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Nick'Otin
post Oct 8, 2009, 09:09 PM
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post Oct 8, 2009, 09:09 PM
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Gold's record-breaking run continues
The precious metal pushes to another high as the dollar slumps and investors remain concerned about inflation.
NEW YORK (CNNMoney.com) -- Gold rallied to its third record high in a row Thursday as the dollar continues to deteriorate and investors remain concerned that a bout of inflation is on the horizon.

December gold rose $11.90 to settle at a fresh all-time high of $1,056.30 an ounce. Earlier in the session, the precious metal surged to a high of $1,062.70.

Analyst expect the streak to continue, saying prices could top $1,100 an ounce by the end of the year.

"Dollar weakness and inflation are the two big drivers," in the gold market, said Joe Foster, a precious metals analyst at Van Eck Global.

The dollar was down 0.6% versus the euro and 0.7% against the British pound. The dollar index, which measures the buck against a basket of currencies, has declined 10% since March.

The greenback was under pressure after aluminum producer Alcoa (AA, Fortune 500) reported a surprise profit late Wednesday, which boosted the market's appetite for risk and sapped safe-haven demand for the dollar.

Many investors think the dollar will continue to depreciate as the nation's budget deficit explodes and investors flock to higher yielding currencies amid sings of a global economic recovery.
Gold is also being supported by persistent concerns that government efforts to stimulate the economy will cause inflation to rise in the future. Precious metals are seen as a hedge against rising prices because they store value better than other types assets.

"Though inflation is not an issue now, it's going to come back with force," said Kathy Lien, director of currency research at Global Forex Trading. "And that's why people are going long gold."

Some traders say the rally has been fueled by large investment funds and that the market is ripe for a correction given the strength of the recent push.

At the same time, demand for the metal from jewelry fabricators has been weak and record prices tend to bring out sellers of scrap gold, which makes for a poor fundamental backdrop.

But others say gold is poised to continue its bull run as the fallout from rock-bottom interest rates and U.S. fiscal policies drives investor demand.

Foster said he expects gold to peak near $1,300 an ounce next spring.

"The things that the Treasury and the Fed are doing to the U.S. financial system are setting gold up to be supported for some time," he said.
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Nick'Otin
post Oct 8, 2009, 09:12 PM
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post Oct 8, 2009, 09:12 PM
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It's China's world. (We just live in it)
After a shopping spree for natural resources, the Chinese are shifting to automakers, high-tech firms, and real estate. Where will they strike next?
(Fortune Magazine) -- You wouldn't think the men who run the oil-rich country of Nigeria would have much spring in their step these days. The nation is plagued by a never-ending guerrilla war, one that has trimmed the country's oil production to two-thirds of its potential capacity.

But now Nigeria is in the process of renewing production licenses for some of its most prolific offshore fields, and there's a new player in town making the traditional oil powers from the West (Royal Dutch Shell (RDSA), Exxon Mobil (XOM, Fortune 500), Total (TOT)) very nervous -- and the Nigerian government very happy.

CNOOC (CEO), one of China's three largest oil companies, is trying to pick off some of the licenses; indeed, the Beijing-based company wants to secure no less than one-sixth of the African nation's production. And CNOOC, apparently, isn't screwing around.

Tanimu Yakubu, an economic adviser to the Nigerian President, recently told the Financial Times that the Chinese company is "really offering multiples of what the existing producers are pledging [for licenses]." Then he added giddily: "We love this kind of competition."
China's acquisitions

Oil in Nigeria (and the Congo and Brazil and Kazakhstan and ...). Natural gas in Iran. Iron ore in Australia. China's hunt for natural resources around the globe, which began in earnest earlier this decade, has intensified as never before.

In September alone, China's sovereign wealth fund, the China Investment Corp. (CIC), shelled out nearly $1 billion to buy an 11% stake in JSC KazMunaiGas Exploration Production, a Kazakhstan oil and gas company. Just a week earlier CIC paid $850 million to acquire 14.9% of Noble Group, the Hong Kong commodity-trading powerhouse. Earlier this summer the China Development Bank lent Petrobras, the Brazilian national oil company, $10 billion to help fund exploration in deep waters off Brazil.

So far this decade China has spent an estimated $115 billion on foreign acquisitions. Now that the nation is sitting on massive foreign-exchange wealth ($2.1 trillion and counting), it is eager to find something (anything!) to invest in besides U.S. Treasury debt.
In 2008, China's investments abroad doubled from $25 billion to $50 billion. Yes, China still lags the U.S., which, as the world's largest exporter of capital, invested $318 billion abroad last year. Yet in many ways, China has only begun. And it won't stop anytime soon.

Though still focused mainly on the natural resources that power its economy, China is now, slowly but surely, broadening its foreign-investment horizons. Both the government and private firms are beginning to look beyond the developing world for assets.

Already the Chinese have bought stakes in foreign banks, utilities, and semiconductor companies. This is a hugely consequential step, both for China and for the global economy.

In the first decade of the 21st century, China established itself as the world's workshop. The next decade (if things go right) could see China emerge as the world's leading exporter of capital.

As Daniel Rosen, the coauthor of a recent study on China's foreign investment and a principal at the Rhodium Group, a New York City consultancy, puts it, "Increasing foreign direct investment is the next critical step in China's integration into the global economy."

How critical? China's recycling of the dollars it earns via its trade surpluses is a key part of the "rebalancing" of China's economy that everyone knows needs to occur. China saves too much, consumes too little, and has been overly reliant on exports to fuel its economic growth.

The current binge of growth at home -- nearly 8% in the first half of 2009 -- has been driven by a huge upsurge in credit growth from state-owned banks, as well as massive government stimulus spending. Neither is sustainable, and indeed, policymakers in China have already begun to rein in the surge in bank lending.

Make no mistake, the way Beijing has generated growth in 2009, however impressive it may look from afar, will prove to be an aberration. Once this period of crisis passes, China has no choice but to confront the necessity to drive up household incomes and private consumption.

This macroeconomic adjustment will, among other things, require a stronger renminbi to boost the Chinese consumer's purchasing power. A more valuable currency will also make foreign assets cheaper for acquisitions, driving microeconomic decisions at the company level.
From factory to owner

The implications for Chinese companies are huge. Becoming the world's factory has pretty much taken China's economy as far as it can.

As consultant Rosen puts it, "For a lot of Chinese companies, domestic economies of scale are now maxed out." China's corporate sector does not need to invest in and run factories that sell sneakers for Nike or toys for Mattel or auto parts for Magna. Chinese companies need to become Nike, Mattel, and Magna. They need, in consultant-speak, to move up the value chain.

Another reason the Chinese are buying stakes in foreign companies -- or buying them outright -- is that so few domestic companies have experience operating in the U.S. or Europe. Everything -- from the regulatory and legal environments to auditing and consumer safety standards -- is alien to the Chinese.

Arguably the most painless mode of entry for them is outright acquisition. That's what Chinese computer maker Lenovo did when it bought IBM's PC business in 2005 -- one of the few high-profile acquisitions of a U.S. business by a mainland company. Lenovo had a dominant position in PCs at home but little presence abroad. The acquisition changed that instantly. Lenovo has since worked hard to maintain the image of a global, as opposed to a Chinese, company.

