams slumped 36 percent, or 48.5 cents, to close at 87 cents on the Australian Stock Exchange. The Sydney-based company has lost two-thirds of its market value this week and is down from the A$2.50 paid by investors in an initial public offering arranged by UBS AG before the company listed on July 27. The lender's inability to obtain financing helped fuel the biggest decline in Asian shares in a year as investors fled high-risk assets. The deepening crisis in credit markets threatens to ensnare more mortgage lenders. Countrywide Financial Corp., the biggest U.S. home-loan issuer, dropped 13 percent after Merrill Lynch & Co. said it may fail."
Bloomberg.com: Opinion
Bloomberg.com: Opinion: "Hedge-Fund Guy Atones for His Subprime Bond Sins: Mark Gilbert By Mark Gilbert Aug. 16 (Bloomberg) -- Dear investor, we'd like to take this opportunity to update you on the recent performance of our hedge fund, Short-Term Capital Mismanagement LLP. As you know, market selection for the entire fund is guided by a proprietary investing tool we like to call ``a dartboard.'' Once the asset classes are decided, individual security selections are generated by digitizing our unique hexagonal cuboid models. Unfortunately, it transpires that our hexagonal cuboids are not as unique as we thought. Hundreds of other hedge funds possess identical dice. The technical term for this is a ``crowded trade.'' You may also see it referred to as ``climbing on a bandwagon already headed for the wall.'' As our alpha generation collapses, our beta has turned negative, our delta hedging has gone toxic and, trust me, you do not want to hear about our gamma. We can't even find our epsilons in the dark with both hands. You will appreciate that accurate pricing is essential for evaluating our investment strategies. This has proven to be extremely challenging in recent days. Previously, we have relied on Bob, the sales guy at Hokey-Cokey Bank. Bob assured us the securities were still worth 100 percent of face value, so everything was cool. Bob sold"
Bloomberg.com: Worldwide
Bloomberg.com: Worldwide: "U.S. Housing Starts Dropped 6.1% to 1.381 Million Pace in July By Shobhana Chandra Aug. 16 (Bloomberg) -- Builders in the U.S. started work on the fewest homes in a decade in July as the industry showed no sign of recovering from the 18-month recession. The greater-than-forecast 6.1 percent decrease to an annual rate of 1.381 million, followed a 1.47 million pace in June, the Commerce Department said today in Washington. Building permits also fell to a 10-year low. Stock markets worldwide have tumbled on concern subprime mortgage defaults will bankrupt more lenders and destabilize the financial system. Consumer spending, which accounts for more than two-thirds of the economy, may weaken as falling prices and limits on borrowing prevent owners from tapping home equity. ``The housing market is still in a downward spiral,'' Brian Bethune, an economist at Global Insight Inc. in Lexington, Massachusetts, said before the report. ``Weak demand is being hollowed out further by much tighter lending conditions in the mortgage credit markets.'' Starts were projected to fall to a 1.4 million unit pace, from an originally reported 1.467 million in June, according to the median forecast of 75 economists polled by Bloomberg News. Estimates ranged from 1.35 million to 1.47 million. Permits, a sign of future construction, decreased 2.8 percent to a 1.373 mill"
FT.com / World - Downturn in US housing market worsens
FT.com / World - Downturn in US housing market worsens: "The crisis in the subprime mortgage market contributed to an 11 per cent fall in sales nationwide in the second quarter, according to the National Association of Realtors. The National Association of Home Builders has only once registered a worse mood than that recorded in its latest monthly survey yesterday. David Seiders, chief economist at the NAHB, said conditions were worsening because “problems in the subprime mortgage sector have spilled over to other components of housing finance, including [more mainstream loans]”. Brian Catalde, president of the association, said: “Builders realise that issues related to mortgage credit cost and availability have become more acute, filtering some prospective buyers out of the market and prompting others to delay their decision to purchase a new home.”"
Bloomberg.com: U.S.
