Global Economy

[Nayak]

Doobai will soon hit the sweet spot of recession cycle. Watch all the obscene display of wealth turn into images of abandoned ruins slowly consumed by the sands.

[svinayak]

Acharya Garu>> Fantastic work, the bar graph you created gives a picture perfect view of the state of Banks in USA. By the way looks like, your work has been appropriated by AP.
Is there away you can claim rights to it?
Remind them it is not correct on their part not to acknowledge the source as "Acharya".

Spinster, Why the surprise. There is a small copyright logo at the bottom right. Who ever publishes it first get the rights.

[pradeepe]

Land...folks...land...land and more land. It should be a part of ones primary investment for all times. We spring forth from it and return to it...we can learn to live off it as well.

Land is that its taxable and immovable. You cannot pack up and run off with land. If you stop paying your taxes, you'll soon find out who really owns all land.

Aye, its a lot harder than picking up ones pet goat and moving on .

I believe that land as a tangible and productive (meaning something that can with personal toil provide means of sustenance) asset is something to work towards aquiring. I get your point though.

[Satya_anveshi]

Vice president at a company I know was given the axe after working there for years. The fund which had bought out the company perhaps felt they could do without him so they gave him the pink slip.

He got furious and refused to leave the premise! They called the cops and sent him packing.

Well...if VP cannot "understand" the usualness of such cost cutting measures, may be he does not deserve to be one.

>>Take nothing for granted. One day you could be employed, next day they could be kicking your arse out the door regardless of what you have sacrificed for the company.

This is understandable from junior employee perspective where there is certain expectations of loyalty, making company part of their lives, going that extra mile while offering them "competitive" salaries. But VP.. I think they should see it coming and in any case are compensated well (depends...how adequately).

[svinayak]

Another one from AP

[K_Reddy]

I have been saying it for years, this economic exuberance for the past few years in the US is totally irrational. They are not going through an other IT revolution creating jobs and new opportunities; they are not exporting anything, only importing more. But their housing market was going through the roof and the Dow crossed 12000. What justifies this? I think the Ivy League MBA’s have blinded the ‘economic experts’ from seeing this by over complicating the subject.

I love America and its people. But this stupid lopsided model of global economics must stop. The dollar needs to fall so they can compete with India and China and we need to stop treating the paper dollar like its gold.

What a scam they have pulled off for so many years. Printing dollars as they like, selling it to us to import what ever they want. A few years ago they stopped posting M3 data! That was an earthquake that went unnoticed! I speak American corporate big wigs and even they believe the whole system is a sham and totally manipulated. I hope they don’t succeed in fooling us again and we finally have a meaningful readjustment. There was a lot of hope that Obama will change things. Sadly I don’t see this happening. All I see is more bailouts and more make-believe prosperity.

[Raju]

What a scam they have pulled off for so many years. Printing dollars as they like, selling it to us to import what ever they want.

I was saying this from long ago. The entire American economy starting with Bretton Woods was a scam perpetrated on the rest by the Anglo victors of so-called WW2. Global economy was held hostage to these folks. It is still the same.

Do not expect any change without any major upheavel. The people that hold power are not going to give it all up at a whim. It will be a fight to the last.

[Nandu]

Three month T-Bills are at 0.1% yield today (up from 0.03% in the chart above in Acharya's post).
In either case, it is essentially equivalent to handing money over the U.S. government and then paying them for the privilege of holding on to it safely for you.

[geeth]

>>>I am not sure why US lawyers need to be paid $300k in dubai to do the
stuff a Indian lawyer would do for $100k. and he will get a better lawyer for the price.

It is the typical Arab mentality. In fact, of all the Goras, they are most comfortable with Brits. Experience of a friend of mine is worth mentioning - This guy joined a one-ship Arab company and toiled for a couple of years to make it now a 15-20 ship company. Once the company prospered the Arab owners started bringing in Goras. After the Goras are there, they want their Chamchas (Goras) in all positions and my friend is really frustated. He has to bide his time there till he gets another opening.

Moral of the story : Indian are there to toil and Arabs and Goras enjoy the fruits of Indian labour.

[ramana]

Due to the impact of the financial crisis on world economies and their strategic fallout I am wondering if this thread should migrate to the Strat Forum. Currently economy dominates and is and will drive the geopolitics. An thoughts?

[Nayak]

AIG CEO's salary is $1; no pay hike for top executives
26 Nov 2008, 0959 hrs IST, PTI

http://timesofindia.indiatimes.com/Busi ... 758630.cms

Print Email Discuss Share Save Comment Text:
NEW YORK: Troubled insurance giant American International Group In (AIG), for which the US government doubled the rescue package to USD 150 billion earlier this month, on Tuesday said that its CEO would get a salary of only one dollar and there would be no pay hikes for its top executives through 2009.

Separately, leading German reinsurance company Munich Re said that it is interested in buying the life insurance business of AIG in Asia.

Announcing compensation restrictions that go beyond the government's directive as part of its bailout package, AIG said its CEO Edward M Liddy would be given an annual salary of just one dollar in 2008 and 2009.

There would also be no annual bonuses in 2009 and no salary increase through 2009 for AIG's top-seven-officer Leadership Group, AIG said.

Besides, AIG has decided against no salary hike through 2009 for the 50 next-highest executives, in addition to bonus, severance and retention award restrictions.