This process, which China has called its "going out" strategy, will not happen overnight. But make no mistake, it is gaining momentum. Take Geely, for example, an ambitious, privately owned automaker based in Hangzhou, a city just south of Shanghai. Its CEO, Gui Shengyue, said last month that the company was interested in buying Volvo's car business from Ford (F, Fortune 500). A deal may or may not happen (of late Volvo's management has been throwing cold water on the idea). But the interest shown by a credible Chinese company in wanting to buy a big, established brand abroad should not be ignored. It's a signpost to the future.
Real estate fever

A big part of that future will involve China investing in financial assets and real estate. Look only at the number of trips that the world's leading hedge fund managers have been making to Beijing this year. They go for the same reason Willie Sutton robbed banks, but they arrive at the headquarters of CIC as supplicants on bended knee, desperate for investable capital in the one place in the world where that is very much in surplus.

CIC has $300 billion of the nation's money to invest, and it has now begun doling out dollops of it to a variety of Western investment managers because it has nowhere near the capacity to run that kind of money by itself. So in September it gave $1 billion to Oaktree Capital Management, the L.A. firm that specializes in buying distressed debt securities (an area that yielded huge returns in the past year).

Analysts expect an additional $2 billion to go to Western hedge funds and money-management companies in the next few months -- and that represents only a sliver of CIC's forthcoming investments.

J.P. Morgan & Co. in Hong Kong estimates that Beijing's sovereign wealth fund will invest $50 billion in the coming year. CIC officials have had recent discussions with several private equity managers -- including BlackRock (BLK, Fortune 500) and Lone Star -- about investing in U.S. real estate. "Mortgage-backed debt as well as outright purchases of buildings," says one banker with knowledge of the talks. "You name it, it's on the table."

Investment advisers who have talked with CIC's top management have said that they are acutely aware of what one investment banker calls "the Japanese precedent." In the late '80s and early '90s Japanese companies splurged on trophy properties, including Rockefeller Center, and wildly overpaid for many of them.

CIC itself, in one of its first investments, bought a 9.9% stake in the Blackstone Group (BX) just before the company's $31-a-share IPO -- and just before the market crashed. (Blackstone now trades at $13.60.) "They are being very careful and very disciplined in their approach to potential real estate investments," says one Western banker in talks with CIC.

The Chinese have already learned from bitter experience that investment abroad is not always win-win. Far from it, in fact. Their first whiff of that reality came in 2005, when CNOOC tried to buy Unocal, the Los Angeles-based oil company, and was rebuffed. The effort triggered opposition in Washington -- some congressmen questioned the wisdom of letting a big American oil company get taken over by a partially state-owned company from a country that, while not an enemy of the U.S., is not an ally either.

As China's state-owned companies increase their foreign investments, expect repeats of the Unocal case. Australia's foreign investment review board recently recommended that no foreign company be allowed more than a 15% stake in any of the country's natural resources companies. That decision, coming in the wake of China's state-owned aluminum company's failed effort to acquire nearly 20% of mining giant Rio Tinto (RTP), is aimed squarely at Beijing.

At a time when trade tensions with Beijing are rising in the wake of President Obama's decision to slap tariffs on Chinese-made tires, the cry of the trade hawks is easy to anticipate: Chinese state-owned companies can buy our assets here, but can we turn around and buy a state-owned company in China?

The answer is no, but that doesn't mean the U.S. should not take China's money. Washington needs to set clear guidelines for Chinese investment. Are all U.S.-based energy companies off-limits? Or only some? Or none? Says Rosen: "I expect China will play by the rules -- provided it knows what the rules are."

Let's hope he's right. Because the Chinese have more dollars than they know what to do with, and economies benefit when both goods and capital flow freely across borders. The U.S. ought to set aside its current economic insecurity and answer a simple question correctly: If the Chinese want to park more of their money in American assets (besides Treasury bills), why wouldn't we open our pockets and take it?
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Nick'Otin
post Oct 12, 2009, 08:49 PM
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post Oct 12, 2009, 08:49 PM
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Oil climbs near $74
The market extends last week's gains as investors remain optimistic about the economic recovery and improved energy demand.
LONDON (Reuters) -- Oil jumped more than 2% towards $74 a barrel on Monday, the highest in over six weeks, on optimism about the pace of global economic recovery and indications of stronger oil demand.

Crude gained 2.6% last week, bolstered by a falling dollar. The International Energy Agency raised its oil demand forecasts and a Reuters survey showed Chinese refineries will keep crude processing at record levels in October.

U.S. crude rose $1.87 to $73.64 by 9:42 ET. It climbed as high as $73.81, the highest since it reached a 2009 peak of $75.00 on Aug. 25.

"The break above $70 has been important as it moves the market into a new and higher trading range," said Christopher Bellew, a broker at Bache Commodities, referring to Brent.

"The better Chinese demand figures published last week and the resilience of equities and gold and a weak dollar have all contributed to this upward move in oil prices."

The U.S. dollar eased against a basket of currencies, further supporting oil, while gold rose. Dollar weakness can boost investor demand for oil and other commodities priced in the U.S. currency.

Signs emerged on Monday that while world energy demand is expected to rise more strongly than forecast next year, key exporters are continuing to keep a lid on supplies for now.

Saudi Arabia, the world's top oil exporter, will keep steady in November the curbs on the contracted volumes of crude it supplies to Asia and Europe, industry sources said.

With holidays in the United States, Japan and Canada on Monday, analysts said oil prices would be largely influenced by equities. European stocks rose, as did U.S. shares. "There are a lot of positive sentiments in the market because of expectations for another rally in stock markets this week as well as improved energy demand forecasts from the IEA," said Ben Westmore, a commodities analyst from the National Australia Bank.

Some of the biggest U.S. corporate names are scheduled to post earnings this week, a reality check for whether a seven-month rally in stocks this year has further to run.
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Nick'Otin
post Oct 12, 2009, 08:54 PM
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post Oct 12, 2009, 08:54 PM
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Dollar mixed as stocks spike
Greenback down against euro on a quiet trading day as investors push stocks higher ahead of corporate earnings reports.
NEW YORK (CNNMoney.com) -- The dollar was mixed against its counterparts in a quiet-but-volatile trading day.

The dollar fell against the euro to $1.4792 but edged slightly higher against the pound to $1.5794. It also rose against the yen to ?89.8040, up from last week's eight-month low.

The greenback was taking its cue from Wall Street, where stocks were spiking back near 10,000 -- a level not seen since last October.

"Equities are gradually climbing, and the dollar is gradually falling. It's an inverted risk correlation," said John Kicklighter, currency strategist at DailyFX.com. "The relationship will hold as long as there isn't a fundamental reason to push the dollar one way or another."

The federal government is closed for the Columbus Day holiday and there is no economic data due Monday. Many investors are taking the day off and are not likely to make big moves ahead of corporate earnings and economic data to be released later this week.

"Once we see what's happening in companies' balance sheets, we will start to see risk appetite adjusting," said Kicklighter, who thinks that company performances during the third quarter "won't be that good."

But they could still weigh on the greenback this week if they meet expectations.

"Even if you have modestly bullish reports with a strong round of numbers, the dollar will break down," said Kicklighter. "If we just see moderate reports or companies post earnings that aren't good at all, that will allow the dollar to garner strength because people will become more realistic about company yields and dividends."
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Nick'Otin
post Oct 12, 2009, 09:00 PM
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post Oct 12, 2009, 09:00 PM
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Recession may be over, but recovery is painful
Survey of top economists by National Association of Business Economics finds more than 80% believe the worst is over, but recovery will be slow and painful.
NEW YORK (CNNMoney.com) -- More than 80% of top economists believe that the recession that started almost two years ago is finally over. But most don't expect meaningful improvement in jobs, credit or housing for months to come.