Bloomberg.com: U.S.: "Countrywide Taps $11.5 Billion Credit Line From Banks (Update3) By Bradley Keoun Enlarge Image A Countrywide home loan branch Aug. 16 (Bloomberg) -- Countrywide Financial Corp., the biggest U.S. mortgage lender, tapped an entire $11.5 billion bank line as the global credit crunch curbed access to short-term financing. Countrywide turned to the backup loan, which it said was provided by a group of 40 banks, a day after Merrill Lynch & Co. raised the prospect of bankruptcy for the Calabasas, California- based lender. Australia's Rams Home Loans Group Ltd. and Canada's Coventree Inc. also sought emergency funding today. ``When a company draws on its bank lines, it just basically gives off the impression that it has run out of options,'' said Christopher Wolfe, managing director at Fitch Ratings, which today dropped Countrywide to BBB+, its third-lowest investment- grade rating. ``Typically these bank lines are there but not really meant to be used.'' The U.S. housing slump forced rival lenders New Century Financial Corp. and American Home Mortgage Investment Corp. to file for bankruptcy protection earlier this year. They joined about 70 companies with links to the mortgage market that have had to close or put themselves up for sale since the start of last year. U.S. homebuilders started work on the fewest houses in a decade in July, the Commerce "
Bloomberg.com: Worldwide
Bloomberg.com: Worldwide: "U.S. Housing Starts Dropped 6.1% to 1.381 Million Pace in July By Shobhana Chandra Aug. 16 (Bloomberg) -- Builders in the U.S. started work on the fewest homes in a decade in July as the industry showed no sign of recovering from the 18-month recession. The greater-than-forecast 6.1 percent decrease to an annual rate of 1.381 million, followed a 1.47 million pace in June, the Commerce Department said today in Washington. Building permits also fell to a 10-year low. Stock markets worldwide have tumbled on concern subprime mortgage defaults will bankrupt more lenders and destabilize the financial system. Consumer spending, which accounts for more than two-thirds of the economy, may weaken as falling prices and limits on borrowing prevent owners from tapping home equity. ``The housing market is still in a downward spiral,'' Brian Bethune, an economist at Global Insight Inc. in Lexington, Massachusetts, said before the report. ``Weak demand is being hollowed out further by much tighter lending conditions in the mortgage credit markets.'' Starts were projected to fall to a 1.4 million unit pace, from an originally reported 1.467 million in June, according to the median forecast of 75 economists polled by Bloomberg News. Estimates ranged from 1.35 million to 1.47 million. Permits, a sign of future construction, decreased 2.8 percent to a 1.373 mill"
2007-08-13
Bloomberg.com: Worldwide
Bloomberg.com: Worldwide: "China's Inflation Rate Jumps to Highest in 10 Years (Update4) By Nipa Piboontanasawat Enlarge Image A butcher in Guangzhou Aug. 13 (Bloomberg) -- Inflation in China, the world's fastest-growing major economy, accelerated to the highest rate in more than 10 years, fueling speculation that the government may raise borrowing costs for a fourth time in 2007. Consumer prices jumped 5.6 percent in July from a year earlier, after gaining 4.4 percent in June, the National Bureau of Statistics said today. That beat the 4.6 percent median estimate of 17 economists surveyed by Bloomberg News. Food costs climbed 15.4 percent after a shortage of pigs pushed up meat prices and bad weather destroyed crops. The central bank is concerned that food inflation will spread, overheating an economy forecast to contribute more to global growth than the U.S. this year. ``It's still mainly a food-price phenomenon, but the central bank will continue to be worried,'' said Huang Yiping, chief Asia economist at Citigroup Inc. in Hong Kong. ``We expect another interest-rate hike this year and one more increase in the reserve ratio for banks.''"
FT.com / World - Asian economies on ‘demographic cliff’
FT.com / World - Asian economies on ‘demographic cliff’: "Asian economies on ‘demographic cliff’ By Andrew Taylor in London Published: August 12 2007 21:41 | Last updated: August 12 2007 21:41 The rise in the size of Asia’s labour force is expected to slow over the next decade threatening output growth in some of the region’s fastest growing economies, according to the International Labour Organisation. Uneven rates of population growth, ageing workforces, and a huge shift in employment from rural areas to cities pose challenges for the region’s rapidly growing economies it says in a report to be published on Monday. Asia’s workforce is expected to increase by 221m to 2bn by 2015 as countries such as Iran, Bhutan, Cambodia and Pakistan continue to benefit from a rise in the proportion of “prime working-age” people, between 25 and 54. But the life of this “demographic dividend” would be limited with the proportion of children aged 0 to 15 and youth aged 15 to 24 declining across the whole of the region. The ILO warns that more developed regions such as Singapore, South Korea and parts of China are likely to hit the “demographic cliff” even earlier."