AIG, for which the US government on November 11 nearly doubled the bailout package to 150 billion dollars from 80 billion dollars previously, is planning to sell some of its assets, including life insurance business in the US, Europe, Latin America and Japan, to recover from a financial mess.

Announcing the pay restrictions for its executives, AIG also said that it is developing a funding structure to ensure that no tax payer dollar is used for annual bonus or future cash performance awards for AIG's "Senior Partners," or the top 60 management people.

Commenting on the move, AIG Chairman and CEO Liddy said, "AIG's senior executives recognize AIG's obligation to tax payers.

"We are extremely grateful for the assistance we have received, and we know we have an obligation to use hat assistance to help AIG recover, contribute to the economy and repay tax payers," Liddy said.

The initial compensation for Liddy, who joined AIG on September 18, will consist entirely of equity grants, showing his confidence in AIG and its team.

While he would not receive an annual bonus in 2008 and 2009, he might be eligible for a special bonus for extraordinary performance payable in 2010Liddy will also not be eligible for severance payments.

Besides, Paula Rosput Reynolds, Vice Chairman and Chief Restructuring Officer, who joined AIG in October, will receive no salary or bonus in 2008. In 2009 and beyond, other than her base salary, any other compensation she receives will be tied directly to the progress of the restructuring efforts.

The other five members of AIG's top-seven-officer Leadership Group will not receive annual bonuses for 2008 or salary increases through 2009.

AIG's Senior Partners will not earn long-term performance awards in 2008 and they will not receive salary hikes in 2009, and their 2008 and 2009 annual bonuses will be limited.

Besides the restriction against any severance payment for the CEO, there will be restrictions on severance payments to members of the top-60 management members.

[shyam]

It is the typical Arab mentality.

One of my friends who runs an IT consulting company in US said this. Few years ago Saudis needed IT consulting services in KSA. They specifically demanded that all consultants must be goras and no Indians. In fact they were willing to pay more for gora consultants. My friend had no problems and supplied them at higher rate.

[Nayak]

Citi went wrong in real estate: CEO Vikram Pandit

http://timesofindia.indiatimes.com/Citi ... 759221.cms

26 Nov 2008, 1205 hrs IST, REUTERS
Print Email Discuss Share Save Comment Text:
NEW YORK: Citigroup Inc Chief Executive Vikram Pandit on Tuesday blamed prior management for diving too deeply into real estate, causing losses that led to this week's massive government bailout of the second-largest US bank by assets.

"What went wrong is we had tremendous concentration in the sense we put a lot of our money to work against US real estate," Pandit said in an interview on PBS' Charlie Rose show. "We got here by lending money, and putting money to work in the US real estate market, in a size that was probably larger than what we ought to have done on a diversification basis."

The government late Sunday rescued Citigroup by agreeing to shoulder most potential losses from a $306 billion portfolio of risky assets, and by injecting $20 billion of new capital, in its biggest effort to prevent a large US bank from failing.

Citigroup has lost $20.3 billion in the last year, and many expect further losses from credit cards and other areas tied to the global economic crisis to pile up.

Since closing on Friday at $3.77, Citigroup shares have risen 61%, and closed on Tuesday up 13 cents at $6.08 on Monday. They have nevertheless tumbled 79% this year, after closing last year at $29.44.

Pandit said in the interview that short-sellers, as well as investors worried about Citigroup's asset quality, were among those who drove the bank's shares down in recent sessions, and that it was important "that we got control of the situation."

"I can completely understand how people on Main Street, people who are not close to this industry, would be furious at what's happened," he said.

Some wealthy investors have begun or pledged to begin buying Citigroup shares.

A Mexican brokerage controlled by Carlos Slim, one of the world's wealthiest people, spent about $150 million to buy nearly 29 million Citigroup shares between Nov 19 and Nov 25.

Meanwhile, Saudi Prince Alwaleed bin Talal last week said he plans to boost his stake in the bank to 5% from less than 4%.

Nice, these guys at the top never take any responsibilities.

[Manu]

Talk about coincidence. I just saw (a second ago), the 1 hour Charlie Rose Interview with Vikram Pandit. I saw Fear/Pain and sheer dread in the Man's eyes. He actually dodged a fair number of questions with indirect reply. Kept saying he has been at the job only for 11 months, he inherited trouble. Nobody could have foreseen this etc. He made many changes, streamlined the business, and perhaps, could have done more, and faster. But did not take responssibility and did not apologize (was asked to do as much by Charlie - rather bluntly, in so far as Charlie's usual style goes).

In the last minute of the show, Charlie showed an excerpt of his show tomorrow - conversation with US Senator Chris Dodd - who, when asked about Citi, basically said "Top Management needs to go". Cited the example of Warren Buffet, who for $5 Billion got ~10% of Goldman Sachs. US Govt, after spending $300 Billion + got ~5% of Citi. Not a "good deal" according to him.

It's Apples and Oranges, but that does not matter. The people are angry, their Home Equity, 401(k), College Savings Plans are all in the toilet. The Mob froths at the mouth - it demands a scapegoat. Some heads will need to roll to pacify them.

I have a very strong feeling that Vikram Pandit's Goose is cooked. It's just a matter of time now. He won't be the CEO in Q1' 09.

[Singha]

in general the avg tenure of a CEO is in low single digits these days.
hence the rush for golden parachutes, they know the stay is going to be
short.

[svinayak]

The government reported Tuesday that the overall economy, as measured by the gross domestic product, shrank at an annual rate of 0.5 percent in the July-September quarter, reflecting the fact that consumer spending, which accounts for two-thirds of economic activity, fell at the fastest pace in 28 years.

