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Showing posts from August, 2008

Flirting with Disaster: Preparation Is Key for Potential Catastrophes

by Laura Rowley

A tornado touched down in my brother's town this month. It didn't affect his home -- because most of it had already burned down over the Fourth of July holiday.

He and his family were away that weekend, and believe stray fireworks landed in the bushes next to the house. Thankfully, no one was injured. One of the firefighters, in the midst of battling the blaze, even had the presence of mind to grab an envelope labeled "graduation money" that my niece had taped to her bedroom wall. (Her high school graduation party was the previous weekend, and she hadn't made it to the bank yet.)

But everything else melted, and they have to recreate a list of their possessions mostly from memory.

Prepare for the Worst

With wildfires becoming more destructive in recent years, the 2008 tornado season one of the deadliest on record, and this year's Atlantic hurricane season forecast to be more active than usual, it's smart to ask "what if?" and protect y…

Wall Street hit by bad news

NEW YORK - WALL Street took a tumble on Friday as weak economic data and a disappointing earnings report from computer giant Dell weighed on the markets and Hurricane Gustav churned toward the Gulf of Mexico.

Low volume may have intensified the losses with trade thin ahead of a three-day Labour Day holiday in the United States, analysts said.

The Dow Jones Industrial Average slumped 171.22 points (1.46 per cent) to end at 11,543.96.

The tech-dominated Nasdaq composite tumbled 44.12 points (1.83 per cent) to 2,367.52 and the Standard & Poor's 500 broad-market index retreated 17.85 points (1.37 per cent) to 1,282.83.

The main indexes closed lower for the week but held onto gains for a strong August. The Dow rose 1.92 per cent, the Nasdaq 2.44 per cent and S&P index 1.78 per cent in the month.

Ahead of the open, the Commerce Department reported consumer spending rose 0.2 per cent in July from June, the weakest gain since February, while personal incomes slid 0.7 per cent, the stee…

Citi tells staff to cut costs

UNITED States-based financial giant Citigroup is well-known for its massive staff bonuses in boom times but now, hit by big losses, it is scrimping to cut costs.

The embattled group is clamping down on colour photocopying by staff and the purchase of new BlackBerrys, the popular portable e-mailing gizmo.

Other drastic measures detailed in a memo sent to staff worldwide include a ban on employees holding off-site meetings, apparently to cut down on the cost of refreshments bought outside.

Separately, sources suggested that up to 200 information technology (IT) jobs could go at Citi's Singapore operations.

In the internal memo, obtained by The Straits Times yesterday, New York-based Mr John Havens, the head of Citi's institutional clients group, urged employees to be much more frugal in their expenses. 'All new BlackBerrys will require pre-approval,' Mr Havens stated in the memo that originated from Citi's New York headquarters.

He added that the managing of expenses is a…

Over 100 US banks in trouble

WASHINGTON: The number of troubled United States banks shot up 30 per cent in just three months to 117, the highest level in five years.

A top regulator also warned that conditions will worsen as the housing slump and credit crisis continue to pound the industry.

More than a year after the credit crisis first flared up, Ms Sheila Bair, chairman of the Federal Deposit Insurance Corp (FDIC), warned on Tuesday that the outlook for the ailing banking industry was bad - and getting worse.

With the swelling tide of toxic loans proving to be even more worrisome than feared, Ms Bair said she expected more banks to join the agency's watch list of problem banks.

'We don't think the credit cycle has bottomed out yet,' she told a quarterly news conference, adding that US banks will not return to high levels of earnings any time soon.

'We expect that banks and thrifts will keep building up reserves for the next several quarters,' she said.

The news pulled down financial shares be…

Investors Chase Phantoms

By Peter Schiff

In football, when a running back intends to cut to the left, he often first fakes right. This move is designed to make the defense commit their resources in the wrong direction. It is my experience that markets often follow a similar path. Just prior to a major move in one direction, markets often make a sharp move in the opposite direction first. With respect to the dollar, gold, oil and other commodities, many on Wall Street have bought into the head fake, and will soon be watching in amazement as the runner sprints to the end zone.

Over the last few months, as the dollar rose more than 10% against a basket of other currencies, and as gold and oil sank to multi-month lows, many investors concluded that a threshold had been crossed, and that the bearish trend for the dollar and the bullish trends for commodities had finally come to an end. But rather than representing a sea change, these counter trend moves more likely signify that the established trends are about to ki…

Bernanke: Financial crisis taking toll on economy

By Jeannine Aversa, AP Economics Writer
Bernanke says financial crisis taking toll on economy, inflation outlook uncertain

JACKSON, Wyo. (AP) -- Federal Reserve Chairman Ben Bernanke said Friday the financial crisis that has pounded the country -- coupled with higher inflation -- is taking a toll on the economy and poses a major challenge to Fed policymakers as they try to restore stability.