2007-08-12
Dollar assets key part of China's reserves: Xinhua: Financial News - Yahoo! Finance
Dollar assets key part of China's reserves: Xinhua: Financial News - Yahoo! Finance: "Dollar assets key part of China's reserves: Xinhua Saturday August 11, 11:36 pm ET BEIJING (Reuters) - China on Sunday delivered a vote of confidence in the dollar, saying dollar assets form an important part of its foreign exchange reserves and the U.S. currency plays a prominent role in the global monetary system. The comments, made to the Xinhua news agency by an unidentified central bank official, follow a report last week by a British newspaper suggesting that Beijing could dump its vast dollar holdings if a trade war broke out with Washington. 'U.S. dollar assets, including American government bonds, are an important component of China's foreign exchange reserves as the dollar enjoys a major position in the international monetary system based on the large capacity and high liquidity of U.S. financial markets,' Xinhua quoted the official as saying. Britain's Daily Telegraph said on Wednesday that 'the Chinese government has begun a concerted campaign of economic threats against the United States,' and was hinting that it might liquidate its holdings of U.S. Treasuries if Washington imposed trade sanctions. The story caused a stir in global markets. U.S. President George W. Bush said China would be foolhardy to dump dollars, while the top Republican on the U.S. Senate Finance"
Citigroup racks up $700 million in credit losses: report - MarketWatch
Citigroup racks up $700 million in credit losses: report - MarketWatch: "Citigroup seen taking $700 million in credit losses By Shawn Langlois, MarketWatch Last Update: 1:52 PM ET Aug 11, 2007 SAN FRANCISCO (MarketWatch) -- Citigroup Inc. has reportedly lost more than $700 million in credit business in recent weeks, placing the world's biggest financial services firm high on the list of casualties from the market-roiling credit crunch. The losses are not a serious issue for a bank that pocketed more than $20 billion last year. The red ink, however, will be embarrassing for Citigroup's (C : Citigroup, Inc News , chart , profile , more Last: 47.00+0.10+0.21% 4:00pm 08/10/2007 Delayed quote data Add to portfolio Analyst Create alert Insider Discuss Financials Sponsored by: C47.00, +0.10, +0.2% ) Chairman and CEO Chuck Prince, undermining his efforts to restore investor confidence, according to a report from the Financial Times on Saturday. Chart of C Prince told the FT last month that the lending party would end, but with so much liquidity that it wouldn't be disrupted by the U.S. subprime mortgage turmoil. The losses, which are in addition to those Citi faces from lending commitments to leveraged buyouts, were incurred mostly in the structured credit business run by Michael Raynes, wh"
2007-08-11
FT.com / World - Florida at centre of US housing bust
FT.com / World - Florida at centre of US housing bust: "Claude, one of many so-called Canadian “snowbirds” who winter in Florida, said he had a good credit rating but opted for a subprime loan because the low initial rate made a short-term investment more profitable. He says he is now “trapped” with an unaffordable mortgage and a depreciating beachfront property. With homeowners such as Claude dotted throughout the country and the outlook for the US housing market darkening, spooked bond investors have been fleeing the $8,500bn mortgage-market and shunning assets vulnerable to knock-on effects. But Joe Hembree, president of the Sarasota Realtors Association, says the local market will recover as flippers cut their losses. “There are great bargains to be had throughout the community as asking prices have dropped,” he says. Already, speculative investors are returning to the market and can be found scouting foreclosed properties, confident a new generation of sun-seekers will be lured by the promise of paradise."
Mortgage defaults spreading, AIG says - Aug. 9, 2007
Mortgage defaults spreading, AIG says - Aug. 9, 2007: "AIG (Charts, Fortune 500) said total delinquencies in its $25.9 billion mortgage insurance portfolio were 2.5 percent. It said 10.8 percent of subprime mortgages were 60 days overdue, compared with 4.6 percent in the category with credit scores just above subprime, indicating that the threat to the mortgage market may be spreading. While maintaining that it is 'comfortable' with its mortgage exposure, AIG gave a gloomy assessment of the market in a presentation to investors and analysts. It said delinquency rates for first mortgages had risen to 3.98 percent in June from 3.56 in April and a low of 3.08 in July 2005. First mortgages represent 90 percent of AIG's domestic mortgage business. AIG divided its mortgage portfolio into three categories: subprime, for borrowers with credit scores below 620; 'non-prime,' for borrowers with credit scores between 620 and 659; and prime, for borrowers with credit ratings above 660. As of June 30, AIG's finance arm, which originates first and second mortgages, recorded delinquencies of 3.68 percent in subprime, 2.13 percent in non-prime, and 0.81 percent in prime."