A weak reading for October would indicate that the current quarter could be off to a rocky start. Nariman Behravesh, an economist at IHS Global Insight, said he was expecting GDP to shrink at a 4 percent rate in the current quarter, reflecting the battering consumers are taking from the worst financial crisis since the 1930s. He predicted that the economy would remain in recession through the first half of next year.

"We are in the early stages of one of the worst recessions in the postwar period, even factoring in a massive stimulus program," Behravesh.

The other reports due out Wednesday were also expected to show further October weakness with orders to factories for big-ticket durable goods plunging by 3 percent and sales of new homes falling by 3 percent, according to the Thomson Reuters survey.

[Singha]

http://www.portfolio.com/news-markets/n ... reets-Boom

a very thoughful 9 page article by michael lewis on the end of wall st boom. he made some money and voluntarily left wall st in 1980s when he couldnt take the hypocrisy anymore.

excerpt:
Now, obviously, Meredith Whitney didn’t sink Wall Street. She just expressed most clearly and loudly a view that was, in retrospect, far more seditious to the financial order than, say, Eliot Spitzer’s campaign against Wall Street corruption. If mere scandal could have destroyed the big Wall Street investment banks, they’d have vanished long ago. This woman wasn’t saying that Wall Street bankers were corrupt. She was saying they were stupid. These people whose job it was to allocate capital apparently didn’t even know how to manage their own.

[svinayak]

Good investment acording to my friend is CA muni bonds which are trading at a discount 5-10% plus they give an interest of 5%

Meltdown 101 Why Fed can easily offer money help
Graphic shows money spent by the federal government in efforts to contain the financial crisis;
http://www.southernledger.com/ap/201469 ... money_help

By Pete Santilli (AP)
Published: 2008-11-26 17:10:02
Location: WASHINGTON

The Bush administration had to strive mightily to win congressional approval of a $700 billion rescue package for the financial system. Now, with no muss and no fuss, the Federal Reserve has announced an even bigger program totaling $800 billion.

What gives Ben Bernanke and his colleagues such power _ and what are the consequences of the Fed's actions?

Here is a look at the Fed's powers and how they are being used to deal with the most serious financial crisis in more than seven decades.

Q: What did the Fed do this week?

A: In the latest in a series of bold moves, the central bank announced on Tuesday that it would purchase up to $600 billion in mortgages and mortgage-backed securities _ investments, in other words _ that are either owned or guaranteed by financial giants Fannie Mae, Freddie Mac and Ginnie Mae, and the Federal Home Loan Banks.

The Fed said it would also create a new program to make up to $200 billion in loans to institutions where the collateral is various types of consumer loans ranging from credit card debt to auto loans and student loans.

Both moves were made in an effort to lower mortgage rates and other consumer loan rates and make those loans more available, in an effort to deal with a prolonged credit crisis that is threatening to pull the country into a severe recession.

Q: What's unusual about the Fed's actions?

A: The Fed normally is not in the business of buying mortgage-backed securities or making loans to boost the market for securities backed by such assets credit card debt and auto loans. In the current crisis, the central bank is using powers it last used extensively during the Great Depression.

Q: How did the Fed suddenly come up with $800 billion to fund these two programs, when the Bush administration had to engage in extensive negotiations with Congress to get legislation for a $700 billion program to help the nation's banks?

A: The short answer is that the Fed used the power it has to print money. It doesn't actually crank up printing presses, but it can create all the money it needs through a few computer key strokes.

Q: That's pretty impressive. How did it get that kind of power?

A: Congress gave the Federal Reserve that power when it created the Fed in 1913 as the nation's central bank, responsible for controlling the nation's money supply. The Fed's goal is to create enough money to keep the economy growing at a steady rate while guarding against creating so much money that it triggers inflation.

Q: How much extra money has it created during the current crisis?

A: Right before the credit crisis first struck with force in August 2007, the Fed's balance sheet stood at $850 billion. As of last week, that figure totaled $2.2 trillion _ nearly a threefold increase.

Q: What is the Fed doing with all of that money?

A: It is essentially pumping it into the financial system, mainly by making loans to banks, giving them added resources with the hope that they will turn around and make more loans to businesses and consumers.

Q: Isn't there a danger that creating all that extra money will fuel inflation?

A: Analysts say that the threat of inflation is not the biggest risk facing the country at the moment. They compare the current economy to a person who has just suffered a serious heart attack. The immediate need is to use a defibrillator to shock the person's heart back to life _ or, in the case of the economy, to supply massive amounts of money to get the credit markets working properly again.

Once that is done, the Fed can worry down the road about withdrawing all the extra money it has supplied to make sure that inflation doesn't become a problem.

Q: How difficult is it for a central bank to withdraw the extra money it injected into the economy before inflation gets out of hand?

A: Throughout history, there are plenty of examples of countries that let inflation get out of control. The last bout of high inflation in this country occurred in the 1970s and early 1980s when a series of oil price shocks sent the country into a period of stagflation _ stagnant growth together with persistently high inflation.

Analysts think that scenario is possible with the current downturn, but they note that the Fed has caught a break, in the form of a 60 percent drop in oil prices since crude hit a record at $147 per barrel in mid-July. The fall in oil prices, along with the severe economic slowdown, should dampen inflation pressures.

[SriKumar]

It is the typical Arab mentality.

