Blog Archives

Things are looking up too! Bernanke is. | O’nomics

Watch our related post on how we have the snowmobile working to clear the c’congested’ road out to work..(TARP)

Well, all we needed to get on the road was pleasant musical carols singing we have cut down the debt..people almost rose to the occassion, refusing to pull out credit cards, but consumer credit overall is up with spending on cars and other personal loans..mortgages haven’t really taken off yet only the superbargain homes being bought up at less than $100k from foreclosures..Out here in the emerging markets, you can’t get easy credit for more than one home per family too and that might still be something to do for Bernanke ( if he makes it!)

October consumer credit outstanding fell at a 1.69 percent annual rate to $2.48 trillion. September’s figures were revised to show a $8.77 billion drop, previously reported as a $14.8 billion fall.

Analysts polled by Reuters had forecast consumer credit dropping by $9.5 billion in October. Consumer credit has now declined for nine straight months.

Confronted with the worst labor market in 26 years, consumers have been reluctant to spend, raising doubts that the fragile economic recovery might falter once the stimulus from government spending runs out.

“Households are still in the process of deleveraging. They are increasing spending, but its coming out of the savings they have accumulated during the recession,” said Bernard Baumohl, chief global economist at The Economic Outlook Group in Princeton, New Jersey.

“They are not acquiring new debt. We need to have consumers ramp up their spending if this economy is to continue to grow through 2010.”

Nonrevolving credit, which includes closed-end loans for big-ticket items such as cars, boats, college education and holidays, rose $3.44 billion, or at a 2.59 percent annual rate, to $1.59 trillion.

via U.S. consumer credit decline slows in Oct | Reuters.

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Arizona borrows $700M line of credit for 2009| Phoenix Business Journal

zyakaira notes: To date the Jobs report at recovery.gov is showing jobs being created in non existent (congressional) districts, Arizona RE is still down 75-90% over 2007..it all happened here and they are borrowing more from a private bank, why doesn’t the Obama Administration print for them? We know ist is irreproachably above the law and all that but the stimulus has a lot of these funds still available!! Jobs are not really happening, mortgages are not being denominated in the numbers provided for.. and the Healthcare bill not fall short unless we find where the real money would be needed in the pipeline..best of luck to recovery.gov

On the other hand, it’s good that the bank can get together for Arizona right now, may be it will just get paid from one of Geithner subscribed kitties down the line..

You think you owe your bank and credit card company a lot of money?

The state of Arizona is primed to take out a $700 million line of credit (essentially a loan) with Bank of America (NYSE: BAC) to help deal with its budget deficits and financial woes.

The Arizona State Loan Commission will hold a meeting on the BofA credit line/loan on Thursday, State Treasurer Dean Martin said Wednesday.

The agenda of the meeting includes notations that in order to discuss the loans, the Loan Commission may go into closed-door sessions that will not be open to the public.

The state faces large budget deficits that could total as much as $4.5 billion for the rest of this fiscal year and the next budget year.

The Loan Commission comprises Martin, Gov. Jan Brewer and Arizona Department of Administration director David Raber.

 

State plans to take out $700M line of credit – Phoenix Business Journal:.

Wells Fargo Settles Lawsuit Over Auction-Rate Securities – DealBook Blog – NYTimes.com

Wells Fargo said on Wednesday that it had agreed to buy back $1.4 billion in auction-rate securities it sold to investors before the market for those securities dried up last year.The decision settles a lawsuit brought against the firm by California’s attorney general for violating the state’s securities laws. Wells Fargo also agreed to pay the state’s expenses related to the lawsuit.The brokerage arm of the bank marketed the securities, which resemble corporate debt and whose interest rates were regularly reset by auctions, as an alternative to cash for years, even after analysts warned that the market could freeze up. In February 2008, banks stopped participating in the auctions and effectively locked up investors’ cash.The suit, brought by the California attorney general, Jerry Brown, contended that Wells Fargo routinely misrepresented, marketed and sold auction-rate securities as safe, liquid and cashlike investments, omitting material facts.“Wells Fargo convinced thousands of investors to purchase auction-rate securities with promises of robust returns and liquidity, but when the market collapsed, investors were left out in the cold,” Mr. Brown said in a statement. “Based on misleading advice, investors bought these risky securities. Now, retail investors and small businesses are finally getting their money back.”Under the terms of the settlement, Wells Fargo agreed to buy back at par value by April 2010 all auction rate securities purchased through its brokerage unit by investors before the market froze up.About half of the auction-rate securities sold by Wells, which is headquartered in San Francisco, were bought by California residents.

via Wells Fargo Settles Lawsuit Over Auction-Rate Securities – DealBook Blog – NYTimes.com.