That's according to a survey released Monday by the National Association for Business Economics (NABE). The group asked 43 top economists last month if they believe the battered U.S. economy has pulled out of the worst U.S. downturn since World War II. Those surveyed include economists from leading Wall Street firms and major corporations, as well as from highly respected universities and research firms.

Thirty-five respondents, or 81%, believe the recovery has begun. Only four, or 9%, believe the economy is still in a recession. The other four say they're uncertain.

Economists in the survey forecast that the U.S. economy grew at an annual rate of 3% in the three months that ended in September, though the official reading of gross domestic product won't be out for weeks.

And all of the economists surveyed expect the recovery to be slow and painful, leaving many people and businesses feeling the effects of the downturn for years to come.

The only organization that can officially declare the beginning or the end of a recession is the National Bureau of Economic Research. But that group doesn't make any sort of declaration until months after the fact, in order to take into account final readings of various economic measures such as employment, income and industrial production. For example, the NBER didn't declare that the recent recession had begun in December 2007 until a full year after the fact.
Lingering weakness

The NABE survey results echo comments made by many other prominent economists who have recently said they think the economy hit bottom at some point this summer.
Most notably, a recent statement from the Federal Reserve declared that economic readings "suggest economic activity has picked up following its severe downturn."

Still, the NABE survey found that economists are forecasting lingering weakness in the labor and housing markets, and that the tight credit markets will continue to be a drag on economic growth into next year.

Unemployment, which was at a 26-year high of 9.8% in September, is forecast to hit 10% during the last three months of this year, and stay there through the first quarter of 2010. By the end of next year, it's only expected to fall back down to 9.5%.

About 54% of those surveyed don't expect the economy to regain the jobs it lost during the recession until 2012, while another 38% expect that to take even longer. Just three of the economists that the NABE spoke to expect these jobs to come back in 2010 or 2011.

And many don't think the worst is over yet for housing either. About a third of economists believe that home prices won't bottom out until early 2010 or later, while a quarter of them believe the low will come in the fourth quarter.

Half of those surveyed expect the financial markets to continue to be a drag on the economy until next year, while 30% of them said that trend could continue into 2011.

The NABE last surveyed economists in May, and they were far less optimistic at the time. Only 18% of them thought the economy would recover in the last quarter of 2009, while 7% saw a turnaround sometime in 2010.
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Nick'Otin
post Oct 12, 2009, 09:03 PM
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post Oct 12, 2009, 09:03 PM
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Banks still stuck with the junk
Beset by delays, the government's program for ridding banks of bad assets is finally poised to take off. But problems still plague the controversial program.
NEW YORK (CNNMoney.com) -- The nation's banks are still sitting on tens of billions of toxic assets -- and they likely will be for quite a while.

The main problem: Tepid interest in a government program designed to cleanse banks' books, which became clogged with subprime mortgages sold at the height of the credit bubble.

The aim of the Public-Private Investment Program, announced by the Treasury Department in March, is to create a market so banks can find buyers for the toxic assets.

To kick start it, the government pledged to match money from private investors and also offered low-cost federal financing.

But many would-be participants such as pension funds, endowments and foundations have balked at jumping in.

For example, CalPERS, California's pension fund for public sector workers and one of the world's largest funds, has so far decided not to invest in PPIP. A company spokesman said the program's "risk/return" was not "the best."

That lack of interest, as a result, has complicated fundraising efforts. Four of the nine asset managers selected to run the program missed a Sept. 30 deadline to raise $500 million in private money.

"That is the problem," said Joshua Rosner, managing director at the independent research firm Graham Fisher & Co. "They are having a hard time raising the money."

At the same time, banks have expressed little interest in selling their cruddy assets, notes Mark Tenhundfeld, a senior vice president at the American Bankers Association in Washington.

"I hope there are sellers out there," said Tenhundfeld. "I just haven't seen any evidence that there is."

Buoyed by raising billions of dollars in fresh capital in recent months, some lenders may instead opt to hold onto their troubled assets rather than sell them and record losses.

Of course, improved values of some of these securities hasn't hurt either. Signs that the U.S. housing market may have bottomed have helped push up the value of complex mortgage securities.

Stabilizing real estate values, however, have also tempered investors' expectations for the types of returns they might see.

Earlier this year, PPIP players could have anticipated yields in excess of 20%. Now, a more realistic return might be somewhere in the neighborhood 8% to 12%, notes Rosner.

"With those kinds of returns and potential lockups on the money, that doesn't provide a terrifically attractive return relative to other asset classes," he said.
Other concerns keep participants at bay

Potential investors are also troubled that lawmakers or regulators could retroactively alter the terms of PPIP.

Last spring, for example, potential asset managers and investors in PPIP feared that the government would impose executive pay limits on participants. Those concerns, however, were allayed when regulators unveiled the terms of the program.

Nevertheless, many would-be investors remain leery about how the government may react if investors were to capture outsized returns using taxpayer money.

With the money raised so far, the program will have up to $12.3 billion in purchasing power of troubled assets. It is expected to expand to $40 billion, including money ponied up by private investors.

And while the terms of the program have scared away some investors, the sheer complexity of the assets has spooked other would-be participants, notes Eric Petroff, the director of research at Wurts & Associates, a Seattle-based consultancy that advises large institutional investors.
Right now, only commercial mortgage-backed securities and certain residential mortgage-backed securities issued before 2009 and originally considered AAA-rated qualify to be sold into the program.

But beneath such securities are layers and layers of investments, pegged to various pools of mortgages, which has made some speculators think twice.

"As a fiduciary, are you really going to want to jump into this?" said Petroff.
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Nick'Otin
post Oct 13, 2009, 08:48 PM
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post Oct 13, 2009, 08:48 PM
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Bank of America to disclose Merrill details
The bank agrees to hand over previously undisclosed information about its purchase of Merrill Lynch to U.S. regulators.
NEW YORK (CNNMoney.com) -- Bank of America Corp. has agreed to share previously undisclosed information related to its purchase of Merrill Lynch with regulators investigating whether the company misled shareholders, the Securities and Exchange Commission said Tuesday.

The agreement would give regulators access to details concerning the bank's failure to disclose what it knew about pending losses at Merrill when it bought the troubled brokerage last year.

The move came after a federal judge last month rejected Bank of America's $33 million settlement with the SEC, which alleged the bank had misled investors about $3.6 billion of bonuses paid to Merrill employees.

The accord, which is subject to court approval, would "allow us to assess further details surrounding the bank's failure to disclose to its shareholders critical information concerning the award of bonuses to Merrill employees," the SEC said in a statement.

It would also give investigators details concerning whether BofA sought to invoke a "material adverse change clause" in its agreement to merge with Merrill, which would have allowed it to walk away from the deal.

BofA decided to release the information, which was protected under its attorney-client privilege, in response to "a lot of pressure in multiple venues for these additional documents," said Larry Di Rita, a Bank of America spokesman.

"We decided to waive [the privilege] in this case because we have nothing to hide," he said. "We acted appropriately in our deliberations and disclosures."

The SEC said the bank also agreed to give regulators access to its communications with the Federal Reserve, the Treasury Department and other federal officials regarding the provision of federal assistance in connection with its purchase of Merrill.

Bank of America (BAC, Fortune 500) chief Ken Lewis, who recently announced plans to step down at the end of the year, has argued that Fed and Treasury officials pressured him to buy Merrill, which was on the verge of collapse, to help stabilize the financial markets.

