Global Economy

[Singha]

smells like days of everyone in US driving new cars is over.

BW

The Auto Credit Crisis: It's Real

AutoNation disputes the claim that there is no credit crisis. Dealers and consumers across the country are feeling it every day

by Marc Cannon

While Ed Wallace claims in his Oct. 8 column that there is no auto credit crisis (BusinessWeek.com, 10/7/08), I invite him to actually talk with any of the thousands of customers who couldn't secure adequate financing on a new vehicle purchase this past month.

I also invite him to ask me about how things look from the point of view of Mike Jackson, chairman and CEO of America's largest automotive retailer, AutoNation (AN). In fact I'm surprised that he hasn't, considering that he made a statement about Mr. Jackson and his thoughts on the credit crisis but never even called the company to get his point of view on what they had been saying. In fact, Mike Jackson is one of the most accessible CEOs in America who visits with customers and associates at every chance.

Had Mr. Wallace done so, I could have given him ample evidence of the drag that tightening credit is having on vehicle sales. With more than 250 dealerships across the country, we're talking with customers every day who can't get the financing they might have qualified for a year ago.


Week in and week out, we collect terabytes of financial data, transaction records, sales statistics, and more, and the story it tells is incontrovertible: The credit crunch is real, it's pervasive, and it's directly affecting all auto retailers.

Worse still, it cuts across all areas of the business, affecting not only people with shaky credit to begin with, but also people who would normally be virtually guaranteed financing. Back in 2007, for example, we were qualifying 90% of our Tier 1 shoppers. Today, we're lucky to qualify 60%.

But don't take my word for it. General Motors (GM) and Ford (F) in their September conference calls stated that the tight credit market was taking a toll on their business. And Senate Majority Leader Harry Reid (D-Nev.), in discussing the bailout package, talked about an auto dealer friend of his who was having trouble getting credit for his customers. CNW Research recently said that only 64% of consumers applying for auto loans so far this year have been approved, compared to 83% a year ago.


Other dealers might not feel as comfortable as we do talking about the situation publicly—after all, as Mr. Wallace notes, confidence is a big driver of consumer spending, and no one wants to say anything that might further erode consumer confidence. Mr. Jackson has been the industry leader who called out the housing crisis, the problem with high inventories, and the shift in vehicle preference. We're unafraid to state, as the leading retailer in America, just how damaging the credit crisis is to us and everyone else who makes a living manufacturing, selling, financing and servicing vehicles. It's something that all of us in the business recognize implicitly, and something that Mr. Wallace could have recognized, too—if he had only taken the time to call us.

Marc Cannon is the senior vice-president for communications at Fort Lauderdale-based AutoNation

[SwamyG]

An ideal man of business

The wise and moral man
Shines like a fire on a hilltop,
Making money like the bee,
Who does not hurt the flower.
Such a man makes his pile
As an anthill, gradually.
The man grown wealthy thus
Can help his family
And firmly bind his friends
To himself. He should divide
His money in four parts:
One part he should live,
With two expand his trade,
And fourth he should save
Against a rainy day.

{from "Digha Nikaya"}

[malushahi]

Question is, was the valuation fair , esp when you know that your cash was going to get go down the black hole immediately.

vina, wasn't the evolution of this mess: exotic products => inability to acertain underlying assets/risk class of portfolios => difficulty in valuation => lack of confidence => cash hoarding => liquidity crunch.

guess what I'm trying to say is are you sure they even have a clue to the size of this mess?

Oh.. for anyone hoping that the global real estate market will turn on a dime and recover.. fat chance.. And for all the India based realtors who were hoping for Private Equity money to bail them out, well, with all the banks now under govt ownership ,control and regulation I expect proprietary trading (the largest cash cow for wall st in recent years, esp for Goldman) and private equity and "internal" hedge funds to get the chop or be severly restricted . No way are they going to go out doling out cash at fanciful valuations to the builders here.

my exact thoughts while discussing this with someone last Friday.

[SwamyG]

At Indian call centers, another view of U.S.

I hope Indians get the lesson fast. My brother tells me that his company is struggling to pay salaries. Coworkers all have home loans, car loans, credit card loans....

Okay Bush now going to make some great fin. comments.....

[John Snow]

I have seen 1987 1990 1994 and this recession.
In the land of Honey and milk hings can turn real ugly to Guns and Roses (on the grave). Just dont flah any wealth, keep a rusty Honda in the drive way along with an American made car (even non functional) speak in english in crowds ( we could easily be mistaken for Fernandez or Santiago).

Also we yindos dont have much of community help during hard times, such as councelling or talking to each other, even in ardship we pretend with false prestige as if we are not impacted. Time for calm and cool thinking.