"Although we have seen improved functioning in some markets, the financial storm that reached gale force" around this time last year "has not yet subsided, and its effects on the broader economy are becoming apparent in the form of softening economic activity and rising unemployment," Bernanke said in a speech to a high-profile economics conference here.

While Bernanke welcomed the recent drops in oil and other commodities' prices, and believes inflation will moderate this year and next, the Fed chief also warned the inflation outlook remains highly uncertain.

The Fed, he said, …

S'poreans bracing for recession

by Rachel Chan

CLOSE to half of the Singapore respondents who participated in a recent survey said they are bracing themselves for a global recession in the next 12 months.

According to the Nielsen Global Consumer Confidence Index, 47 per cent - the highest among Asia-Pacific countries - of the 500 Singaporean respondents are steadying themselves for an economic downturn.

This is the first time, since the survey's inception in 2005, that Singapore's consumer confidence has dropped, said The Nielsen Company.

The survey is done biannually to measure confidence levels, spending habits and major concerns of consumers.

Singapore is sixth on the Consumer Confidence Index chart for the Asia-Pacific region, which includes countries like Malaysia, New Zealand and China.

Even Nordic nations like Denmark, Norway and Finland - countries that have consistently topped the Nielsen Consumer Confidence Index - share Singapore's pessimism.

Results from the quantitative online survey, conducted in …

Why Gold Got Crushed This Week -- and Why It Will Roar Back

Ay, caramba! Not to put too fine a point on it, gold bugs got hit in the face with a frying pan this week. The yellow metal dropped like a hot rock on Monday, hitting its lowest levels of the year.

So what in the world happened? And is all hope lost for gold?

The short answers to those questions are as follows.

1. South Ossetia happened.
2. No, all hope is not lost. In fact, gold will be a screaming buy again at some point down the road.

Let me explain...

Russia, Georgia and the Dog That Didn’t Bark

To start, you’ve probably read about the shooting war that flared up between Russia and Georgia (the country, not the state) over the past week or so.

One minute, Russian and Georgian leaders were focused on the 2008 Olympic Games in Beijing. The next minute, Putin was flying home as fighter jets scrambled and tanks rolled in to South Ossetia.

It’s a fascinating little conflict. U.S. politicians are putting all the blame on Russia, but things are a bit more complicated than that.

I’d love to d…

Jim Rogers Exclusive: Bigger Financial Shocks Loom...

Jim Rogers Exclusive: Bigger Financial Shocks Loom Consequences to Impact for Years
Stock-Markets / Credit Crisis 2008
Aug 19, 2008 - 05:00 AM

By: Money_Morning


Keith Fitz-Gerald wrotes: VANCOUVER, B.C. – The U.S. financial crisis has cut so deep – and the government has taken on so much debt in misguided attempts to bail out such companies as Fannie Mae ( FNM ) and Freddie Mac ( FRE ) – that even larger financial shocks are still to come, global investing guru Jim Rogers said in an exclusive interview with Money Morning .

Indeed, the U.S. financial debacle is now so ingrained – and a so-called “Super Crash” so likely – that most Americans alive today won't be around by the time the last of this credit-market mess is finally cleared away – if it ever is, Rogers said.



The end of this crisis “is a long way away,” Rogers said. “In fact, it may not be in our lifetimes.”

During a 40-minute interview during a wealth-management conference in this West Coast Canadian city last month, Rogers also…

Ex-IMF Chief Economist Predicts US Bank Collapse

LONDON -- The global financial crisis is set to get worse, with a large U.S. bank likely to collapse in the next few months, a former International Monetary Fund chief economist has warned, the BBC reports on its Web site Tuesday.

Kenneth Rogoff said that despite hopes that the U.S. economy had turned the corner, it was "not out of the woods."

"I would even go further to say "the worst is to come'," he said.

"We're not just going to see mid-sized banks go under in the next few months," said Rogoff, who held the IMF role between 2001 and 2004.

"We're going to see a whopper, we're going to see a big one, one of the big investment banks or big banks," he said at a conference in Singapore, the BBC reports.

Reuter:Large U.S. bank collapse seen ahead

By Jan Dahinten

SINGAPORE (Reuters) - The worst of the global financial crisis is yet to come and a large U.S. bank will fail in the next few months as the world's biggest economy hits further troubles, former IMF chief economist Kenneth Rogoff said on Tuesday.

