Financial News

[Rex Kickass]

Down drops 200+ within minutes of the opening bell, on fears related to an announcement from DubaiCo, who wants to delay/defer payments on loans. The gov't run company has over $60B in loans, and is just now hitting the first balloons. Investors see a possible ripple effect. Yikes.

 

The long term game for the Middle East is uglier than just the current wars and religious/cultural conflicts. The region is realizing they won't be able to live off oil forever, so they go into tourism, with heavy debts. If the debts cause problems, the governments will have to pour more oil money in to cover. They then would likely reduce supply levels and increase prices, causing spikes in oil and gas. As consumers use this to go further and further away from oil, the loop feeds on itself, until the region plummets into economic hell.

 

Scary stuff for them, and all the more reason for the US to get off oil before others do, so at least we don't have to get as entangled in that nightmare situation.

 

It also has the potential to be good news for the dollar, at least temporarily. Almost all the exposure from Dubai World has to do with European banks instead of US ones. And the debt on Dubai World is 100 billion dollars, roughly 100% of Dubai's GDP.

[NorthSideSox72]

It also has the potential to be good news for the dollar, at least temporarily. Almost all the exposure from Dubai World has to do with European banks instead of US ones. And the debt on Dubai World is 100 billion dollars, roughly 100% of Dubai's GDP.

Holy frijoles, I didn't know it was that high as a % of GDP. That isn't good.

 

Also, strong dollar long term is good, but short term it will result in further losses in the equity markets.

 

[Cknolls]

Holy frijoles, I didn't know it was that high as a % of GDP. That isn't good.

 

Also, strong dollar long term is good, but short term it will result in further losses in the equity markets.

Not when the gov't is putting an artificial bid under the market. PPT working overtime today.

[kapkomet]

Not when the gov't is putting an artificial bid under the market. PPT working overtime today.

which gov't?

[Cknolls]

which gov't?

 

 

The BEN and TIMMY SHOW!!!!

[NorthSideSox72]

The BEN and TIMMY SHOW!!!!

Wait, what? You are saying the US is looking to bid into the debt being played with by DubaiCo?

 

[Cknolls]

Wait, what? You are saying the US is looking to bid into the debt being played with by DubaiCo?

 

 

They are buying futures today!! Putting a bid in the market to keep it up.

[mr_genius]

They are buying futures today!! Putting a bid in the market to keep it up.

 

WTF!

[NorthSideSox72]

They are buying futures today!! Putting a bid in the market to keep it up.

Buying what futures? You mean they are buying indexes because they are trying to prop up the market? Or they are making a move on the financial futures? I'm confused.

 

[mr_genius]

The DJIA is completely overvalued right now. Totally bubble. There is a going to be another crash, there is no way around it.

[NorthSideSox72]

WTF!

Yeah, i don't get what he is saying either.

 

[NorthSideSox72]

The DJIA is completely overvalued right now. Totally bubble. There is a going to be another crash, there is no way around it.

Based on what data? Until today's Dubai debacle, most people saw the markets as being pretty centered value-wise, from the articles I have read. That's why its been treading water. Its only overvalued if you think that retail and/or manufacturing are in for a big fall in the near term, and that's not what most of the supposed experts are saying right now.

 

[mr_genius]

Based on what data? Until today's Dubai debacle, most people saw the markets as being pretty centered value-wise, from the articles I have read. That's why its been treading water. Its only overvalued if you think that retail and/or manufacturing are in for a big fall in the near term, and that's not what most of the supposed experts are saying right now.

 

Retail and the US consumer is wounded; in the next couple years critically. Corporations won't make inroads into developing markets which is what would need to happen to keep value. Losing this many consumers, and propping them up with unemployment benefits, is not a stable solution.

[Cknolls]

It is a pretty well known fact that the gov't is an active player in the markets. President's Working Group. Also known as the PPT(Plunge Protection Team). A close today under 1080 would have been a bearish signal portending a larger pullback was in order down to the low 1000's and maybe even 980. Not to say it won't happen because I do think it will and possibly on or around Dec. 2nd to be a little more specific. 1111 was a turning point in that it "squared out" with the March 6th low. The Russell is very weak and the Transports look loike they are putting in an MA topping pattern with no support until 3400 or so.

[southsider2k5]

Holy frijoles, I didn't know it was that high as a % of GDP. That isn't good.

 

Also, strong dollar long term is good, but short term it will result in further losses in the equity markets.

 

It will also give some big relief in the commodities markets, which will provide relief to a lot more people at the bottom of the social strata.

[Balta1701]

It also has the potential to be good news for the dollar, at least temporarily. Almost all the exposure from Dubai World has to do with European banks instead of US ones. And the debt on Dubai World is 100 billion dollars, roughly 100% of Dubai's GDP.