Read on: from CNN


As economy sinks, officials fear violent solutionsStory Highlights
With nowhere else to turn, some people are calling suicide-prevention hot lines

Counseling services are in high demand and domestic-violence shelters are full

Worries mount after a string of financially related violent incidents across U.S.

Texas psychologist says current crisis breeding a sense of chronic anxiety
Next Article in U.S. »




(AP) -- An out-of-work money manager in California loses a fortune and wipes out his family in a murder-suicide.


The Switchboard of Miami has recorded more than 500 foreclosure-related calls this year.

1 of 2 A 90-year-old Ohio widow shoots herself in the chest as authorities arrive to evict her from the modest house she called home for 38 years.

In Massachusetts, a housewife who had hidden her family's mounting financial crisis from her husband sends a note to the mortgage company warning: "By the time you foreclose on my house, I'll be dead." Then Carlene Balderrama shot herself to death, leaving an insurance policy and a suicide note on a table.

Across the country, authorities are becoming concerned that the nation's financial woes could turn increasingly violent, and they are urging people to get help. In some places, mental-health hot lines are jammed, counseling services are in high demand and domestic-violence shelters are full.

"I've had a number of people say that this is the thing most reminiscent of 9/11 that's happened here since then," said the Rev. Canon Ann Malonee, vicar at Trinity Church in the heart of New York's financial district. "It's that sense of having the rug pulled out from under them."

With nowhere else to turn, many people are calling suicide-prevention hot lines. The Samaritans of New York have seen calls rise more than 16 percent in the past year, many of them money-related. The Switchboard of Miami has recorded more than 500 foreclosure-related calls this year.

"A lot of people are telling us they are losing everything. They're losing their homes, they're going into foreclosure, they've lost their jobs," said Virginia Cervasio, executive director of a suicide resource enter in southwest Florida's Lee County.

But tragedies keep mounting:

• In Los Angeles, California, last week, a former money manager fatally shot his wife, three sons and his mother-in-law before killing himself.

Karthik Rajaram, 45, left a suicide note saying he was in financial trouble and contemplated killing just himself. But he said he decided to kill his entire family because that was more honorable, police said.

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After the murder-suicide, police and mental-health officials in Los Angeles took the unusual step of urging people to seek help for themselves or loved ones if they feel overwhelmed by grim financial news. They said they were specifically afraid of the "copycat phenomenon."

"This is a perfect American family behind me that has absolutely been destroyed, apparently because of a man who just got stuck in a rabbit hole, if you will, of absolute despair," Deputy Police Chief Michel Moore said. "It is critical to step up and recognize we are in some pretty troubled times."

• In Tennessee, a woman fatally shot herself last week as sheriff's deputies went to evict her from her foreclosed home.

Pamela Ross, 57, and her husband were fighting foreclosure on their home when sheriff's deputies in Sevierville came to serve an eviction notice. They were across the street when they heard a gunshot and found Ross dead from a wound to the chest. The case was even more tragic because the couple had recently been granted an extra 10 days to appeal.

• In Akron, Ohio, the 90-year-old widow who shot herself on Oct. 1 is recovering. A congressman told Addie Polk's story on the House floor before lawmakers voted to approve a $700 billion financial rescue package. Mortgage finance company Fannie Mae dropped the foreclosure, forgave her mortgage and said she could remain in the home.

• In Ocala, Florida, Roland Gore shot his wife and dog in March and then set fire to the couple's home, which had been in foreclosure, before killing himself. His case was one of several in which people killed spouses or pets, destroyed property or attacked police before taking their own lives.

"The financial stress builds up to the point the person feels they can't go on, and the person believes their family is better off dead than left without a financial support," said Kristen Rand, legislative director of the Washington D.C.-based Violence Policy Center.

Dr. Edward Charlesworth, a clinical psychologist in Houston, Texas, said the current crisis is breeding a sense of chronic anxiety among people who feel helpless and panic-stricken, as well as angry that their government has let them down.

"They feel like in this great society that we live in we should have more protection for the individuals rather than just the corporation," he said.

It's not yet clear there is a statistical link between suicides and the financial downturn since there is generally a two-year lag in national suicide figures. But historically, suicides increase in times of economic hardship. And the current financial crisis is already being called the worst since the Great Depression.

Counselors at Catholic Charities USA report seeing a "significant increase" in the need for housing counseling.

One mental health counselor said half of her clients were on some form of antidepressant or anti-anxiety medication. The agency has seen a decrease in overall funding, but it has expanded foreclosure counseling and received nearly $2 million for such services in late 2007.

Adding to financially tense households is an air of secrecy. Experts said it's common for one spouse to blame the other for their financial mess or to hide it entirely, as Balderrama did.

After falling 31/2 years behind in payments, the Taunton, Massachusetts, housewife had been intercepting letters from the mortgage company and shredding them before her husband saw them. She tried to refinance but was declined.