One of my friends who runs an IT consulting company in US said this. Few years ago Saudis needed IT consulting services in KSA. They specifically demanded that all consultants must be goras and no Indians. In fact they were willing to pay more for gora consultants. My friend had no problems and supplied them at higher rate.

Heard this from 2 independent sources: that in some Gulf countries, they will bring in goras with low/no qualifications and give them managerial jobs, for no other reason than they are gora. In one case, a desi with a B.E., doing a core engineering job, was working for a Brit who was a truck driver- this was in Dubai or Qatar. Another person said the very same thing...this was in the context of a bank-type job. I dont know how wide-spread this is, but if it is, one has to really wonder about how such a mind-set can exist in the 21st century.

[Neshant]

The vast pool of coolies leave them with the impression that people of the subcontinent are little more than slave labor. Whether bidis and pakis are aware of that is something i wonder.

Not that they could tell the difference but are most of the coolies there Indians, bidis or pakis? I'm talking specifically about construction and other menial labor from there on down.

[Nandu]

U.S. National Bureau of Economic Research : The recession started in December 2007.

http://online.wsj.com/article/SB1228152 ... lenews_wsj

[Muppalla]

Heard this from 2 independent sources: that in some Gulf countries, they will bring in goras with low/no qualifications and give them managerial jobs, for no other reason than they are gora. In one case, a desi with a B.E., doing a core engineering job, was working for a Brit who was a truck driver- this was in Dubai or Qatar. Another person said the very same thing...this was in the context of a bank-type job. I dont know how wide-spread this is, but if it is, one has to really wonder about how such a mind-set can exist in the 21st century.

This is absolutely true and I had personal experience. It was my first consulting experience abroad from India when IT consulting was just starting to bubble in mid 90s. I was assigned to design and develop a temporary solution to a Qatar based Arab company that is investing in retail cloth store franchise of a British company in Moscow. It is not a complex system even for my low experience of that time. All it needed was inventory management, fix the sales prices using the cost prices (in USD and Pound) and data feeds to Teller machines of the store. The manager was also Indian at Qatar and we flew together to Moscow to implement this "temporary solution" so that the permanent solution from a Brit company will be implemented at a later date. Inspite of the Manager's peer reivew of the not working software from the Brit company he(Arab owner of the franchise) persisted by saying "they are Brits and they know everything. It got to be complicated". I competed my so called temporary solution and the store is functioning with its barcoding, teller machine software, sales data and reports. I left the place in three months and the Arab guy waited for an year to implement the Brit's sofware for almost an year. The manager insisted that he can get the whole thing from TCS in 10% of the price that he is paying to Brit company. He did not agree because Brits have to be great as compared to Indians. The most funny part is that I was almost forgetting the assignment and I am planning to move to US and here comes a call from that UK company with a job and they desperately wanted me to help them in understanding the system ( year passed and they are still using my temp solution). Being young and immature, I was extremely angry and felt so sad for being not getting the recognition that I deserved. The Qatar company's Indian manager was very philosophical and kept my spirits up. Due to the anger I did not accept the job of implementing the "would be great software from Brits" in the oher stores he is planning to start in Ukraine and other just seperated SU countries.

Lesson (after some maturity in thinking ) Use the Arab countires to earn fast money. No where you can make/save as much as you can make in these countries. Use that a capital to fulfil your later dreams. I did not do that and moved to massaland.

[svinayak]

Inspite of the Manager's peer reivew of the not working software from the Brit company he(Arab owner of the franchise) persisted by saying "they are Brits and they know everything. It got to be complicated".

He did not agree because Brits have to be great as compared to Indians.

Arab country and their identity are created by British during colonial times and they are mentally colonized. They got their information about Indians and Hindus from British folks.

Reading history is important when you are consulting from one country to another across regions. You need to know the local history and interaction and impact of western Europe with rest of the world. Read Orientalism and political history of Middle East. This hold of the anglo saxon over the economies of the Arabs needs to be understood.

[Nandu]

Three month T-Bills are at 0.1% yield today (up from 0.03% in the chart above in Acharya's post).
In either case, it is essentially equivalent to handing money over the U.S. government and then paying them for the privilege of holding on to it safely for you.

Yet another record low today. 0.01%

[Singha]

delinquent mortages are expected to be 8% of all mortages by end of year per WSJ. these are mortgages more than 60 days overdue. teaser rates are expiring in large nos.

a friend who has just r2i'ed says US is about the only major economy with
bankruptcy laws very favourable to the public. you declare personal bankruptcy, leave house keys in mailbox and walk out. the bank cannot come after you to recover any of the money, they have to take possession of the house and recover what they can. you just live in rented acco and hope to repair credit for later.

he was also saying people are finding it unfeasible to move between states
there for job purposes because current house prices << buying price. even people who want to r2i are in same hole. my friend never bought a house, so he managed a clean break.

[Singha]

Newsweek has a soln to the Big-3 automaker problem:

Merge all of them down into one company

[vsudhir]

US Cities cut back on Salaries, jobs, services expecting shortfalls

Battered by record foreclosures and falling tax revenue, cities are laying off workers, raising fees and closing libraries and recreation centers.

"Almost every city in the country is feeling the impact," says Chris Hoene, director of policy and research at the National League of Cities.

Apparently, Dubya said he was 'sorry' the economic crisis was happening.

Meanwhile, the federal bailout monies are lying unused or at best 'inefficiently utilised'.