"The U.S. is not out of the woods. I think the financial crisis is at the halfway point, perhaps. I would even go further to say 'the worst is to come'," he told a financial conference.

"We're not just going to see mid-sized banks go under in the next few months, we're going to see a whopper, we're going to see a big one, one of the big investment banks or big banks," said Rogoff, who is an economics professor at Harvard University and was the International Monetary Fund's chief economist from 2001 to 2004.

"We have to see more consolidation in the financial sector before this is over," he said, when asked for early signs of an end to the crisis.

"Probably Fannie Mae and…

Bracing for Inflation

By John K. Castle

Growing evidence suggests American consumers, businesspeople, and political leaders should all be bracing for double-digit inflation, probably as early as 2009.

The relative price stability of the past 15 years is giving way to worsening inflation, despite the recent softening of oil prices. The Consumer Price Index for all items shows the inflation rate averaged 2.6% a year from 1992 through 2007 but has doubled since January, reaching an annual rate of 5.6% in July (BusinessWeek.com, 8/14/08). By next year, the monthly figure could hit double digits, and the inflation rate for 2009 overall could triple 2007's 2.85%.

I say this not only because I have looked at a broad range of statistics that point in this direction. I also run a private equity investment firm that owns companies in a number of industries -- including restaurants, the manufacture of gardening tools, oil and gas exploration services, and distribution of entertainment products such as books and vide…

Financial Crisis Is Expected To Bring More Big Shocks

The year-old financial crisis is not only far from over but could actually get much worse, bringing more big shocks to the US economy and stock market, a host of experts said Monday.

Among the predictions: the failure of some of the country's biggest financial institutions, the collapse of 1,000 banks and a possible government bailout of mortgage giants Fannie Mae (NYSE:FNM - News) and Freddie Mac (NYSE:FRE - News).


"I think the financial problem is halfway through the cycle," David Kotok, chairman and chief investment officer from Cumberland Advisors, told CNBC. "There's another shoe to drop ahead of us and it could be more severe."

Kotok thinks Merrill Lynch (NYSE:MER - News), Wachovia (NYSE:WB - News) and other financial companies are at risk of failure as the cost of raising capital soars at a time when the banks need to pay settlements over auction rate securities.

The cash companies need to shore up bad investments, "is up to about $50 billion and wi…

Clouds gather over bonuses

Mr Lee, who is in his 40s and a managing director at a foreign bank based in Singapore, is bracing himself for sharply reduced bonuses.

“We're still okay right now, but I'm worried for my situation if the condition does not change in six months time,” Mr Lee says.

Mr Lee's plight represents a growing concern among finance industry executives who realise they have little choice but to lower pay and hope for a rebound next time round.

Compensation experts are tipping annual bonuses to fall by as much as 40% this year, as the subprime concerns loom large and the sentiment in Singapore's financial sector remains cautious.

Pernille Storm, director of banking and financial services at Hudson Singapore, says investment banking has been hit the hardest as significantly fewer deals are being managed, but even within corporate and transaction banking, “on target” bonus expectations have moved down from six-months to around four-month bonuses.

Given the harsh environment, banks are ea…

Analysts say US housing market recovery not until 2009

WASHINGTON- As the US economy appears more than ever linked to the health of the housing market, analysts see no end to falling prices or recovery in the sector before 2009.

After several years of a sizzling boom, housing prices in the United States have fallen for the past year and a half, according to the closely watched S&P/Case-Shiller index.

In May, prices fell a record 16 percent from a year ago.

But for the majority of analysts, the price decline still is not enough to put the sector on the road to recovery.

"Home prices in the US are likely to start to stabilize or touch bottom sometime in the first half of 2009," former Federal Reserve chairman Alan Greenspan said Thursday.

But "prices could continue to drift lower through 2009 and beyond," he added.

Treasury Secretary Henry Paulson regularly repeats that the real-estate sector presently is the biggest danger for the US economy.

Paulson in late July warned that foreclosures and the number of existing homes fo…

HK bargain hunters turn to bulk buying to beat inflation

HONG KONG : Hong Kong shoppers, ever on the hunt for a bargain, are tackling soaring food prices by getting together and buying in bulk, but experts warn the trend could make the inflation problem even worse.

Hong Kong households have been struggling with inflation that officially hit six percent in July, but which many fear is actually higher as pork and rice prices have soared by up to 64 percent since the start of the year.

