回顧過去10年，網絡泡沫化在2001年爆發了；去年次貸危機轟炸了。
原產品價格近期漲勢如虹，單是石油價在短短數個月內就屢創新高的“佳績”，難道另一輪的泡沫化已成形？
《中國報》綜合經濟學家意見，他們認為，原產品泡沫化是有跡可尋的。
一旦泡沫破滅，原產品價格晉盤整期，將對國家經濟構成的影響有多大？老百姓從中嚐到的是甜頭還是苦頭？
物極必反，成形的原產品泡沫不斷膨脹之際，破滅之日，或逼在眉梢，抑或還可撐一段時間。
當泡沫破裂時，對百姓生活負擔和國家經濟將構成一定的影響，影響有多大？這是我們關注的。
原產品價格暴漲至高峰時，需求消失殆盡，若泡沫在這瞬間破裂，原產品價格就會從高空中迅速挫跌。
興業研究經濟學家白文春向《中國報》指出，若原產品，尤其是石油價格挫至低于每桶100美元（約326.65令吉），通脹率肯定會下滑，百姓擔子也會減輕。
成本帶動
國際油價在6月26日盤中，一度上探每桶140.39美元（約457.39令吉），閉市報139美元，皆是歷上新高紀錄。
政府在6月4日宣佈，每公升無鉛汽油從1.92漲至2.70，有鉛汽油則從1.88令吉漲至2.62令吉，並將在8月開始實行新燃油補貼管理機制。
若燃油新機制有如早前報導所指，是根據市價自由浮動，百姓將從中獲益。
英特太平洋證券研究主管安東尼達斯指出，一旦泡沫破裂，原產品價格將晉盤整，進而減低由成本帶動（cost-push）的通脹壓力。
“同時，原產品價格走緩，將給國家銀行更大空間喘息，包括不調高利率。”
他說，我國主要面臨成本帶動型通脹壓力，只有原料成本走低，方可減緩通脹壓力。
“雖然根據理論，通脹高漲需調升利率克制，但是我國通脹非由需求拉動型（demand-pull），若一味調高利率，反而遭殃的是老百姓。”
他說，利率調高后，不但不能解決通脹問題，反而導致通脹惡化。
安東尼指出，屆時，商家經商成本更高，繼而將轉嫁成本給客戶，平民百姓可消費收入減低，通脹壓力不減反增，最終受苦的還是百姓。
安東尼說，原產品價格料將盤整約40%，短期最大的關注是停滯性通膨（stagflation）課題。
“我們看到成本帶動型通脹壓力升溫，同時又察覺實際經濟成長放緩。”
泡沫有跡可尋
投機熱錢紛紛湧入，原產品期貨市場在近期熱鬧起來了。
當交易架構不是完全建立在供需基本面上，市場擔心，原產品泡沫是否成形了？
白文春和安東尼皆異口同聲指出，原產品泡沫化是有跡可尋。
安東尼曾在報告中指出，目前的石油期貨市場已變質了，從“買家與賣家”交易，搖身變成投機商交易場所。
“我們發現，投機商是原油市場的最大客戶，市場分額在8年來翻倍。”
持71%訂單
雖然美國財政部長鮑爾森指出，他沒有，也無法找到證據證明，投機人士是推動油價持續上漲的主要力量。
惟根據美國原產品期貨交易委員會（CFTC），在2000年1月，投機商控制買進在紐約原產品交易所（NYME）的西德州中原油（West Texas Intermediate crude oil）期貨訂單37%。
惟在今年4月，中介商和投機商持有期貨訂單71%！
據英國《經濟學家》雜誌報道，目前國際原油期貨交易市場的投機資金約有2600億美元（約8493億令吉），是03年的20倍。
升息克物價侵蝕企業盈利
通脹觸頂，各國中央銀行該怎么辦？
綜合全球經濟學家意見認為，隨著通脹壓力揚高，全球主要央行或會調高利率克通脹。
惟他們說，國際資金短期內看空公債市場，料國際短線資金比較不會流向原產品市場。
“新興亞洲市場如印度和中國短期內通脹壓力仍很大，擔心這將會侵蝕亞洲新興市場的企業盈利增長，和當地經濟成長表現。”
目前，許多新興國家如印度、印尼、菲律賓、巴西和匈牙利皆已步入升息列車，歐元區也預估將在7月3日調升利率至4.25%。
美息不動
美國聯邦儲備局（FED）在本月26日宣佈，維持利率2%不變。
不過，期貨市場解讀美聯儲聲明，認為年底或是明年初開始或會升息。
此外，我國第二財長丹斯里諾莫哈末說，由于國內通脹是成本帶動造成，升息無法奏效，政府暫未遇見利率調高的挑戰。
官方預測，大馬通脹率今年將衝高至5%，全年經濟成長可達致5至6%。
5月份消費價格指數（CPI）揚至3.8%，創22個月新高，經濟學家不排除國行調升利率25個基點的可能性。
破裂就在美國大選後
原產品泡沫幾時將“扑”地一聲破裂？
安東尼大擔預測，美國選舉后，將是泡沫醞釀破裂危機之時。美國將在今年11月4日大選。
“我預計，原產品泡沫將在今年末季或明年首季宣告破滅。”
同時，他預估，美國今年經濟不會增長，為零成長率；明年則微揚1%。
“美國料將在明年調漲利率，美元逐漸升值，原產品價格也回返正軌。”
白文春指出，目前仍難以預計泡沫何時破裂，關鍵在于兩大因素，包括美國國會或通過及實施原產品，尤其是針對石油期貨投資的新條例，以阻止石油價格繼續攀高，泡沫也將隨之爆裂。
“目前全球受石油高企影響，導致各國皆難逃通脹魔掌，結果或被逼調高利率抑制通脹，惟這將拖累經濟成長放緩。”
他說，投機活動進而減少，並撤離原產品期貨市場，原產品價格將晉盤整。
美國國會設限油價可回跌50%
安東尼指出，當投機活動升溫之際，是政府進場干預時機。
“尤其是大工業國需制定新條例限制投機活動，及減低產油成本。”
他說，雖然大馬暫沒有能力設定條例干預市場，惟可透過大型機構如石油輸出國家組織（OPEC）和國際貨幣基金（IMF），共同努力遏止投機活動。
“我們認為，油價應徘徊在每桶60美元（約195.99令吉）至70美元（約228.66令吉）。”
反映實際供需
能源專家曾在美國眾議院聽證會上指出，若該國國會對金融機構投資原產品施以嚴格限制，油價或從現有的每桶高于135美元（約440.98令吉）水平，回跌約50%。
他們認為，油價可能在一段合理的短時間內，回跌到每桶65美元（約212.32令吉）到約228.66令吉。
眾議院能源及商務小組主席丁格爾說，議員應為投機客的操作規模設下明確限制，和要求投資銀行揭露所有能源交易資料。
另外，許多美國國會議員也尋求抑制能源期貨市場雙向交易，並為美國外匯投資設限，甚至提高投機客保證金。
美國原產品期貨交易委員會宣佈一系列舉措，以改善能源期貨市場監管，包括要求投資銀行和養老基金等機構投資者，每月報告原油期貨交易市場的投資情況，並尋求加強與英國等其它國家的監管機構合作。
“這可確保市場不受欺詐行為操縱，價格反映供需關係。”
現有價格超出合理水平30%
原產品泡沫化，始于17世紀的荷蘭。
在西元1637年2月，荷蘭掀起鬱金香花泡沫化浪潮，鬱金香價格在短短2個月內翻漲10倍，被推高至1磅1500荷蘭盾，或約3477.07令吉。
當時，1500荷蘭幣相等于一位普通木匠4年薪水。
但是，歷史高價的代價，就是鬱金香需求直線走低，價格應聲大演滑鐵盧。
400年過去了，安東尼達斯和白文春皆指出，現有原產品市場皆充斥另一波泡沫危機。
白文春指出，自去年9月美國宣佈減息開始，投機客紛紛將目標鎖定在原產品市場，導致原產品期貨價格漲勢如虹。
根據雷曼兄弟（Lehman Brothers）數據，截至今年4月中，共有2350億美元（約7676億令吉）流向原產品市場，較2006年初的700億美元（約2286億令吉）暴增2.4倍。
另一方面，法國興業銀行（Societe Generale）分析員艾伯特愛德華則指出，目前原產品價格有如踩高蹺般危險，料年底前會泡沫化。
吸引大批熱錢
分析界認為，原料價格早在去年9月便已達合理價位，根據標準普爾高盛原產品指數計算，目前原產品價格已經超出合理價位30%。
此外，原油價格飆漲，小麥、咖啡及白米價格也紛紛寫下紀錄，吸引大批熱錢投資。
Monday, June 30, 2008
Sunday, June 29, 2008
大陸九成股民虧損
調查顯示，去年初至目前，中國股市投資者九成人錄得虧損，只有4.34%人有盈利，3.15%勉強保本。
“國際金融報”報導，二零零七年十月上證綜指創下6124點的高點至今，上證綜指已下跌50%有多。儘管市場呼吁救市的呼聲很高，但在管理層推出一些或直接或間接對市場有影響的政策後，曇花一現的效果，讓股民並未看到A股未來的希望。
報導表示，有調查顯示，近六成股民金融資產減半，不斷縮水的帳戶讓他們苦不堪言。從去年一月一日起截至今年六月十九日，參與調查的人群中虧損者比例達到92.51%，盈利的投資者僅有4.34%，勉強保本的為3.15。
報導指出，在被調查的虧損的投資者中，有59.98%的人目前虧損佔其金融資產的50%以上，有14.5%的人虧損佔其金融資產的40%，有11.43%的人虧損佔其金融資產的30%，有5.74%的人虧損佔其金融資產的20%，有2.46%的人虧損佔其金融資產的10%，有5.89%的人虧損佔其金融資產的10%以下。
據報導，在這些股民的“帳冊”中，大小非減持和基金的做空成為此次虧損的兩大主因。
“國際金融報”報導，二零零七年十月上證綜指創下6124點的高點至今，上證綜指已下跌50%有多。儘管市場呼吁救市的呼聲很高，但在管理層推出一些或直接或間接對市場有影響的政策後，曇花一現的效果，讓股民並未看到A股未來的希望。
報導表示，有調查顯示，近六成股民金融資產減半，不斷縮水的帳戶讓他們苦不堪言。從去年一月一日起截至今年六月十九日，參與調查的人群中虧損者比例達到92.51%，盈利的投資者僅有4.34%，勉強保本的為3.15。
報導指出，在被調查的虧損的投資者中，有59.98%的人目前虧損佔其金融資產的50%以上，有14.5%的人虧損佔其金融資產的40%，有11.43%的人虧損佔其金融資產的30%，有5.74%的人虧損佔其金融資產的20%，有2.46%的人虧損佔其金融資產的10%，有5.89%的人虧損佔其金融資產的10%以下。
據報導，在這些股民的“帳冊”中，大小非減持和基金的做空成為此次虧損的兩大主因。
Saturday, June 28, 2008
越南通貨膨脹
貨幣貶值、股市大跌、外資撤離、通貨膨脹、投資過熱……。越南正經歷的種種似乎與11年前的泰國驚人地相似。如果帶著金融危機的想像進入越南，你會失望。普通的越南人並不知道什么是通貨膨脹，他們唯一感覺的是白米貴了，喝咖啡花的錢多了，但生活還是繼續。
據中國《三聯生活周刊》報導，胡志明市的老區和新區是截然不同的兩部分。2004年始，來越南的外國人不再像以往一樣，僅去被稱為西貢的第一郡等老區度假；還要去被稱為「越南奇跡」的第七郡等高樓大廈集中的地方。
2006年開始，越南股市、樓市一起暴漲，以越南高級白領為代表的社會精英階層開始投資股市和樓市。
2007年底，股市、樓市開始暴跌，這些人的投資大部分遭受了損失，有不少人剛買的公寓被迫還給了銀行。
2008年3月，胡志明市連續發生白米搶購風潮。隨即，老區所在的第一郡等地發生了搶購黃金和美元的風潮。
黃金和美元，是越南普通百姓覺得最重要的保值之物。直到以白米價格暴漲為代表的普遍通貨膨脹開始時，才影響到普通百姓的生活和心態。
5月開始，越南政府出台一系列宏觀調控政策，越南盾貶值、平抑米價等， 人們的生活才逐漸恢復了常態。老區所在的第一郡、第五郡等地，人們在樹蔭裡喝著冰咖啡。
街頭飛奔的摩哆也沒有因國際油價暴漲而減少——因為政府一直在補貼油價——好像前一段發生的搶購風潮和自己的生活全無關係。
事實上，平靜是因為知情甚少，這場蔓延全國的經濟危機影響大小如何、將如何收場，沒有人有現成的答案。而一旦政府補貼油價的政策在6月底結束，街頭的摩哆是否還能盛行，也是個未知數。
不分階級享樂至上
2005年，剛從韓國來越南胡志明市的權柱壽很驚奇地發現，他的越南員工和韓國員工差別非常大。權柱壽是韓國友利銀行總部，派遣到胡志明市分行來做行長的，剛開始很不習慣。
「越南員工永遠不願意加班，他們的理由也永遠是和朋友約好了喝咖啡」。
權柱壽的辦公地點在胡志明第一郡的新華大廈，在老城區成片的3、4層樓建築中顯得卓爾不群。在這裡辦公是最讓人艷羨的。樓下有嚴格的保安，本國人進出會受盤問。
即使是大樓附屬的咖啡館也比一般的場所貴幾倍。不少穿著整齊、看上去和西方國家的同行們一樣的年輕人，在裡面自得地喝著咖啡。他們屬于越南的新富階層，多數畢業于國家經濟大學，在這裡工作，起薪就有4、500美元（約1600令吉）。
在越南，戰后這代人口基本特徵就是喜歡享受，和他們的父母親很不一樣。「不分收入和階層，都喜歡休閒、旅遊和享樂，他們還沒有什么生活壓力，按照傳統風俗和父母親居住在一起，不追求房子和汽車」。
而在這幢樓裡工作的員工尤其突出。以他們分行的員工說， 即使是門口執勤的保安，每個月只掙上1、200萬越南盾（約392.84令吉），但隔兩天花幾萬、幾十萬盾去喝咖啡也是常態。而一個月幾百美元收入的高級職員，也能花上1000多美元（約3200令吉）去國外度假，「完全沒有后顧之憂的樣子」。
據中國《三聯生活周刊》報導，胡志明市的老區和新區是截然不同的兩部分。2004年始，來越南的外國人不再像以往一樣，僅去被稱為西貢的第一郡等老區度假；還要去被稱為「越南奇跡」的第七郡等高樓大廈集中的地方。
2006年開始，越南股市、樓市一起暴漲，以越南高級白領為代表的社會精英階層開始投資股市和樓市。
2007年底，股市、樓市開始暴跌，這些人的投資大部分遭受了損失，有不少人剛買的公寓被迫還給了銀行。
2008年3月，胡志明市連續發生白米搶購風潮。隨即，老區所在的第一郡等地發生了搶購黃金和美元的風潮。
黃金和美元，是越南普通百姓覺得最重要的保值之物。直到以白米價格暴漲為代表的普遍通貨膨脹開始時，才影響到普通百姓的生活和心態。
5月開始，越南政府出台一系列宏觀調控政策，越南盾貶值、平抑米價等， 人們的生活才逐漸恢復了常態。老區所在的第一郡、第五郡等地，人們在樹蔭裡喝著冰咖啡。
街頭飛奔的摩哆也沒有因國際油價暴漲而減少——因為政府一直在補貼油價——好像前一段發生的搶購風潮和自己的生活全無關係。
事實上，平靜是因為知情甚少，這場蔓延全國的經濟危機影響大小如何、將如何收場，沒有人有現成的答案。而一旦政府補貼油價的政策在6月底結束，街頭的摩哆是否還能盛行，也是個未知數。
不分階級享樂至上
2005年，剛從韓國來越南胡志明市的權柱壽很驚奇地發現，他的越南員工和韓國員工差別非常大。權柱壽是韓國友利銀行總部，派遣到胡志明市分行來做行長的，剛開始很不習慣。
「越南員工永遠不願意加班，他們的理由也永遠是和朋友約好了喝咖啡」。
權柱壽的辦公地點在胡志明第一郡的新華大廈，在老城區成片的3、4層樓建築中顯得卓爾不群。在這裡辦公是最讓人艷羨的。樓下有嚴格的保安，本國人進出會受盤問。
即使是大樓附屬的咖啡館也比一般的場所貴幾倍。不少穿著整齊、看上去和西方國家的同行們一樣的年輕人，在裡面自得地喝著咖啡。他們屬于越南的新富階層，多數畢業于國家經濟大學，在這裡工作，起薪就有4、500美元（約1600令吉）。
在越南，戰后這代人口基本特徵就是喜歡享受，和他們的父母親很不一樣。「不分收入和階層，都喜歡休閒、旅遊和享樂，他們還沒有什么生活壓力，按照傳統風俗和父母親居住在一起，不追求房子和汽車」。
而在這幢樓裡工作的員工尤其突出。以他們分行的員工說， 即使是門口執勤的保安，每個月只掙上1、200萬越南盾（約392.84令吉），但隔兩天花幾萬、幾十萬盾去喝咖啡也是常態。而一個月幾百美元收入的高級職員，也能花上1000多美元（約3200令吉）去國外度假，「完全沒有后顧之憂的樣子」。
Friday, June 27, 2008
Banks should fear a rate hike
The Fed left rates alone Wednesday. But with inflation fears brewing, an eventual rate hike could spell more trouble for embattled banks.NEW YORK (CNNMoney.com) -- If the outlook for the banking industry worsens in the months ahead, the Federal Reserve may have something to do with it.