In July, on the day the house was to be auctioned, she faxed the note to the mortgage company. Then the 52-year-old walked outside, shot her three beloved cats and then herself with her husband's rifle.

Notes left on the table revealed months of planning. She'd picked out her funeral home, laid out the insurance policy and left a note saying, "pay off the house with the insurance money."

"She put in her suicide note that it got overwhelming for her," said her husband, John Balderrama. "Apparently she didn't have anyone to talk to. She didn't come to me. I don't know why. There's gotta be some help out there for people that are hurting, (something better) than to see somebody lose a life over a stupid house."

[Paul]

Family therapists, teachers and parents tell anecdotes about teenagers who are badly rattled by the news, in denial, or both. A daughter is shaken as her mother calls for an emergency family meeting. The son of a Wall Street financier whose fortune has collapsed tauntingly tells his father he can take care of himself: he will sell more marijuana.

http://finance.yahoo.com/family-home/ar ... ady-or-Not

[svinayak]

Emerging nations hit by default fears

Emerging markets face $111bn maturing debt

Reversal of fortune for emerging markets

[ramana]

What about credit card debt? Is that the next domino with all these job losses and real estate markets being down?

[vsudhir]

What about credit card debt? Is that the next domino with all these job losses and real estate markets being down?

Prescient.

Businessweek has it up as a big feature story. And its not trivial, though certainly smaller than the mortgage mess. It will hit banks and firms like Amex, chase and MorganStanley that have so far dodged the subprime bullet.

And yes, Joe Biden made it very hard last yr for individuals to declare bankruptcy based on credit card debts thus ensuring 10000s of folk continue to get harassed for a looong time to come.

[svinayak]

Bubbles and the current financial crisis


Bubbles! Bubbles!... My bubbles!
... a cartoon character from Finding Nemo


Is there an end to the current financial bloodbath that is plaguing the world markets? Like a recursive nightmare, you wake up from one nightmare to find yourself in the middle of another. I am still in the middle of my productive career, and I don't find it amusing that my life savings go down 5% everyday. I just can't imagine what it must be for those who are staring retirement in the face or who have already retired. The only light I see at the end of the tunnel is the proverbial headlight of an approaching express train.


Folding banks, closing auto dealerships, collapsing companies, massive layoffs, government defaults; the looming specter is stunning. Many pundits are saying that this will be a mild recession and we should be back on track in a couple of years. In particular let me quote the following:


'Standard & Poor's chief economist David Wyss expects a mild recession that ends next spring. "Gradually we will regain confidence in the market. Lower oil prices and a falling trade deficit will help," he says. "This is a financial panic, not an economic one." '

I don't know what weeds these people are smoking. A lot more bad news awaits us. What we are seeing today is a result of 60 years of unbridled growth and reckless spending. The dominoes are falling and there is no telling when or where they will stop. They blame it on many factors: corporate greed, extreme leverage, wall street excesses, mortgage crisis and so on.

I remember reading this article by S Gurumurthy of RSS. Though the article itself has been ridiculed by the economists and intellectuals in various forums, and there are some factual errors in the numbers quoted, I felt there was an element of truth in it. This article was written in 2002 or thereabouts. Common sense tells me that I can not continue to spend more than I have. A day will come when the bill collectors come calling. This is true for individuals and also true for institutions. But there is a white elephant in the room everyone seems intent on ignoring.

I laughed out loud when President Bush doled out money to people as a stimulus package. The trouble with the economy was not that people were not spending enough; it was that people have spent way too much and they can no longer finance their profligate ways. During the last several years rate of personal savings by Americans has turned negative. The so-called stimulus package only inflated various bubbles a little more. Besides it encouraged people to be even more reckless with their money.

Since the 1940s, America has managed to build a huge economy based on consumer spending. It starts with how money is created (primarily through bank lending, see here). Every time someone borrows money (say to pay for a new car), the system creates a little bubble and new money is injected into the system. This money is supposed to be taken out at a later stage when the loan is paid off, but people keep spending money all the time so the money is never really destroyed except during serious economic contractions. This is not specific to the US economy, most of the modern economies have grown in this way.

This bubble creates other bubbles. Consider this: when there is more economic activity, the governments have more tax revenue and therefore bigger budgets. The current political wisdom tells us that the money should be spent immediately on populist and not-so populist schemes such as the earmarks. After all, one must get elected again in a few years. Once a particular expense head has been created by a government, it seldom goes away. Many economists argue that deficit financing is good for the economy. Wars and natural disasters have contributed by further expanding the budgets. Among certain quarters, there is almost a macabre glee whenever natural disaster such as an earthquake or a hurricane hits.