2 points.

 

1. Good news for the dollar could be bad news for actual recovery in terms of job creation.

 

2. 100% of GDP as debt...why, people in this country are freaking out over quite a bit less than that here.

[Balta1701]

Back to those unemployment claims and how the seasonal adjustment fits in...

In short, the seasonal adjustment factor predicts that new UI claims should rise by 103,000 in the week before Thanksgiving relative to two weeks before Thanksgiving. Because claims only went up by 68,000, the BLS thinks that is very good news for the job market--not as many people are being laid-off from construction and Christmas rush goods-producing jobs as December nears.

 

The worry is that not as many people are being laid off because there aren't as many people at work in construction and Christmas rush goods-producing jobs to be laid off, and that we should be at the very least cautious in interpreting one-week movements in unemployment insurance claims. Perhaps we want to argue that the labor market is improving in a sense, but we should be clear on what sense that improvement is.

Link

[southsider2k5]

2 points.

 

1. Good news for the dollar could be bad news for actual recovery in terms of job creation.

 

2. 100% of GDP as debt...why, people in this country are freaking out over quite a bit less than that here.

 

We are trying really hard to make it to 100%. I just saw the second "Don't call it a stimulus" jobs plan is being worked on. Throw in health care, cap and trade, and gently mix in some pork, you are working on a good chunk.

 

I also don't think they have anywhere near a 12 trillion dollar debt.

[jasonxctf]

http://www.thestreet.com/_yahoo/story/1063...E&cm_ite=NA

 

NEW YORK (TheStreet) -- A regional manufacturing indicator of business activity -- this time in the Midwest -- surprised to the upside again in November, ticking to its highest point in over a year.

 

The Chicago purchasing managers index rose to 56.1 in November from 54.2 in October, according to a release on Monday. Many economists and analysts had forecast the index to decline to 53.3.

 

The figure, cobbled together from a survey of purchasing managers, acts as a gauge of the health for the manufacturing industry in the Midwest. An index value above 50 denotes expansion, while a showing below 50 suggests that the sector is contracting. The October result was also its first above the threshold in over a year.

 

A reading on new orders also rose during the month, to 62.8 from 61.4.

[southsider2k5]

This essentially confirms what many of us have known for years. The regulating bodies of the government are really good at predicting the past, the future, not so much.

 

http://online.wsj.com/article/SB1000142405...3520372002.html

 

Systemic Risk and Fannie Mae

The education of Joe Stiglitz and Peter Orszag.

 

As Congress lumbers toward creating a systemic-risk regulator, it's worth a look back—to 2002, when an economist named Stiglitz and a duo named Orszag wrote a paper with the droll title, "Implications of the New Fannie Mae and Freddie Mac Risk-Based Capital Standard."

 

We won't keep you in suspense. The paper, written the year after Joseph Stiglitz won the Nobel Prize for economics, concludes that "on the basis of historical experience, the risk to the government from a potential default on GSE debt is effectively zero." Their analysis has recently been making the rounds on the Web to a chorus of chortles.

 

But the real lesson of the paper is not that Mr. Stiglitz, or Peter Orszag, the current White House budget director, and his brother Jonathan are dupes or rubes. The paper is notable because it represents the almost universally held view of the two government-sponsored mortgage giants at the time and for years afterward.

 

These pages began writing about the systemic risk posed by Fannie and Freddie at around the same time, but until the very end we were in the distinct minority. Fan and Fred's own regulator assured the world that they were well-capitalized almost until they were put into conservatorship in September 2008.

[orszag1117] Bloomberg News

 

Peter Orszag

 

The Stiglitz-Orszag paper's method was to put the companies through "millions of potential future scenarios," and then to judge the likelihood of default. The assumptions in the test were said to be "severe." Even so, the probability of a default was found to be "so small that it is difficult to detect." Some $111 billion in taxpayer-funded bailouts later, with perhaps hundreds of billions to go, the risks have been detected.

 

To be fair, the Orszags and Mr. Stiglitz acknowledged that "the extremely rare events located in the tail of a distribution are often quite difficult to analyze accurately." Even so, they noted that White House budget gnomes had tested Fan and Fred's capital against "the financial and economic conditions of the Great Depression." The result: "[G]iven 1990 levels of capital, both Fannie Mae and Freddie Mac had sufficient capital to survive."

 

In reality, it took barely a year of financial distress for Fan and Fred to burn through their capital and wind up in taxpayer laps. Professor Stiglitz says of his paper today, "I'd like to think that if we'd done the same stress test in 2007 . . . we would have said, 'You ought to be worried.'" Taxpayers would like to think so too.