Lawmakers criticized Lewis in June for using the threat of scuttling the Merrill deal as a so-called "bargaining chip" for more government assistance.

BofA also faces investigations by Congress and New York State Attorney General Andrew Cuomo over its handling of the Merrill acquisition and subsequent bonus payments.

In a letter to Cuomo's office Monday, BofA said the newly disclosed details will also be available to state officials and Congress.
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Nick'Otin
post Oct 13, 2009, 08:58 PM
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post Oct 13, 2009, 08:58 PM
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Time for big banks to show the money
Third-quarter financial reports from the likes of Citi and BofA will show an industry still struggling with big losses.
NEW YORK (Fortune) -- A year after the government applied a tourniquet to the banking industry, the bleeding has slowed -- but it hasn't stopped.

The six biggest U.S. banks will tell investors in coming weeks how they did in the third quarter. Analysts expect four of the six to post profits, and the best-run banks -- Goldman Sachs (GS, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) -- are likely to more than double last year's bottom line.

But Wall Street expects profits at both Wells Fargo (WFC, Fortune 500) and Morgan Stanley (MS, Fortune 500) to fall from a year ago. And the biggest beneficiaries of Washington's too-big-to-fail mindset, Citi (C, Fortune 500) and Bank of America (BAC, Fortune 500), may lose money.

Bank analysts say a severe economic downturn preceded by a long credit boom means stubbornly high losses on home loans, credit cards and commercial properties will be working their way through the system for a while -- which translates to uneven profit reports at big banks and, in some cases, failures at smaller ones.

"We're through the worst of the storm, but we're not out of the other side of it," said William Schwartz, senior vice president for the U.S. financial institutions group at ratings agency DBRS.

The big banks have been sheltered over the past year by lavish government assistance, ranging from Treasury loans to expanded deposit insurance to federally backed loan guarantees. Some of those props are due to start falling. The Federal Deposit Insurance Corp.'s loan guarantee program, for instance, is due to expire Oct. 31.

In the meantime, bank stocks have rallied off their winter lows -- driven in large part by gains that were concentrated in nonbanking businesses such as fixed-income trading and investment banking.

The major bank stocks all posted massive gains in the third quarter, led by a 57% jump at Citi, whose shares continue to fetch less than $5 each, and 30%-plus rises at BofA, Goldman Sachs and JPMorgan Chase.

"The big firms have more revenue streams, so they're probably a little better off right now than the regionals," said Schwartz.

JPMorgan Chase, which has emerged as a rare beneficiary of the financial crisis via its low-cost, government-assisted acquisitions of Bear Stearns and Washington Mutual, is due to post third-quarter numbers Wednesday morning. Analysts polled by Thomson Financial expect its earnings to rise to 49 cents a share from 11 cents a year ago, as solid performances in fee-based businesses such as mortgage and investment banking offset rising costs in its big credit card book.

Thursday morning will bring reports from another big winner over the past year, Goldman Sachs, and from Citigroup, which continues to struggle under the weight of big loan losses. Analysts expect Goldman to make $4.24 a share for the third quarter, up from $1.81 a year ago. Citi, meanwhile, is expected to lose 21 cents a share, compared with a 60-cent loss last year.

"Citi's earnings remain under significant pressure near term along with the industry," analysts at JPMorgan wrote in a note to clients last week.

Closing out the week will be Bank of America, which is due to post third-quarter numbers Friday morning. Analysts expect the bank to lose 6 cents a share for the quarter, reversing the year-ago profit of 15 cents.

The numbers will come less than a month after the bank's longtime CEO, Ken Lewis, quit under pressure from shareholders, as well as legislators who question his handling of BofA's takeover of Merrill Lynch.

Two other banks dealing with management changes -- the investment firm Morgan Stanley, whose CEO John Mack announced plans last month to retire, and West Coast lender Wells Fargo, whose Chairman Dick Kovacevich will step aside Jan. 1 -- are expected to post results next week. Both firms are expected to make less money than they did in last year's third quarter.
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Nick'Otin
post Oct 13, 2009, 09:02 PM
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post Oct 13, 2009, 09:02 PM
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A test case for Wall Street justice
The trial begins Tuesday for two former Bear Stearns hedge fund managers accused of fraud. But the government will have a harder time going after others, legal experts say.
NEW YORK (CNNMoney.com) -- Two former Bear Stearns hedge fund managers go to court Tuesday in the first, and so far only, prominent criminal trial stemming from the mortgage meltdown.

Ralph Cioffi and Matthew Tannin are accused of painting a rosy picture of their portfolios, even though "the defendants believed that the funds were in grave condition and at risk of collapse," according to the prosecution.

Experts say the case against them is compelling, and the government wants to make them an example. But others say it will be hard to nail down anyone else.

Prosecutors blamed Cioffi and Tannin for causing Bear Stearns investors to lose more than $1 billion, alleging that their fraudulent behavior led to the collapse of their hedge funds and, subsequently, Bear Stearns. They have both pleaded not guilty and are out on bail: $4 million for Cioffi and $1.5 million for Tannin.

Jury selection is scheduled to begin Tuesday in U.S. District Court in Brooklyn, N.Y. Cioffi and Tannin could each face 20 years if convicted of securities fraud.

Cioffi could face an additional 20 years on charges of insider trading for moving $2 million of his own money out of a poorly-performing Bear Stearns fund and into a separate fund "for which he had supervisory responsibilities," according to prosecutors.

A spokesman for Tannin's legal defense declined to comment. Lawyers for Cioffi did not return messages.
Making an example

"I don't know whether it's a test case, but [it] certainly will test the government theory of going after Wall Street defendants who, according to the government, were less than forthright about the future prospects of their fund," said Robert Mintz, a former federal prosecutor who leads white collar defense at the law firm McCarter & English.

Ken Springer, a former FBI agent, certified fraud examiner and president of the consultant firm Corporate Resolutions, was more succinct: "I think this a line in the sand that the government is drawing and I think they're going to make an example."

Springer described this as a "pivotal case for the government to show that this kind of behavior is not acceptable" and he said the prosecution's evidence is "compelling."

The two defendants presented their hedge funds, which totaled some $1.4 billion in 2006, as "low risk" investments in AAA-rated pieces of collateralized debt obligations, backed by pools of securities such as mortgages, according to government lawyers.

By the spring of 2007, they allege the two men were having private conversations about the declining prospects of their funds and the impending meltdown. Tannin told Cioffi that the "subprime market looks pretty damn ugly" and he suggested that they "close the funds now," according to prosecutors.

"Notwithstanding their views to the contrary, the defendants led investors and creditors to believe that, despite the challenges presented in the market, the funds would continue to generate an increasing net asset value," wrote prosecutors, in a press release at the time of their June 19, 2008 indictment.

And on Sept. 22, prosecutors accused Cioffi, a New Jersey resident, of flying to Florida to try to retrieve documents from the Fort Myers-based Busey Bank, where he had attempted to obtain a $4.25 million line of credit. His lawyers deny that he was trying to snag the documents ahead of a federal subpoena, as the prosecutors allege.

Ken Rubinstein, an asset protection lawyer with the New York firm Rubinstein & Rubinstein, also believes that prosecutors have a strong case against Cioffi and Tannin, but that it's a unique situation.

"These are the only two that have come out because these are the only two where the facts are clear enough in the government's favor," he said.
Fraudulent - or just stupid?

Even though Cioffi and Tannin are the only fund managers charged with the fraudulent behavior that fueled the collapse, no one is alleging that they alone brought down Wall Street.