The Pentagon has been asked to plan to deploy upto 20k troops inside the USA in case of an NBC emergency. Domestic deployment of the US military would violate a 130 yr old law.

All these are headlines from Drudge. While moi was totally immersed in mumbai news, things have been moving elsewhere.

[Vipul]

Singhaji, Personal bankruptcy laws were very liberal earlier.The credit card companies got together and had new laws passed 2-3 years back, and as a result the procedure for declaring bankruptcy has got a lot tougher.There are obligations now which the person has to fulfill if he wants to make a clean start and repair the credit.

[Nandu]

Even withe new laws consumers/borrowers have lots of advantages with housing. In most states, a first mortgage is non-recourse, i.e. the lender cannot demand anything more than the house itself in return for the loan not being paid. Also, in many states, your primary residence is exempt from being lost in a bankruptcy.

[Shivani]

Bailout Watch 227: Ford, Chrysler and GM Asking for $34b

• Chrysler November Sales Drop 47%
• GM Sales Plummet Apace, Down 41% In November
• Ford November Sales Drop 30%

[Vipul]

Even withe new laws consumers/borrowers have lots of advantages with housing. In most states, a first mortgage is non-recourse, i.e. the lender cannot demand anything more than the house itself in return for the loan not being paid. Also, in many states, your primary residence is exempt from being lost in a bankruptcy.

The house may be safe but with a bad credit report you cant get a good job or anything else that requires a credit check. I personally know a case of job denial based on credit report(It was a financial client).

[Singha]

nytimes
College May Become Unaffordable for Most in U.S.


By TAMAR LEWIN
Published: December 3, 2008

The rising cost of college — even before the recession — threatens to put higher education out of reach for most Americans, according to the biennial report from the National Center for Public Policy and Higher Education.

Over all, the report found, published college tuition and fees increased 439 percent from 1982 to 2007 while median family income rose 147 percent. Student borrowing has more than doubled in the last decade, and students from lower-income families, on average, get smaller grants from the colleges they attend than students from more affluent families.

“If we go on this way for another 25 years, we won’t have an affordable system of higher education,” said Patrick M. Callan, president of the center, a nonpartisan organization that promotes access to higher education.

“When we come out of the recession,” Mr. Callan added, “we’re really going to be in jeopardy, because the educational gap between our work force and the rest of the world will make it very hard to be competitive. Already, we’re one of the few countries where 25- to 34-year-olds are less educated than older workers.”

Although college enrollment has continued to rise in recent years, Mr. Callan said, it is not clear how long that can continue.

“The middle class has been financing it through debt,” he said. “The scenario has been that families that have a history of sending kids to college will do whatever if takes, even if that means a huge amount of debt.”

But low-income students, he said, will be less able to afford college. Already, he said, the strains are clear.

The report, “Measuring Up 2008,” is one of the few to compare net college costs — that is, a year’s tuition, fees, room and board, minus financial aid — against median family income. Those findings are stark. Last year, the net cost at a four-year public university amounted to 28 percent of the median family income, while a four-year private university cost 76 percent of the median family income.

The share of income required to pay for college, even with financial aid, has been growing especially fast for lower-income families, the report found.

Among the poorest families — those with incomes in the lowest 20 percent — the net cost of a year at a public university was 55 percent of median income, up from 39 percent in 1999-2000. At community colleges, long seen as a safety net, that cost was 49 percent of the poorest families’ median income last year, up from 40 percent in 1999-2000.

The likelihood of large tuition increases next year is especially worrying, Mr. Callan said. “Most governors’ budgets don’t come out until January, but what we’re seeing so far is Florida talking about a 15 percent increase, Washington State talking about a 20 percent increase, and California with a mixture of budget cuts and enrollment cuts,” he said.

In a separate report released this week by the National Association of State Universities and Land-Grant Colleges, the public universities acknowledged the looming crisis, but painted a different picture.

That report emphasized that families have many higher-education choices, from community colleges, where tuition and fees averaged about $3,200, to private research universities, where they cost more than $33,000.

“We think public higher education is affordable right now, but we’re concerned that it won’t be, if the changes we’re seeing continue, and family income doesn’t go up,” said David Shulenburger, the group’s vice president for academic affairs and co-author of the report. “The public conversation is very often in terms of a $35,000 price tag, but what you get at major public research university is, for the most part, still affordable at 6,000 bucks a year.”

While tuition has risen at public universities, his report said, that has largely been to make up for declining state appropriations. The report offered its own cost projections, not including room and board.

“Projecting out to 2036, tuition would go from 11 percent of the family budget to 24 percent of the family budget, and that’s pretty huge,” Mr. Shulenburger said. “We only looked at tuition and fees because those are the only things we can control.”

Looking at total costs, as families must, he said, his group shared Mr. Callan’s concerns.

Mr. Shulenburger’s report suggested that public universities explore a variety of approaches to lower costs — distance learning, better use of senior year in high school, perhaps even shortening college from four years.

“There’s an awful lot of experimentation going on right now, and that needs to go on,” he said. “If you teach a course by distance with 1,000 students, does that affect learning? Till we know the answer, it’s difficult to control costs in ways that don’t affect quality.”

Mr. Callan, for his part, urged a reversal in states’ approach to higher-education financing.

“When the economy is good, and state universities are somewhat better funded, we raise tuition as little as possible,” he said. “When the economy is bad, we raise tuition and sock it to families, when people can least afford it. That’s exactly the opposite of what we need.”

