Fritz
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Re:Dow last 5 years versus the Dow last 1 year
« Reply #1 on: 2008-07-14 22:37:56 » |
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Quote:| [WW]I made this comparison graphic earlier today. |
I am unable to see the alleged graph ... does this means all the money is now gone ?  ......
I watched the Business report Friday night on PBS and I just don’t understand ..... How can 75% of all Mortgages be going through IndyMAC and FannieMae ?
Why was the FED counting on them to get the US out the mortgage crunch ?
The attached articles seem incongruous .... "hope" ... "no hope"... and between the lines ... "we're not in Kansas anymore"
The minds at the water cooler suggest that the world is putting billions into the US to prop the US banking system up ... is that true ?
I've dutifully been reading the CoV posts as well and yet I'm inclined to assume the fetal position with single malt scotch in a baby bottle (no ice, not shaken) rocky gentle to Deep Purple "My Women from Tokyo".
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Fritz
Source:Reuter UK
Author: Walter Brandimarte
Date: July 14th 2008
NEW YORK, July 14 (Reuters) - U.S. stocks fell on Monday as worry about the health of the U.S. banking sector after Friday's collapse of IndyMac [Fritz] It collapsed into what ? outweighed earlier optimism over the government's plan to stabilize Fannie Mae and Freddie Mac
On Sunday, the U.S. Treasury and the Federal Reserve said they would lend money and buy equity if needed to rescue the two pillars of the U.S. housing market, sending shares soaring early on Monday. For details, see [ID:nSP52252]
But the gains soon fizzled as analysts noted any direct government investment in Fannie Mae and Freddie Mac would further dilute existing shares -- the last thing investors want <snip>
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Source: CNN Money
Author: CNNMoney.com staff writer Aaron Smith contributed to this report
Date: July 14, 2008: 7:23 AM EDT
NEW YORK (CNNMoney.com) -- The federal government's plan to rescue Fannie Mae and Freddie Mac won support from some experts and politicians Monday but did not fully assure investors in the beleaguered mortgage finance giants.
Share prices of Fannie and Freddie, continuing their weak run, fell to fresh 17-year lows. Their performance was troubling because the two firms are crucial sources of home loan funding and key to any recovery of the battered housing market and the broader economy.
The Treasury Department and Federal Reserve announced steps Sunday to make funds available to the firms if necessary. Experts said the success of the efforts will ultimately be measured by market reaction.
Shortly after the U.S. markets opened, shares of Fannie (FNM, Fortune 500) jumped as much as 32%, while shares of Freddie (FRE, Fortune 500) jumped 26% higher. By early afternoon, they had fallen deeply into negative territory before rebounding a bit at the end of the day.
Fannie ended the day down 5% while Freddie closed with an 8% loss.
Things were a touch better in credit markets, as Freddie received good prices on $3 billion in corporate debt it sold through auction early Monday morning.
Three-month bonds sold at a slightly lower interest rate than Freddie's previous auction a week earlier, while the six-month bond sold for only a narrowly higher price, according to wire service reports. That suggests that investors are more confident about the near term outlook for the firms than the long-term.
Government tries to assure investors
Treasury Secretary Henry Paulson said Sunday that the Bush administration plans to ask Congress to pass legislation that would temporarily extend lines of credit from Treasury to the mortgage providers. The firms now have authority to borrow up to $2.25 billion each from Treasury. A Treasury spokeswoman said the department had not yet set a new limit it would ask Congress to authorize.
Paulson also proposed that Treasury be given authority to buy equity in the companies, although a Treasury spokeswoman said Monday that the department did not expect to need to use the authority, that it was only proposed as a "back-stop" to be used on an "as-needed" basis.
Sen. Christopher Dodd, D-Conn., told reporters Monday afternoon that he hoped the proposals could be passed by both the House and Senate as early as this week.
The Paulson plan could be attached to a pending housing bill, Dodd said. The housing measure, which strengthens the regulatory oversight of the firms as well as provide relief for homeowners facing foreclosure, was passed by the Senate on Friday and was expected to go back to the House this week.
Dodd said he believed that the result of Freddie's debt offering was a sign that the markets have more confidence in the outlook for the two firms, even if their stock prices have taken additional hits.