Members of the Fed's policy-setting committee left interest rates untouched Wednesday. But more importantly, the central bank left the door open to future rate hikes to curb inflation pressure as a result of soaring energy and commodity prices.
Such a move may not happen until later this year or early 2009. But even a moderate increase in short-term interest rates by the Fed in the future could pose yet another headache for the struggling banking industry.
"It's never good - when the Fed raises rates - for the banking industry," said Anthony McSwieney, senior financial analyst at the rating agency A.M. Best.
When the Fed began its rate-cutting campaign last September, it was one of the few saving graces for banks, which were, at the time, in the early throes of the credit crunch.
Why banks like low interest rates
The cuts led to a steepening of the yield curve, meaning that the difference between short-term rates and long-term rates widened.
That drove down short-term borrowing costs for banks and securities firms. At the same time, higher long-term rates boosted banks' net interest margins, the profits they make from taking in deposits and lending them back out.
All told, the nearly 8,500 domestic insured deposit institutions reported a 9.6% jump in net interest income, to nearly $95 billion, during the first quarter of this year from a year ago, according to the Federal Deposit Insurance Corp.'s quarterly banking report.
While their most recent quarterly results may not have reflected it because of credit-related writedowns, household banking names like Citigroup (C, Fortune 500), Bank of America (BAC, Fortune 500) or Wachovia (WB, Fortune 500) tended to be the biggest beneficiaries of the rate cuts, according to FDIC data.
Typically, these big banks are also more affected by rate hikes because they tend to rely more on so-called wholesale funding sources, such as the debt market, for capital. The debt market is highly sensitive to changes in interest rates.
But if the Fed were to shift to an inflation-fighting stance and start raising rates, smaller banks could be the ones who get stung the most.
Gerald Hanweck, a finance professor at George Mason University's School of Management, warns that smaller banks already grappling with exposure to bad mortgages could be in the deepest trouble.
"Some of these banks right now are barely profitable," said Hanweck. "They are right on the edge and [higher rates] could tip them into losses."
Rate hikes could also make an already tough lending environment even tougher. In previous years, banks could compensate for rising rates by relaxing their underwriting standards to increase loan volume or attract new borrowers.
Nowadays, however, heightened regulatory scrutiny and rising loan losses have prompted banks, both large and small, to tighten their underwriting standards. And consumers aren't doing a lot of borrowing nowadays even with rates as low as they are.
But banks' interest rate pain wouldn't end there.
Increased competition for deposits
Rising interest rates would also lead to even more intense competition for deposits, notes Michael Nix, a principal at Greenwood Capital Associates in Greenwood, S.C., which oversees about $750 million in assets.
Many online banks and brokerages have been offering their own interest bearing money market accounts, often at a higher rate than traditional banks, in recent years.
To be sure, a rate increase would not affect every bank in an identical way, notes Khanh Vuong, a vice president at at A.M. Best who oversees the bank rating group. In fact, he said the impact of rising rates could "vary from region to region and bank to bank."
Banks with well-positioned balance sheets would be able to weather a rising rate environment, he noted. And financial institutions that aren't as threatened by fierce competition for deposits would also be able to withstand rate pressure.
But for an industry that's already dealing with a host of problems, the possibility of rate hikes down the road is not an encouraging sign.
Thursday, June 26, 2008
Fed holds rates steady, shows more worry on prices
WASHINGTON (Reuters) - The Federal Reserve held interest rates steady on Wednesday and signaled it was in no hurry to raise them, even as it voiced greater concern about inflation.
The decision by the U.S. central bank left the benchmark overnight fed funds rate at 2 percent and effectively ended an aggressive rate-cutting campaign that the Fed launched in September to put a floor under an economy hit hard by a housing downturn and credit crisis.
"Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased," the Fed said.
The statement marked a small step toward a tougher anti-inflation stance from a central bank that until recently had been intently focused on the economy's weakness.
"While the (Fed) sees greater upside risk to inflation than it has previously, it stopped far short of signaling a timetable or even a commitment for a rate hike," Citigroup economist Robert DiClemente said in a note to clients.
"We see policy settling into a watchful, waiting mode, perhaps considerably longer than markets expect," he said.
U.S. stocks finished the session higher and prices for U.S. government bonds ended flat as traders scaled back expectations for a rate hike at the Fed's next meeting in August. Interest-rate futures put chances of an August increase at just over 30 percent, down from about 50 percent on Tuesday.
At the same time, the dollar hit a two-week low against the euro, undercut by the expectation that the gap between U.S. and euro-zone interest rates is set to widen. Earlier on Wednesday, a comment from European Central Bank President Jean-Claude Trichet had cemented expectations of an ECB rate hike in July.
A Reuters poll of 16 top bond dealers found that most do not expect the Fed to start raising rates until the middle of next year.
WORRIES ON BOTH SIDES
Policy-makers at the U.S. central bank are at a difficult juncture. A deepening housing decline looks like it will be a drag on economic growth for months to come, even as higher oil and commodity prices threaten to ignite broader inflation.
The Fed's decision, in a 9-1 vote by its rate-setting committee, marked the first time it had held rates steady at a policy session since embarking on a series of rate reductions in September. Dallas Fed President Richard Fisher dissented, saying he preferred to raise rates.
Despite stronger inflation language, the Fed voiced lingering concerns about obstacles to growth over the next several quarters posed by tight credit, the housing slump and rising energy prices.
Still, it said "overall economic activity continues to expand." After its last meeting April 30, it described economic activity as "weak."
Senior Fed officials in recent weeks have said that risks of a serious recession had receded after a period of turmoil marked by surging mortgage delinquencies and the near bankruptcy of investment bank Bear Stearns, and they have begun to turn their sights on the need to contain inflation.
With oil prices that hit record highs in early June just shy of $140 a barrel, top Fed officials have said they would be particularly vigilant to ensure expectations of higher inflation do not build in a way that could set off a harmful upward spiral of rising prices and wages.
In its statement on Wednesday, the Fed described inflation expectations as "elevated." In April, it had simply noted that they had risen.
At the same time, however, the economy has yet to show any clear signs of vigor.
The government said on Wednesday that new home sales fell 2.5 percent in May, and reports released earlier in the week showed another record annual drop in house prices in April, while consumer confidence slid this month to a 16-year low.
The decision by the U.S. central bank left the benchmark overnight fed funds rate at 2 percent and effectively ended an aggressive rate-cutting campaign that the Fed launched in September to put a floor under an economy hit hard by a housing downturn and credit crisis.
"Although downside risks to growth remain, they appear to have diminished somewhat, and the upside risks to inflation and inflation expectations have increased," the Fed said.
The statement marked a small step toward a tougher anti-inflation stance from a central bank that until recently had been intently focused on the economy's weakness.
"While the (Fed) sees greater upside risk to inflation than it has previously, it stopped far short of signaling a timetable or even a commitment for a rate hike," Citigroup economist Robert DiClemente said in a note to clients.
"We see policy settling into a watchful, waiting mode, perhaps considerably longer than markets expect," he said.
U.S. stocks finished the session higher and prices for U.S. government bonds ended flat as traders scaled back expectations for a rate hike at the Fed's next meeting in August. Interest-rate futures put chances of an August increase at just over 30 percent, down from about 50 percent on Tuesday.
At the same time, the dollar hit a two-week low against the euro, undercut by the expectation that the gap between U.S. and euro-zone interest rates is set to widen. Earlier on Wednesday, a comment from European Central Bank President Jean-Claude Trichet had cemented expectations of an ECB rate hike in July.
A Reuters poll of 16 top bond dealers found that most do not expect the Fed to start raising rates until the middle of next year.
WORRIES ON BOTH SIDES
Policy-makers at the U.S. central bank are at a difficult juncture. A deepening housing decline looks like it will be a drag on economic growth for months to come, even as higher oil and commodity prices threaten to ignite broader inflation.
The Fed's decision, in a 9-1 vote by its rate-setting committee, marked the first time it had held rates steady at a policy session since embarking on a series of rate reductions in September. Dallas Fed President Richard Fisher dissented, saying he preferred to raise rates.
Despite stronger inflation language, the Fed voiced lingering concerns about obstacles to growth over the next several quarters posed by tight credit, the housing slump and rising energy prices.
Still, it said "overall economic activity continues to expand." After its last meeting April 30, it described economic activity as "weak."
Senior Fed officials in recent weeks have said that risks of a serious recession had receded after a period of turmoil marked by surging mortgage delinquencies and the near bankruptcy of investment bank Bear Stearns, and they have begun to turn their sights on the need to contain inflation.
With oil prices that hit record highs in early June just shy of $140 a barrel, top Fed officials have said they would be particularly vigilant to ensure expectations of higher inflation do not build in a way that could set off a harmful upward spiral of rising prices and wages.
In its statement on Wednesday, the Fed described inflation expectations as "elevated." In April, it had simply noted that they had risen.
At the same time, however, the economy has yet to show any clear signs of vigor.
The government said on Wednesday that new home sales fell 2.5 percent in May, and reports released earlier in the week showed another record annual drop in house prices in April, while consumer confidence slid this month to a 16-year low.
Wednesday, June 25, 2008
油價與金價
今年一開年，有兩項世人拚命爭奪的價值品價格暴升。
一是石油，一桶售價突破100美元，這是石油史上從沒有過的超高價格。
一是黃金，一安士過了860美元，是金價的空前紀錄。
為什么油價高金價也高？
一般人都以為石油與黃金有直接連動關係。
回看過去的石油與黃金在價格上的變動，兩者沒有連帶關係。
由1984年至2006年的22年長時間，石油價格上上下下的異動，黃金價格的上落不大，即使有過相當差異的異動，卻沒有必然的關係。
當然，上個世紀70年代第一次石油危機，石油漲價黃金也漲價，而且續漲4倍價錢，可能是這個原因，近來石油漲價黃金也漲價，人們以為石油和黃金兩者之間有連動作用。
其實，金價高漲，並非直接受油價帶起。
黃金在這段時期價格高騰，是全球物價高漲，相對的是幣值下跌形成通貨膨脹，才是黃金價走高的真正原因。
過去，尤其是2004年時油價走高，物價下跌，世間出現通貨收縮現象，世界企業界，還有能力從節約瘦身的減低成本避過了通脹危機，金價因此沒跟隨油價上升。
但當原油上升到一桶過了70美元大關，企業界可以節省開源及降低成本的能力到了極限界。
過了70美元的高價，原油牽動物價上升，景氣陷入不透明亂象，通貨膨脹的不安因素，開始刺激黃金市場。
在危機時代，黃金的特異性尤其明顯。石油始終是商品，黃金本身就是一種通貨，有本身的價值。
當石油價高到世界陷入不安境界，黃金就成為受到信任的保值品。如果一定要說油價與金價有關，關連是間接的。
一是石油，一桶售價突破100美元，這是石油史上從沒有過的超高價格。
一是黃金，一安士過了860美元，是金價的空前紀錄。
為什么油價高金價也高？
一般人都以為石油與黃金有直接連動關係。
回看過去的石油與黃金在價格上的變動，兩者沒有連帶關係。
由1984年至2006年的22年長時間，石油價格上上下下的異動，黃金價格的上落不大，即使有過相當差異的異動，卻沒有必然的關係。
當然，上個世紀70年代第一次石油危機，石油漲價黃金也漲價，而且續漲4倍價錢，可能是這個原因，近來石油漲價黃金也漲價，人們以為石油和黃金兩者之間有連動作用。
其實，金價高漲，並非直接受油價帶起。
黃金在這段時期價格高騰，是全球物價高漲，相對的是幣值下跌形成通貨膨脹，才是黃金價走高的真正原因。
過去，尤其是2004年時油價走高，物價下跌，世間出現通貨收縮現象，世界企業界，還有能力從節約瘦身的減低成本避過了通脹危機，金價因此沒跟隨油價上升。
但當原油上升到一桶過了70美元大關，企業界可以節省開源及降低成本的能力到了極限界。
過了70美元的高價，原油牽動物價上升，景氣陷入不透明亂象，通貨膨脹的不安因素，開始刺激黃金市場。
在危機時代，黃金的特異性尤其明顯。石油始終是商品，黃金本身就是一種通貨，有本身的價值。
當石油價高到世界陷入不安境界，黃金就成為受到信任的保值品。如果一定要說油價與金價有關，關連是間接的。
Tuesday, June 24, 2008
原油為何用美元交易？
美國根本不是最大石油出產國，為什么油價用美國貨幣美元作買賣，到今天為止，仍然是一桶原油美元多少來計算。
最單純的原因，是石油由美國市場發展成為世界誰也不能缺少的能源。
當初期只作點燈用途的石油，進入二十世紀成為工、農、軍事及每個人日常生活的直接或間接必需能源，石油由美國大規模石油企業控制，買賣時也就以美元為計算根据了。
近年，政治上跟美國不咬弦的一部分產油國，拒絕用美元作為石油交易的通用貨幣，在外交及石油市場上，的確翻起幾番風浪。
跟美國鬥仇近三十年的伊朗，還有近年取代古巴而正面和美國較量的南美油國委內瑞拉，為反美也為避開受美元牽制，石油的交易不用美元，改用歐元了。
到去年十二月，兩國的石油交易，完全脫離美元關係。
不用美元用其他貨幣作石油買賣，外交上產生十分複雜的交錯后果。
分析家認為，五年前，美軍兵攻伊拉克，其中一個引火源頭，是當時反美的伊拉克獨裁者侯賽因，棄美元而改用歐元為石油貨幣，令美國擔心更多西亞產油國有樣學樣而傷害美元挫損美國，所以武力摧毀侯賽因及他的政權。
俄羅斯已經擠身世界三名以內的產油大國，石油買賣用俄國貨幣盧布，也是石油交易脫離美元束縛的一大行動。
不過，不用美元交易，傷的不止美國，大多數產油國傷得比美國更重，原因很簡單，幾乎的產油國賺到石油錢都換成美元幣值，脫離美元交易，美元受挫下跌，這些拿著美元的產油國的錢財將大打折扣。
同樣的，像握有最多以美元為儲備金的如中國、台灣、日本、韓國、香港，絕對不肯也不能承受美元幣值大跌的折損。
到今天，原油交易，還是用美元。
最單純的原因，是石油由美國市場發展成為世界誰也不能缺少的能源。
當初期只作點燈用途的石油，進入二十世紀成為工、農、軍事及每個人日常生活的直接或間接必需能源，石油由美國大規模石油企業控制，買賣時也就以美元為計算根据了。
近年，政治上跟美國不咬弦的一部分產油國，拒絕用美元作為石油交易的通用貨幣，在外交及石油市場上，的確翻起幾番風浪。
跟美國鬥仇近三十年的伊朗，還有近年取代古巴而正面和美國較量的南美油國委內瑞拉，為反美也為避開受美元牽制，石油的交易不用美元，改用歐元了。
到去年十二月，兩國的石油交易，完全脫離美元關係。
不用美元用其他貨幣作石油買賣，外交上產生十分複雜的交錯后果。
分析家認為，五年前，美軍兵攻伊拉克，其中一個引火源頭，是當時反美的伊拉克獨裁者侯賽因，棄美元而改用歐元為石油貨幣，令美國擔心更多西亞產油國有樣學樣而傷害美元挫損美國，所以武力摧毀侯賽因及他的政權。
俄羅斯已經擠身世界三名以內的產油大國，石油買賣用俄國貨幣盧布，也是石油交易脫離美元束縛的一大行動。
不過，不用美元交易，傷的不止美國，大多數產油國傷得比美國更重，原因很簡單，幾乎的產油國賺到石油錢都換成美元幣值，脫離美元交易，美元受挫下跌，這些拿著美元的產油國的錢財將大打折扣。
同樣的，像握有最多以美元為儲備金的如中國、台灣、日本、韓國、香港，絕對不肯也不能承受美元幣值大跌的折損。
到今天，原油交易，還是用美元。
Monday, June 23, 2008
Coming Week: Don't Count on the Fed
Stocks will limp into the next week at levels not seen since the Bear Stearns debacle, with no hope of a boost from the Federal Reserve.