"I think it's clear that there's been a lot of fraud in the system," said Dick Bove, banking analyst for Rochdale Securities. "It's a multi-layered system, and at every layer people chose not to do the proper due diligence, which is criminal. Everywhere along the line there were excesses, and perhaps the biggest excesses [were from] the government itself, because it had an obligation [to prevent fraud.]"

Despite the rampant wrongdoing by white collars leading up to the market meltdown of 2007, Bove said that pinpointing fraudulent acts and perpetrators is complex and difficult.

"There would have to be some intensive investigating to ferret out the people who were doing these things and I don't know what the risk-reward will be," he said. "It's going to take a lot of work to figure out who they are."

Even when investigators find a couple of suspects, like Cioffi and Tannin, it can be difficult to prove that they had any intention of deliberately misleading investors, or if they were simply making stupid mistakes.

In this way, hedge fund investors are just as responsible for their demise as the portfolio managers, said David Wyss, chief economist for Standard & Poor's.

"Nobody held a gun to these people's heads and told them to buy subprime mortgages," he said. "It's a combination of stupidity and overconfidence, and unfortunately, both were national epidemics."

But even if most of the pre-crash behavior on Wall Street can be attributed to lack of due diligence rather than deliberate fraud, Bove said that's hardly an excuse.

"Is it wrong? Goddamn right, it's wrong," he said. "Is anyone going to do anything about it? I sincerely doubt it."

"I think, in the end, that the defense is going to argue that some of the greatest minds in the economy were unable to predict the recession, so how could these two be held accountable?" said Mintz, the lawyer at McCarter & English.
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Nick'Otin
post Oct 14, 2009, 08:26 PM
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post Oct 14, 2009, 08:26 PM
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AIG bonuses in the cross hairs
House Oversight Committee hears testimony from bailout overseer on nearly $1.8 billion in bonuses promised by troubled insurer AIG.
NEW YORK (CNNMoney.com) -- Congress is resurfacing its outrage over AIG's bonuses after a report detailed the vast scope and scale of the troubled insurer's executive compensation plan.

Neil Barofsky, the special inspector general of the $700 billion bailout program, said in a report released Tuesday that AIG's 2008 compensation plans totaled $1.77 billion. That's despite the company recording nearly $100 billion in losses last year, including the largest ever quarterly loss in the history of American business.

Barofsky appeared before the House Oversight Committee Wednesday morning to answer lawmakers' questions about his report.

"What is the justification for giving bonuses to people who drove their own firm off a cliff and very nearly crashed the U.S. economy?" asked Committee chairman Edolphus Towns, D-N.Y. "Wasn't there something seriously out of whack here?"

Barofsky's report says that AIG had roughly 630 separate compensation programs for bonuses, retention and deferred compensation in 2008. The most controversial of the plans was the $475 million in retention payments to employees of AIG's Financial Products unit. Employees of that division wrote insurance contracts on complex financial instruments that led to the company's near collapse and subsequent $182 billion taxpayer-subsidized bailout.

AIG has argued that the retention payments are necessary to keep the 400 employees of the Financial Products unit, who the company says are uniquely qualified to take necessary steps to pay back the government.

Bonuses paid to 'non-essential' workers: Though Barofsky acknowledges that many Financial Products employees are needed to unwind that division's portfolio, the report also shows that bonuses were paid to non-essential personnel at the Financial Products unit, including $7,700 to a kitchen assistant, $700 to a file administrator and $7,000 to a mailroom assistant.

Rep. Elijah Cummings, D-Md., said he was furious that AIG paid out bonuses to non-essential staff, saying the insurer had deceived Congress about the scope of the bonuses to that unit.

"AIG has not been truly honest with the Congress of the United States of America," said Cummings. "[Former AIG Chief Executive Edward] Liddy constantly told me about bonuses, and each time he never gave us all the information."

Barofsky said he too "was left with the impression that the money was going to people who were necessary and involved with complex transactions, but retention payments went to essentially to every single employee at financial products."

Treasury dropped the ball: Barofsky said part of AIG's failure to report the scope of the bonuses was due to their complicated nature, but he also called out Treasury for failing in its job to understand the company's compensation structure.

"I would throw one other possibility in there and that's incompetence," said Barofsky. "We were the first to ask the question of who were the people who got compensation and what their jobs were."

But he said the Fed had a very different interest in AIG than Treasury did. The central bank was acting as creditor, solely concerned with getting its money back. To the Fed, a few hundred million dollars "was not a big deal" compared to the more than $100 billion it gave AIG.

Treasury, however, acted as investor, and it should have done more exploring of the company's inner workings, Barofsky argued.

"This was a failure. It was a failure of oversight from Treasury," said Barofsky. "A failure to give clear directions and have a clear oversight is a recipe for disastrous consequences of earlier this year."
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Nick'Otin
post Oct 14, 2009, 08:31 PM
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post Oct 14, 2009, 08:31 PM
Post #51
Gold rally loses steam
After surging to a new trading high above $1,070 an ounce, prices end lower as the Federal Reserve says inflation will decrease.
NEW YORK (CNNMoney.com) -- Gold closed slightly lower Wednesday, after surging above $1,070 an ounce, as investors positioned themselves just prior to the release of the Federal Reserve meeting minutes.

December gold fell $2 to settle at $1,064.00 an ounce, after trading above $1,070.00 an ounce earlier in the session. Prices rose overnight to an all-time trading trading high of $1,072.00 an ounce.

"After the market made the move to a new high overnight, we saw a slight pullback as traders booked profits ahead of the FOMC," Adam Klopfenstein, senior market strategist at commodities brokerage firm Lind-Waldock, said before the minutes were released.

Gold, which has gained more than 20% this year, has been supported by worries that government efforts to stimulate the economy could set the stage for inflation as the economy recovers.

However, minutes from the September meeting of Federal Reserve's Open Market Committee indicated that the central bank expects inflation to decrease over the next few years.

"With the significant underutilization of resources expected to persist through 2011, the staff forecast core inflation to slow somewhat further over the next two years from the pace of the first half of 2009," according to the minutes.

At the same time, gold prices have been boosted by the weak U.S. dollar, which fell to a 14-month low Wednesday on speculation that U.S. interest rates will remain low for a longer-than-anticipated period of time.

The dollar index, which gauges the greenback's value against a basket of rival currencies, slid to 75.45, marking its lowest level since August 2008.

The weak dollar also boosted oil prices, which rose above $75 a barrel for the first time this year.

A softer greenback makes commodities that are priced in dollars, such as gold and oil, cheaper for investors using other currencies.

Investors will get more inflation data Thursday, when the government releases its September Consumer Price Index.

The closely watched inflation gauge is expected to show an increase of 0.2% in September, compared to a 0.4% rate the month before, according to a consensus of economists surveyed by Briefing.com.

Consumer prices excluding volatile food and energy costs, the so-called core CPI, are expected to have risen 0.1%, the same rate of increase as in August.
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Nick'Otin
post Oct 14, 2009, 08:36 PM
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post Oct 14, 2009, 08:36 PM
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Dollar weakens as stocks surge
Greenback continues decline is investors dig into stocks and push Dow near 10,000 level.
NEW YORK (CNNMoney.com) -- The dollar remained under pressure on Wednesday as investors' appetite for riskier assets, such as stocks and commodities, increased following strong quarterly reports.

The dollar slid against the euro to $1.4892 after hitting a 14-month low earlier in the session. The greenback also fell against the yen and the pound to ?89.5050 and $1.5966, respectively.