[abhischekcc]

The vast pool of coolies leave them with the impression that people of the subcontinent are little more than slave labor. Whether bidis and pakis are aware of that is something i wonder.

Not that they could tell the difference but are most of the coolies there Indians, bidis or pakis? I'm talking specifically about construction and other menial labor from there on down.

That's because we Indians have not kicked their arse in a long time. Arabs only respect those who disrespect them. What we need to do is set up a radioactive mushroom cloud in Riyadh. That'll get their attention.


-------------------

On the Citigroup fiasco-
Do you remember the movie 'Fun with Dick and Jane'. Jim Carrey is promoted just when the company is about to collapse. He was made the fall guy.

I feel the same is true for Pandit as well. Not to mention Obama. These guys have been set up to take the blame for the mess created by whites.

[abhischekcc]

Newsweek has a soln to the Big-3 automaker problem:

Merge all of them down into one company

Man, even that company will not be able to take on Honda.



--------------

Doobai will soon hit the sweet spot of recession cycle. Watch all the obscene display of wealth turn into images of abandoned ruins slowly consumed by the sands.

One of the great things about this recession and stock market collapse is that it has hit the finances of missionaries and islamists very severly. The stock market was a great way these people could store money and raise money. That is gone now.

Another kick in the unmentionables for these people is the fall in commodity prices. Now KSA and UAE and other sundry jehadis can't raise money by selling oil also. They need oil prices to stay above $50 to $70 per barrel (depending on which country), just to break even on their national budgets.

With oil prices trading close to the BEP for them, it mans no more budget surpluses to invest in US market or bombs in Indian trains. Hope oil prices fall below $50. That will hit oil producers across the board.

Remember, less money means they cannot afford to buy off their opponents. IOW, oil countries are set for internal strife - especially if oil prices stay low long enough.

They CAN live off their earlier investments. But who wants to dig into the piggy bank, especially when the piggy bank itself is shrinking? If they try to divest their stock portfolio, two bad things happen - one, they are selling at huge losses, and second, they ensure that the rest of the portfolio shrinks even further.

--Perfect storm for the enemies of Hinduism.

[abhischekcc]

A few years ago they stopped posting M3 data! That was an earthquake that went unnoticed!
I speak American corporate big wigs and even they believe the whole system is a sham and totally manipulated. I hope they don’t succeed in fooling us again and we finally have a meaningful readjustment.

IIRC that was in March 2003. It did not go unnoticed. Many people noticed and adjusted their strategies accordingly.

There was a lot of hope that Obama will change things. Sadly I don’t see this happening. All I see is more bailouts and more make-believe prosperity.

Obama was elected for a very simple reason - so that the American people could be fooled again into believing that real change is possible.

Because of the pain they had been going thru in Bush years - Iraq, loss of himes, etc - they might just have stopped believing in their leaders and asked for real change in the way the country is run - like during the Vietnam wars. Obama's (s)election was done to pre-empt such a movement.

Obama is here to prevent real change and pretend it is happening.

[abhischekcc]

Singha>>a very thoughful 9 page article by michael lewis on the end of wall st boom. he made some money and voluntarily left wall st in 1980s when he couldnt take the hypocrisy anymore

Michael Lewis is the author of Liar's Poker. I suggest everyone buy that book. Its hilarious.

[ss_roy]

I am not sure that most of you comprehend the full extent of this self-inflicted disaster. If you do, I am sorry for repeating it.

The facts-

1] The entire western banking system is insolvent- not illiquid, just plain insolvent. Extensive governement intervention is the only reason banks are still operating in the western world.

2] The mechanisms of self-regulation and credit rating has been shown to be fraudulent. Many financial sectors like IBs, Hedge Funds and even plain insurance companies are f**ked. Inter-institution trust has collapsed. Banks are hoarding money and the effects of credit contraction on non-financial businesses are starting to get ugly.

3] The financial system in the west will never be the same again. To date they have lost 4 times the amount of inflation adjusted money they have made since 1400 AD . The 600 year old business model of western banks is therefore essentially dead. Lots of reasons. The reincarnated version of western banks will look a lot like nationalized banks in India.

4] This collapse has destroyed trillions of notional wealth and will destroy trillions more. Pensions in the western world are DOA. Many professions like doctors, lawyers are starting to realize that they will never make the same amount of money again.

5] The financial shell games and ponzi schemes of the last 30 years have come back to haunt them- all at once!The demographic profile of the west is not good. They have too many baby boomers who had hoped to retire but now find themselves unable to retire.

6] Don't believe westerners who say "it will come back". That is PR and wishful thinking. Read more about the real causes of this crisis and why it will essentially end the dominance of the west.

7] The west has not yet officially capitulated, but it will have to..

What it means for India.

1] China is toast! Unless they pull a rabbit out their behinds, their progress will start to unwind. They built an economy that was too dependent on exports, and they discouraged their citizens from consuming their own stuff. The debt based export market has collapsed, and local consumption has not yet caught up with production. Expect massive job losses and widespread civil unrest.

2] Pakistan is DOA. Hopefully they (fundies) will pull of a stupid stunt with loose nukes in the west. It would be very desirable if the US nuked them in retaliation.

3] The main leverage of the west over 'colored' countries like India is gone! They need you much more than you need them. But you guys have to realize that and take advantage of this calamity. Expect them to line up and sell you high tech stuff- nuclear reactors, missiles, avionics, aircrafts, technology- anything you desire. Their socioeconomic system requires new consumers, they are old and tapped out- you are not.