Oil and other commodity prices rallied again last week while credit conditions worsened on Wall Street and the dollar weakened further.
The Fed, which will release its June decision on interest rates Wednesday, will almost certainly hold steady, leaving investors to parse through its policy statements for any sign of what will come next.
"Our view is that the pressures on the Fed are going to get worse over the next few months," says Lehman Brothers economist Ethan Harris. "They're going to face headline inflation of about 5% with the release of the August CPI, but simultaneously, they'll see a continued string of weak labor market reports with a rising unemployment rate, so those two pieces of data are going to offset each other and leave the Fed with its hands tied."
Crude oil futures bubbled up again Friday to close near $135 a barrel while stocks tanked. The Dow Jones Industrial Average lost 3.8% over the week and fell back below the 12,000 mark to finish up at its lowest close since March 10. The S&P 500 shed 3% to hits its lowest close since March 28, and the Nasdaq Composite dropped 2%.
The latest spike in crude came after The New York Times reported Friday that Israel has performed a military exercise in potential preparation for a bombing of Iran's nuclear facilities. The market's reaction was a stark demonstration of the sensitivities that exist on Wall Street to geopolitical shocks as it grapples with a relentless financial crisis.
Against that backdrop, Saudi Arabia was to host an oil conference over the weekend aimed at calming jitters in global markets about fossil fuel supplies. RGE Monitor analyst Rachel Ziemba says the Saudis want to show investors that they're concerned about the toll that high oil prices are taking on the global economy.
"We may start to see some market actors begin to acknowledge that oil is at its peak and may start trending downward," says Ziemba. "Rising global demand for commodities underpins the bull markets in commodities, but oil and other markets have gone too far. At some point, there will be a more sustained pullback."
Ziemba notes the Saudis already have added a half-million barrels a day to global supplies in recent weeks, and they may add more. Meanwhile, demand for gasoline in the U.S. and Europe is waning as consumers adjust to higher prices; China is lowering its gasoline subsidies. Also, she says the Fed has played a role in pushing oil prices higher.
"The aggressive easing that we've seen from the Fed and injection of liquidity has found its way into the energy markets," says Ziemba.
Meanwhile, in the U.S. stock market, financials are getting pounded as investors factored in a fresh round of writedowns on mortgage-related securities. Lehman BrothersLEH dropped 8% last week amid lingering questions about its ability to survive the credit crunch in the wake of Bear Stearns' collapse. Citigroup C shed 5%, Morgan StanleyMS lost 8% and Merrill Lynch MER was down 6%.
Merrill has been singled out for its counterparty risk exposure to bond insurance giants MBIA MBI and Ambac ABK, which were both downgraded as expected last week by Moody's. Without triple-A credit ratings from the major ratings agencies, the bond insurers don't have a business model, and their shareholders could be stripped by insurance regulators to protect policy holders. Shares of MBIA lost 9% last week, while Ambac dropped 8%.
Meanwhile, credit downgrades for the bond insurers were accompanied by a rash of downgrades for the securities they guaranteed, reflecting a broad deterioration of credit conditions in the bond markets. At the same time, Moody's and Standard & Poor's signaled likely credit downgrades for major U.S. automakers General Motors GM, Ford F and Chrysler, reflecting a cultural shift toward fuel efficiency in the U.S. and the "dire state" of the auto-financing market.
Ford announced that it's delaying the release of its new F-150 pickup truck amid production cutbacks, and it sees sales weakening into 2009. Its shares lost 8% last week, while GM shares were down 16% to their lowest levels since 1982.
The market action paints a dark picture for the U.S. economy, and the outlook, as it weighs on American consumers, is likely to show up in the Conference Board's release of its consumer confidence index in June. Economists expect it to slip to 57 from 57.2 -- its lowest reading in 16 years.
The Fed will announce its decision not to change its short-term interest rate target on Wednesday afternoon, and beforehand, the government is expected to report before the opening bell that orders for durable goods were flat in May after dipping 0.5% in April. Later, investors will receive May's tally of new-home sales from the Commerce Department, and they'll also see a report on crude oil inventory levels, which could roil the energy markets.
Wednesday is also a big earnings day, with reports expected from Monsanto MON, Nike NKE and Research In Motion RIMM.
On Thursday, investors will be greeted with the government's final report on first-quarter GDP growth, which was previously estimated to be 0.9%. That figure is expected to stay positive at around 1%, although there's still a crowd out there that believes a recession began early this year when job growth turned negative and will ultimately show up in the numbers.
Later, the National Association of Realtors will report its existing-home sales tally for May, and most economists expect to see further deterioration in the housing market.
Friday will see earnings from KB Home KBH, and the government is expected to report that personal incomes rose 0.4% in May, up from 0.2% in April, while personal spending was up 0.7%, up from 0.2%. The PCE core inflation rate for May is expected at 0.2%, which would give the Fed more support to argue that inflation is contained and rates should be left where they are.
Despite all the economy's problems, Frank O'Connor of Zecco Trading is still holding out hope.
"We'll avert recession, but barely," says O'Connor. "This is all part of a bottoming-out process."
Oil and other commodity prices rallied again last week while credit conditions worsened on Wall Street and the dollar weakened further.
The Fed, which will release its June decision on interest rates Wednesday, will almost certainly hold steady, leaving investors to parse through its policy statements for any sign of what will come next.
"Our view is that the pressures on the Fed are going to get worse over the next few months," says Lehman Brothers economist Ethan Harris. "They're going to face headline inflation of about 5% with the release of the August CPI, but simultaneously, they'll see a continued string of weak labor market reports with a rising unemployment rate, so those two pieces of data are going to offset each other and leave the Fed with its hands tied."
Crude oil futures bubbled up again Friday to close near $135 a barrel while stocks tanked. The Dow Jones Industrial Average lost 3.8% over the week and fell back below the 12,000 mark to finish up at its lowest close since March 10. The S&P 500 shed 3% to hits its lowest close since March 28, and the Nasdaq Composite dropped 2%.
The latest spike in crude came after The New York Times reported Friday that Israel has performed a military exercise in potential preparation for a bombing of Iran's nuclear facilities. The market's reaction was a stark demonstration of the sensitivities that exist on Wall Street to geopolitical shocks as it grapples with a relentless financial crisis.
Against that backdrop, Saudi Arabia was to host an oil conference over the weekend aimed at calming jitters in global markets about fossil fuel supplies. RGE Monitor analyst Rachel Ziemba says the Saudis want to show investors that they're concerned about the toll that high oil prices are taking on the global economy.
"We may start to see some market actors begin to acknowledge that oil is at its peak and may start trending downward," says Ziemba. "Rising global demand for commodities underpins the bull markets in commodities, but oil and other markets have gone too far. At some point, there will be a more sustained pullback."
Ziemba notes the Saudis already have added a half-million barrels a day to global supplies in recent weeks, and they may add more. Meanwhile, demand for gasoline in the U.S. and Europe is waning as consumers adjust to higher prices; China is lowering its gasoline subsidies. Also, she says the Fed has played a role in pushing oil prices higher.
"The aggressive easing that we've seen from the Fed and injection of liquidity has found its way into the energy markets," says Ziemba.
Meanwhile, in the U.S. stock market, financials are getting pounded as investors factored in a fresh round of writedowns on mortgage-related securities. Lehman BrothersLEH dropped 8% last week amid lingering questions about its ability to survive the credit crunch in the wake of Bear Stearns' collapse. Citigroup C shed 5%, Morgan StanleyMS lost 8% and Merrill Lynch MER was down 6%.
Merrill has been singled out for its counterparty risk exposure to bond insurance giants MBIA MBI and Ambac ABK, which were both downgraded as expected last week by Moody's. Without triple-A credit ratings from the major ratings agencies, the bond insurers don't have a business model, and their shareholders could be stripped by insurance regulators to protect policy holders. Shares of MBIA lost 9% last week, while Ambac dropped 8%.
Meanwhile, credit downgrades for the bond insurers were accompanied by a rash of downgrades for the securities they guaranteed, reflecting a broad deterioration of credit conditions in the bond markets. At the same time, Moody's and Standard & Poor's signaled likely credit downgrades for major U.S. automakers General Motors GM, Ford F and Chrysler, reflecting a cultural shift toward fuel efficiency in the U.S. and the "dire state" of the auto-financing market.
Ford announced that it's delaying the release of its new F-150 pickup truck amid production cutbacks, and it sees sales weakening into 2009. Its shares lost 8% last week, while GM shares were down 16% to their lowest levels since 1982.
The market action paints a dark picture for the U.S. economy, and the outlook, as it weighs on American consumers, is likely to show up in the Conference Board's release of its consumer confidence index in June. Economists expect it to slip to 57 from 57.2 -- its lowest reading in 16 years.
The Fed will announce its decision not to change its short-term interest rate target on Wednesday afternoon, and beforehand, the government is expected to report before the opening bell that orders for durable goods were flat in May after dipping 0.5% in April. Later, investors will receive May's tally of new-home sales from the Commerce Department, and they'll also see a report on crude oil inventory levels, which could roil the energy markets.
Wednesday is also a big earnings day, with reports expected from Monsanto MON, Nike NKE and Research In Motion RIMM.
On Thursday, investors will be greeted with the government's final report on first-quarter GDP growth, which was previously estimated to be 0.9%. That figure is expected to stay positive at around 1%, although there's still a crowd out there that believes a recession began early this year when job growth turned negative and will ultimately show up in the numbers.
Later, the National Association of Realtors will report its existing-home sales tally for May, and most economists expect to see further deterioration in the housing market.
Friday will see earnings from KB Home KBH, and the government is expected to report that personal incomes rose 0.4% in May, up from 0.2% in April, while personal spending was up 0.7%, up from 0.2%. The PCE core inflation rate for May is expected at 0.2%, which would give the Fed more support to argue that inflation is contained and rates should be left where they are.
Despite all the economy's problems, Frank O'Connor of Zecco Trading is still holding out hope.
"We'll avert recession, but barely," says O'Connor. "This is all part of a bottoming-out process."
Sunday, June 22, 2008
另類投資:蒲公英,雜草變黃金
在華爾街分析師大力推薦下，蒲公英已躍居為商品市場的新寵。蒲公英具備餵養牲畜與提供汽車燃料的雙重優勢，吸引大量投機買盤湧入，推升蒲公英期貨價格大漲。
蒲公英過去被視為雜草，如今鹹魚翻生，期貨價格前周在霍博肯有機農業交易所（HOAX），漲至每英斗6.76美元，創該合約今年1月開始交易以來的最高紀錄。蒲公英期貨1月15日的收盤價為99美分。
自營商辛奈勒（Chip Signaler）說：「未來蒲公英每英斗的價格會漲到10美元，然后直奔15美元。這是一項能餵養全球人口，與降低能源成本的雙管投資。」
美國農民也壓寶蒲公英后市。今年來，他們縮減小麥與黃豆的耕種面積，把估計15%的土地轉作蒲公英耕地。
這種植物向來以富含維他命與礦物質聞名，根、葉、花都可利用，用來生產茶、沙拉和啤酒。而且，收割后，植株不需借助太多外力就能重生。
市場對蒲公英的需求似無止盡，不僅散戶投資人看好后市、大舉買進蒲公英期貨，原先為規避美元貶值而買進石油期貨的避險基金，如今也大舉投入以美元計價的蒲公英期貨。
這種情況看起來像典型的投資泡沫，但熟悉市場人士卻持相反意見。交易員與基金經理人認為，蒲公英製成的飼料較便宜，意味出口到中國的牛肉價格更低，而價格下降只會更加助長需求。
華爾街分析師說，石油屬于日益耗竭的資產，以后有必要與蒲公英油混合。
為了迎接收割季，Amalgamated有機食品公司準備讓中西部的12座乙醇廠改煉製蒲公英油，未來能和汽油混合製成燃料。
科學家指出，這種混合燃料可作為石油的替代品，效果也遠比乙醇好。美國煉油業者說，新產品名為「dandeleen」，將于2009年初投產。
不過，這波蒲公英投資熱潮並未削弱投資人對其他商品的興趣。受到心理因素影響，他們持續買進穀物、金屬與石油。玉米價格不斷攀升，原因是農民改種蒲公英，導致外界預料玉米產量會減少。
蒲公英過去被視為雜草，如今鹹魚翻生，期貨價格前周在霍博肯有機農業交易所（HOAX），漲至每英斗6.76美元，創該合約今年1月開始交易以來的最高紀錄。蒲公英期貨1月15日的收盤價為99美分。
自營商辛奈勒（Chip Signaler）說：「未來蒲公英每英斗的價格會漲到10美元，然后直奔15美元。這是一項能餵養全球人口，與降低能源成本的雙管投資。」
美國農民也壓寶蒲公英后市。今年來，他們縮減小麥與黃豆的耕種面積，把估計15%的土地轉作蒲公英耕地。
這種植物向來以富含維他命與礦物質聞名，根、葉、花都可利用，用來生產茶、沙拉和啤酒。而且，收割后，植株不需借助太多外力就能重生。
市場對蒲公英的需求似無止盡，不僅散戶投資人看好后市、大舉買進蒲公英期貨，原先為規避美元貶值而買進石油期貨的避險基金，如今也大舉投入以美元計價的蒲公英期貨。
這種情況看起來像典型的投資泡沫，但熟悉市場人士卻持相反意見。交易員與基金經理人認為，蒲公英製成的飼料較便宜，意味出口到中國的牛肉價格更低，而價格下降只會更加助長需求。
華爾街分析師說，石油屬于日益耗竭的資產，以后有必要與蒲公英油混合。
為了迎接收割季，Amalgamated有機食品公司準備讓中西部的12座乙醇廠改煉製蒲公英油，未來能和汽油混合製成燃料。
科學家指出，這種混合燃料可作為石油的替代品，效果也遠比乙醇好。美國煉油業者說，新產品名為「dandeleen」，將于2009年初投產。
不過，這波蒲公英投資熱潮並未削弱投資人對其他商品的興趣。受到心理因素影響，他們持續買進穀物、金屬與石油。玉米價格不斷攀升，原因是農民改種蒲公英，導致外界預料玉米產量會減少。
Saturday, June 21, 2008
中國央視美女主播, 炒股賺百萬
周瑛鋒有大大的眼睛，勻稱的瓜子臉，氣質出眾。中國中央電視台的女主播，一向是各界矚目的焦點，不過其中一位號稱最美麗女主播的周瑛鋒，遭網友爆料是個短線炒股高手。這名網友說，短短1年內，周瑛鋒單靠短線進出賺進約215萬令吉，個人身家直逼450萬令吉，甚至還成新疆一家上市公司大股東。
中央電視台女主播周瑛鋒有大大的眼睛，勻稱的瓜子臉，氣質出眾。
有人說，他是日本女星工藤靜香和台灣女星陳德容的混合體，號稱中國最美麗的女主播，在網路上有許多粉絲。
不過，這位美麗的女主播不只有外表漂亮，理財術更讓人刮目相看，周瑛鋒于前年底大舉買進新疆一家瀕臨破產的上市公司50萬股，在今年初中國股市開始暴跌前又全數賣出，輕鬆賺進215萬令吉。
人紅是非多
網友說，周瑛鋒打敗了中國所有基金經理，及股市專家。
更有人質疑這種股神都望塵莫及的炒股方式，是因為周瑛鋒掌握內線，涉嫌內線交易。
周瑛鋒對此不回應，只在網路上感謝大家支持。
同事也替他抱屈，因為周瑛鋒出生在新疆有地緣關係，而且她的老公是投資銀行的高階主管，投資上自然有獨到見解，現在鬧出這樣炒股鋒波，只能說人紅是非多。
Friday, June 20, 2008
Former Bear Stearns hedge fund managers indicted
NEW YORK (Reuters) - Two former Bear Stearns hedge fund managers were arrested and indicted on conspiracy and securities fraud charges on Thursday following a federal criminal probe into the collapse of two funds they oversaw.