"Until risk appetite trends abate, the dollar will be fixed with how equities and commodities move," said John Kicklighter, currency strategist at DailyFX.com.

Stocks surged Wednesday, with the Dow industrials nearly hitting the 10,000 level for the first time in a year, following forecast-beating quarterly profits from Intel (INTC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500).

Commodities also rushed to highs. Gold continued to tread in record territory, and oil prices topped $75 for the first time this year.

Analysts predicted better-than expected retail sales data to boost the greenback, but the figures did not overwhelm investors' risk appetite. Overall retail sales dropped in September due to the end of the government's Cash for Clunkers program, but sales outside of the auto industry gained.

"We were hoping that this morning's economic data would have an impact on price action, but the primary driver for the dollar is still risk appetite," Kicklighter said. "Whenever these fundamental drivers are at extremes, correlation really tightens up."

Kicklighter said investors will be focusing and feeding risk appetite through all markets with the Dow nearing the 10,000-level, and the correlation will not break down until there is steadier development.

The long term direction of the dollar is most sensitive to the Federal Reserve's monetary policy, which has kept interest rates near zero. Kicklighter says that there is only a 5% chance of a rate hike by December, but the forecast for an increase in early 2010 is more hawkish.
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Nick'Otin
post Oct 14, 2009, 08:36 PM
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post Oct 14, 2009, 08:36 PM
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Oil hits 2009 high, holds above $75
Crude settles above $75 a barrel for the first time this year as the dollar weakens and the outlook for energy demand brightens.
NEW YORK (CNNMoney.com) -- Oil prices surged above $75 a barrel Wednesday for the first time this year as the U.S. dollar remained weak and investors bet that global energy demand is poised to recover.

Crude for November delivery rose $1.03, or 1.39%, and settled at $75.18 a barrel, after climbing to a high of $75.40 a barrel earlier in the session. The last time oil prices ended trading above $75 was exactly one year ago when they settled at $78.63.

Wednesday was the first time oil rose above $75 a barrel in 2009 and comes after prices traded between $65 and $75 a barrel since May.

"The markets continue to get positive indications about the economy," said John Kilduff, an energy analyst at MF Global in New York. "We've broken out of the $65-$75 range and we're clearly headed for $80 a barrel."

Wednesday's advance came as the dollar slumped to a 14-month low on speculation that U.S. interest rates will remain low for a longer-than-expected time.

The dollar index, which gauges the greenback's value against a basket of rival currencies, slid to a low of 75.45, its weakest level since August 2008.

A softer greenback makes dollar-denominated commodities such as crude oil more appealing to investors using other currencies.

Oil prices were also supported by optimism about the global economic recovery and upbeat forecasts for energy demand next year.

Stocks rallied after stronger-than-expected quarterly results from finance firm JPMorgan Chase (JPM, Fortune 500) and chipmaker Intel Corp. (INTC, Fortune 500) fueled optimism about the economic recovery.

The Dow Jones industrial average has hit 10,000 -- a level not seen since Oct. 3, 2008, when it reached 10,124 during the trading session.

Asian and European markets also rallied, with an index of global shares climbing to its highest level in a year.

On Tuesday, the Organization of the Petroleum Exporting Countries said a recovering world economy could boost crude demand by 700,000 barrels per day next year.

The improved outlook came after the U.S. Energy Information Administration and the Paris-based International Energy Agency raised their 2010 demand forecasts last week.
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Nick'Otin
post Oct 15, 2009, 08:34 PM
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post Oct 15, 2009, 08:34 PM
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Oil crosses $77 for first time in 2009
Crude oil prices surged on a surprisingly sharp drop in gasoline stockpiles and a weakening dollar. But analysts see prices falling in the next few weeks.
NEW YORK (CNNMoney.com) -- Oil prices climbed above $77 a barrel on Thursday -- a first for the year -- after a bullish government showed a surprise drop in gasoline stockpiles and a lower-than-expected rise in crude inventories.

Oil for November delivery rose $1.88, or 2.5%, to $77.06 a barrel in midday trading, after hitting an intraday high of $77.28.

"Crude oil has been enjoying incredible momentum and piggybacking on the stock market for the last several weeks, especially with the Dow going over 10,000 yesterday," said James Cordier, president of Liberty Trading Group. Oil prices settled above $75 Wednesday for the first time since October 2008.

Though the government's inventory report showed a sharp drop in gasoline stockpiles and pushed oil prices higher, Cordier said the significance of the figure will dwindle because demand for gas naturally drops in the fourth quarter. He said it will not be a factor again until next spring.

"We're buying the rumor and selling the fact," Cordier said. "The market is extremely overbought and I expect a sell off coming today or tomorrow. Oil should ease back into the low $70-range later this week or next week."

Cordier added that crude prices generally go into a tailspin mid-October and current demand for oil doesn't justify prices above $70 a barrel.

And if stocks retreat from their highs, a drop is even more likely.

Crude prices were also boosted by a weak dollar. Crude oil, like other commodities, is priced in dollars, and a weaker greenback can help support prices.

Inventory report. The Energy Information Administration reported a modest increase in crude stocks of 400,000 barrels in the week ended Oct. 9. Analysts were expecting a rise of 2.2 million barrels, according to a consensus estimate collected by energy information provider Platts.
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Nick'Otin
post Oct 15, 2009, 08:59 PM
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post Oct 15, 2009, 08:59 PM
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Dollar mixed on strong economic data
Greenback gains versus yen but slips against euro and pound as better-than-expected data suggests economic recovery.
NEW YORK (CNNMoney.com) -- The dollar was mixed against major rivals on Thursday following better-than-expected economic data about inflation and jobless claims.

The dollar surged 1.2% against the yen to ?90.5150, but slid against the euro and the pound to $1.4939 and $1.6260, respectively.

"Even though equities turned sour today, strong economic data fueled the recovery story and risk appetite in the U.S. and drove the dollar lower against high yielding currencies," said Kathy Lien, director of currency research at Global Forex Trading. "Whenever you factor in risk appetite, investors take money out of lower currencies."

The government released a tame inflation report on Thursday, which showed that although the Consumer Price Index is down, the core CPI, which excludes food and energy prices, edged slightly higher than expected.

The Labor Department's report on initial jobless claim showed a surprise drop in the number of U.S. workers filing new claims for unemployment insurance.

Despite the better-than-expected data, Lien said the dollar will continue to remain under pressure.

"There are more reasons to sell the dollar than buy it, and all of the reasons will hold through the end of the year," Lien said, adding that dollar has been declining because the Federal Reserve has kept interest rates near zero and "it's more and more likely that the Fed will be the last central bank to tighten monetary policy."

Lien added that the dollar fell aggressively last month, and over the last decade, the dollar has continued its September trend 70% of the time in the three months following.
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Nick'Otin
post Oct 19, 2009, 08:17 PM
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post Oct 19, 2009, 08:17 PM
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Bernanke warns against trade imbalances
Fed chairman cautions that export-led growth by Asian nations and U.S. protectionism could hinder durable economic growth.
SANTA BARBARA, Calif. (Reuters) -- U.S. Federal Reserve Chairman Ben Bernanke warned on Monday that pursuit of export-led growth by Asian nations could lead to a reemergence of global trade imbalances and undercut efforts to achieve more durable growth.

Throwing his weight behind a call by the Group of 20 nations to rebalance the global economy, Bernanke said Asian nations should put in place policies that discourage excess saving and boost consumption.

At the same time, he said the United States needed to increase its saving and "substantially reduce federal deficits over time."