Institutional investors fleeing from risk: market research - Aug. 10, 2007
Institutional investors fleeing from risk: market research - Aug. 10, 2007: "Big investors fleeing risk State Street report: Big-money investors at one-year high for risk aversion. August 10 2007: 8:43 AM EDT LONDON (Reuters) -- Big-money institutional investors have turned more risk averse than at any time since August last year, taking positions they typically do not reverse quickly, State Street data showed Friday. The U.S. financial services firm said its clients, who keep some $13.04 trillion with it as a custodian, have moved into what it called a 'safety first' regime. More markets news... * European stocks in the red for '07 * European banks to inject more cash * America's most dangerous jobs Video More video Vice Chairman of Goldman Sachs International Bob Hormats gives his analysis of the global credit crunch. Play video This is characterized by moving from emerging to developed market equities, embracing bonds and unwinding currency 'carry' trades. Institutional investors tend to take a longer-term view of markets than other investors, so shifts in their strategy can have a significant impact on a market's recovery. The firm said that since September last year investors had been taking positions reflective either of abundant liquidity or leverage opportunities."
FT.com / Home UK / UK - Markets stunnedby ECB move
FT.com / Home UK / UK - Markets stunnedby ECB move: "Markets stunnedby ECB move Published: August 10 2007 03:00 | Last updated: August 10 2007 03:00 The European Central Bank stunned markets yesterday with its aggressive intervention to quash a brewing liquidity crisis in European financial markets. The ECB move far exceeded in scale and scope the relatively modest steps taken by the Federal Reserve to sustain adequate liquidity in US markets. After noting a sharp rise in overnight interest rates to 4.7 per cent - far above the target 4 per cent - the ECB put out a statement in the morning saying it stood 'ready to assure orderly conditions in the euro money market'. Within a couple of hours it acted: taking the unprecedented step of offering a pre-announced unlimited tender so that European banks could get as much cash as they wanted. The last time it stepped in to provide large-scale liquidity in response to market concerns was in the aftermath of the September 11 terrorist attacks. But even then, it did not offer unlimited support. Equally striking was the amount of money the 49 banks that took up the tender received: €94.8bn ($129bn). This was far above the €69bn banks took on September 12 and the €40bn the next day. By contrast, the Federal Reserve - which also saw overnight rates move up to above 5.75 per cent, compared with its "
European stocks turn negative for the year - Aug. 10, 2007
European stocks turn negative for the year - Aug. 10, 2007: "European stocks see biggest drop in 4 years Banking shares lead declines as credit crisis deepens and causes biggest one-day percentage decline; selloff turns European stocks negative on the year. August 10 2007: 3:01 PM EDT FRANKFURT (Reuters) -- European shares suffered their biggest one-day percentage decline in more than four years Friday, fueled by fears of a liquidity crisis stemming from problems in the U.S. subprime mortgage market. Banking shares were among the worst hit, with Barclays down 6.4 percent, ABN AMRO down 3.5 percent and Societe Generale declining 5 percent. Video More video Subprime loans in the U.S. are proving an Achilles heel for otherwise strong global markets. CNN's Maggie Lake reports. Play video Mining stocks such as Rio Tinto (Charts) and BHP Billiton (Charts) slid more than 6 percent amid falling metal prices as investors feared a possible credit crisis could affect the overall economy, hampering growth."
Countrywide Hit by Credit Market Woes - WSJ.com
Countrywide Hit by Credit Market Woes - WSJ.com: "Countrywide Hit by Credit Market Woes By JAMES R. HAGERTY August 9, 2007 8:23 p.m. Countrywide Financial Corp. and other mortgage companies are facing 'unprecedented disruptions' in debt and mortgage-finance markets that could hurt earnings and the company's financial condition, the Calabasas, Calif., lender said in a regulatory filing. (Read the SEC filing)"
FT.com / Capital markets - Quarter-point US rate cut fully priced in
FT.com / Capital markets - Quarter-point US rate cut fully priced in: "Quarter-point US rate cut fully priced in By Michael Mackenzie and Richard Beales in New York Published: August 9 2007 19:12 | Last updated: August 9 2007 21:55 Investors moved on Thursday to fully price in a quarter percentage point cut in US interest rates in the next two months in reaction to the turmoil in financial markets. Expectations shifted sharply from earlier in the week after a US Federal Reserve meeting on Tuesday that reaffirmed its existing monetary policy focus on inflation risks. After that meeting, earlier expectations of a cut had once again receded. European markets are also now pricing in a reduced chance of an interest rate rise from the European Central next month, in spite of the bank’s recent tightening bias. Neither the ECB nor the Fed has yet hinted at the possibility of rate cuts in the coming months. But dealers said further losses associated with US subprime mortgages and structured credit instruments could force rate cuts by central banks."