Former managers Ralph Cioffi, 52, and Matthew Tannin, 46, surrendered to officials and were paraded in handcuffs in front of reporters and onlookers en route to their arraignment. The two pleaded not guilty and their attorneys said they will fight the charges.
The disintegration last summer of the two funds helped kick off a credit crisis that persists today by stoking widespread fears about investments linked to risky subprime mortgage loans.
According to the indictment, the fund managers lied about the funds' prospects, despite concerns over liquidity and the outlook for the market.
In a April 22 e-mail included in the indictment, Tannin warned Cioffi the subprime market could be "toast" -- while at the same time both men were touting their funds as an "awesome opportunity" for investors.
Cioffi is facing an additional insider trading charge for transferring a portion of his own investments from one of the funds without telling investors, prosecutors said.
The crumbling of the two funds, the High Grade Structured Credit Strategies Master Fund and the Enhanced Master Fund, also spurred questions about the oversight and risk management operations at Bear Stearns, which was sold in March to JPMorgan Chase & Co in an emergency takeover deal brokered by the U.S. Federal Reserve.
INDICTMENT
The indictment by a New York federal grand jury quoted Cioffi as telling Tannin on March 3, 2007, that "the worry for me is that subprime losses will be far worse than anything people have modeled."
Soon after, he forecast a "meltdown" in the subprime sector and told a colleague he was "sick to my stomach" over the funds' March performance.
Nevertheless, the indictment said, Cioffi and Tannin continued to promote their funds as a buying opportunity.
"We have an awesome opportunity," Cioffi told a Bear Stearns broker with clients invested in the funds, the indictment said.
Tannin gave a similar message to the same broker and told investors he was going to add money to his own investments in the funds, it said.
But Tannin never did add money and Cioffi transferred $2 million of his $6 million investment in one of the funds to another Bear fund with a higher return and failed to tell investors who asked if he had done so, the indictment said.
"Hedge fund investors, like all investors in the securities markets, are entitled to rely on those to whom they entrust their money," Benton Campbell, U.S. Attorney for the Eastern District of New York, said at a news conference on Thursday.
"These defendants chose to breach that trust and today they are being held accountable."
In a statement, Cioffi's attorney Edward Little, from law firm Hughes Hubbard and Reed, said: "The subprime crisis took everyone by surprise, including the Fed and Treasury, and dozens of the largest financial institutions have lost over $300 billion to date on the same investments.
"Ralph Cioffi's funds lost money in exactly the same way. Because his funds were the first to lose might make him an easy target but doesn't mean he did anything wrong."
Susan Brune, an attorney at Brune & Richard LLP representing Tannin, said: "Matt Tannin is innocent. He is being made a scapegoat for a widespread market crisis. He looks forward to his acquittal."
CHARGES
The U.S. Securities and Exchange Commission also filed civil securities fraud charges against the pair, accusing them of misrepresenting the funds' investments.
The Eastern District of New York and the FBI's New York Field Division were to announce the filing of conspiracy and wire and securities fraud charges against the two.
Cioffi met authorities at an agreed location and Tannin surrendered after waiting for officials outside his residence, according to a person familiar with the matter.
If convicted of securities fraud, Cioffi and Tannin face maximum sentences of 20 years of imprisonment. If convicted of conspiracy, they each face a maximum sentence of five years.
Both men were granted bail.
Cioffi's bail was secured by a $4 million bond, guaranteed by residences in Tenafly, New Jersey, and Naples, Florida. Tannin's bail was secured by a $1.5 million bond, guaranteed by his Upper West Side apartment in New York. Both men's wives also appeared in court to accept the bail conditions.
Law officials escorted the two men in handcuffs past media and photographers as they walked out of the Federal Plaza building in Manhattan, where the FBI has its local offices.
Former managers Ralph Cioffi, 52, and Matthew Tannin, 46, surrendered to officials and were paraded in handcuffs in front of reporters and onlookers en route to their arraignment. The two pleaded not guilty and their attorneys said they will fight the charges.
The disintegration last summer of the two funds helped kick off a credit crisis that persists today by stoking widespread fears about investments linked to risky subprime mortgage loans.
According to the indictment, the fund managers lied about the funds' prospects, despite concerns over liquidity and the outlook for the market.
In a April 22 e-mail included in the indictment, Tannin warned Cioffi the subprime market could be "toast" -- while at the same time both men were touting their funds as an "awesome opportunity" for investors.
Cioffi is facing an additional insider trading charge for transferring a portion of his own investments from one of the funds without telling investors, prosecutors said.
The crumbling of the two funds, the High Grade Structured Credit Strategies Master Fund and the Enhanced Master Fund, also spurred questions about the oversight and risk management operations at Bear Stearns, which was sold in March to JPMorgan Chase & Co in an emergency takeover deal brokered by the U.S. Federal Reserve.
INDICTMENT
The indictment by a New York federal grand jury quoted Cioffi as telling Tannin on March 3, 2007, that "the worry for me is that subprime losses will be far worse than anything people have modeled."
Soon after, he forecast a "meltdown" in the subprime sector and told a colleague he was "sick to my stomach" over the funds' March performance.
Nevertheless, the indictment said, Cioffi and Tannin continued to promote their funds as a buying opportunity.
"We have an awesome opportunity," Cioffi told a Bear Stearns broker with clients invested in the funds, the indictment said.
Tannin gave a similar message to the same broker and told investors he was going to add money to his own investments in the funds, it said.
But Tannin never did add money and Cioffi transferred $2 million of his $6 million investment in one of the funds to another Bear fund with a higher return and failed to tell investors who asked if he had done so, the indictment said.
"Hedge fund investors, like all investors in the securities markets, are entitled to rely on those to whom they entrust their money," Benton Campbell, U.S. Attorney for the Eastern District of New York, said at a news conference on Thursday.
"These defendants chose to breach that trust and today they are being held accountable."
In a statement, Cioffi's attorney Edward Little, from law firm Hughes Hubbard and Reed, said: "The subprime crisis took everyone by surprise, including the Fed and Treasury, and dozens of the largest financial institutions have lost over $300 billion to date on the same investments.
"Ralph Cioffi's funds lost money in exactly the same way. Because his funds were the first to lose might make him an easy target but doesn't mean he did anything wrong."
Susan Brune, an attorney at Brune & Richard LLP representing Tannin, said: "Matt Tannin is innocent. He is being made a scapegoat for a widespread market crisis. He looks forward to his acquittal."
CHARGES
The U.S. Securities and Exchange Commission also filed civil securities fraud charges against the pair, accusing them of misrepresenting the funds' investments.
The Eastern District of New York and the FBI's New York Field Division were to announce the filing of conspiracy and wire and securities fraud charges against the two.
Cioffi met authorities at an agreed location and Tannin surrendered after waiting for officials outside his residence, according to a person familiar with the matter.
If convicted of securities fraud, Cioffi and Tannin face maximum sentences of 20 years of imprisonment. If convicted of conspiracy, they each face a maximum sentence of five years.
Both men were granted bail.
Cioffi's bail was secured by a $4 million bond, guaranteed by residences in Tenafly, New Jersey, and Naples, Florida. Tannin's bail was secured by a $1.5 million bond, guaranteed by his Upper West Side apartment in New York. Both men's wives also appeared in court to accept the bail conditions.
Law officials escorted the two men in handcuffs past media and photographers as they walked out of the Federal Plaza building in Manhattan, where the FBI has its local offices.
Thursday, June 19, 2008
Morgan Stanley in rogue trade probe
Morgan Stanley on Wednesday became the latest financial group to be hit by the actions of a suspected rogue trader after revealing that a London-based credit derivatives trader had incorrectly valued his positions, forcing the company to take a $120m revenue hit.
Morgan Stanley said it had discovered the error in May, immediately alerted the Financial Services Authority and suspended the individual pending an internal probe. Morgan Stanley declined to comment further.
The trader, identified by market participants as Matt Piper, is suspected of increasing the value of his derivatives book to present his performance in a better light, according to a person familiar with the investigation. However, the mismarkings could also have been human error.
A trader at a rival firm said the trader had been involved in short-term trading of credit index options on the CDX index.
The mismarkings could have dated back as far as 2007, another person familiar with the investigation said. They came to light in a special review of Morgan Stanley’s hard-to-value asset classes, which have few observable market prices.
Colm Kelleher, Morgan Stanley’s chief financial officer, said the company had made a $120m “negative adjustment” to its revenues as a result of the trader’s actions.
Mr Kelleher denied that the problem was symptomatic of a failure of risk management at Morgan Stanley, which last year had to take a $9.4bn writedown on a bet on mortgage securities.
“I don’t think it is a cultural issue . . . we are much better at picking up these sorts of things than we were,” Mr Kelleher said in an interview after Morgan Stanley reported a 60 per cent fall in second-quarter profits.
John Mack, chairman and chief executive, overhauled the firm’s risk controls after the huge loss on the mortgage trade, firing co-president Zoe Cruz and recruiting Kenneth deRegt, a veteran banker, as chief risk officer.
Richard Dunn, a former head of risk at Merrill Lynch, said: “No individual should be allowed that much of an impact on the earnings of the company. The checks and balances surrounding the trader ought to have kicked in earlier.”
In March, Credit Suisse confirmed SFr2.86bn (€1.8bn) of mismarkings over the fourth quarter of last year and first quarter of 2008 was due to misconduct. The same month, Lehman Brothers suspended two traders in London pending a review of positions that could result in markdowns of up to $150m.
Morgan Stanley said it had discovered the error in May, immediately alerted the Financial Services Authority and suspended the individual pending an internal probe. Morgan Stanley declined to comment further.
The trader, identified by market participants as Matt Piper, is suspected of increasing the value of his derivatives book to present his performance in a better light, according to a person familiar with the investigation. However, the mismarkings could also have been human error.
A trader at a rival firm said the trader had been involved in short-term trading of credit index options on the CDX index.
The mismarkings could have dated back as far as 2007, another person familiar with the investigation said. They came to light in a special review of Morgan Stanley’s hard-to-value asset classes, which have few observable market prices.
Colm Kelleher, Morgan Stanley’s chief financial officer, said the company had made a $120m “negative adjustment” to its revenues as a result of the trader’s actions.
Mr Kelleher denied that the problem was symptomatic of a failure of risk management at Morgan Stanley, which last year had to take a $9.4bn writedown on a bet on mortgage securities.
“I don’t think it is a cultural issue . . . we are much better at picking up these sorts of things than we were,” Mr Kelleher said in an interview after Morgan Stanley reported a 60 per cent fall in second-quarter profits.
John Mack, chairman and chief executive, overhauled the firm’s risk controls after the huge loss on the mortgage trade, firing co-president Zoe Cruz and recruiting Kenneth deRegt, a veteran banker, as chief risk officer.
Richard Dunn, a former head of risk at Merrill Lynch, said: “No individual should be allowed that much of an impact on the earnings of the company. The checks and balances surrounding the trader ought to have kicked in earlier.”
In March, Credit Suisse confirmed SFr2.86bn (€1.8bn) of mismarkings over the fourth quarter of last year and first quarter of 2008 was due to misconduct. The same month, Lehman Brothers suspended two traders in London pending a review of positions that could result in markdowns of up to $150m.
Wednesday, June 18, 2008
Inflation: 3 big questions
Uncle Sam says the cost of living isn't out of hand. Then why do you feel like you're living hand to mouth?
Crude oil is trading at $135 a barrel. Global food prices are so high that they've triggered riots in some poor countries. No wonder many sharp-eyed market observers worry that the two-decade stretch of low inflation is coming to an end.
That's hardly certain, but the risk is high enough and immediate enough that you need to confront some serious questions about today's landscape. For most of us, those questions about inflation boil down to these three:
How bad is it right now?
By historical standards, we're still living in a world of manageable price increases. According to the Bureau of Labor Statistics, the official scorekeeper of inflation, the main consumer price index (CPI) is up 4.2% since last May. That's high for this decade, but hardly panic-inducing.
Hang on, though - only 4.2%? Who are they kidding? Does anybody at the BLS ever gas up a car?
"The official data are not jibing with what people are experiencing in their real life," says Barry Ritholtz, CEO of research firm Fusion IQ and a well-known critic of the official inflation measure.
Part of the disconnect is psychological. You buy food and gas, which are skyrocketing in price, much more frequently than, say, digital cameras, which are getting cheaper. So the rising prices loom larger in your mind than the falling ones.
But the truth is that official inflation will unavoidably be a rough approximation, at best, of what you are feeling in your wallet. To build the CPI, the BLS collects price information on thousands of goods and services. Each of those items is part of a hypothetical basket of goods a typical urban consumer might buy.
But, of course, no one is exactly average. For instance, food is about 15% of the household budget in the CPI, but it could be a much bigger chunk of your spending if you have a big family. In that case, your personal CPI may be zooming ahead of the numbers you read in the paper.
And then there's the way the BLS goes about measuring price increases. The biggest component of a typical budget, housing, can't be calculated by measuring home-sale prices. Instead, the BLS uses a figure that estimates the amount homeowners would pay if they rented their homes.
During the height of the housing bubble, that methodology made for a wild disconnect between the price increases home buyers were actually facing and what the CPI measured. Even today, if you buy a house, you are still going to pay significantly more than you would have a few years ago in many markets - a reality not reflected in the CPI.
There's yet another peculiar feature of the inflation formula: The BLS adjusts the numbers to reflect quality improvements. This makes some sense. After all, today's $2,000 laptop is faster and lighter than a $2,000 system from 1998 and can double as a TV, stereo and videoconferencing system. But does the average consumer think a 2008 sedan is actually cheaper than a 2007 model just because the manufacturer improved the tire-pressure monitors?