Feeling the pinch of the rising cost of living, one community project now uses the Internet to allow low-income families to pool their resources to buy in bulk at impressive discounts compared to retail outlets.

The 'Grassroots Family Joint Council - Mutual Help Bulk Purchase Scheme' was launched in July and has since garnered support from non-government organisations and charities in the Chinese territory.

"They started this scheme on their own as they thought that they would have better bargaining power to get better prices from wholesalers," sai…

'Expect more layoffs this year'

LABOUR chief Lim Swee Say expects retrenchment this year to be higher than last year's, but still below the historical average.

Low-skilled manufacturing workers will bear the brunt of job losses.

These workers, typically categorised as plant and machine operators and assemblers, form almost 10 per cent of Singapore's workforce of 1.8 million.

Mr Lim, secretary-general of the National Trades Union Congress, gave his response yesterday when asked for his retrenchment projections following recent official figures showing a slowdown.

He said in an e-mail reply to The Straits Times: 'We expect the number to be higher than last year, but likely to be still below the average level of 10,000.'

On average, about 10,000 workers are laid off each year.

Retrenchments hit a high of almost 30,000 in 1998 during the Asian financial crisis. Last year, however, it dipped to a 10-year low of 7,675 following three years of strong growth and high job creation.

Latest official figures showed 4,…

OPEC official says output cuts may be needed

An Iranian official in the Organization of Petroleum Exporting Countries said Saturday that the producers group is considering leaving oil production levels unchanged or perhaps even trimming them to shore up flagging prices and defend market share.

"The market is oversupplied by at least 1 million barrels a day. If OPEC would like to remove this additional oil out of the market, then OPEC has to cut some production," OPEC governor Mohammad Ali Khatibi told Dow Jones in a telephone interview.

"There will be maybe two options. One option is maintaining the level of production. It means OPEC will roll over the production. The other option will be some decrease in production," he added.

The topic will lead OPEC's agenda when representatives of the group's 13 member nations gather Sept. 9 in Vienna to discuss production policy.
Oil prices peaked in early July at over $145 a barrel. They have since fallen 22% as the high prices carved deeply into demand, especially …
What jobs will be the most demanded in view of the changes in the financial industry 5 to 10 years down the road?

Accountants? Tax advisors?

Investment bankers seem to be falling out of favour soon, unless they are able to acquire new thinking and new skills?

The Future of Investing: A 2020 Vision

by Ricky McRoskey

In finance, things change. Forty years ago you couldn't buy a futures contract based on a currency, 25 years back the first collateralized debt obligation hadn't hit the market, and two years ago subprime wasn't a curse word on Wall Street.

But investors—and the folks who make money by packaging new investment products—always seem eager to move on to the next big thing. If financial history has taught us anything, it's that change is inevitable—change in everything from the way banks package risk, to the way governments regulate savings institutions, to the ways consumers can invest their savings. And with the recent upheavals in equity and fixed income markets, the financial industry is left to ponder: What change is next? What will the financial world look like in 2020?

The quick answer is an industry more transparent, more international, and more driven by individual investors than today's.

BusinessWeek asked financial professionals and academics t…

The Future of Investing: A 2020 Vision

by Ricky McRoskey

In finance, things change. Forty years ago you couldn't buy a futures contract based on a currency, 25 years back the first collateralized debt obligation hadn't hit the market, and two years ago subprime wasn't a curse word on Wall Street.

But investors—and the folks who make money by packaging new investment products—always seem eager to move on to the next big thing. If financial history has taught us anything, it's that change is inevitable—change in everything from the way banks package risk, to the way governments regulate savings institutions, to the ways consumers can invest their savings. And with the recent upheavals in equity and fixed income markets, the financial industry is left to ponder: What change is next? What will the financial world look like in 2020?

The quick answer is an industry more transparent, more international, and more driven by individual investors than today's.

BusinessWeek asked financial professionals and academics t…

Diary of a finance intern

Courtesy of efinancialcareers

Week 1: Coffee and competitiveness

This week began with an all-intern training session where we looked at the different areas of the business and the different products. The next two days were spent in equities training with the other equity interns. Some interns had majored in finance but for those who, like me, are from completely different backgrounds it was all a bit confusing. I did however learn a lot, make a few friends and write a big list of all the things I needed to work on when I had some free time.

There are three interns on my desk and while it is nice to have the support it makes things very competitive. We were not due on our desk until Thursday morning, but we all decided to head there after training on Monday and so the competition began. I start work at around 6am and leave at around 6pm. Following this, I usually go out for drinks to get to know people and to prove to my colleagues that I am not tired or stressed. I had less than four hou…