Bloomberg.com: U.S.
Bloomberg.com: U.S.: "The $2 trillion market for mortgages not backed by government- sponsored agencies is at a standstill. That's just the beginning. Other types of mortgages are suffering. So are firms and banks that package the debt for investors. The ripples were felt in Europe and Asia, where central banks offered cash to banks amid a credit crunch. And some corporations, from countertop makers to railroads, are blaming the mortgage meltdown and housing slump for earnings that fell short of analysts' estimates. Even a mobile-phone company, Dallas-based MetroPCS Communications Inc., says it's feeling the pinch from customers facing foreclosure. And experts such as William Ford, former president of the Federal Reserve Bank of Atlanta, say the chance of a recession is growing. ``Housing created a lot of ancillary economic activity and jobs, and now we are in the reverse process,'' says Paul Kasriel, chief economist at Northern Trust Corp. in Chicago and a former Fed economist."
Bloomberg.com: U.S.
Bloomberg.com: U.S.: "The $2 trillion market for mortgages not backed by government- sponsored agencies is at a standstill. That's just the beginning. Other types of mortgages are suffering. So are firms and banks that package the debt for investors. The ripples were felt in Europe and Asia, where central banks offered cash to banks amid a credit crunch. And some corporations, from countertop makers to railroads, are blaming the mortgage meltdown and housing slump for earnings that fell short of analysts' estimates. Even a mobile-phone company, Dallas-based MetroPCS Communications Inc., says it's feeling the pinch from customers facing foreclosure. And experts such as William Ford, former president of the Federal Reserve Bank of Atlanta, say the chance of a recession is growing. ``Housing created a lot of ancillary economic activity and jobs, and now we are in the reverse process,'' says Paul Kasriel, chief economist at Northern Trust Corp. in Chicago and a former Fed economist."
2007-08-10
Fears of global liquidity crisis grip markets: Financial News - Yahoo! Finance
Fears of global liquidity crisis grip markets: Financial News - Yahoo! Finance: "Fears of global liquidity crisis grip markets Friday August 10, 3:24 pm ET By Daniel Bases NEW YORK (Reuters) - Global stock markets fell and high-yielding currencies lost value on Friday, even as central banks pumped extra cash into the financial system to help temper fears of a liquidity crisis gripping investors. Worldwide, central banks have injected at least $326 billion into their financial systems in the past 48 hours in an effort to prevent a global liquidity crunch that has its roots in the riskiest end of the U.S. mortgage market. In its biggest single day of temporary open market operations in nearly six years, the U.S. Federal Reserve added $38 billion in reserves in three moves, the first coming before U.S. stock markets began trading. U.S. stocks opened sharply lower, following the pattern of steep losses in European and Asian stock indexes. The European Central Bank added 61.05 billion euros ($83.6 billion) on Friday, less than its record-setting sum of 94.841 billion on Thursday. Asian authorities also added cash to their financial systems on Thursday and Friday."
2007-08-08
Bloomberg.com: Commodities
Bloomberg.com: Commodities: "Gold, Silver Futures Gain on Dollar Decline Against Euro
By Pham-Duy Nguyen
Aug. 8 (Bloomberg) -- Gold and silver rose in New York as the dollar weakened against the euro, boosting the precious metals' appeal as alternative investments.
Five of the past six bear markets for the dollar have resulted in a higher gold price. The U.S. currency fell to a record low against the euro on July 24, helping to spark a 4.4 percent gain in gold last month.
``The bounce in the euro is helping gold,'' said Nick Ruggiero, a trader at Eagle Futures Inc. in New York. ``There's been some pretty strong buying coming in.''"