Critics including Bill Gross, the managing director of bond giant Pimco, argue that such adjustments are just too subjective. But statistical nuances aside, there's one big, obvious reason why 4.2% is more painful than it looks.
"There's been this collision of faster price growth and weaker wage growth," says Jared Bernstein, a senior economist at the Economic Policy Institute. In April, hourly earnings grew by 3.4% over the previous year, less than the CPI. The upshot: You've got cause to be anxious.
"The fears of inflation are not overblown," says Bernstein. "After you factor in inflation, people are facing declining wages."
How bad will it get?
Inflation could easily go higher from here. To understand why, you first have to know what really drives prices up. To read the newspaper business section these days, the cause of the current spike seems obvious: China.
It's certainly true that in China, as well as the rest of the developing world, low-wage workers are rapidly climbing the economic ladder and consuming more. That's put massive pressure on markets for basic commodities like oil and wheat.
"The problem with both food and energy is that supply is still rushing to catch up with global demand," says economist Ken Beauchemin of Global Insight.
But rising food and fuel prices don't necessarily trigger higher prices across the board - consumers might, for example, just respond to higher gas prices by paying less for cable TV and other stuff. What really determines the overall level of prices is the amount of money sloshing around in the economy.
When there are too many dollars chasing too few goods and services, you get inflation. And it's the Federal Reserve's job to get that balance right. When the Fed lowers rates, it pumps more cash into the economy; when it raises rates, it pulls the money back in.
"When inflation first shows up, people are always wanting to blame other things than Federal Reserve policy," says Brian Wesbury, chief economist at First Trust Advisors. "In the 1970s it was OPEC, today it's China. But in reality, our inflation is coming from easy money."
Actually, inflation without food and energy - so-called core inflation - is still fairly low for now. (That good news, ironically, is partly a result of those stagnant wages.) But there's a solid case to be made that money has been too easy for too long.
In the aftermath of the 2001 stock market collapse and the attacks of 9/11, then Federal Reserve chairman Alan Greenspan embarked on an aggressive interest-rate-cutting campaign to stimulate the economy, culminating in a 45-year-low rate of 1%.
The Fed followed that up with some rate hikes, but new chairman Ben Bernanke and his fellow board members have lately been on a rate-cutting tear. Since last September they've slashed the federal funds rate by 3.25 percentage points in an effort to unfreeze jittery credit markets in the wake of the mortgage debacle. The impact is already being felt: In late May, the Federal Reserve hiked its 2008 inflation projection by a full percentage point.
Could inflation get up to the double-digit levels seen in the '70s and early '80s? Unlikely. Most Fed watchers think today's Fed board will ultimately take a much tougher line on fighting inflation than their Carter-era counterparts did.
"It's nearly impossible for me to believe that we could ever return to double-digit inflation, given the lessons of history," says Beauchemin. Still, the risk of at least some inflation is likely to keep nagging for a while. Even if the Fed stops cutting rates, Wesbury argues, that won't be enough. "We won't whip inflation until we get interest rates much higher than they are today," he says.
The dilemma for Bernanke and company is that higher interest rates tend to slow down economic growth and boost unemployment. With the credit crisis still roiling, the Fed may be more frightened of triggering an economic bust than it is of higher prices.
How will it affect me?
Inflation is annoying enough in the short term - a fact you're reminded of every time you pour $4-a-gallon milk on your cereal. Over the longer run, it's the mortal enemy of anyone who wants a comfortable retirement.
For instance, assuming today's inflation rate of about 4%, a private pension or annuity payment of $5,000 a month will buy only $2,300 worth of goods and services in 20 years' time. If inflation jumps to 6%, the purchasing power of that retirement income will fall to $1,600 over that same period.
Inflation will also decrease the value of any insurance policy that pays a fixed benefit. That's why financial advisers recommend an inflation rider for long-term-care policies. Even then you generally have to choose in advance the annual rate by which benefits increase; if inflation turns out to be higher, you've lost some protection.
Inflation fears also portend higher interest rates, since they're the Fed's main tool for fighting higher prices and lenders' best way of protecting themselves. So one of the best hedges you have right now is to lock in your debt at today's low rates.
For instance, if you're a homeowner and you have an adjustable-rate mortgage, you couldn't pick a better time to refinance into a 30-year fixed-rate mortgage. Get those 6% rates while they last - because they probably won't.
Last but not least, rising inflation can hammer your portfolio returns, even on low-risk investments like U.S. Treasuries. As interest rates go up, so do the yields that bond issuers must offer to entice new investors. That makes all the investments already in the market less valuable by comparison.
Crude oil is trading at $135 a barrel. Global food prices are so high that they've triggered riots in some poor countries. No wonder many sharp-eyed market observers worry that the two-decade stretch of low inflation is coming to an end.
That's hardly certain, but the risk is high enough and immediate enough that you need to confront some serious questions about today's landscape. For most of us, those questions about inflation boil down to these three:
How bad is it right now?
By historical standards, we're still living in a world of manageable price increases. According to the Bureau of Labor Statistics, the official scorekeeper of inflation, the main consumer price index (CPI) is up 4.2% since last May. That's high for this decade, but hardly panic-inducing.
Hang on, though - only 4.2%? Who are they kidding? Does anybody at the BLS ever gas up a car?
"The official data are not jibing with what people are experiencing in their real life," says Barry Ritholtz, CEO of research firm Fusion IQ and a well-known critic of the official inflation measure.
Part of the disconnect is psychological. You buy food and gas, which are skyrocketing in price, much more frequently than, say, digital cameras, which are getting cheaper. So the rising prices loom larger in your mind than the falling ones.
But the truth is that official inflation will unavoidably be a rough approximation, at best, of what you are feeling in your wallet. To build the CPI, the BLS collects price information on thousands of goods and services. Each of those items is part of a hypothetical basket of goods a typical urban consumer might buy.
But, of course, no one is exactly average. For instance, food is about 15% of the household budget in the CPI, but it could be a much bigger chunk of your spending if you have a big family. In that case, your personal CPI may be zooming ahead of the numbers you read in the paper.
And then there's the way the BLS goes about measuring price increases. The biggest component of a typical budget, housing, can't be calculated by measuring home-sale prices. Instead, the BLS uses a figure that estimates the amount homeowners would pay if they rented their homes.
During the height of the housing bubble, that methodology made for a wild disconnect between the price increases home buyers were actually facing and what the CPI measured. Even today, if you buy a house, you are still going to pay significantly more than you would have a few years ago in many markets - a reality not reflected in the CPI.
There's yet another peculiar feature of the inflation formula: The BLS adjusts the numbers to reflect quality improvements. This makes some sense. After all, today's $2,000 laptop is faster and lighter than a $2,000 system from 1998 and can double as a TV, stereo and videoconferencing system. But does the average consumer think a 2008 sedan is actually cheaper than a 2007 model just because the manufacturer improved the tire-pressure monitors?
Critics including Bill Gross, the managing director of bond giant Pimco, argue that such adjustments are just too subjective. But statistical nuances aside, there's one big, obvious reason why 4.2% is more painful than it looks.
"There's been this collision of faster price growth and weaker wage growth," says Jared Bernstein, a senior economist at the Economic Policy Institute. In April, hourly earnings grew by 3.4% over the previous year, less than the CPI. The upshot: You've got cause to be anxious.
"The fears of inflation are not overblown," says Bernstein. "After you factor in inflation, people are facing declining wages."
How bad will it get?
Inflation could easily go higher from here. To understand why, you first have to know what really drives prices up. To read the newspaper business section these days, the cause of the current spike seems obvious: China.
It's certainly true that in China, as well as the rest of the developing world, low-wage workers are rapidly climbing the economic ladder and consuming more. That's put massive pressure on markets for basic commodities like oil and wheat.
"The problem with both food and energy is that supply is still rushing to catch up with global demand," says economist Ken Beauchemin of Global Insight.
But rising food and fuel prices don't necessarily trigger higher prices across the board - consumers might, for example, just respond to higher gas prices by paying less for cable TV and other stuff. What really determines the overall level of prices is the amount of money sloshing around in the economy.
When there are too many dollars chasing too few goods and services, you get inflation. And it's the Federal Reserve's job to get that balance right. When the Fed lowers rates, it pumps more cash into the economy; when it raises rates, it pulls the money back in.
"When inflation first shows up, people are always wanting to blame other things than Federal Reserve policy," says Brian Wesbury, chief economist at First Trust Advisors. "In the 1970s it was OPEC, today it's China. But in reality, our inflation is coming from easy money."
Actually, inflation without food and energy - so-called core inflation - is still fairly low for now. (That good news, ironically, is partly a result of those stagnant wages.) But there's a solid case to be made that money has been too easy for too long.
In the aftermath of the 2001 stock market collapse and the attacks of 9/11, then Federal Reserve chairman Alan Greenspan embarked on an aggressive interest-rate-cutting campaign to stimulate the economy, culminating in a 45-year-low rate of 1%.
The Fed followed that up with some rate hikes, but new chairman Ben Bernanke and his fellow board members have lately been on a rate-cutting tear. Since last September they've slashed the federal funds rate by 3.25 percentage points in an effort to unfreeze jittery credit markets in the wake of the mortgage debacle. The impact is already being felt: In late May, the Federal Reserve hiked its 2008 inflation projection by a full percentage point.
Could inflation get up to the double-digit levels seen in the '70s and early '80s? Unlikely. Most Fed watchers think today's Fed board will ultimately take a much tougher line on fighting inflation than their Carter-era counterparts did.
"It's nearly impossible for me to believe that we could ever return to double-digit inflation, given the lessons of history," says Beauchemin. Still, the risk of at least some inflation is likely to keep nagging for a while. Even if the Fed stops cutting rates, Wesbury argues, that won't be enough. "We won't whip inflation until we get interest rates much higher than they are today," he says.
The dilemma for Bernanke and company is that higher interest rates tend to slow down economic growth and boost unemployment. With the credit crisis still roiling, the Fed may be more frightened of triggering an economic bust than it is of higher prices.
How will it affect me?
Inflation is annoying enough in the short term - a fact you're reminded of every time you pour $4-a-gallon milk on your cereal. Over the longer run, it's the mortal enemy of anyone who wants a comfortable retirement.
For instance, assuming today's inflation rate of about 4%, a private pension or annuity payment of $5,000 a month will buy only $2,300 worth of goods and services in 20 years' time. If inflation jumps to 6%, the purchasing power of that retirement income will fall to $1,600 over that same period.
Inflation will also decrease the value of any insurance policy that pays a fixed benefit. That's why financial advisers recommend an inflation rider for long-term-care policies. Even then you generally have to choose in advance the annual rate by which benefits increase; if inflation turns out to be higher, you've lost some protection.
Inflation fears also portend higher interest rates, since they're the Fed's main tool for fighting higher prices and lenders' best way of protecting themselves. So one of the best hedges you have right now is to lock in your debt at today's low rates.
For instance, if you're a homeowner and you have an adjustable-rate mortgage, you couldn't pick a better time to refinance into a 30-year fixed-rate mortgage. Get those 6% rates while they last - because they probably won't.
Last but not least, rising inflation can hammer your portfolio returns, even on low-risk investments like U.S. Treasuries. As interest rates go up, so do the yields that bond issuers must offer to entice new investors. That makes all the investments already in the market less valuable by comparison.
Tuesday, June 17, 2008
Midwest flooding spurs record corn prices
CHICAGO (Reuters) - The worst flooding in the U.S. Midwest in 15 years sent fresh shocks to global markets and consumers as corn prices hit record highs on devastating crop losses in the heart of the world's top grain exporter.
The price of corn at the Chicago Board of Trade soared above $8 a bushel for the first time as relentless rains and overflowing rivers raised fears that Midwest farmers will not be able to grow much of anything on as many as 5 million acres.
"The market is being driven by water," said Glenn Hollander, a veteran grain merchant on the CBOT trading floor.
"Estimates show 3 million acres of corn under water and probably 2 million didn't get planted. So that gets you up to 5 million or over 700 million bushels, and that takes out the entire carry-out," he said, referring to estimates for grain stocks carried over to the next crop year.
Overwhelmed river levees across Iowa and Illinois, which produce about a third of U.S. corn and soybeans, have also displaced thousands of people. Twenty-six people have died since May 25 during storms or tornadoes in flood-stricken Midwest states.
The White House said U.S. President George W. Bush would pay a one-day visit on Thursday.
Dry weather was forecast through Wednesday across the region, allowing some rivers to recede. But those flows were surging into the Mississippi River, which was expected to rise above 1993 records and test barriers guarding low-lying sections of Burlington, Iowa, and Quincy, Illinois.
Hundreds of National Guard troops and volunteers reinforced levees on Monday on both sides of the Mississippi.
Some of the worst agricultural flooding was in Iowa, where the U.S. Department of Agriculture said 9 percent of the state's corn crop and 8 percent of the soybeans were flooded -- some 2 million acres.
"It's not a good start, at all," Iowa farmer Donald Miller said from his partly flooded farm near Iowa City. "This corn should be knee-high right now and it's ankle high, the good stuff is. The puny stuff, it's stunted, and probably will never amount to anything."
Saturated, mushy soils suffocated the seedlings, he said.
Many farmers waited for flooded fields to dry out enough for them to decide whether to replant soaked acres.
But yields will be down due to late planting.
The problems add up to more food inflation for not just U.S. domestic consumers but also dozens of countries that buy U.S. grain. The United States exports 54 percent of the world's corn, 36 percent of soybeans and 23 percent of wheat.
STICKER SHOCK
Foreign buyers are scrambling.
"They have sticker shock right now. There are credible people in the trade who think corn will be $2 higher in a month. It could happen. That would put beans up to $20. It could happen. Anything can happen," said Rich Feltes, senior vice president and director of MF Global Research.
On Monday morning, the price of corn for delivery in July before next year's harvest jumped to a record $8.07 a bushel before retreating to close at $7.87, the eighth consecutive day of record prices. Soybeans for July delivery neared the record of $15.96 before closing at $15.34.
Group of Eight finance ministers, meeting in Japan over the weekend, highlighted the threat to the global economy.
"Elevated commodity prices, especially of oil and food, pose a serious threat to stable growth worldwide, have serious implications for the most vulnerable and may increase global inflationary pressure," the ministers said in a communique that did not offer any specific remedies.
The damage to Iowa's bridges, highways, roads and railroad tracks is worse than what the state suffered in 1993.
"They've lost a lot of bridges and they've lost a lot of track and it's affected freight service throughout the state," said Dena Gray-Fisher of Iowa's Department of Transportation.
Amtrak suspended passenger train service between Chicago and St. Paul, Minnesota, and from Chicago to Denver.
Iowa officials said 36,000 people have been evacuated or forced from their homes in Iowa, and the state's losses may exceed the $2.1 billion suffered during the epic 1993 flood that triggered huge federal outlays. In total, the 1993 flood caused 48 deaths and $21 billion in damage.
As in 1993, rebuilding and repairing homes, roads, rail lines, bridges, electrical grids and sewers could boost the region's economy, officials said.
"It will certainly take a long time" to rebuild, Iowa Gov. Chet Culver said.
The price of corn at the Chicago Board of Trade soared above $8 a bushel for the first time as relentless rains and overflowing rivers raised fears that Midwest farmers will not be able to grow much of anything on as many as 5 million acres.
"The market is being driven by water," said Glenn Hollander, a veteran grain merchant on the CBOT trading floor.
"Estimates show 3 million acres of corn under water and probably 2 million didn't get planted. So that gets you up to 5 million or over 700 million bushels, and that takes out the entire carry-out," he said, referring to estimates for grain stocks carried over to the next crop year.