Without intervention this unstable system will seek some stability through cyclical economic downturns and many of the bubbles will gradually deflate. There have been downturns in the American economy, such as the recession of 80s and 90s, hyper inflation of 70s, stock market crash of 1987 and dotcom crash of 2000. Every time the government intervention has been short sighted with no attention paid to long term consequences of these actions. None of these events convinced the political leaders, financial leaders and individuals that they must spend less than they have or else...

If you remember the dotcom bubble of the 1990s, many people believed that the stock market will never go down. Ditto with housing markets of early 2000s. Similarly for too long, investors all over the world have nursed a belief that dollar is a safe haven and Americans will never default. This has caused them to send money to America in unrealistically large amounts of money through real estate investments, government bonds and lately purchases of assets of large financial institutions. This has significantly contributed to the financial bubble.

To keep this bubble inflated, governments and institutions have to spend more money and foreigners have to keep pouring their savings into American economy. To encourage these events, the lowest pillar that is bearing the weight of all these bubbles, our friend Joe, must keep spending. The trouble is that Joe can't spend any more money because his account is overdrawn. Nobody is willing to lend him either.

The credit crisis is a sign that people have understood the true nature of our economy. Money in my pocket is better than money in yours. Nobody trusts the bogus credit ratings of individuals and institutions anymore. At some level one can blame the banks for lending to one and all, but the blame must be shared by everyone; legislators for not providing enough oversight; bankers for not ensuring the borrowers have capacity to repay; borrowers for being greedy.

Americans have a total debt of about 120% of the GDP. The companies collectively have a debt of 160% of the GDP. Total American debt reached 53 Trillion dollars. That's about $176,000 of debt for each resident of the country. People and institutions have leveraged way beyond their means to pay back. To paraphrase Nouriel Roubini, now “the housing bubble, the mortgage bubble, the equity bubble, the bond bubble, the credit bubble, the commodity bubble, the private equity bubble, the hedge funds bubble are all now bursting at once in the biggest real sector and financial sector deleveraging since the Great Depression”.

The casino culture has taken over the American financial markets. Short selling of stocks is the most obvious and glaring example of the gambling that savvy stock market players indulge in. There is also the futures market for commodities. For example the much maligned speculators who have presumably driven up the price of oil and other commodities. In the 1990s new instruments of financial trade called derivatives were created. These are the CDOs, the CDSs and many others from the alphabet soup, which Warren Buffet famously called financial instruments of mass destruction. That bubble is now worth 55 Trillion dollars. To put it in perspective, it is more than the annual gross product of the entire world. This is nothing but suicidal gambling by large financial institutions hedge funds, and wealthy individuals with no added benefit to the society at large. This is another bubble that is waiting to burst and who knows what happens then.

If my hypothesis about the economy is correct, then there are three ways this crisis will resolve itself. Firstly the obvious one, in which there will be a catastrophic crash of markets and institutions all over the world. This will be too chaotic for anyone to predict the sequence of events accurately. The consequences are too horrific even to contemplate, but humanity will survive. It may take a decade or two to recover to some semblance of normalcy.

Second way is that the current patchwork of interventions will work and somehow the world markets will be stabilize. However, I think this only be temporary and we will come back to the same situation sooner or later, perhaps with a bigger bubble, because we not really addressing the underlying causes.

Third way is when our leaders act responsibly, the markets respond in a sane manner and people correct their ways. Government will stop wasteful spending, wall street will stop being greedy and people will start saving more responsibly for their retirement and their children's education. If by some miracle this sequence of events comes to pass, then it will still take a couple of decades for us to come back to stability. The reasons are obvious, the the bubbles are simply too large and they can't be deflated in a short time. However the likelihood of this happening are extremely remote. Consider:

- Law makers are short sighted and often ignorant
- Government likes to keep borrowing to spend even more money and has zero credibility with
the main street having spent all of its political capital waging pointless wars
- Washington is full of wested interests, but none protecting Joe's interests
- Wall street has short memory and within a few years it will retrace the history
- Regulators have no credibility as they are either corrupt or ideological but almost never right

This problem is not unique to America. I am only using American example because I have lived here for the last 8 years or so and seen what is happening first hand. I am sure similar things are happening in many other countries as well.

The situation is rather bleak, but people change only when there are catastrophic events that overtake them, or a JFKesque leader guides them. Is Obama the JFK of our generation? I sincerely hope so, but I am very skeptical.

What are the lessons for India in this crisis? Unfortunately I don't believe India will escape it unscathed. The only silver lining is that India is not yet that highly leveraged that it will suffer as deeply as the US. However, India is following the path that US took in the '50s and '60s. We can yet avoid it by ensuring that the truly important issues are addressed and never compromised in the name of capitalism. These issues are, savings for retirement, ensuring universal health care and providing good education to all those who want it. Most importantly we should not build our future on bubbles.
Posted by Ravi Kulkarni at 10:30 PM 1 comments

http://kulkarnr.blogspot.com/

[RamaY]

When seen in perspective....