 

The crucial point is that assessing systemic risk is difficult to impossible—and the likelihood of coming to a reliable consensus about it is even lower. Both Orszags and Mr. Stiglitz were officials in the Clinton Administration and saw the debates about Fan and Fred that the Clinton Treasury began in the late 1990s, only to get clobbered by the companies' lobbying machine. Yet the three amigos still saw fit to put their names to a paper dismissing any risk of failure.

 

Why should anyone think that regulators—or economists—will predict the next systemic debacle any better? We only know better about the past. When the next problem erupts, as in 2002, smart people will be on both sides of the argument. And when large, systemically important companies are threatened with curbs on their business, they will pay Nobel laureates to write studies that explain away the dangers, and hire lobbyists to block any reform. A future Treasury secretary may also dismiss critics of a future Fannie Mae, or Goldman Sachs, as "ideologues," as Hank Paulson did in 2007-2008.

 

The very existence of a systemic risk regulator, or council of regulators, will assist the largest and riskiest firms by creating an illusion of stability in a world made less stable by the implicit guarantee that this regulator would convey. It would be an accident waiting to happen, and one made inevitable by the institution created to prevent it.

 

Look no further than the eminent Mr. Stiglitz or the brilliant Orszag brothers for how hard it is to detect systemic risk, much less to do anything about it.

[southsider2k5]

http://online.wsj.com/article/SB1259638436...html?mg=com-wsj

 

North Korea Revalues Currency, Triggering Chaos

 

 

By EVAN RAMSTAD

 

SEOUL -- North Korea revalued its currency for the first time in 50 years and placed strict limits on exchanging old bills for new ones, moves that appear designed to flush out money that people earned in market activities the country's authoritarian government doesn't like.

 

The action triggered chaos, according to news outlets in South Korea that specialize in obtaining information from the North, as people rushed to banks and offices of the ruling Workers Party to get information, make exchanges or trade existing North Korean won for euros and U.S. dollars.

[Korea] Bloomberg News

 

100 won bank notes

 

The revaluation was announced on Monday over a cable-broadcast system that can't be monitored outside the country. North Korea issued new notes with an exchange value of 100 to 1 against old ones and said people could make exchanges from Tuesday to Saturday.

 

The revaluation was reported in South Korean media early Tuesday and confirmed later by China's state news agency, Xinhua, which has an office in the North Korean capital Pyongyang. Xinhua quoted one store clerk as saying that state-run stores in the city are closed this week so employees can re-price goods.

 

It is the latest and most sweeping step by the North Korean regime to rein in economic activity that is perceived to threaten the grip that dictator Kim Jong Il, the government and the Workers Party have on the country and its people.

 

For more than a year, reports from aid groups and media outlets that specialize in North Korea have described crackdowns on markets that operate unofficially but became the center of economic activity when the state-run distribution system broke down after a famine a decade ago.

 

According to the reports, authorities have forced women, who more often than men are found selling goods in markets, into work at state-run factories and farms. And in June, they shut down the country's largest unofficial market, a sprawling complex where about 30,000 small businesses were believed to be selling food and goods in a suburb of Pyongyang.

 

The move will have little impact outside the country since the North Korea won isn't used for trade and isn't recognized for exchange by any country, even China, its chief trading partner and political benefactor.

 

Merchants in the Chinese city of Dandong, the most active border crossing with North Korea, said Tuesday that North Korean trading partners had told them about the revaluation, but they said they didn't know the details. Trade on the China-North Korean border is mainly conducted in U.S. dollars and euros, so the Chinese traders said they weren't expecting much impact on their business.

 

Inside North Korea, the economic impact of the revaluation is difficult to gauge since there's been no official data about the size of the North Korean economy or its banking system since the 1960s.

 

Officially, the won trades at 135 per U.S. dollar. But defectors say it is routinely traded in North Korean border cities, where foreign currency is most necessary, for about 2,000 to 3,000 per U.S. dollar. A typical person in the impoverished country may earn only about 5,000 won a day, aid workers and defectors say.

 

The most disruptive element of the revaluation is the limit on the amount of old money that can be exchanged for new bills. Initial reports indicated the government would allow only 100,000 old won to be exchanged, likely wiping out the holdings of people who have earned and saved from market activities for years.

 

According to an account by NKNet, a Seoul-based Web service focused on North Korea, people in Pyongyang on Monday night pressed party officials to allow more money to be exchanged. In response, according to the report, the officials lifted the exchangeable amount to 150,000 won in cash and 300,000 won in savings accounts.

 

North Korea last issued new currency in 1992 but hasn't revalued currency since 1959.

—Jaeyeon Woo and Gordon Fairclough contributed to this article.

 

Write to Evan Ramstad at [email protected]

[southsider2k5]

And with no incentives to stick around and try to make things work... bye, bye GM. yup, the auto industry that is too big to fail, is now the CEO kiss of death.