Overwhelmed river levees across Iowa and Illinois, which produce about a third of U.S. corn and soybeans, have also displaced thousands of people. Twenty-six people have died since May 25 during storms or tornadoes in flood-stricken Midwest states.
The White House said U.S. President George W. Bush would pay a one-day visit on Thursday.
Dry weather was forecast through Wednesday across the region, allowing some rivers to recede. But those flows were surging into the Mississippi River, which was expected to rise above 1993 records and test barriers guarding low-lying sections of Burlington, Iowa, and Quincy, Illinois.
Hundreds of National Guard troops and volunteers reinforced levees on Monday on both sides of the Mississippi.
Some of the worst agricultural flooding was in Iowa, where the U.S. Department of Agriculture said 9 percent of the state's corn crop and 8 percent of the soybeans were flooded -- some 2 million acres.
"It's not a good start, at all," Iowa farmer Donald Miller said from his partly flooded farm near Iowa City. "This corn should be knee-high right now and it's ankle high, the good stuff is. The puny stuff, it's stunted, and probably will never amount to anything."
Saturated, mushy soils suffocated the seedlings, he said.
Many farmers waited for flooded fields to dry out enough for them to decide whether to replant soaked acres.
But yields will be down due to late planting.
The problems add up to more food inflation for not just U.S. domestic consumers but also dozens of countries that buy U.S. grain. The United States exports 54 percent of the world's corn, 36 percent of soybeans and 23 percent of wheat.
STICKER SHOCK
Foreign buyers are scrambling.
"They have sticker shock right now. There are credible people in the trade who think corn will be $2 higher in a month. It could happen. That would put beans up to $20. It could happen. Anything can happen," said Rich Feltes, senior vice president and director of MF Global Research.
On Monday morning, the price of corn for delivery in July before next year's harvest jumped to a record $8.07 a bushel before retreating to close at $7.87, the eighth consecutive day of record prices. Soybeans for July delivery neared the record of $15.96 before closing at $15.34.
Group of Eight finance ministers, meeting in Japan over the weekend, highlighted the threat to the global economy.
"Elevated commodity prices, especially of oil and food, pose a serious threat to stable growth worldwide, have serious implications for the most vulnerable and may increase global inflationary pressure," the ministers said in a communique that did not offer any specific remedies.
The damage to Iowa's bridges, highways, roads and railroad tracks is worse than what the state suffered in 1993.
"They've lost a lot of bridges and they've lost a lot of track and it's affected freight service throughout the state," said Dena Gray-Fisher of Iowa's Department of Transportation.
Amtrak suspended passenger train service between Chicago and St. Paul, Minnesota, and from Chicago to Denver.
Iowa officials said 36,000 people have been evacuated or forced from their homes in Iowa, and the state's losses may exceed the $2.1 billion suffered during the epic 1993 flood that triggered huge federal outlays. In total, the 1993 flood caused 48 deaths and $21 billion in damage.
As in 1993, rebuilding and repairing homes, roads, rail lines, bridges, electrical grids and sewers could boost the region's economy, officials said.
"It will certainly take a long time" to rebuild, Iowa Gov. Chet Culver said.
Monday, June 16, 2008
Brokers reminded not to key in personal trades
BROKERS at brokerage houses have been reminded not to key in personal trades but channel them through house brokers. This reminder, already part of Bursa Malaysia's rulings to prevent insider trading and front running, came in the wake of massive trading losses at Golden Jomalina Food Industries Bhd, a subsidiary of Golden Hope Plantations Bhd.
Traders and industry players said they would not be surprised if the relevant brokerages, through which the trades were executed, were already conducting in-house investigations.
In fact, the Securities Commission and Bursa would have the credit trail of all trades done and could easily find out if anyone has “benefited'' from this fiasco and in what manner. In fact, industry players say the authorities can unveil all “submarine'' trades.
In response to a query from StarBiz, the SC said: “We review all cases on a regular basis.''
“A lot of people do this kind of things,'' an industry source said. “But it gets uncovered at a public company. There should actually be a detailed report on the entire affair.''
Worldwide, there are plenty of such cases involving large amounts of losses not properly accounted for and explained. Just a look at the phenomenal write-downs at the US financial houses linked to subprime will indicate that till this day, nobody really knows what assets have been bundled and unbundled. And yet, the cash calls continue and the world willingly pours in money to “save'' these companies.
In the case of Golden Jomalina, industry players feel there may be a need to probe deeper as to how in-house rules could have been broken, where the instructions came from or whether there was a “blatant'' attempt to transfer funds legally out of Golden Hope before the merger.
Industry players estimated that to incur a loss of RM120mil, a trader might have transacted as many as 40,000 contracts or one million tonnes of palm oil, at a loss of more than RM100 per tonne over a period of time, and the trader kept adding short positions as the prices rose.
Refineries are supposed to conduct buy hedges and the notion of selling short in a rising market is highly questionable, traders said. There are also questions on whether the losses could have been higher, and if any plantation profits, for example, could have been used to offset those losses. If at all, industry players estimated it would not be much – maybe RM20mil to RM30mil.
Traders and industry players said they would not be surprised if the relevant brokerages, through which the trades were executed, were already conducting in-house investigations.
In fact, the Securities Commission and Bursa would have the credit trail of all trades done and could easily find out if anyone has “benefited'' from this fiasco and in what manner. In fact, industry players say the authorities can unveil all “submarine'' trades.
In response to a query from StarBiz, the SC said: “We review all cases on a regular basis.''
“A lot of people do this kind of things,'' an industry source said. “But it gets uncovered at a public company. There should actually be a detailed report on the entire affair.''
Worldwide, there are plenty of such cases involving large amounts of losses not properly accounted for and explained. Just a look at the phenomenal write-downs at the US financial houses linked to subprime will indicate that till this day, nobody really knows what assets have been bundled and unbundled. And yet, the cash calls continue and the world willingly pours in money to “save'' these companies.
In the case of Golden Jomalina, industry players feel there may be a need to probe deeper as to how in-house rules could have been broken, where the instructions came from or whether there was a “blatant'' attempt to transfer funds legally out of Golden Hope before the merger.
Industry players estimated that to incur a loss of RM120mil, a trader might have transacted as many as 40,000 contracts or one million tonnes of palm oil, at a loss of more than RM100 per tonne over a period of time, and the trader kept adding short positions as the prices rose.
Refineries are supposed to conduct buy hedges and the notion of selling short in a rising market is highly questionable, traders said. There are also questions on whether the losses could have been higher, and if any plantation profits, for example, could have been used to offset those losses. If at all, industry players estimated it would not be much – maybe RM20mil to RM30mil.
Sunday, June 15, 2008
香港學生以炒股為主業
香港學生正將助學貸款和家庭儲蓄投到動盪的股市中，這一增長的趨勢，正引起社會工作者的擔憂。在這個金融中心，精通金融衍生品的祖母們和滿口股經的德士司機，已不是什么新鮮事。
2007年香港恒生指數攀升39%之際，香港大學法律系學生愛雯李，在股票和權證上投資了3.8萬美元，但是他的盈利在香港股市早前的跌勢中，就已折損過半。
「這對我來說是好的一課，」李在談及恐慌性拋盤席捲全球市場時說道。「我得說，每10個男生當中，就有4到5個炒股。」
長期以來，炒股被認為是金融系學生打發時間的無傷大雅之事，但是根據香港中文大學的數據，學生炒股正變得更加廣泛，大約10%的學生，將自己過半儲蓄都投到市場上。
香港理工大學校長潘宗光最近在一次演講中，嚴厲批評了這些學生，稱他們「把炒股當專業，把學問當副業」。
「為了滿足那點貪慾，好學生變得像病態的賭徒一樣，這值得嗎？」
一夜暴富神話起激勵作用
一夜暴富的神話，讓很多人相信那是值得的。
一個22歲的研究生，最近被報紙捧為香港「學生股神」，因為僅僅在36個月的時間里，他就將家庭財富，從9000美元炒到了44.87萬美元。
但是，社會工作者們認為，為了買股票，學生正面臨巨大的信用卡債務。
「一些學生沒有錢，所以，他們就用獎學金和助學貸款來炒股，」明愛展晴中心的社會工作主任Joe Tang說道。
2007年香港恒生指數攀升39%之際，香港大學法律系學生愛雯李，在股票和權證上投資了3.8萬美元，但是他的盈利在香港股市早前的跌勢中，就已折損過半。
「這對我來說是好的一課，」李在談及恐慌性拋盤席捲全球市場時說道。「我得說，每10個男生當中，就有4到5個炒股。」
長期以來，炒股被認為是金融系學生打發時間的無傷大雅之事，但是根據香港中文大學的數據，學生炒股正變得更加廣泛，大約10%的學生，將自己過半儲蓄都投到市場上。
香港理工大學校長潘宗光最近在一次演講中，嚴厲批評了這些學生，稱他們「把炒股當專業，把學問當副業」。
「為了滿足那點貪慾，好學生變得像病態的賭徒一樣，這值得嗎？」
一夜暴富神話起激勵作用
一夜暴富的神話，讓很多人相信那是值得的。
一個22歲的研究生，最近被報紙捧為香港「學生股神」，因為僅僅在36個月的時間里，他就將家庭財富，從9000美元炒到了44.87萬美元。
但是，社會工作者們認為，為了買股票，學生正面臨巨大的信用卡債務。
「一些學生沒有錢，所以，他們就用獎學金和助學貸款來炒股，」明愛展晴中心的社會工作主任Joe Tang說道。
Saturday, June 14, 2008
Wall Street ends turbulent week with sharp gains
NEW YORK - Wall Street ended a turbulent week with a sharp gain Friday after government readings on inflation and a drop in oil prices eased worries about the effect of rising prices on consumers. The advance lifted the Dow Jones industrial average more than 165 points, and the three major indexes turned in a mixed performance for the week.
Short-term Treasury prices rose after being pounded earlier this week on fears that the Federal Reserve would be forced to raise interest rates to combat inflation.
The readings arriving Friday and gains in the dollar supported a notion that the Fed will be able to walk a middle line as it seeks to balance the well-being of the economy with pressures from rising prices. Recent drops in the dollar had contributed to higher oil prices because a weaker greenback makes each barrel more expensive.
"The news today tells us that it's not getting worse," said Linda Duessel, equity market strategist at Federated Investors. She said that while investors aren't necessarily seeing improvement in areas like inflation, they appear relieved that prices aren't running out of control and forcing the Fed to hike rates and risk sending the economy into a steep downturn.
"I think market watchers are hoping and expecting that we don't need another rate cut," she said.
The government's report that prices are rising came as no surprise to investors or consumers. The Labor Department's Consumer Price Index grew 0.6 percent last month, which was just above the 0.5 percent economists had expected. The core inflation reading, which excludes often volatile food and energy prices, edged up a more moderate 0.2 percent, as expected.
While overall prices showed their biggest one-month gain since November, the fact that the run-up seems largely contained to food and energy appeared to give investors some solace. Price spikes in all areas could make it harder for some consumers to reach into their wallets for anything more than the basics. And a pullback in consumer spending, which accounts for more than two-thirds of U.S. economic activity, could derail investors' hopes of seeing an economic recovery later in the year.
Still, the rise in energy costs is leaving some consumers in a downcast mood. The Reuters/University of Michigan preliminary reading on consumer sentiment for June fell to a near 30-year-low of 56.7 from 59.8 last month.
But the easing of some inflation concerns Friday appeared to bolster the case for the Fed to keep rates unchanged when it meets June 24-25 and to perhaps hold off on boosting rates for several meetings. Comments this week from Fed officials, however, make clear that policymakers are mindful of rising prices and the taxing effect they can have on the economy.
Friday's session saw the Dow rise 165.77, or 1.37 percent, to 12,307.35.
Broader stock indicators also rose Friday. The Standard & Poor's 500 index advanced 20.16, or 1.50 percent, to 1,360.03, and the Nasdaq composite index rose 50.15, or 2.09 percent, to 2,454.50.
Stocks rose moderately Thursday following a steep sell-off Wednesday that came as oil prices rose and stirred inflation worries. For the week, the Dow logged a 0.80 percent gain, the S&P 500 slipped 0.05 percent and the Nasdaq composite index fell 0.81 percent.
The inflation findings appeared to lend some calm to the bond markets. Bond investors fear inflation because it lowers the value of fixed-income securities, so short-term Treasurys, the most vulnerable to the effects of rising prices, moved higher.
The 2-year yield, which moves opposite its price, fell to 3.03 percent from 3.05 percent late Thursday. The yield on the benchmark 10-year Treasury note, however, rose to 4.26 percent from 4.22 percent. The yield on the 30-year long bond rose to 4.80 percent from 4.76 percent.
The dollar rose against other major currencies, while gold prices fell.
Oil prices fell, following a sharp rebound in the previous session. A barrel of light, sweet crude declined $1.88 to settle at $134.86 on the New York Mercantile Exchange.
Michael Strauss, chief economist at Commonfund, said the advances seen Thursday and Friday belie some of the unease over inflation. He said Wall Street remains worried that inflation, while somewhat in check now, could pop in the coming months.
"Behind the scenes of the euphoria ... they're still very nervous about financial market conditions and there still very nervous about economic conditions," he said.
Strauss expects Wall Street's volatility will continue. He said investors will looking to a reading due Tuesday on inflation at the wholesale level for indications on whether some businesses will be able to continue to refrain from passing some rising costs to consumers.
"We're still going to trade with the inverse jitters of the energy market," he said, predicting that stocks will still likely take a hit if oil prices rise.
In corporate news, Anheuser-Busch Cos. is holding preliminary talks with rival Grupo Modelo SAB, according to a report in The Wall Street Journal. The maker of Budweiser, Bud Light and other brands has received an unsolicited $46 billion bid from Belgian brewer InBev SA. Anheuser-Busch fell 28 cents to $61.12.
Lehman Brothers Holdings Inc. rose $3.11, or 13.7 percent, to $25.81 following reports that Chief Executive Richard Fuld is looking for outside capital, possibly from a sovereign wealth fund or a U.S. investor. The investment bank's shares fell sharply during the week after the company reported a nearly $3 billion second-quarter loss. The company also ousted its chief financial officer and chief operating officer.
Yahoo Inc. is now turning to rival Google Inc. to help squelch a rebellion among its shareholders who believe it should have accepted Microsoft Corp.'s $47.5 billion buyout offer while it was still available last month. Late Thursday, Yahoo announced talks with Microsoft had ended with no deal.
Yahoo fell 5 cents to $23.47, Google rose $18.56, or 3.4 percent, to $571.51 and Microsoft rose 83 cents, or 2.9 percent, to $29.07.
Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where consolidated volume came to 4.59 billion shares, essentially flat with Thursday.
The Russell 2000 index of smaller companies rose 13.77, or 1.91 percent, to 733.61.
Overseas, Japan's Nikkei 225 average closed 0.61 percent higher. Britain's FTSE 100 index closed up 0.21 percent, Germany's DAX 30 index rose 0.76 percent, and the French CAC-40 index advanced 0.21 percent.
Short-term Treasury prices rose after being pounded earlier this week on fears that the Federal Reserve would be forced to raise interest rates to combat inflation.
The readings arriving Friday and gains in the dollar supported a notion that the Fed will be able to walk a middle line as it seeks to balance the well-being of the economy with pressures from rising prices. Recent drops in the dollar had contributed to higher oil prices because a weaker greenback makes each barrel more expensive.
"The news today tells us that it's not getting worse," said Linda Duessel, equity market strategist at Federated Investors. She said that while investors aren't necessarily seeing improvement in areas like inflation, they appear relieved that prices aren't running out of control and forcing the Fed to hike rates and risk sending the economy into a steep downturn.
"I think market watchers are hoping and expecting that we don't need another rate cut," she said.