This is apart from the hidden bonus in the healthcare bill over the redefinition of San diego and other California metros as rural etc costing $300 million to Obama’s administration. A good day for Californians!

Will the French dominate post crisis?

The French BNP and the Barclays’ have definitely come out on top post-crisis and given parochial attitudes in both nations, their governments are likely to plan making heavy weather on the bad financial markets industry..but I wouldn’t say these repayments signify any better practices on the part of these wannabe practitioners on the global horizon, but rather the fact that they were bystanders during the banking explosion of the last decade.

They do maintain a continued conservative stance which will come in useful, but given the history of the markets..they are much more likely to be the source of the next big black hole in a few days (years) maybe. However, with Citi planning to get out of government stakes as well, this could really absorb the prior decades’ sentiments some more and yet faster..leaving us with a blank slate in which to regulate our childrens’ future.

Coming back to the French, they do not have the depth in their markets to fund expansion and their global diaspora in terms of expansion by SocGen and BNP hardly enough to give them currency to support their non US pro Iran , pro Russia stance. They could however be the closest Euro member state for the new nations in East Europe that have been trying to get a piece of the global economics in this last decade as also they could substantially support some African nations. Being pragmatic however, they are likely to discover faster that they really do not want significant exposure in these markets

BNP recently paid $19.8 billion for Fortis (October 2008) and has therefore significantly completed its footprint in West Europe while SocGen has been active in Asia ( Offshore from Singapore, JVs with SBI in India)

China has had a long history with European Banks with the Deutsche Asiatique Bank, British Belgian Industrial Bank of China and the Sino Belgian Bank which issued Taels (North Asian currency) during Siberian-Japanese-Chinese trade ‘wars’ of the late 19th century but has never been remunerative for Foreign bank ( Comparitively with India, Chinese have very few branches and investment assets in Foreign banks)

However, as of March 2009 Bank of china had already purchased 20% in the Paris based Banque de Rothschild and with BNP out of government indebtedness, its reasons for going into China would be more mercantile than ever.

BNP Paribas, the largest French bank, said on Tuesday that it would raise €4.3 billion from investors to repay government bailout funds, The New York Times’s David Jolly and Chris V. Nicholson reported.

BNP Paribas, based in Paris, said its board had decided to repay, within the next month, the €5.1 billion, or $7.5 billion, it borrowed from the state March 31. The government would also receive a payout of €226 million on the nonvoting preferred shares it purchased.

Baudouin Prot, BNP Paribas’s chief executive, said in a conference call that the G20 meeting in last week in Pittsburgh, where world leaders agreed in principle that banks should raise more capital, had influenced the timing of BNP’s decision to issue shares, as had the lender’s share price, which is up more than 92 percent this year.

Christophe Nijdem, a banking analyst at Alphavalue in Paris, called the stock issue’s timing “judicious.”

“They had a window of opportunity,” he said. “A lot of banks will turn to the market in the months to come, and it’s first come, first serve.”

Mr. Nijdem added that, compared to American banks, European banks were more leveraged, and had to play catch up. Major Western banks are forecast to post losses of almost $2.5 trillion for the period 2007-2010, according to the International Monetary Fund.

via BNP Paribas to Raise $6.27 Billion to Repay Bailout – DealBook Blog – NYTimes.com.

AIG’s Taiwan Life Unit

zyakaira notes: The Taiwan Life unit: The recent laundry list of asset sales planned by AIG see here continues to find conflict of interest in almost each of its deals, as AIG remains the buck stopper of the entire industry’s claims good or bad..

Bloomberg reports that Morgan Stanley’s (NYSE:MS) private equity fund pulled out of the bidding group Chinatrust Financial Holding Co. is leading. So is Chinatrust still in the bidding?

The sale of the unit is expected to bring in about $2 billion, but it could have trouble hitting that price target as the unit is under as much financial pressure as its parent. Nan Shan was forced to raise $1.45 billion in a rights offer last year to avoid slipping below a regulatory capital requirement as unprofitable policies eroded its reserves.