By Pham-Duy Nguyen
Aug. 8 (Bloomberg) -- Gold and silver rose in New York as the dollar weakened against the euro, boosting the precious metals' appeal as alternative investments.
Five of the past six bear markets for the dollar have resulted in a higher gold price. The U.S. currency fell to a record low against the euro on July 24, helping to spark a 4.4 percent gain in gold last month.
``The bounce in the euro is helping gold,'' said Nick Ruggiero, a trader at Eagle Futures Inc. in New York. ``There's been some pretty strong buying coming in.''"
Bloomberg.com: Commodities
Bloomberg.com: Commodities: "Gold, Silver Futures Gain on Dollar Decline Against Euro
By Pham-Duy Nguyen
Aug. 8 (Bloomberg) -- Gold and silver rose in New York as the dollar weakened against the euro, boosting the precious metals' appeal as alternative investments.
Five of the past six bear markets for the dollar have resulted in a higher gold price. The U.S. currency fell to a record low against the euro on July 24, helping to spark a 4.4 percent gain in gold last month.
``The bounce in the euro is helping gold,'' said Nick Ruggiero, a trader at Eagle Futures Inc. in New York. ``There's been some pretty strong buying coming in.''"
By Pham-Duy Nguyen
Aug. 8 (Bloomberg) -- Gold and silver rose in New York as the dollar weakened against the euro, boosting the precious metals' appeal as alternative investments.
Five of the past six bear markets for the dollar have resulted in a higher gold price. The U.S. currency fell to a record low against the euro on July 24, helping to spark a 4.4 percent gain in gold last month.
``The bounce in the euro is helping gold,'' said Nick Ruggiero, a trader at Eagle Futures Inc. in New York. ``There's been some pretty strong buying coming in.''"
Bloomberg.com: News
Bloomberg.com: News: "Subprime `Tsunami' Hits Asset-Backed Commercial Paper Market
By Mark Pittman and Elizabeth Stanton
Aug. 8 (Bloomberg) -- Companies are extending payments on commercial paper backed by home loans for the first time as the subprime mortgage crisis spreads to debt perceived to be among the safest in the market, according to Moody's Investors Service.
Units of American Home Mortgage Investment Corp., the residential-mortgage lender that filed for bankruptcy, Luminent Mortgage Capital Inc., facing margin calls from lenders, and Aladdin Capital Management LLC, this week exercised an option allowing them to delay repaying the debt, Moody's said.
The three issuers are probably the only ones to defer payments since extendible asset-backed commercial paper was first sold 12 years ago, according to New York-based Moody's. The failure of some companies to pay on time has cast a pall over the securities, which are considered to be almost risk free, said Lee Epstein, chief executive officer of Money Market One."
By Mark Pittman and Elizabeth Stanton
Aug. 8 (Bloomberg) -- Companies are extending payments on commercial paper backed by home loans for the first time as the subprime mortgage crisis spreads to debt perceived to be among the safest in the market, according to Moody's Investors Service.
Units of American Home Mortgage Investment Corp., the residential-mortgage lender that filed for bankruptcy, Luminent Mortgage Capital Inc., facing margin calls from lenders, and Aladdin Capital Management LLC, this week exercised an option allowing them to delay repaying the debt, Moody's said.
The three issuers are probably the only ones to defer payments since extendible asset-backed commercial paper was first sold 12 years ago, according to New York-based Moody's. The failure of some companies to pay on time has cast a pall over the securities, which are considered to be almost risk free, said Lee Epstein, chief executive officer of Money Market One."
China threatens 'nuclear option' of dollar sales - Telegraph
China threatens 'nuclear option' of dollar sales - Telegraph: "China threatens 'nuclear option' of dollar sales
By Ambrose Evans-Pritchard
Last Updated: 9:54am BST 08/08/2007
The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
# Blog - Dollar to collapse?
Fistful of dollars - China threatens 'nuclear option' of dollar sales
Fistful of dollars - China's trade surplus reached $26.9bn in June
Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.
Shifts in Chinese policy are often announced through key think tanks and academies.
Described as China's 'nuclear option' in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.
It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds."
By Ambrose Evans-Pritchard
Last Updated: 9:54am BST 08/08/2007
The Chinese government has begun a concerted campaign of economic threats against the United States, hinting that it may liquidate its vast holding of US treasuries if Washington imposes trade sanctions to force a yuan revaluation.