The government's report that prices are rising came as no surprise to investors or consumers. The Labor Department's Consumer Price Index grew 0.6 percent last month, which was just above the 0.5 percent economists had expected. The core inflation reading, which excludes often volatile food and energy prices, edged up a more moderate 0.2 percent, as expected.
While overall prices showed their biggest one-month gain since November, the fact that the run-up seems largely contained to food and energy appeared to give investors some solace. Price spikes in all areas could make it harder for some consumers to reach into their wallets for anything more than the basics. And a pullback in consumer spending, which accounts for more than two-thirds of U.S. economic activity, could derail investors' hopes of seeing an economic recovery later in the year.
Still, the rise in energy costs is leaving some consumers in a downcast mood. The Reuters/University of Michigan preliminary reading on consumer sentiment for June fell to a near 30-year-low of 56.7 from 59.8 last month.
But the easing of some inflation concerns Friday appeared to bolster the case for the Fed to keep rates unchanged when it meets June 24-25 and to perhaps hold off on boosting rates for several meetings. Comments this week from Fed officials, however, make clear that policymakers are mindful of rising prices and the taxing effect they can have on the economy.
Friday's session saw the Dow rise 165.77, or 1.37 percent, to 12,307.35.
Broader stock indicators also rose Friday. The Standard & Poor's 500 index advanced 20.16, or 1.50 percent, to 1,360.03, and the Nasdaq composite index rose 50.15, or 2.09 percent, to 2,454.50.
Stocks rose moderately Thursday following a steep sell-off Wednesday that came as oil prices rose and stirred inflation worries. For the week, the Dow logged a 0.80 percent gain, the S&P 500 slipped 0.05 percent and the Nasdaq composite index fell 0.81 percent.
The inflation findings appeared to lend some calm to the bond markets. Bond investors fear inflation because it lowers the value of fixed-income securities, so short-term Treasurys, the most vulnerable to the effects of rising prices, moved higher.
The 2-year yield, which moves opposite its price, fell to 3.03 percent from 3.05 percent late Thursday. The yield on the benchmark 10-year Treasury note, however, rose to 4.26 percent from 4.22 percent. The yield on the 30-year long bond rose to 4.80 percent from 4.76 percent.
The dollar rose against other major currencies, while gold prices fell.
Oil prices fell, following a sharp rebound in the previous session. A barrel of light, sweet crude declined $1.88 to settle at $134.86 on the New York Mercantile Exchange.
Michael Strauss, chief economist at Commonfund, said the advances seen Thursday and Friday belie some of the unease over inflation. He said Wall Street remains worried that inflation, while somewhat in check now, could pop in the coming months.
"Behind the scenes of the euphoria ... they're still very nervous about financial market conditions and there still very nervous about economic conditions," he said.
Strauss expects Wall Street's volatility will continue. He said investors will looking to a reading due Tuesday on inflation at the wholesale level for indications on whether some businesses will be able to continue to refrain from passing some rising costs to consumers.
"We're still going to trade with the inverse jitters of the energy market," he said, predicting that stocks will still likely take a hit if oil prices rise.
In corporate news, Anheuser-Busch Cos. is holding preliminary talks with rival Grupo Modelo SAB, according to a report in The Wall Street Journal. The maker of Budweiser, Bud Light and other brands has received an unsolicited $46 billion bid from Belgian brewer InBev SA. Anheuser-Busch fell 28 cents to $61.12.
Lehman Brothers Holdings Inc. rose $3.11, or 13.7 percent, to $25.81 following reports that Chief Executive Richard Fuld is looking for outside capital, possibly from a sovereign wealth fund or a U.S. investor. The investment bank's shares fell sharply during the week after the company reported a nearly $3 billion second-quarter loss. The company also ousted its chief financial officer and chief operating officer.
Yahoo Inc. is now turning to rival Google Inc. to help squelch a rebellion among its shareholders who believe it should have accepted Microsoft Corp.'s $47.5 billion buyout offer while it was still available last month. Late Thursday, Yahoo announced talks with Microsoft had ended with no deal.
Yahoo fell 5 cents to $23.47, Google rose $18.56, or 3.4 percent, to $571.51 and Microsoft rose 83 cents, or 2.9 percent, to $29.07.
Advancing issues outnumbered decliners by about 3 to 1 on the New York Stock Exchange, where consolidated volume came to 4.59 billion shares, essentially flat with Thursday.
The Russell 2000 index of smaller companies rose 13.77, or 1.91 percent, to 733.61.
Overseas, Japan's Nikkei 225 average closed 0.61 percent higher. Britain's FTSE 100 index closed up 0.21 percent, Germany's DAX 30 index rose 0.76 percent, and the French CAC-40 index advanced 0.21 percent.
Friday, June 13, 2008
The World According to 'The Bear'
As Robert Arnott steps out of a taxi en route to a CNBC interview at the New York Stock Exchange, two young Italian tourists stop him on the street. "Do you know where The Bull is?" asks one of the young men clutching a map. The bull in question is Charging Bull, a 7,000-pound, 16-foot-long bronze sculpture by Italian artist Arturo Di Modica that stands in Bowling Green Park.
Arnott, an investment guru who lives in California, isn't familiar with the twisty streets of Lower Manhattan, but one of his colleagues points the tourists in the right direction. I Little do the Italians know that they've just met The Bear, a.k.a. Rob Arnott, chairman of investment advisory firm Research Affiliates.
Big and burly, with a gray-flecked beard and a bit of a belly after loading up on pastries during a trip to Europe, Arnott certainly looks the part. His bearish outlook informs the way he manages $35 billion for clients such as pension giant CalPERS. Included in that $35 billion is $15.2 billion he runs in the Pimco All Asset Fund (NYSE:PKO - News) for Pacific Investment Management (Pimco). Index strategies he has created are used in products offered by a variety of investment companies, including some Charles Schwab (NasdaqGS:SCHW - News) mutual funds. The strategies are also the basis for a slew of exchange-traded funds (ETFs) listed in the U.S., France, Sweden, and elsewhere.
Stocks are likely to move lower in the next six months and will be in hibernation for years, predicts Arnott. "For the long-term investor, stocks will offer single-digit returns over the next 10 to 20 years, though individual years could be far better or worse," he says. Among Arnott's worries: Congress getting too protectionist or doing a massive bailout of the housing market. Even after such musings, though, Arnott says: "I don't perceive myself as wildly bearish, but compared to rest of world I am." He does see some bright spots. "There are always places to invest," he says. He likes U.S. Treasury Inflation-Protected Securities (TIPS) and local currency emerging markets debt.
Arnott, 53, made his name as a pioneer in the wonky-sounding field of tactical asset allocation. He advocates actively shifting assets among categories -- stocks, bonds, real estate, commodities -- to take advantage of pricing anomalies or strong market sectors. He's also known for his bold, big-think forecasts. "His talent is his insight," says Nobel prize-winning economist Harry Markowitz, who is an adviser to Research Affiliates. Arnott's views are closely followed by leading financial advisers such as Louis Stanasolovich, a Pittsburgh wealth manager. "A lot of people are focused on what is happening this minute. Rob steps back and says: 'Here's the big picture,'" says Stanasolovich, CEO of Legend Financial Advisors.
Stanasolovich has invested more than $20 million of his clients' money in the Pimco All Asset Fund. In that fund, Arnott mixes quantitative screens with his own insights to rebalance the portfolio among investments such as stocks, bonds, TIPS, commodities, emerging-market debt, and real estate. The fund, which invests only in other Pimco portfolios, is up 6.01% for the past year, 4.8 percentage points ahead of the Dow Jones Moderate Portfolio Index, according to fund tracker Morningstar. The fund's five-year annualized return, however, is 6.77% through June 9, below the 10.69% return for its benchmark. All Assets's top bets include inflation-related strategies (30%), alternative bond strategies (26%), short-term strategies (14%), and equities and convertible bonds (10%).
Math Geek At The BeachAt the beginning of May, Arnott and about 15 colleagues moved some 50 miles from Pasadena, Calif., up to Newport Beach to be closer to Pimco, Arnott's biggest client. But the unofficial reason for the change of location is that Arnott fell in love with the beach when he was studying economics, applied mathematics, and computer science as a student at University of California at Santa Barbara in the 1970s.
Now he and his wife, Marina, are living in a beachfront property -- but he rents it. His skepticism about equities, it turns out, is paired with a weak forecast for real estate. His says it makes more sense to rent a $5 million house for $8,000 a month than to be saddled with a huge mortgage and high property taxes: "That's the situation in coastal (Orange County)."
His big-picture view on real estate is that plunging home prices will continue to fuel a consumer-spending slump. That's because the cash consumers tapped from home-equity loans amounted to 5% of gross domestic product, he says. Arnott figures that roughly half of the $600 billion in home-equity withdrawals was used to buy consumer goods in 2005.
From his new stomping grounds, Arnott continues to beat the drum for a subject he's passionate about: fundamental indexing. It's a way of weighting indexes on metrics such as sales, cash flow, and dividends rather than by market capitalization. Although several people claim to be pioneers in this area, Arnott puts his stamp on the theory in a new book, The Fundamental Index: A Better Way to Invest (Wiley; $29.95), which he co-authored with colleagues. "If I didn't write it," he says, "someone else would."
Arnott says there is a basic problem with traditional indexing: Companies are weighted by market capitalization, which leads to an overweighting of overvalued companies and an underweighting of undervalued ones. Fundamental indexers say focusing on metrics such as sales makes it easier to identify the most undervalued companies. "The idea behind the traditional index fund is a very powerful one," says investor and author Peter Bernstein, an adviser to Arnott. "To take issue with it in this way takes Rob Arnott's tenacity and thinking."
Indeed, Arnott's tweaking of the tenets of passive investing raises the ire of indexing stalwarts such as Vanguard Group founder Jack Bogle, whom Arnott considers an investment hero. "My problem is that the basic thesis of fundamental indexing is definitely not proven," says Bogle, who's skeptical of backtesting data that show such indexes outperforming the Standard & Poor's 500-stock index by two percentage points annually for the past 46 years.
Bogle also notes that the PowerShares FTSE RAFI U.S. 1000 ETF, which uses Arnott's strategy and tracks the performance of the largest U.S. equities based on book value, cash flow, sales, and dividends, is down 13.4% for the past 12 months, while the Vanguard 500 Index Fund is down 7.93%. "He's gone down almost twice as much as the market in the last 12 months. That's pretty remarkable," says Bogle. "It's especially remarkable since he assured the world that his theory also gave better downside protection."
"Of course it has underperformed," Arnott counters. The cap-weighted index tilts toward growth companies, while fundamental indexes favor value companies, he explains.
The controversy doesn't end there. Among fundamental indexers, there's squabbling over who gets credit for the idea as well as the optimal way to construct a fundamental index. Arnott says he stays out of the fray to focus on getting more institutions to buy his index products. Just $30 billion of $5 trillion in indexed assets is in fundamental indexing strategies.
Arnott takes a measured approach to his hobbies, too. In January he set a goal of riding at least two of his 20 vintage motorcycles every month. (He's a little behind on his goal.) Some of his prized bikes include a Morbidelli built by Enzo Ferrari's engineering team and a 1949 Vincent Black Lightning that set an Australian Land Speed Record of 154 mph in 1949. His worst fear: that fellow cycle enthusiast and talk show host Jay Leno will find out about a bike he's interested in and outbid him.
Arnott also travels the globe chasing solar eclipses. "A total solar eclipse is the most remarkable -- and beautiful -- spectacle that the skies can offer us," he says. His goal is to spend an hour of his life under eclipses -- no easy feat considering some last for 30 seconds. So far he has viewed nine, including one from Eastern Antarctica. He expects to cross the half-hour mark on Aug. 1, in Central China.
Bear markets, like eclipses, can be fleeting, but Arnott foresees a down market with staying power. "We've only seen the first leg," he says.
Arnott, an investment guru who lives in California, isn't familiar with the twisty streets of Lower Manhattan, but one of his colleagues points the tourists in the right direction. I Little do the Italians know that they've just met The Bear, a.k.a. Rob Arnott, chairman of investment advisory firm Research Affiliates.
Big and burly, with a gray-flecked beard and a bit of a belly after loading up on pastries during a trip to Europe, Arnott certainly looks the part. His bearish outlook informs the way he manages $35 billion for clients such as pension giant CalPERS. Included in that $35 billion is $15.2 billion he runs in the Pimco All Asset Fund (NYSE:PKO - News) for Pacific Investment Management (Pimco). Index strategies he has created are used in products offered by a variety of investment companies, including some Charles Schwab (NasdaqGS:SCHW - News) mutual funds. The strategies are also the basis for a slew of exchange-traded funds (ETFs) listed in the U.S., France, Sweden, and elsewhere.
Stocks are likely to move lower in the next six months and will be in hibernation for years, predicts Arnott. "For the long-term investor, stocks will offer single-digit returns over the next 10 to 20 years, though individual years could be far better or worse," he says. Among Arnott's worries: Congress getting too protectionist or doing a massive bailout of the housing market. Even after such musings, though, Arnott says: "I don't perceive myself as wildly bearish, but compared to rest of world I am." He does see some bright spots. "There are always places to invest," he says. He likes U.S. Treasury Inflation-Protected Securities (TIPS) and local currency emerging markets debt.
Arnott, 53, made his name as a pioneer in the wonky-sounding field of tactical asset allocation. He advocates actively shifting assets among categories -- stocks, bonds, real estate, commodities -- to take advantage of pricing anomalies or strong market sectors. He's also known for his bold, big-think forecasts. "His talent is his insight," says Nobel prize-winning economist Harry Markowitz, who is an adviser to Research Affiliates. Arnott's views are closely followed by leading financial advisers such as Louis Stanasolovich, a Pittsburgh wealth manager. "A lot of people are focused on what is happening this minute. Rob steps back and says: 'Here's the big picture,'" says Stanasolovich, CEO of Legend Financial Advisors.
Stanasolovich has invested more than $20 million of his clients' money in the Pimco All Asset Fund. In that fund, Arnott mixes quantitative screens with his own insights to rebalance the portfolio among investments such as stocks, bonds, TIPS, commodities, emerging-market debt, and real estate. The fund, which invests only in other Pimco portfolios, is up 6.01% for the past year, 4.8 percentage points ahead of the Dow Jones Moderate Portfolio Index, according to fund tracker Morningstar. The fund's five-year annualized return, however, is 6.77% through June 9, below the 10.69% return for its benchmark. All Assets's top bets include inflation-related strategies (30%), alternative bond strategies (26%), short-term strategies (14%), and equities and convertible bonds (10%).
Math Geek At The BeachAt the beginning of May, Arnott and about 15 colleagues moved some 50 miles from Pasadena, Calif., up to Newport Beach to be closer to Pimco, Arnott's biggest client. But the unofficial reason for the change of location is that Arnott fell in love with the beach when he was studying economics, applied mathematics, and computer science as a student at University of California at Santa Barbara in the 1970s.
Now he and his wife, Marina, are living in a beachfront property -- but he rents it. His skepticism about equities, it turns out, is paired with a weak forecast for real estate. His says it makes more sense to rent a $5 million house for $8,000 a month than to be saddled with a huge mortgage and high property taxes: "That's the situation in coastal (Orange County)."
His big-picture view on real estate is that plunging home prices will continue to fuel a consumer-spending slump. That's because the cash consumers tapped from home-equity loans amounted to 5% of gross domestic product, he says. Arnott figures that roughly half of the $600 billion in home-equity withdrawals was used to buy consumer goods in 2005.
From his new stomping grounds, Arnott continues to beat the drum for a subject he's passionate about: fundamental indexing. It's a way of weighting indexes on metrics such as sales, cash flow, and dividends rather than by market capitalization. Although several people claim to be pioneers in this area, Arnott puts his stamp on the theory in a new book, The Fundamental Index: A Better Way to Invest (Wiley; $29.95), which he co-authored with colleagues. "If I didn't write it," he says, "someone else would."