"To achieve more balanced and durable economic growth and to reduce the risks of financial instability, we must avoid ever-increasing and unsustainable imbalances in trade and capital flows," Bernanke said at a conference on Asia sponsored by the San Francisco Federal Reserve Bank.

Bernanke said that while trade imbalances had started to narrow as U.S. households ramped up saving in response to a deep recession eating at their wealth, he cautioned that the imbalances may begin to grow anew as the global economy recovers and trade volumes rebound.

"Trade surpluses achieved through policies that artificially enhance incentives for domestic saving and the production of export goods distort the mix of domestic industries and the allocation of resources, resulting in an economy that is less able to meet the needs of its own citizens in the longer term," he said.

U.S. officials have long pressed China to allow its yuan currency to appreciate, which would lessen any price advantage Chinese goods may have in global markets. China has vowed to move toward more currency flexibility, but it has kept the yuan on a tight leash.

Bernanke said that the performance of the dollar and the U.S. economy will depend on the government's success in controlling the country's budget deficit.

"Our policymakers recognize that we need to develop a fiscal exit strategy that will involve a trajectory toward sustainability," Bernanke said in response to a question after the speech.

"That is critically important in order to maintain confidence in our economy and confidence in our currency. I know that is very well understood in Washington," he said.
Asian rebound


The Fed chairman said that Asian economies had rebounded strongly from the crisis, with annualized growth rates in the double digits expected in China, Hong Kong, Korea, Malaysia, Singapore and Taiwan.

"At this point, while risks to the economic outlook certainly remain, Asia appears to be leading the global recovery," he said.

Countries with the most open economies, such as Singapore, Hong Kong, and Taiwan took the biggest hits as a result of the turmoil, he said. China, India, and Indonesia, which are "among the least financially open" economies, expanded throughout the crisis, Bernanke said.

While conceding that greater global integration increases vulnerability to world-wide economic shocks, he voiced concern that Asian nations could draw the wrong lesson and said greater openness would promote stronger growth over the longer term.

"Protectionism and the erecting of barriers to capital flows should thus be strongly resisted," he said. "Striking a reasonable balance between trade and growth in domestic demand is the best strategy for driving economic expansion."
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Nick'Otin
post Oct 19, 2009, 08:19 PM
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post Oct 19, 2009, 08:19 PM
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Bank of America: $2.2 billion loss
Nation's biggest bank is hit by bad loans. Outgoing CEO Ken Lewis calls credit costs 'our major financial challenge going forward.
NEW YORK (CNNMoney.com) -- Bank of America proved no match for the ongoing recession as the nation's biggest bank reported a steep loss Friday.

With Americans continuing to default on their credit cards and mortgages, the company said it lost $2.2 billion in the third quarter, which included several charges related to the government's move to rescue the firm over the past year.

Bank of America's results come at a particularly difficult time for the Charlotte, N.C.-based lender and its CEO Ken Lewis.

Last month, the company's embattled leader announced plans to step down amid ongoing scrutiny over his role in the company's controversial purchase of Merrill Lynch.

Friday's results also come just a day after Lewis agreed to a deal not to accept a salary or bonus in his final year as CEO in an effort to deflect some of scrutiny the firm faces.

During a conference call with analysts, Lewis thanked the investment community for its support over the years, adding that he felt confident that Bank of America's board would find a suitable replacement. The company has provided no indication when a new CEO might be named.

"I have no doubt that Bank of America will thrive in my absence," he said.
Credit fallout

Lewis' outlook, however, did little to soften the blow of the firm's latest results. During the quarter, the company said it lost 26 cents. Analysts were anticipating BofA to fare slightly better, expecting a loss of 21 cents a share, according to Thomson Reuters.

Experiencing the bulk of the quarter's losses was Bank of America's mortgage and credit card businesses. Both divisions lost more than $1 billion during the July-September period, as more and more Americans found themselves out of work and unable to keep up with their loan payments.

Loan troubles also intensified within Bank of America's commercial real estate portfolio, amid slower spending by both businesses and consumers.


Still, there were some encouraging signs. In the latest quarter, the company set $11.7 billion for bad loans, down from $13.4 billion in the previous quarter.

"If you look at underlying numbers, credit quality is improving," said Alan Villalon, a senior research analyst at Minneapolis-based First American Funds

Bank of America's Lewis acknowledged that credit issues remained the biggest challenge facing the company going forward, but added that the company may have reached a peak in loan losses.

One bright spot was its wealth management division, one of the key businesses that led Bank of America to complete its controversial deal with Merrill Lynch last year. Both revenues and profits within the division were more than double the previous year's levels and held steady from last quarter.
Challenges remain

One key question that continues to swirl around the company is when it might be able to get out from under the government's thumb.

In exchange for accepting $45 billion in bailout money over the past year, the company is required to make hefty dividend payments. In the latest quarter, it paid $1.2 billion in preferred share dividends, with much of it going to the government.

The company's pay practices for its top 100 highest paid employees are also currently under review by the Obama administration's so-called "pay czar". Kenneth Feinberg, the man charged with handling the task, is expected to rule on the matter by the end of the month.

And that's not including the numerous high-profile state and federal investigations the company is facing related to its controversial purchase of Merrill Lynch. It is also engaged in a legal battle with the Securities and Exchange Commission over its alleged failure to notify shareholders of its decision to pay Merrill executives outsized bonuses last year.

Hoping to deflect some of that scrutiny, Bank of America agreed earlier this week to share previously undisclosed information related to its purchase of Merrill Lynch with regulators.

The agreement would give regulators access to details concerning the bank's failure to disclose what it knew about pending losses at Merrill when it bought the troubled brokerage last year.

Bank of America (BAC, Fortune 500) shares fell more than 4% in late Friday trading.
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Nick'Otin
post Oct 19, 2009, 08:19 PM
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post Oct 19, 2009, 08:19 PM
Post #58
Dollar mixed against rivals
Greenback continues broad softness, but it rises on the pound after a difficult weekend for the British currency.
NEW YORK (CNNMoney.com) -- The dollar fell against most currencies early Monday ahead of a euro zone finance ministers' meeting, but it rose against the pound as the British currency took several hits over the weekend.

Currency investors were awaiting the Eurogroup meeting in Luxembourg later Monday for possible remarks from officials on the euro's strength. The group could also discuss dollar weakness on continued concerns that the U.S. Federal Reserve will hold rates near zero and that the dollar could lose its place as the world's dominant reserve currency.

Early Monday, the buck edged down 0.19% against the euro, to $1.4934. The greenback also slipped against the Japanese yen, buying ?90.84. Both currencies are considered safe havens.

But the dollar rose against the British pound, rising 0.28% to $1.631.

It was a tough weekend for the British pound. On Sunday, Bank of England monetary policy committee member Adam Posen told the Sunday Times newspaper that the central bank should continue buying assets in its quantitative easing program because the financial system has yet to fully recover.

The British currency also suffered on comments from the Ernst and Young Item Club, a group of economists who said Saturday the pound could fall until 2014.
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Nick'Otin
post Oct 19, 2009, 08:19 PM
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post Oct 19, 2009, 08:19 PM
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Oil retreats from one-year high
Crude prices pull back slightly from previous week's 10% rally.
NEW YORK (CNNMoney.com) -- Oil prices slipped early Monday, pulling back from the previous week's rally.

Crude held its 10% gain over a seven-day rally last week, ending with a one-year high above $78 a barrel on Friday. Oil hit the high despite a stronger dollar and weaker stocks that usually pressure prices.