The Dot-com bubble: When the Wilshire daily data is converted to the Federal Reserve base numbers, the total shareholder wealth stands at $18.445 trillion on March 24, 2000 and $9.984 trillion on October 9, 2002. The difference is an astonishing $9.657 trillion loss of shareholder wealth, or 52 percent.

the 10 trillion loss

Housing bubble: ~$11 trillion and counting.

Not that bad if we compare it with 2002 episode. The catch is the low and middle income Americans who were caught in the game. Lets hope the Fed package really alleviates the financial pain on these people.

And good news for India :

1. Crude imports - $68B in 2007-08. India will gain $17B due to the price fall. This amounts nearly 80,000 crore savings. (India to gain $17b on falling crude prices)

2. Rupee/$ exchange rate – The cheaper rupee exchange rate will make our exports competitive. 2007-08 estimate exceeded $163B vs $160B estimate. First five months in 2008-09 achieved $81.2B. (India exceeds export estimates)

[Nayak]

Your unformatted URL is phucking up the page. Mods help please.

[svinayak]

[Nandu]

VIX closed the same today as it did last Friday, fwiw.

[pradeepe]

Woah! DOW up 11%+!!. Irrational exuberance or the end of the drop?

What he giveth with one hand, he taketh away with the other ! ..

And you are proved right once again

That smiley is of course a forced one, the last few months ave been very very hard on my 401K. Mostly parked in treasury bonds now, but that was locking the door after mucho damage had already been inflicted...

[Ameet]

Estimated price of oil for various oil producing countries to balance their budgets

http://english.eluniversal.com/2008/10/ ... 8487.shtml

Amid the fall of crude oil prices, some specialized firms have begun to estimate the impact of the economic crisis on the finances of petroleum exporting countries.

According to studies prepared by PFC Consulting Limited, a Washington-based wholly owned subsidiary of Power Finance Corporation Limited, and German bank Deutsche Bank, Venezuela is the most vulnerable country to the financial crisis.

PFC considers that Venezuela needs that the price of oil averages USD 97 to balance its accounts while in 2000, the South American country required that the price of the barrel of petroleum was USD 34.

The results of the study, released by Reuters, show that Nigeria can balance its budget with a price of USD 71 a barrel; Iran (USD 58); Saudi Arabia (USD 62); Kuwait (USD 48); United Arab Emirates (USD 51) and Algeria (USD 35).

Deutsche Bank says that next year Venezuela and Iran require that the average price of oil remains at USD 95; Saudi Arabia at USD 55 and Russia at USD 70.

The Ministry of Energy and Petroleum only releases the weekly price of the Venezuelan basket of crudes, and based on the statistics, oil prices dropped 35.3 percent, from USD 126.46 on July 18 to USD 81.78 at the end of last Friday session.

"We believe the deepening banking sector crisis and the significant slowdown in global growth that lies ahead will continue to put downward pressure on commodity prices," said Deutsche Bank in a report released on Friday.

Goldman Sachs said on Monday in a note to clients: "A combination of fear, de-stocking and disruptions across the supply chain owing to frozen credit markets is currently depressing oil demand far below where underlying economic fundamentals would suggest."

Goldman expects crude to average USD 75 in the fourth quarter and USD 70 at the end of the year, but added: "Should the financial and economic crisis cut deeper into demand, the market could fall as low as USD 50 a barrel."

Deutsche Bank estimates that a price of oil at USD 60 could be considered "cheap."

"We find oil prices would need to fall to USD 35 a barrel in order to bring prices in real terms back to their long run historical averages. However, we believe that important changes in the market especially the geographic location of marginal demand and supply suggest that USD 60 a barrel represents a more realistic characterization of 'cheap' oil," said the report issued by the German bank.

Thanks to the growing optimism among investors after the measures aimed to address the crisis and restore confidence in markets, as well as speculations about OPEC production, the oil regained part of the lost ground.

In the New York Mercantile Exchange (Nymex), the West Texas Intermediate barrel, which is the reference price for the Venezuelan oil basket, traded at USD 81.19, up USD 3.49 in relation to the price at the end of Friday session.

"It appears the utter lack of confidence exhibited on Friday is being replaced with a modicum of confidence," said John Kilduff, analyst at MF Global, as reported by AFP.

The Organization of Petroleum Exporting Countries will hold a meeting in Vienna on November 18 and members of the OPEC such as Iran have urged to reduce oil production to defend prices.

[vina]

The Citadel Crumbles..

Citadel is Kenneth Griffin's (the uber whiz kid and one of the most successful hedge fund managers.., the "up and coming" Warren Buffet, and Citadel was referred to as the Goldman in making) hedge fund.. Down 30%.. Now now.. Expect redemption pressures to start .. Citadel seems to be sitting on a ton of illiquid assets when there is no liquidity in the markets. Expect a big blow up here.