So who else is in the bidding for the unit?

Carlyle Group, which joined Fubon Financial Holding Co.

Cathay Financial Holding Co.

China Strategic Holdings Ltd. may have joined Primus Financial Holdings Ltd.

Binding offers are due for submission on Aug. 28, according to the reports. – Maria Woehr

via Morgan Stanley, ChinaTrust to drop AIG unit bid? (Dealscape – Private capital).

Tarnished Citigroup Looks Like It Could Shine Again – WSJ.com

Citigroup has been garnering investor interest amid optimism on Wall Street that the worst is over for the beleaguered banking company.

Citi shares have been pounded in the past two years, falling to around $3 from $55 because of heavy losses and a huge increase in its shares outstanding as a result of a $58 billion preferred-stock exchange offer designed to shore up the company's equity capital base.

Citi stock is down 50% this year alone, while J.P. Morgan Chase shares have risen 20%, to a recent $38, and Goldman Sachs has surged 90%, to a recent $162.

The Worst Is Past

The bullish case for Citi is that it has put concerns to rest about its viability and capital adequacy.

And, based on tangible book value, a conservative measure of shareholder equity, its stock looks inexpensive. (Book value is the value at which assets are carried on a company's balance sheet — or the value of a company if it sold off all its tangible holdings.)

Citi has been trading at about 70% of its book value of $4.30 a share, pending completion of the preferred exchange offer that probably will boost its share count to 23 billion from the current 5.5 billion.

In contrast, J.P. Morgan and Goldman fetch about 1.6 times tangible book; Wells Fargo commands twice its book value.

“Citi is the one stone that investors haven't turned over,” says John McDonald, a banking analyst at Sanford Bernstein who carries a price target of $4 on Citi shares.

via Tarnished Citigroup Looks Like It Could Shine Again – WSJ.com.

Banks Post Profits, Aided by Asset Sales – NYTimes.com

zyakaira  notes: Citi reported $4.3 billion, BofA $3.2 billion on $33 billion, $JPM $2.7 billion on $27.7 billion, with TARP repayments costing $0.10 to the EPS and $GS reported $1.8 billion (WAMU and MER seem to have paid off!)

Citi and BofA woula have made losses without the one time stake sales while JP Morgan has absorbed the bullets and GS never got shod in the shooting gallery for all practical purposes.

Unfortunately, $DB and the European banks are still sinking! Citi beat the analysts to hell! One more shot for the next quarters acquisition boom. If you note, all profit is from underwriting and fees while morts and Fixed Income has stopped bleeding at these 4 and hopefully $WFC

NOW LET’s GET TO REPAIRING THE ROAD AND THE POWER PROBLEMS, as Mamaa would say..

nytimes ->;

But behind the figures was a sober reality: Those happy results were driven by billions of dollars in one-time gains — in the case of Bank of America, by a profit from the sale of a stake in a big Chinese bank and, in the case of Citigroup, by a bonanza from a new joint venture for its Smith Barney division.

Without those one-offs, the banks, despite two taxpayer-financed bailout dollars apiece, would have lost billions.

Like Goldman Sachs and JPMorgan Chase, which stunned Wall Street earlier this week with robust earnings reports, Bank of America and Citigroup got big increases from their trading operations.

But the pain being felt by hard-pressed American consumers hurt these giants even more. Both banks set aside billions of dollars to cover looming losses on consumer loans and warned that, given the tough economy, the road ahead could be rocky.

Still, the results exceeded analysts’ expectations. Bank of America announced earnings of 33 cents a share, and Citigroup reported earnings of 49 cents a share. The results at Citigroup far outstripped the loss of 18 cents a share that analysts had predicted.

But both banks — the last of the big lenders that have yet to pay back their emergency bailout money from the federal government — sold significant assets during the quarter, cushioning their bottom lines. Bank of America’s results were enhanced by the $5.3 billion pretax gain from the sale of shares in the China Construction Bank. Citigroup formed a joint venture with Morgan Stanley for Smith Barney, resulting in an $11.1 billion pretax gain.

While the results provided another sign that American banking industry is stabilizing somewhat faster than many had expected, they nonetheless underscored how the sagging consumer economy is hurting banks big and small. For the moment, trading and other traditional Wall Street businesses, such as securities underwriting, are generating profit at many big institutions.