"It looks as least that first blush that these ideas that are being floated are having the desired effect and that is to calm things down here and to restore some confidence that the people need to have in these [firms]," he told CNNMoney earlier in the day.
Paulson and Securities and Exchange Commission Chairman Christopher Cox have agreed to testify before Dodd's Senate Banking Committee on Tuesday. Federal Reserve Chairman Ben Bernanke had already been set to testify before the committee Tuesday to give his semi-annual update on his view of the economy.
In addition to the Treasury statement Sunday evening, the Fed announced that the Federal Reserve Bank of New York had been granted authority to lend to Fannie and Freddie should such lending prove necessary. The Fed has traditionally only lent money directly to commercial banks, but since it helped engineer a purchase of Bear Stearns in March, it has allowed Wall Street firms to also tap into that source of funds, known as the discount window.
"This plan meets the policy requirements for a rescue," said Jaret Seiberg, a financial services analyst for the Stanford Group, a Washington research firm, in a note Monday morning. "It provides emergency liquidity measures and establishes a mechanism for injecting capital into the enterprises if needed."
Both companies said that they have adequate capital and that it is possible they might not need to turn to the Fed or Treasury for funds. The Office of Federal Housing Enterprise Oversight, the federal regulator that oversees the firms, also said on Sunday that the companies have enough capital.
Seiberg said it's too soon to tell if the plans announced Sunday are enough to see Fannie and Freddie through the current crisis.
"Ultimately, the success or failure of this plan rests with the market," he said.
University of Central Florida economist Sean Snaith said he agrees that the actions by Treasury and the Fed were prompted by market concerns more than any imminent problem the firms might have continuing normal operations.
"Using the stock market as a barometer is difficult to do in a case like this," Snaith said. "This crisis is essentially a crisis of confidence, and that confidence takes some time to restore."
Main player in mortgage market [Fritz] Doesn't the energy issue come into play just a little ... RESTORE from what ?
The two firms, which were set up by the government, own or back about $5 trillion worth of home debt - half the mortgage debt in the country. They have suffered about $12 billion in losses between them since last summer.
Since the crisis in credit markets last year, they have become virtually the only source of funding for banks and other home lenders looking to make home loans. Their ability to do so is crucial to the recovery of the battered home market and the broader U.S. economy.
Despite their government-sponsored status, they are owned by shareholders, and those investors drove shares down by nearly half last week on concerns that they would not be able to raise the capital they need to cover future losses. The declining share price made it more difficult and expensive to raise that capital. Fear was rampant on Wall Street last week that a government bailout would leave shareholders' stake worthless.
-- CNNMoney.com staff writer Aaron Smith contributed to this report.
First Published: July 14, 2008: 7:23 AM EDT
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Source: CNN Money
Author Barney Gimbel
Date: Last Updated: July 14, 2008: 12:04 PM EDT
The new new world order
Skyrocketing oil prices. Double-digit inflation. Is the great global economic boom finally coming to an end?[Fritz]What Boom ?
(Fortune Magazine) -- What may be the world's busiest grocery store is a Carrefour "hypermarket" in the Gubei area of Shanghai's Changning District.
Seven days a week, from 8:30 A.M. to 11 P.M., customers jam the aisles of this 126,000-square-foot market and fill their baskets with a dizzying array of produce, meats, and electronics from around the world. Last year six million people - more than twice the population of Chicago - shopped here and dropped $155 million along the way.
There are no signs of a global slowdown in these aisles. Carrefour's sales in China were up 25% in the first quarter of this year. Sales in places like Brazil and Romania jumped more than 50%. Poland is hot. So are Argentina, Turkey, and Colombia.
But the picture isn't the same in Carrefour's home country: France grew an anemic 2.6% last year. "If you're a consumer sitting in Paris and you're reading newspapers or watching TV, it looks like the world is coming to an end," says Carrefour executive David Shriver. "But consumers in places like China and Brazil simply don't see it that way."
Welcome to the new, precariously bipolar world.
While gross domestic product growth is cooling a bit in emerging markets, the results are still tremendous compared with the U.S. and much of Western Europe. The 54 developing markets surveyed by Global Insight will post a 6.7% jump in real GDP this year, down from 7.5% last year. The 31 developed countries will grow an estimated 1.6%.