Korea back to 1997?
Sounds like the button has been pressed and this sounds like the starting woosh of Korea getting flushed down.

Ah.. Schandenfreude .. I can hear the bubbles burst in Australia. Australia was riding two bubbles, the property bubble AND commodity bubble. I think the double whammy is just the doctor ordered for them. Did I mention that they will go down faster than you can say "Bundaberg Rum" ?

Australia currency and stock markets tumble

[Singha]

indeed, numerous glossy mags and TV aus channels were showing high end beachfront
properties in australia last few yrs. I always thought whether such a small pop had so
many rich people..not even mainstream like sydney or melbourne but smaller places in
gold coast, perth, adelaide and so on.
to me it seemed like everyone could get into a high end resort style golf community
situated right on a magical white sand beach and green clear water.

and poor lil me stuck in bendakalooru

[rsingh]

Last week people were panicking over the financial system... now it's the real economy
Takashi Ushio
Marusan Securities

Situation in a nutshell.

[Singha]

bloomberg:

UBS Gets $59.2 Billion Bailout; Credit Suisse Raises Capital

By Warren Giles
Enlarge Image/Details

Oct. 16 (Bloomberg) -- UBS AG, Switzerland's biggest bank, was forced into a $59.2 billion government bailout after piling up the biggest losses of any European lender from the global credit crisis.

UBS will get a 6 billion Swiss francs ($5.2 billion) capital injection from the government to help it set up a fund for as much as $60 billion of toxic assets that will be supported by the central bank, the government said in a statement from the capital Bern. Credit Suisse Group AG raised 10 billion francs from private investors including the Qatar Investment Authority and announced a third-quarter loss, it said today from Zurich.

The measures will help the banks meet tighter capital rules that the Federal Banking Commission is planning to introduce, the regulator said, and reduce risky assets on UBS's balance sheet. The government plans to raise deposit guarantees and is ready to back short- and medium-term interbank liabilities of Swiss banks, after countries across Europe took similar measures.

[Singha]

few yrs ago bernie ecclestone the F1 tyrant spat on us when we asked for F1.
now he goes around with a katora trying to find 'emerging markets' for his
product.
the Melbourne GP is also permanently over.
he was betting on gora impression to run it as a street race in singapore.

I think we should kick this guy out when he shows face next. a total
waste of precious petrol and not too many tourists. ticket prices likely
to be very high to old bernie can hire more girls in london.

French cancel 2009 F1 Grand Prix
Kimi Raikkonen's Ferrari in action at Magny-Cours
The French Grand Prix was due to take place at Magny-Cours in June 2009

The 2009 French Formula One Grand Prix has been cancelled after the French Motorsports Federation (FFSA) withdrew financing for the event.

Magny-Cours was due to stage the race on 28 June 2009 but France will now not feature on next season's FIA calendar.

"For economic reasons, the FFSA has decided to cancel the (2009) French Grand Prix," said a FFSA statement.

"The FFSA would like to thank all those clients who have supported the event in the last few years."

The FFSA confirmed that all those who had already booked tickets would be reimbursed and apologised for the inconvenience caused by the cancellation.

France has only once been absent - in 1955 - from the F1 calendar since the championship started in 1950.

[Arya Sumantra]

After the home loans crisis, the next big thing is believed to be the study loans. The job losses in unkil is believed to have affected many students' ability to pay up their long term loans.

[Paul]

The English plans of setting up new T20 by 2010 in Vilayat would also have gone up in smoke with this crisis.

[mayurav]

After the home loans crisis, the next big thing is believed to be the study loans. The job losses in unkil is believed to have affected many students' ability to pay up their long term loans.

What is the size of outstanding student loans in the US? I read credit card debt is around 1T$

[Singha]

I read credit card as $900b....much of it will never be paid back and neither
can they hire the US army to go around repossessing undies(used) and
old dvd players bought with that "free" money by the weaker sections.

paki wapda trained toll collectors could do it for a fee.

http://ipezone.blogspot.com/2007/09/us- ... me-ii.html

More than $17 billion in private student loans were issued last year, up from $4 billion a year in 2001. Outstanding student borrowing jumped from $38 billion in 1995 to $85 billion last year, according to experts and lawmakers.
............
Citigroup Inc., Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co., Wachovia Corp. and Regions Financial Corp. are also big players in the private student loan business. And there has been an explosion in specialized student loan lenders, such as EduCap, Nelnet Inc., NextStudent Inc., Student Loan Corp., College Loan Corp., CIT Group Inc. and Education Finance Partners Inc.

The question is whether everyone who borrowed will be able to repay. Experts don't track default rates on private student loans, but many predict sharp increases in years to come...