3] If India plays it's cards right, it could position itself as the biggest growth market in the world. We still have well run and transparent banks and people who do not save too much like the chinese or too little like the americans.

4] I hope that any new government in India (2009?) will not be full of geriatrics. Hopefully, they will also stop being obstructionist, petty and let people become rich. I have always believed that politicians and bureaucrats in India conspire to hinder progress and keep people poor.

I could write in much greater detail, but it might make it harder to grasp the big picture.

If could post links to blogs that have been following this story for the last 3 years, if you want..

[Singha]

saw an article in ET today that indian moneybags who had bought
into dubai real estate are left high and dry now with developers
stopping project activity.

and the Amir helpfully passed a law saying that if a customer
cancels, the developer can retain 30% of the cash indefinitely and only return this when he resells the cancelled flat

here is another:
http://economictimes.indiatimes.com/Int ... 746936.cms

Boom turns to gloom as crisis hits Dubai
24 Nov 2008, 0200 hrs IST, REUTERS

DUBAI: The seaside emirate of Dubai shifted into crisis mode this week as its breakneck building boom stalled, its lending bonanza evaporated and
the government pondered wider steps to rescue banks.

Dubai - self-styled bling capital of the Middle East, nightclub hotspot for the teetotalling Gulf and home to the world's tallest building and biggest mall - has gone pear-shaped.

"It's gotten pretty ugly out there," analysts at Nomura Investment Banking wrote in a note this week, describing Dubai's property market as "a full-scale frenzy in which speculation went largely unchecked until it was very late."

The result may be a new business model for the emirate, one based less on debt and speculation.

Dubai's response is now being hammered out by a committee of business and government leaders charged with steering the emirate through the crisis and perhaps throwing its high-debt business model out the window.

Big developers have started firing staff and paring projects, banks like Emirates NBD ENBD.DU have blocked consumer credit to employees of companies at risk, and at least one major mortgage company has stopped lending altogether.

"Lenders blinded by rising oil prices and borrowers spellbound by easy returns have helped build a mountain of private sector debt in parts of the region that has generated an illusion of excess and abundance," Nomura said.

Now, investors fear that individuals and corporations alike will have trouble paying back Dubai's non-bank foreign currency debt estimated at just under $70 billion, according to estimates by ratings agency Fitch.

Shares in the region have lost around $1 trillion since the beginning of the year as investors fled. The UAE finance ministry said last month it would inject 70 billion dirhams ($19 billion) into the banking system, and is already looking at doing more to keep interbank liquidity flowing.

Many had hoped that the six countries of the Gulf Cooperation Council (GCC) would escape the crisis due to their massive current account surpluses from energy exports.

"Dubai is the most vulnerable, as it has little oil and has been booming on the oil surpluses from the GCC, Iran and Russia," said analysts at Citibank this week.

Dubai Inc

Dubai Inc - the name applied to the emirate because it is run more as a business than a state - now faces a major overhaul and has taken on teams of consultants to advise on how it might reshape itself in an era of weaker credit, rising competition, falling speculation and narrower profit margins.

With barely any oil to call its own within the loose UAE confederation, Dubai made its bid for fame by housing banks, retail, media, shipping and logistics enterprises and by billing itself as a safe haven in a volatile region for investors.

Post-crisis, banks and property firms are likely to merge, developers retrench, and the wild culture of speculation grow tame.

In addition, some suggest that the monetary regimes in the Gulf - all, except Kuwait, which peg their currencies to the dollar - may need to restructure as floating regimes instead, a move likely to spur decades-old goals of monetary union.

Few anticipate default given the widespread view that Dubai is too big to fail and the implicit support provided by its neighbor Abu Dhabi - home to the largest sovereign wealth fund in the world, ADIA.

"We believe Dubai will pull through with some help," Citibank said.

But with the cost of credit for the Gulf's top 22 financial firms rising from 30 basis points over LIBOR in early 2007 to around 200 now, many expect Dubai's spree to halt, plans to be swept from the drawing board, and existing projects to struggle.

The result, in the end, may be the sustainable growth model that Dubai has sought all along.

[Singha]

bloomberg:

Dubai Speculators Quit as Lending Drought Bursts Desert Bubble

By Glen Carey

Dec. 4 (Bloomberg) -- The classified ads in Dubai read like an obituary for a real-estate market that until a few months ago seemed immune from the global credit crisis.

A Turkish investor, who identified himself as Sebat, took out 10 bright yellow ads in the Nov. 25 edition of Gulf News, the United Arab Emirates’ biggest newspaper, with the headline: “DIRECT FROM OWNER DISTRESS SALE!!!” Sebat said he used to be able to buy four or five properties at a time and sell them the next day for a profit of as much as 5 percent.

“There is panic in the market,” said Sebat, 52, who wouldn’t give his full name because he’s juggling 60 properties.

The property bubble in the desert emirate, home to the world’s tallest building, most expensive hotel suite and largest manmade islands, is bursting as scarce credit and slumping oil prices have international investors scurrying to dump assets. That may shatter Dubai’s goal of creating a sustainable economy by building the Persian Gulf hub for finance and tourism, forcing it to depend on oil-rich neighbor Abu Dhabi for financing.

“Dubai is more precarious than it has ever been,” said Christopher Davidson, author of “Dubai: The Vulnerability of Success” (2008, Columbia University Press). “If the property industry collapses in Dubai, it will be finished. Dubai’s relative autonomy will come to an abrupt end.”