 

http://www.businessweek.com/bwdaily/dnflas...9122_757949.htm

 

Henderson Said to Have Flunked Review on Fixing GM

GM's board's concluded, says a source, that the CEO had failed to make sufficient progress in the 100 days since the company emerged from bankruptcy

 

(Bloomberg) — General Motors Chief Executive Officer "Fritz" Henderson resigned after the board of directors concluded he hadn't done enough to fix the finances and culture of the biggest U.S. automaker, a person familiar with the matter said.

 

On Tuesday, the board gave Henderson, 51, a 100-day review on his performance since GM's bankruptcy exit, said the person, who asked not to be identified because the discussions were private. While Henderson had made progress, it wasn't enough, said the person, who didn't have specifics about the evaluation.

 

Chairman Ed Whitacre took over on an interim basis, giving the former AT&T Inc. CEO and chairman a chance to put his stamp on GM and pick a permanent chief. Henderson, a 25-year GM employee, became CEO in March when President Barack Obama's auto task force asked Rick Wagoner to leave as part of a U.S. rescue.

 

"They're looking to rebuild the company in a completely different form," Maryann Keller, president of consultant Maryann Keller & Associates, told Bloomberg Television. "They're looking to bring in someone who has a completely different perspective."

 

The search for a new CEO "begins immediately," Whitacre said in a statement released by GM after today's board meeting in Detroit.

Revenue surprise, further cash drains

 

Whitacre, 68, was selected by the auto task force to run a revamped board when Detroit-based GM left Chapter 11 with the government as majority owner. The personnel decisions were made by the board, not the Administration, a U.S. official said.

 

Henderson's tenure spanned GM's slide into bankruptcy on June 1 and a July 10 exit, backed by $50 billion in federal aid. He surprised analysts last month when GM reported generating $3.3 billion in cash in the third quarter and said it would begin repaying federal loans early. At the same time, he said GM lost $1.15 billion and would consume cash again this quarter.

 

Whitacre told reporters today in Detroit that Henderson "has done a remarkable job leading the company through a time of challenge, and momentum has been building over the past several months, but we all agreed changes needed to be made." He didn't take questions or elaborate on the executive shake up.

 

That assessment differed from the one Whitacre had given in a Nov. 10 interview at his office in Texas, when he said the directors backed Henderson, whose posts at GM included serving as chief operating officer and chief financial officer under Wagoner.

 

"We have some momentum now, there's a lot of enthusiasm," Whitacre said then. "We're all cautiously optimistic. The board is fully behind Fritz; he's working hard."

 

Whitacre said he will now be working at GM's Renaissance Center headquarters in Detroit on a "daily basis."

Pressure to reform and take GM public

 

GM has formed a search committee to recruit a new CEO, said Chris Preuss, a company spokesman. The automaker notified U.S. officials about Whitacre's ascent and Henderson's departure, Preuss said.

 

Vice-Chairman Robert Lutz will speak at the Los Angeles Auto Show Wednesday in place of Henderson, Preuss told reporters in Detroit.

 

Henderson was under pressure to return GM to profit after more than $88 billion in losses since the end of 2004. He was expected to change the automaker's culture, prepare GM to start repaying loans, and hold a public stock sale by the second half of 2010. GM reported a $1.15 billion third-quarter loss on Nov. 16.

 

With Henderson in charge, GM has had deals to sell its Saturn and Saab brands fall apart. The automaker also decided last month to keep the Opel brand, rather than sell it as planned.

 

GM is cutting its U.S. brands from eight to four, keeping the Chevrolet, Cadillac, Buick, and GMC brands. In addition to ending its affiliation with Saab, GM is winding down Saturn and Pontiac and has a deal to sell Hummer to Sichuan Tengzhong Heavy Industrial Machinery, based in Chengdu, China.

 

To contact the reporters on this story: Jeff Green in Southfield, Michigan, at [email protected]; Katie Merx in Southfield, Michigan, at [email protected]; David Welch in Southfield, Michigan, at [email protected].

[jasonxctf]

WASHINGTON – The economic recovery gained traction in late fall as shoppers spent a bit more and factories bumped up production. That assessment Wednesday by the Federal Reserve marked its most upbeat view since the economy tumbled into recession two years ago.

 

The Fed's new snapshot of business barometers nationwide found that conditions have generally improved since the last report in late October.

 

Eight of the Fed's 12 regions surveyed reported some pickup in activity or improved conditions, the Fed said. Those regions were: Boston, New York, Chicago, St. Louis, Minneapolis, Kansas City, Dallas and San Francisco.

 

The four other regions — Philadelphia, Cleveland, Richmond and Atlanta — described conditions as little changed or mixed.

[lostfan]

Bank of America to pay back 45 billion of bailout money.

[NorthSideSox72]

New jobless claims surprised low again today, 5th straight weekly decline.