[John Snow]

After the home loans crisis, the next big thing is believed to be the study loans. The job losses in unkil is believed to have affected many students' ability to pay up their long term loans.

What is the size of outstanding student loans in the US? I read credit card debt is around 1T$

During the CLinton era and republican congress, They reformed the welfare and student loans programs.

The real amount student loans will be 1/3 of the total rest is all interest accumulated.

I had on number of occasions posted on BRF that the Banks in US are solvent because of Credit card business and student loans why?

Even when the interest rates were historically low, the credit cards were carrying 29 to 33 % interests, while the student loans were backed up federal govt during the Bush Raj the banks were allowed to charge any rates as they perceived inspite of being underwritten by USG.

There were plenty of scams taking student loans and attending school of Cosmotology to study Rogain affects on skulls and looks!

[satya]

If US continues in recession ( more or less )for a longer period than CNBC hosts keep saying , commodities specially oil prices heading south coupled with poor retail sales in US , can the twin engines for US credit requirements : GCC & PRC be able to keep buying Treasuries by container loads ? . TIC numbers today arent much encouraging .
At around 60-70$ per barrel there isn't much of surplus to be generated from GCC's budget balancing acts ,in addition to their commitments in desert mirages of Dubai & mini dubais springing all over GCC region .

JMHTs

[mayurav]

Thanks Singhaji. So 85B$ is the outstanding loan and if interest is included it is 250B$? Is that correct Snowji?

Auto loans maybe another 50-100B$.

1T CC debt looks most scary for the banks with no collateral except for the threat of FICO score going down. But when juntha's FICO will go down it isn't much of a deterrent.

[Singha]

indeed - defaulting on CC is going to be #200 on the worry list when people are struggling
to keep their homes and cars. without a car its terrible outside only a few cities.

[svinayak]

Thomson Financial News
Fed's Bernanke says US has avoided two key mistakes made in Great Depression
http://www.forbes.com/afxnewslimited/fe ... 59042.html

10.15.08, 2:39 PM ET
WASHINGTON (Thomson Financial) - Federal Reserve Board Chairman Ben Bernanke argued today that the US so far has successfully avoided two key mistakes made in the Great Depression, and said today's situation is 'not remotely' as serious as the economic collapse of the early 1930s.

In a question and answer session after a speech to the Economic Club of New York today, Bernanke said the two big mistakes of the Great Depression were keeping money tight and allowing the financial system to collapse. When asked whether recent government policy actions would have helped avoid the Great Depression, Bernanke did not answer directly but said the Fed and the government did not make either of those two mistakes.

'I think we've avoided both of those critical errors,' he said.

Along those lines, he said the lessons for monetary policy today are that moving quickly is important, and noted that the Fed began cutting its key interest rate even in the face of criticism that the Fed might be fueling inflation. He said the seriousness of the credit crunch has 'confirmed our strategy' that creating liquidity in the market was the right move.

Bernanke said another key lesson of the current crisis is how policy-makers should handle asset bubbles. On this topic, he said a key question is whether monetary or regulatory policy should be the leading approach, and suggested that the latter approach is critical.

'I do believe that the latter does have a significant role to play in constraining excessive leverage, excessive risk-taking and the other elements that lead to bubbles,' he said.

Bernanke used his speech to note that with passage of the Wall Street bailout bill earlier this month, the government now has all the tools necessary to tackle the economic crisis. He also repeated that the Fed remains ready to use all available tools as needed, a possible hint at further rate cuts, and warned that even if market stability returns the US is likely to face slow growth in in the coming quarters.

pete.kasperowicz@thomsonreuters.com

[John Snow]

Mayurav ji. The credit card debt owed is an asset on the books of bank, the student loan is asset to the bank. SO wwhen you see the net worth of a bank you obliged to include these assets. Now these are technically non performing assets, which will become public libility when bailed out by Feds. Technically there is no difference between the sub prime loans and student loans and credit card loans all of them starting with teaser rates, the only difference is in case of real estate the there is real asset (hence real estate) where as credit card debt and student loans are only IOU worth swiping you know what....

Auto loans are generally limited to 6 years as depreciation is limited to 6 years and the value of car depriciates the most when? The moment you take possion of the keys of the car . By how much? 20%!

So that part of the bad loans has different dynamic, again commanlity is that it is a tangable product like home( real estate).

People have leveraged way beyond the means by which they could pay off loans. The home values were inflated to start with, then the equity loans leveraged even more of the artificial price so the net value of the asset is only a very small fractional part. In addition the supply far exceeds the demand, hence there will be contraction ( deflation of assets and also inflation at the same time inflation will catch up once the most powerfull macro tools power unleashed reaches the conumer) STAGFLATION is my Prognosis in the next 2 to 3 years 2 yeras for stabilization ( the gyroscopic effect) and semblence of narmalacy after 6 years.