By 6:50 a.m. ET Monday, crude for November delivery had fallen 47 cents, or 0.6%, to $78.06 a barrel.

Analysts have questioned whether oil's recent rally is justified. While prices last week moved in tandem with factors such as the Dow Jones industrial average (INDU) crossing the psychological level of 10,000, crude market fundamentals remain weak. Supplies in the U.S. have continued to climb while demand remains unclear pending broader economic recovery.


Oil prices bucked typical trends from other markets early Monday, as stock futures pointed to a lower open and the dollar edged lower against a basket of currencies. The price of oil tends to rise on a softer greenback because crude is priced in dollars around the world.

The national average price for a gallon of regular unleaded gasoline increased to $2.564, up 1.7 cents from the previous day's $2.547, according to a daily survey conducted for motorist group AAA.
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Nick'Otin
post Oct 20, 2009, 08:18 PM
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post Oct 20, 2009, 08:18 PM
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Hyundai: The newest U.S. auto power
South Korea's Hyundai Motor is now a force to be reckoned with in the battered U.S. auto market as more consumers flock to its Hyundai and Kia brands.
NEW YORK (CNNMoney.com) -- In a year of unprecedented turmoil for the U.S. auto industry, one major car maker has emerged as a winner. And that company isn't based in Detroit, Japan or Europe.

South Korea's Hyundai Motor Group has gained significant ground against its more established rivals this year. In fact, the company, which has separate operations for its Hyundai and Kia brands in the U.S., is the only one to report sales growth this year.

U.S. sales for General Motors, Ford Motor (F, Fortune 500) and Chrysler Group, as well as Japan's Toyota Motor ™, Honda Motor (HMC) and Nissan (NSANY), are all down between 25% to 50% from a year ago. But combined U.S. sales for the Hyundai and Kia brands are up 2.6%.

As a result, the two brands have picked up 2.2 percentage points of market share during the first nine months of 2009. Hyundai and Kia now combine for 7.4% of the U.S. auto market.

That puts Hyundai Motor Group just ahead of Nissan as the sixth-largest automaker in terms of U.S. auto sales. And the Korean automaker is rapidly closing in on Chrysler, which now has just a 9.2% share of the U.S. market.

"They're definitely considered one of the major automakers today, which was definitely not the case this time last year," said Jesse Toprak, vice president of industry trends for car pricing tracker TrueCar.com.

So how has Hyundai become such a significant threat to Detroit's Big Three and the Japanese auto giants?
The right cars at the right time

Industry experts said that Hyundai has primarily been a beneficiary of the economic downturn.

High gas prices steered buyers away from the pickups and SUVs that had been a mainstay for Detroit's Big Three to more fuel efficient cars that are Hyundai's specialty. That trend accelerated thanks to this summer's popular Cash for Clunkers program, which gave buyers money to buy a new car if they traded in their old gas guzzler.

Hyundai's and Kia's combined U.S. sales leapt 30% over the course of July and August compared to a year earlier. The rest of the industry suffered a 7% decline in sales over those two months -- despite a boost from Cash for Clunkers.

The company also has been able to steal share because its vehicles typically cost less than similar models from rivals. Lower-priced vehicles obviously appealed to buyers squeezed on credit or worried about their jobs.

That has helped Hyundai steal share not just from its troubled Detroit rivals, but also from Toyota and Honda -- despite these Japanese automakers' similar focus on smaller cars.

"Fundamentally the market has come to them," said Jeremy Anwyl, chief executive officer of auto industry tracker Edmunds.com.

But now that Cash for Clunkers is history and many economists are talking about an end to the recession, will Hyundai continue to gain ground? Company officials said that it will be a challenge but expressed confidence.

"We've done a great job of lifting our brand this year. We're on lists we weren't on before," said Dave Zuchowski, vice president of U.S. sales for Hyundai. "But we're going to keep our foot on the gas. We have a lot of work to do."

Zuchowski admits that Hyundai uniquely benefited from the economic downturn and the hit that the rest of the auto industry took. He compared it to the effect that the oil shocks of the 1970s and early 1980s had on helping the Japanese automakers to establish themselves with U.S. buyers.

But Hyundai also made some savvy moves to take advantage of the trends moving the market in its direction.
Increased production and more advertising = higher sales

In January, the company rolled out its Hyundai Assurance program, which allowed buyers who lost their jobs to return their cars without penalty. A month later, Hyundai added a new wrinkle to the program. The company agreed to cover three months of payments for buyers that were looking for work.

The program helped drive up awareness of the Hyundai brand. GM and Ford Motor (F, Fortune 500) eventually came out with their own version in response to Hyundai's success.

Hyundai also did a better job than most of its rivals of preparing for demand from Cash for Clunkers. In the spring, as many U.S. auto plants were idled due to weak sales, Hyundai raised production at its U.S. plants from four days to five to give it adequate supplies in anticipation of the program.
The company also guaranteed its dealers they would get the up to $4,500 payments per car sold under Cash for Clunkers directly from Hyundai, rather than having them wait for reimbursement from the government.

That turned out to be a smart move. Dealers for many of Hyundai's competitors ran into a cash crunch due to slow government payments, which limited the ability of some rivals to fully reap the benefits of the program.

Hyundai has also been taking advantage of the troubles facing General Motors and Chrysler. The company has grabbed dozens of U.S. dealerships or facilities cut loose by GM and Chrysler as part of their bankruptcies.

Experts say that Hyundai may also get a lift as GM drops its Pontiac and Saturn brands in the coming months. According to research from Edmunds.com, people who've bought Pontiac or Saturn models in the past have also looked at Hyundai models before making their purchase.

Hyundai has stepped up its marketing efforts as well -- and at a time when many competitors were pulling back on how much they spend on promotions.

The company advertised during the Super Bowl for the first time ever in 2008 and did so again this year. The company also had a commercial during this year's Academy Awards. Zuchowski said Hyundai is looking for more high-profile sponsorship opportunities going forward.
What's next?

Experts almost universally praise Hyundai for the success of its fuel-efficient Hyundai and Kia vehicles.

But even as many American consumers continue to shift to smaller cars, experts say that Hyundai has the opportunity to grab even more market share if it sold more trucks.

Light trucks still account for nearly half of U.S. auto sales. Hyundai has limited crossover and minivan offerings and has less than a 5% share of the light truck market.

There have been rumors that Hyundai is planning to introduce a pickup offering in the future. Zuchowski would only say there are no immediate plans for such a truck.

The company also has only one luxury vehicle, the Hyundai Genesis. By way of comparison, most other automakers have a full lineup of cars marketed under separate luxury brands.

Some experts say that Hyundai may need to come out with its own separate luxury brand if it is going to compete effectively in that higher-profit part of the market.

"Luxury buyers buy image, and the image of Hyundai is not on the short list for most luxury buyers," said Toprak. "You're going to have a tough time selling a $50,000 Hyundai, even if the car is worth that kind of money."

Still, experts say that Hyundai and Kia have a solid group of new cars ready to hit the market in the next few years, such as the redesigned versions of Hyundai's Santa Fe crossover and Sonata sedan and Kia's new Soul and Forte small cars.

"The early signals from their product pipeline is they should be very competitive," said Jeff Schuster, executive director of global forecasting for J.D. Power & Associates.

Schuster added that as long as the company continues to do what it has been doing, Hyundai should be able to keep gaining market share. And that could mean that the once little South Korean car company may become an even bigger thorn in the side of both Detroit and Japan.
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