At Bank of America, a record trading profit of $6.7 billion and a pickup in investment banking fees lifted net revenue to $33.1 billion, up from $20.7 billion a year ago.

via 2 Ailing Banks Post Profits, Aided by Asset Sales – NYTimes.com.

India’s wealth drop 32%

(PTI – NDTV.Com)
The wealth of world’s rich people dropped nearly 20 per cent to $32.8 trillion, while India saw the second largest decline in the number of High Net Worth Individuals at the end of 2008, says a report.
 
The population of HNWIs shrank by about 15 per cent to 8.6 million and in India, the numbers came down by 31.6 per cent to 84,000, says the World Wealth Report from Merrill Lynch and Capgemini.
 
HNWIs are referred to those who have at least $one million in investable assets, excluding primary residence, collectibles, consumables, and consumer durables.
 
“At the end of 2008, the worlds population of HNWIs was down 14.9 per cent from the year before to 8.6 million, and their wealth had dropped 19.5 per cent to $32.8 trillion.
 
The declines were unprecedented, and wiped out two robust years of growth in 2006 and 2007,” the report said.
 
Interestingly, the wealth of such individuals grew about 7.2 per cent from 2005 to 2007 while their wealth rose 10.4 per cent during the same period.
 
“India’s HNWI population shrank 31.6 per cent to 84,000, the second largest decline in the world, after posting the fastest rate of growth (up 22.7 per cent) in 2007.
 
“India, still an emerging economy, suffered declining global demand for its goods and services and a hefty drop in market capitalisation (64.1 per cent) in 2008,” the report said.

Posted via email from The investment blog on Post

Gold and Euro move up in style

The USD recovery cycle is halted unless USD falls

The USD recovery cycle is halted unless USD falls

that’s my man! RT @keithshepard: http://chart.ly/73rwg5 $FXE – $GLD & FXE have been moving .. (source: http://bit.ly/18s5BZ) (via @twazzup)

Posted via email from The investment blog on Post

The new nuts and bolts | Obama’s new supervisory layer

President Barack Obama released a plan on Wednesday to overhaul U.S. financial regulation in response to a banking and capital markets crisis that played a big role in pushing the economy into recession.

The plan is meant to prevent a repeat of the crisis by closing oversight gaps, requiring thicker capital cushions at financial companies and improving the protection of consumers and investors.

WHAT ARE THE MAIN CHANGES PROPOSED?

The Federal Reserve would monitor “systemic risk” in the economy, together with a council led by Treasury.

The Federal Deposit Insurance Corp would get power to seize and resolve the problems of troubled non-bank companies that pose risks to the economy. The U.S. Securities and Exchange Commission would get additional limited “resolution authority.”

A National Bank Supervisor would be created, taking in the supervision duties of the Office of Comptroller of the Currency OCC and the Office of Thrift Supervision OTS, both Treasury units. The thrift charter that is the legal basis of the savings and loan business would be eliminated and the OTS would be closed.

Financial companies would have to hold more capital to absorb losses when times get tough, and boost their liquidity, or their ability to move quickly in and out of various holdings.

Asset-backed securities issuers would face new regulation, as would hedge funds and credit rating agencies. An independent Consumer Financial Protection Agency would be formed.

Oversight of over-the-counter derivatives would be imposed, as well as “harmonizing” futures and securities regulation, and new payment and settlement system safeguards would be created.

WHY ARE THE CHANGES NEEDED?

The worst financial crisis in generations has thrown banking and capital markets into disarray, dragging down economies around the world.

The Obama administration and congressional Democrats see the crisis as rooted in failures going back years, in some cases decades, in regulation and behavior.

The presidents proposals try to update a regulatory system formed largely during the Great Depression. The goal is to equip regulators to keep better track of markets that have grown in size and scope far beyond the governments view.

The proposals also try to address what Democrats see as an ill-advised government tendency in recent years to trust too much in markets self-correcting and self-policing ability.

via Q+A: What are main issues about Obamas financial plan? | Reuters .

zyakaira notes: Most of it has been here in place internally in banks, like asking the lender to stay liable for the loan till it is repaid..practices overlooked in a period of quick sales and large ramp up..or as deal sweeteners, life is much the same at the banks, whether these agencies can engender respect remins to be seen. But the crisis did bring us one good thing, 24X7 news and transparency in the financial system in terms of a large ‘bank’ of public information on each event