The difference in growth rates represents the largest spread between developed and developing markets in the 37-year history of the survey. "The fact that the U.S. is no longer the locomotive of growth it was a few years ago," says Nariman Behravesh, Global Insight's chief economist, "doesn't seem to be that important anymore."
Put another way, the American consumer is still hungry, but the world consumer is voracious.
Consider the growing middle class in China, which is expected to multiply sevenfold by 2020, to 700 million people, according to Euromonitor, and India, where the number of middle-income folks will grow more than tenfold, to 583 million, says consultancy McKinsey & Co. First they want new homes with electricity - witness the quadrupling prices since 2000 of steel, oil, and copper. Then, as incomes rise, so does demand for everything from toothpaste to telephones, from automobiles to airplanes.
At first blush this sounds like great news for Global 500 companies: Chinese and Indian consumers essentially offsetting belt-tightening by Americans and Western Europeans. And indeed, overseas growth has been a bright spot - so far - for many of the world's largest corporations. Wal-Mart's (WMT, Fortune 500) international sales grew 17.5% this year - triple what it saw Stateside - and now constitute 24% of the company's total revenue, up from 8.9% a decade ago. Roughly half of GE's (GE, Fortune 500) gas turbines produced in Greenville, S.C., end up in Saudi Arabia, which is building four new cities; rival Abu Dhabi is spending $200 billion on attractions, including a Guggenheim museum.
"There is still a lot of double-digit growth out there," says John Rice, GE's vice chairman. "The clearly tougher financial markets in the U.S. don't appear to be impacting global demand for everything."
But double-digit growth is also creating double-digit inflation. Americans whine about $4 gasoline and $5 Cheerios, but elsewhere in the world the reaction is much more serious. Truckers in South Korea, France, and Spain have blocked highways to protest high fuel prices, and angry Egyptians barricaded roads after a cut in flour subsidies. In India inflation rose to above 8% in May from below 4% last August. Chinese inflation was 7.7% in May, up from 1% in early 2006.
It's worse in the smaller markets: Inflation now exceeds 30% in Ukraine and Venezuela and 25% in Vietnam. This translates into some pretty jaw-dropping price increases: Rents are up 82% in Dubai in 12 months, and rice prices in India have nearly tripled since January. Such rapid inflation can stifle growing economies, and many analysts think the great global boom eventually will flame out - or at least dramatically slow.
And let's not forget that many of the countries experiencing strong growth today depend on exports to the U.S. to keep their economies humming; a slowdown in U.S. spending surely will have ripple effects in places like India, China, Vietnam, and Mexico.
The problem is how to fix it. Most experts believe that to break the back of double-digit inflation, central bankers have to raise interest rates dramatically, which can result in higher fuel prices, rising unemployment, and eventually a recession.
"This kind of situation always ends in tears," says Global Insight's Behravesh. "If you let inflation get out of control, it hurts. If you try to clamp down, it hurts."
For the rest of the planet, a slowdown in the emerging world would be a double-edged sword: Once-hot markets for, say, L'Oréal lipstick or Tide detergent would cool, hurting corporate growth prospects. A less ravenous China or India, though, would surely lead to a drop in the price of many commodities, including oil, offering much-needed relief to pocketbooks worldwide.
What is the CEO of a Global 500 company to do? Listen to the doom-and-gloom economists and act cautiously, or keep pushing into fast-growing but fragile economies?
Smart executives are doing a bit of both, seeking new growth markets with the full understanding that their plans will be shaped and changed by global forces. Some of those trends are huge and long-lasting, like the rise of the global middle class. Others are not: Carrefour, for example, almost had a disaster on its hands when Chinese consumers threatened to boycott the chain over an event it could not foresee or control: A pro-Tibetan protester in Paris assaulted a wheelchair-bound Chinese Olympic torchbearer.
Robert McDonald, Procter & Gamble's (PG, Fortune 500) chief operating officer, has borrowed a military term to describe this new business world order: "It's a VUCA world," he says - volatile, uncertain, complex, and ambiguous. "The idea that a butterfly flaps its wings in Africa and an earthquake occurs somewhere else in the world is our reality. It's no longer just a nice book that Thomas Friedman wrote," he adds, referring to the New York Times columnist's book on globalization. "It's my life."
First Published: July 14, 2008: 5:20 AM EDT
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