# Blog - Dollar to collapse?
Fistful of dollars - China threatens 'nuclear option' of dollar sales
Fistful of dollars - China's trade surplus reached $26.9bn in June
Two officials at leading Communist Party bodies have given interviews in recent days warning - for the first time - that Beijing may use its $1.33 trillion (£658bn) of foreign reserves as a political weapon to counter pressure from the US Congress.
Shifts in Chinese policy are often announced through key think tanks and academies.
Described as China's 'nuclear option' in the state media, such action could trigger a dollar crash at a time when the US currency is already breaking down through historic support levels.
It would also cause a spike in US bond yields, hammering the US housing market and perhaps tipping the economy into recession. It is estimated that China holds over $900bn in a mix of US bonds."
The Almighty Ruble - New York Times
The Almighty Ruble - New York Times: "As the ruble increases in value — not just against the dollar, but against brawnier currencies, too, like the euro — imported goods are becoming cheaper for Russian consumers. Now ruble notes, once handed over by the fistful for a loaf of bread, are being used to purchase Mercedeses, flat-screen televisions and European beach vacations.
Of course, the party could be short-lived. Russia takes in roughly $530 million a day from oil, its most lucrative export. If the price of oil declines, so will the ruble. And even if the price of oil does not fall, an oil-fueled boom brings dangers of its own. In many countries, an over-reliance on petrodollars has led to underinvestment in businesses outside oil and gas, and a subsequent withering of other domestic industries.
To deal with such downsides of the ruble’s rise, Russia is salting away oil money in a rainy day fund, called the Stabilization Fund, which holds more than $120 billion. In January, Moscow will split it into two funds: the Reserve Fund and the Fund of National Prosperity, the latter intended for state investments.
Together with the Central Bank of Russia’s foreign reserves, Russian authorities have a currency reserve of $413 billion, the largest per capita foreign c"
Of course, the party could be short-lived. Russia takes in roughly $530 million a day from oil, its most lucrative export. If the price of oil declines, so will the ruble. And even if the price of oil does not fall, an oil-fueled boom brings dangers of its own. In many countries, an over-reliance on petrodollars has led to underinvestment in businesses outside oil and gas, and a subsequent withering of other domestic industries.
To deal with such downsides of the ruble’s rise, Russia is salting away oil money in a rainy day fund, called the Stabilization Fund, which holds more than $120 billion. In January, Moscow will split it into two funds: the Reserve Fund and the Fund of National Prosperity, the latter intended for state investments.
Together with the Central Bank of Russia’s foreign reserves, Russian authorities have a currency reserve of $413 billion, the largest per capita foreign c"
Bloomberg.com: News
Bloomberg.com: News: "China's Reserves `Politicized,' Says Bank of New York (Update2)
By Jake Lee
Aug. 8 (Bloomberg) -- China's $1.33 trillion foreign- exchange reserves are becoming a political tool in trade negotiations with the U.S., said Simon Derrick, Bank of New York's chief currency strategist.
China, the largest holder of U.S. Treasuries after Japan with $407 billion, plans to invest in other securities as it sets up an agency to boost returns on its investments. The government should use reserves as a ``bargaining chip'' with foreign governments, Market News cited a government researcher as saying July 30.
``It is easy to believe that China's foreign-exchange reserves are becoming politicized,'' London-based Derrick wrote in a research note dated yesterday. Recent comments from Chinese researchers ``carry an underlying threat.''
Xia Bin, director of the financial research department of the State Council, or cabinet, said overseas news publications described the reserves as a ``nuclear threat,'' and added the government should realize its potential, Market News reported.
China suggested it will sell Treasuries should the U.S. impose trade sanctions to force a yuan revaluation, the Daily Telegraph reported today, citing Xia and another Chinese researcher. Sales by China would send bond yields higher and possibly tip the U.S. into recession, the U.K. newspaper said."
By Jake Lee
Aug. 8 (Bloomberg) -- China's $1.33 trillion foreign- exchange reserves are becoming a political tool in trade negotiations with the U.S., said Simon Derrick, Bank of New York's chief currency strategist.
China, the largest holder of U.S. Treasuries after Japan with $407 billion, plans to invest in other securities as it sets up an agency to boost returns on its investments. The government should use reserves as a ``bargaining chip'' with foreign governments, Market News cited a government researcher as saying July 30.