This is what even Obama was saying in debate yesterday, there is no magic bullet this time around, by the way I lost 175000 during this turmoil in MFs. So I have to retire only after 10 yrs from now.

[John Snow]

Shut Up Bernake

You were forced not to make mistakes because of the stakes on hand (and of the world pressure)

Unlike in 20 and 30, ( Markets function on the basis of information travel and availablity of information) this time around the markets are wired real time and the information is near instantaneous. I would have been charitable if you opened your big mouth well before the eruption of this mess. You along with Secretary of tresaury ( actually trechery) slept at the wheel.
I dont even wqaant to get started, wish you read BR
"Where tomorrow comes today while other await it to dawn"

[mayurav]

Roubini garu thinks it will be U-shaped with a 2 year recession and deflation the major concern in that time. He says we are lucky it is not L shaped recession like the lost decade (or two) in Japan.

I see Dr. Doom (Roubini) on most programs now. I believe he was dismissed as being permanently pessimistic when he presented this meltdown possibility 2 years ago.

You can see how the interviewing woman gets scared around 3/4 of the way in this interview.

http://media2.bloomberg.com/cache/vDHgWim6Nh8U.asf

[svinayak]

http://www.slideshare.net/eldon/sequoia ... etteroct08

[abhischekcc]

If US continues in recession ( more or less )for a longer period than CNBC hosts keep saying , commodities specially oil prices heading south coupled with poor retail sales in US , can the twin engines for US credit requirements : GCC & PRC be able to keep buying Treasuries by container loads ? . TIC numbers today arent much encouraging .
At around 60-70$ per barrel there isn't much of surplus to be generated from GCC's budget balancing acts ,in addition to their commitments in desert mirages of Dubai & mini dubais springing all over GCC region .JMHTs

Good question satya.

And if you take that line of thinking further - then this is the question you will encounter: If the US cannot offload its debts to Asian central banks, would it still be able to fund its wars in Iraq and Afghanistan???

One way or another, US is going to withdraw from the Middle East, and the west will finally lose its ability to attack Asia. When they lose military superiority, only then will the power shift to Asia really happen.

Interesting times ahead.

[Singha]

some of the ambitious EU expeditionary military projects are likely to see major cuts
- like reduced number of AAW ships already happened, but the LPD/helis/marines
thing also costs plenty of money. as does next gen C3I kit even the opex of a
E3 would not be cheap.

let us see fate of JSF, EF, CVF etc in EU.

Japan and Soko would need to go nukular.

[pradeepe]

Sounds very possible. Just the possibility of withdrawing and leaving SE Asia to the chinese would ensure that Uncle himself will egg Japan to go nuclear. But Uncle's probably going to be afraid of Japan going nuclear all by itself. So atleast 1 more if not 2 nations.

[krishnan]

Its getting uglier

http://sify.com/finance/fullstory.php?id=14779206

“The poison has spread to the mid-prime and prime mortgages as well and so the $700 billion bailout will not be enough,” he adds. “Mid-prime loans have a peculiar structure. For the first two years, only the interest on the loan has to be paid. After that, the principal portion kicks in. And that has started to happen now,” says Ward.

As the US economy enters into a recession and the principal portion to be repaid also kicking in, the chances of mid-prime borrowers defaulting have gone up.

The US home loan market is estimated to be around $11 trillion. Of this $1 trillion is the sub-prime market and the mid-prime market is around $1.4 trillion.

[John Snow]

Ok folks already shipping industry (container ships) is seeing huge drop in demand because of the turmoil. The consequences is that Insurance companies Marine coverage is shrinking.

I am of the opinion that US EU Russia have

1)to open up their Military Hardware for rapid sales deployment who ever can pay.

2) cut their programmes especially US and Obama has already indicated that, so all the private contractors who had good times drawing $200, 000 per assignment like Black well, Dick companies will be gone very quickly. There might be investigations around those involved too.

3) There will be feelers (already being done) to Taliban to an honorable withdrawl from Afghanistan.

4) There will be push to buy some outdated Nuclear wares to make India buy.

5) The dollar will initial fall and corresponding downward adjusment ofother currencies will occur.

6) Then dollar will gain over other currencies


"one can not wage a war without plunder or increase in taxes" Spinster

So US will reduce tensions in areas of war like situation.


Indian opportunities.

Renegotiate yes renegotiate arms deals ( No not Nuke deal ) especially Russian ones like Vikramaditya, MIL helicopters, Buy from France all deals must come with TOT. No end user certificaate business.


More later

[Singha]

Blackwater is a global brand now. I have seen combat vests with blackwater, swat, delta force, seal, ATF
in street markets. needless to say a chipanda paintball gun type was kitting himself up with all such
gear including a plastic helmet inside.