The emirate’s push into luxury property developments and tourist attractions was diversification on “paper sand,” said Davidson, a professor of Middle Eastern affairs at Durham University in the U.K.

‘Nasty Downturn’

Real-estate prices may drop 20 percent or more, analysts at EFG-Hermes Holding SAE, the biggest publicly traded investment bank in Egypt, said in a report this week.

Nakheel PJSC, the Dubai state-owned developer of three palm-shaped islands in the Persian Gulf, said Nov. 30 that it is scaling back or delaying work on some of its $30 billion in projects, including the 62-story Trump International Hotel & Tower near the Mega Yacht Club on the trunk of Palm Jumeirah.

“In such a nasty downturn, which we are seeing now, they are just not immune to global events,” said Michael Baer, founder of Dubai-based Baer Capital Partners and great-grandson of Julius Baer, who started Switzerland’s largest independent wealth manager. “Maybe the boom is over for the time being.”

The sheikhdom may need help from Abu Dhabi and the U.A.E. to service its debt, according to Moody’s Investors Service. Dubai borrowed $80 billion to finance its transformation and make up for a lack of natural resources. It has just 4 billion barrels of oil reserves, compared with Abu Dhabi’s 92.2 billion barrels.

‘Healthy Correction’

Dubai officials say the emirate can weather the storm.

“The real estate sector is witnessing a healthy correction,” Mohammed Ali Alabbar, chairman of Emaar Properties PJSC and head of a committee studying the effects of the global credit crisis on Dubai’s economy, said in a Nov. 24 speech. “This is a consequence of global financial conditions and is inherent to the very nature of the market.”

Dubai will meet its debt obligations, he said.

Baer said he is optimistic the boom will return if the government takes the right actions. “There will be layoffs, they will have readjustments in asset prices and maybe they will have more careful accounting practices,” he said.

Led by Sheikh Mohammed bin Rashid al-Maktoum, Dubai attracted investment with no income tax and free-trade zones. Dubai, the second-biggest of the U.A.E.’s seven states, benefited from an inflow of international investors eager to tap the Gulf’s wealth after a six-year surge in oil prices.

Five-Year Boom

Real-estate values surged fourfold over the past five years, fueled by a supply shortage and an influx of expatriates. Rising commodities prices drove inflation, which accelerated to a record 11.1 percent in the U.A.E. last year. Dubai opened its property market to foreign investment in 2002.

Borrowers tapped mortgages for as much as 90 percent of a property’s value to buy homes on the manmade fronds of the Palm Jumeirah and villas with gardens or golf-course views in developments such as Emirates Hills, The Springs and The Lakes.

Now the credit crunch is coming to Dubai. It’s being aggravated by oil prices that have tumbled 68 percent since reaching a record $147.27 a barrel on July 11.

That will mean less interest in buying third or fourth homes in Dubai, said Gabriel Stein, a director at London’s Lombard Street Research, which provides economic analysis.

“There are bound to be white-elephant developments,” he said. “If it was built on the premise of ‘build it and they will come’ then that will now turn out to be a mistake.”

Bargain Villas

Banks are tightening lending or freezing it altogether. Amlak Finance PJSC, one of the U.A.E.’s biggest mortgage lenders, said Nov. 19 that it had suspended new home loans. London-based Lloyds TSB Group Plc stopped offering mortgages for apartments in Dubai on Nov. 11 and reduced the amount it will lend for villas to 50 percent of the price, from 80 percent.

The cost of a seven-bedroom villa on Palm Jumeirah dropped to as low as 19 million dirhams ($5.2 million) last month, from 30 million dirhams in September, according to the Dubai unit of German real-estate company Engel & Voelkers AG.

On Nov. 20, Nakheel and its South African partner threw a $20 million party for the opening of the $1.5 billion Atlantis resort, complete with the world’s biggest fireworks display and celebrities from actress Charlize Theron to singer Kylie Minogue. The hotel’s most expensive suite costs $42,000 a night excluding breakfast.

Two days later, the U.A.E. stepped in to shore up Dubai’s two biggest mortgage lenders, Amlak and Tamweel PJSC. They are merging with state-owned Real Estate Bank, based in Abu Dhabi.

No Longer Immune

Artur Khayrullin moved to Dubai three years ago to escape the Russian winter and invest in the booming real-estate market. Now he’s being forced to sell four apartments to raise cash for his family business in Moscow. They have been on the market for two months.

“With all this oil money in the region, I thought the Dubai property market would be secure from the global problems,” the 30-year-old Bentley owner said, reached on his mobile phone on the beach. Now, “nobody is getting financing.”

The worst may be yet to come as a glut of properties arrives on the market.

About 70,000 units are scheduled to be completed in 2009, more than half of which were originally planned for this year and last, according to a September report from EFG-Hermes.

Buyers willing to commit to purchases before construction are harder to find. So-called off-plan sales helped fuel the bubble with some properties passing through multiple buyers. Off-plan prices have dropped as much as 20 percent since September, according to developer Al Jabal Holdings.

“The speculative buyers were more than 50 percent of the market,” said Eckart Woertz, chief economist at the Dubai- based Gulf Research Center. “They have disappeared.”

Istanbul native Sebat said he’s prepared to leave after 12 years in Dubai.

“I will be in a very big panic and will want to get out of Dubai if I don’t think things will get better,” he said.

[abhischekcc]

Deleted unrelated whine about Indian politics