``It is easy to believe that China's foreign-exchange reserves are becoming politicized,'' London-based Derrick wrote in a research note dated yesterday. Recent comments from Chinese researchers ``carry an underlying threat.''
Xia Bin, director of the financial research department of the State Council, or cabinet, said overseas news publications described the reserves as a ``nuclear threat,'' and added the government should realize its potential, Market News reported.
China suggested it will sell Treasuries should the U.S. impose trade sanctions to force a yuan revaluation, the Daily Telegraph reported today, citing Xia and another Chinese researcher. Sales by China would send bond yields higher and possibly tip the U.S. into recession, the U.K. newspaper said."
Bloomberg.com: Opinion
Bloomberg.com: Opinion: "The U.K. has had a property bubble every bit as crazy as the U.S.'s. Valuations were stretched, and lending criteria loosened. And now arrears are starting to rocket, even while the economy remains healthy.
Not only does the U.K. face its own subprime crisis, it could be far worse than in the U.S.
The latest figures on debts and mortgage arrears in the U.K. certainly make grim reading. Households ``are getting into more trouble when it comes to their mortgages,'' London-based consulting firm Capital Economics Ltd. said in a note to investors. ``With higher interest rates yet to have their full effect, mortgage arrears are likely to rise further, while unsecured bad debt might start to rise again too.''"
Not only does the U.K. face its own subprime crisis, it could be far worse than in the U.S.
The latest figures on debts and mortgage arrears in the U.K. certainly make grim reading. Households ``are getting into more trouble when it comes to their mortgages,'' London-based consulting firm Capital Economics Ltd. said in a note to investors. ``With higher interest rates yet to have their full effect, mortgage arrears are likely to rise further, while unsecured bad debt might start to rise again too.''"
Adjustable-Rate Morgages resetting soon
 clipped from www.nytimes.com
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2007-08-07
Bloomberg.com: Japan
Bloomberg.com: Japan: "Land Prices in Parts of Tokyo Comparable to Bubble-Era Levels
By Kathleen Chu
Aug. 7 (Bloomberg) -- Land prices in parts of central Tokyo last year reached comparable levels to 1991, when nationwide land prices peaked, indicating the possibility of a ``mini bubble,'' Mizuho Research Institute said in a report.
Mizuho estimated that the most expensive 5 percent of land in Tokyo's 23 wards averaged 33.7 million yen ($283,861) per square meter in 2006, after adjusting prices to eliminate the effects of interest rates and the economic growth rate. That was greater than the average of 31 million yen per square meter in 1991, the institute said."
By Kathleen Chu
Aug. 7 (Bloomberg) -- Land prices in parts of central Tokyo last year reached comparable levels to 1991, when nationwide land prices peaked, indicating the possibility of a ``mini bubble,'' Mizuho Research Institute said in a report.
Mizuho estimated that the most expensive 5 percent of land in Tokyo's 23 wards averaged 33.7 million yen ($283,861) per square meter in 2006, after adjusting prices to eliminate the effects of interest rates and the economic growth rate. That was greater than the average of 31 million yen per square meter in 1991, the institute said."
2007-08-06
Article from July 31 about prime delinquencies rising
Expect more woes with prime home-equity loans: "New data seem to confirm fears that Countrywide Financial is not the only lender facing problems with prime home-equity loans.
Countrywide set off a panic in the stock and bond markets when it said a week ago that 4.6 percent of its prime home-equity loans were delinquent or in foreclosure as of June 30, up sharply from 3.8 percent three months ago and 1.8 percent a year ago.
Although subprime delinquency rates have been soaring, Countrywide was the first major lender to report rising delinquencies among prime borrowers with higher credit scores. But it won't be the last.
Industrywide, the percentage of prime home-equity loans at least 60 days delinquent has more than doubled to 1.14 percent in May from 0.51 percent in May 2006, according to new data from First American LoanPerformance."
Countrywide set off a panic in the stock and bond markets when it said a week ago that 4.6 percent of its prime home-equity loans were delinquent or in foreclosure as of June 30, up sharply from 3.8 percent three months ago and 1.8 percent a year ago.
Although subprime delinquency rates have been soaring, Countrywide was the first major lender to report rising delinquencies among prime borrowers with higher credit scores. But it won't be the last.
Industrywide, the percentage of prime home-equity loans at least 60 days delinquent has more than doubled to 1.14 percent in May from 0.51 percent in May 2006, according to new data from First American LoanPerformance."
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