Arnott says there is a basic problem with traditional indexing: Companies are weighted by market capitalization, which leads to an overweighting of overvalued companies and an underweighting of undervalued ones. Fundamental indexers say focusing on metrics such as sales makes it easier to identify the most undervalued companies. "The idea behind the traditional index fund is a very powerful one," says investor and author Peter Bernstein, an adviser to Arnott. "To take issue with it in this way takes Rob Arnott's tenacity and thinking."
Indeed, Arnott's tweaking of the tenets of passive investing raises the ire of indexing stalwarts such as Vanguard Group founder Jack Bogle, whom Arnott considers an investment hero. "My problem is that the basic thesis of fundamental indexing is definitely not proven," says Bogle, who's skeptical of backtesting data that show such indexes outperforming the Standard & Poor's 500-stock index by two percentage points annually for the past 46 years.
Bogle also notes that the PowerShares FTSE RAFI U.S. 1000 ETF, which uses Arnott's strategy and tracks the performance of the largest U.S. equities based on book value, cash flow, sales, and dividends, is down 13.4% for the past 12 months, while the Vanguard 500 Index Fund is down 7.93%. "He's gone down almost twice as much as the market in the last 12 months. That's pretty remarkable," says Bogle. "It's especially remarkable since he assured the world that his theory also gave better downside protection."
"Of course it has underperformed," Arnott counters. The cap-weighted index tilts toward growth companies, while fundamental indexes favor value companies, he explains.
The controversy doesn't end there. Among fundamental indexers, there's squabbling over who gets credit for the idea as well as the optimal way to construct a fundamental index. Arnott says he stays out of the fray to focus on getting more institutions to buy his index products. Just $30 billion of $5 trillion in indexed assets is in fundamental indexing strategies.
Arnott takes a measured approach to his hobbies, too. In January he set a goal of riding at least two of his 20 vintage motorcycles every month. (He's a little behind on his goal.) Some of his prized bikes include a Morbidelli built by Enzo Ferrari's engineering team and a 1949 Vincent Black Lightning that set an Australian Land Speed Record of 154 mph in 1949. His worst fear: that fellow cycle enthusiast and talk show host Jay Leno will find out about a bike he's interested in and outbid him.
Arnott also travels the globe chasing solar eclipses. "A total solar eclipse is the most remarkable -- and beautiful -- spectacle that the skies can offer us," he says. His goal is to spend an hour of his life under eclipses -- no easy feat considering some last for 30 seconds. So far he has viewed nine, including one from Eastern Antarctica. He expects to cross the half-hour mark on Aug. 1, in Central China.
Bear markets, like eclipses, can be fleeting, but Arnott foresees a down market with staying power. "We've only seen the first leg," he says.
Thursday, June 12, 2008
So, What Do You Do For A Living?
Earlier this week a member asked me the following question:
"I have recently begun trading full time. On a recent stint in a part-time, temporary job I was asked who I was currently working for. This question came up very frequently both in the social world and the professional world. Although being a trader is a fantastic way to make a living, it does not translate so well into terms that most people would understand. I loathe to label myself “a day trader,” and yet that is the closest description of what I do that most people understand. I have also tried “self-employed” but that seems too close to “unemployed” for comfort. How do you describe what you do in a simple sentence?"
So, after sharing how I typically respond to this question, I then asked readers to submit their own suggestions. Over 500 were received (many of them both helpful and humorous).
Those of us who trade for a living often struggle with answering this question either because people assume you are just a day trading gambler and/or you don't want to be in the position of providing hot stock tips or talk about the market during your off hours. In fact, many of the suggestions I received had nothing to do with the market (i.e. tell them you are a garbage collector, plumber, house husband, drug dealer, you work for the IRS, life insurance salesman, etc.) But, the best responses I received were both truthful and interesting enough that you could avoid the inevitable "so you're a daytrader, right?" response after telling people you trade and invest in the market for your profession.
Here are quite a few of my personal favorites:
"I buy things, and then I sell them."
"I manage investments for a private organization."
"I am self-employed in the field of risk management."
"I am a silent partner in different publicly traded companies."
"We have a family business that I'm involved with."
"I am a market economist."
"I am in investment manager."
"I do market research."
"I'm a supply/demand engineer."
"I work for my own consulting company."
"I am a money manager."
"I am a portfolio manger for private investors."
"I'm in the finance business - you know, stocks and bonds and things like that."
"I am in investment business."
"I buy and sell companies that are undervalued."
"I am a probabilities analyst."
"I work in independent capital management."
"I manage private capital."
"I am an independent investment analyst."
"I am an investment manager for a private fund."
"I work in the investment business."
"I own my own business."
"I'm an inventory manager."
"I do stock market research."
"I'm a self-employed economic analyst."
"I run a small private financial company."
"I manage capital."
"I study the stock market."
"I do computer work."
"I own my own risk management business."
"I am presently between careers."
"I run a private hedge fund that is closed to individual investors."
"I manage my real estate and brokerage accounts."
"I am a professional investor."
"I am an independent asset manager."
"I work in asset management."
"I buy and sell companies."
"I'm a capital markets actuary."
"I'm an equities manager."
"I'm a retired investor living on a pension."
"I'm a freelance investor."
"I develop stock market trading systems."
"I am an investor."
"I'm a personal portfolio manager."
"I am a personal financial specialist."
"I surf the waves of hope and denial."
"I'm a retirement enhancement engineer."
"I collect money for a living."
"I run my own investment company."
"I'm a money making machine."
For everyone who participated (and provided email addresses with their response) I'll do a random prize drawing later today and pick out 10 for free gifts that I'll send out next week. A sincere thank you to all who submitted their recommendations.
"I have recently begun trading full time. On a recent stint in a part-time, temporary job I was asked who I was currently working for. This question came up very frequently both in the social world and the professional world. Although being a trader is a fantastic way to make a living, it does not translate so well into terms that most people would understand. I loathe to label myself “a day trader,” and yet that is the closest description of what I do that most people understand. I have also tried “self-employed” but that seems too close to “unemployed” for comfort. How do you describe what you do in a simple sentence?"
So, after sharing how I typically respond to this question, I then asked readers to submit their own suggestions. Over 500 were received (many of them both helpful and humorous).
Those of us who trade for a living often struggle with answering this question either because people assume you are just a day trading gambler and/or you don't want to be in the position of providing hot stock tips or talk about the market during your off hours. In fact, many of the suggestions I received had nothing to do with the market (i.e. tell them you are a garbage collector, plumber, house husband, drug dealer, you work for the IRS, life insurance salesman, etc.) But, the best responses I received were both truthful and interesting enough that you could avoid the inevitable "so you're a daytrader, right?" response after telling people you trade and invest in the market for your profession.
Here are quite a few of my personal favorites:
"I buy things, and then I sell them."
"I manage investments for a private organization."
"I am self-employed in the field of risk management."
"I am a silent partner in different publicly traded companies."
"We have a family business that I'm involved with."
"I am a market economist."
"I am in investment manager."
"I do market research."
"I'm a supply/demand engineer."
"I work for my own consulting company."
"I am a money manager."
"I am a portfolio manger for private investors."
"I'm in the finance business - you know, stocks and bonds and things like that."
"I am in investment business."
"I buy and sell companies that are undervalued."
"I am a probabilities analyst."
"I work in independent capital management."
"I manage private capital."
"I am an independent investment analyst."
"I am an investment manager for a private fund."
"I work in the investment business."
"I own my own business."
"I'm an inventory manager."
"I do stock market research."
"I'm a self-employed economic analyst."
"I run a small private financial company."
"I manage capital."
"I study the stock market."
"I do computer work."
"I own my own risk management business."
"I am presently between careers."
"I run a private hedge fund that is closed to individual investors."
"I manage my real estate and brokerage accounts."
"I am a professional investor."
"I am an independent asset manager."
"I work in asset management."
"I buy and sell companies."
"I'm a capital markets actuary."
"I'm an equities manager."
"I'm a retired investor living on a pension."
"I'm a freelance investor."
"I develop stock market trading systems."
"I am an investor."
"I'm a personal portfolio manager."
"I am a personal financial specialist."
"I surf the waves of hope and denial."
"I'm a retirement enhancement engineer."
"I collect money for a living."
"I run my own investment company."
"I'm a money making machine."
For everyone who participated (and provided email addresses with their response) I'll do a random prize drawing later today and pick out 10 for free gifts that I'll send out next week. A sincere thank you to all who submitted their recommendations.
Wednesday, June 11, 2008
Sime Darby sacks CFO
KUALA LUMPUR: Sime Darby Bhd on Monday sacked its chief financial officer (CFO) and another senior executive following an in-depth inquiry into RM120mil losses from crude palm oil (CPO) futures trading.
The services of group CFO Razidan Ghazalli and group vice-president (1) of downstream and biofuel Muhamad Mohan Kittu Abdullah were terminated with immediate effect.
In a statement yesterday, Sime Darby said the trading losses at Golden Jomalina Food Industries Bhd, a subsidiary of Golden Hope Plantations Bhd (GHope), were discovered in August 2007, several months before the merger of GHope, Kumpulan Guthrie Bhd and Sime Darby.
Shortly after the losses were discovered, KPMG Forensic was engaged to conduct an investigative review of the futures trading operations at Golden Jomalina.
The forensic accountants completed their report and handed it to Sime Darby this year. The issue was deliberated by the group’s board of directors at a meeting on May 28.
After having reviewed the forensic accountant's report and findings by a panel of independent directors set up by the audit committee, Sime Darby’s board determined that the persons concerned had failed to discharge their functions to the standard of care that were reasonably expected of them.
Razidan was GHope’s finance director while Muhammad Mohan was Jomalina’s general manager when the losses were racked up through futures trading between October 2006 and August 2007.
According to a Sime Darby spokesman, appropriate provisions had been made and the group would not have its future profitability affected by the past losses.
He added that measures had been taken to strengthen processes and trading parameters.
“The decision to terminate the services of the two staff members was taken after an extensive process of investigation and deliberation. While it is never a pleasant task to dismiss any personnel, the board felt that the move was necessary in the interest of accountability and to protect stakeholders of Sime Darby,” said the spokesman.
Meanwhile, industry analysts contacted by StarBiz said the RM120mil trading losses would not have an impact on their earnings forecasts on Sime Darby as the group confirmed that it already made ample provisions to account for the losses.
A plantation analyst with a bank-backed brokerage said while the revelation (of the losses) might raise concerns among investors, Sime Darby had made the right decision to make its top staff accountable for the glaring irregularities within the group’s highly diversified operations.
“The group is advocating transparency and issuing a stern warning that irrespective of the rank, none of its staff will be spared from the consequences of irregularities which can keep on cropping up in any big organisation,” the analyst said.
Another analyst concurred that it was a positive move by Sime Darby to reveal the losses rather than to cover up.
“I believe that some plantation analysts since last year have already sensed the irregularities, particularly the losses in the group’s downstream operations, attributing it to the unfeasible biodiesel operation.
“This losses were somewhat overlooked, given the good performance in the upstream plantation operation due to the higher CPO prices,” he added.
The services of group CFO Razidan Ghazalli and group vice-president (1) of downstream and biofuel Muhamad Mohan Kittu Abdullah were terminated with immediate effect.
In a statement yesterday, Sime Darby said the trading losses at Golden Jomalina Food Industries Bhd, a subsidiary of Golden Hope Plantations Bhd (GHope), were discovered in August 2007, several months before the merger of GHope, Kumpulan Guthrie Bhd and Sime Darby.
Shortly after the losses were discovered, KPMG Forensic was engaged to conduct an investigative review of the futures trading operations at Golden Jomalina.
The forensic accountants completed their report and handed it to Sime Darby this year. The issue was deliberated by the group’s board of directors at a meeting on May 28.
After having reviewed the forensic accountant's report and findings by a panel of independent directors set up by the audit committee, Sime Darby’s board determined that the persons concerned had failed to discharge their functions to the standard of care that were reasonably expected of them.
Razidan was GHope’s finance director while Muhammad Mohan was Jomalina’s general manager when the losses were racked up through futures trading between October 2006 and August 2007.
According to a Sime Darby spokesman, appropriate provisions had been made and the group would not have its future profitability affected by the past losses.
He added that measures had been taken to strengthen processes and trading parameters.
“The decision to terminate the services of the two staff members was taken after an extensive process of investigation and deliberation. While it is never a pleasant task to dismiss any personnel, the board felt that the move was necessary in the interest of accountability and to protect stakeholders of Sime Darby,” said the spokesman.
Meanwhile, industry analysts contacted by StarBiz said the RM120mil trading losses would not have an impact on their earnings forecasts on Sime Darby as the group confirmed that it already made ample provisions to account for the losses.
A plantation analyst with a bank-backed brokerage said while the revelation (of the losses) might raise concerns among investors, Sime Darby had made the right decision to make its top staff accountable for the glaring irregularities within the group’s highly diversified operations.
“The group is advocating transparency and issuing a stern warning that irrespective of the rank, none of its staff will be spared from the consequences of irregularities which can keep on cropping up in any big organisation,” the analyst said.
Another analyst concurred that it was a positive move by Sime Darby to reveal the losses rather than to cover up.
“I believe that some plantation analysts since last year have already sensed the irregularities, particularly the losses in the group’s downstream operations, attributing it to the unfeasible biodiesel operation.
“This losses were somewhat overlooked, given the good performance in the upstream plantation operation due to the higher CPO prices,” he added.
Tuesday, June 10, 2008
China stocks slide 7.7 pct on monetary tightening
SHANGHAI (Reuters) - China's main stock index tumbled 7.73 percent on Tuesday, its biggest drop since June last year, after the central bank announced a harsher-than-expected tightening of monetary policy to fight inflation.
Banks and property shares led the declines as buyers fled the market, fearing more action by the central bank in coming months. Weakness in global equities markets, which are being hit hard by high oil prices, also dragged down Chinese stocks.
The Shanghai Composite Index (.SSEC) closed at 3,072.333 points, not far from the day's low of 3,045.058, leaving it 50 percent below last October's record peak. Tuesday's slide in the Shanghai and Shenzhen markets erased about $240 billion of value.
Losing Shanghai stocks overwhelmed gainers by 891 to 20, while more than 530 shares plunged their 10 percent daily limits. Turnover in Shanghai A shares was very thin at 60.3 billion yuan ($8.7 billion).
"Nobody dares to buy in a market like this -- confidence is gone," said Chen Jinren, analyst at Huatai Securities, adding that the index had a good chance in coming days or weeks of testing its 13-month low of 2,990 points, hit on April 22.
The government intervened to support the market in April by cutting the stock trading tax, and many investors see a good chance of another rescue attempt -- perhaps the long-delayed introduction of margin trade and securities lending, which would benefit brokerages and could draw some buyers back to the market.
But many analysts think high inflation, the prospect of more monetary tightening and poor supply/demand conditions for shares could continue to weigh on the market for months. "Official steps to help the market may not work," said Chen.
GLOBAL CYCLE
Cao Xuefeng, analyst at Western Securities, said he believed authorities would do what was necessary to prevent financial market instability in the run-up to the Beijing Olympic games in August, a politically sensitive time.
But he and others said investors worried China could get caught up in a regional or global cycle of high inflation, tightening monetary policy and sliding equities prices.
The stock market crash in Vietnam, where inflation has been in the double digits, is receiving heavy Chinese media coverage and while the two economies are very different, investors are starting to draw parallels between the markets, Cao said.
Sources familiar with the data told Reuters on Tuesday that China's May consumer price inflation, to be officially announced on Thursday, was 7.7 percent, down sharply from April's 8.5 percent.
But Zhang Qi, analyst at Haitong Securities, said this figure would not be low enough to reassure investors, especially as the central bank's aggressive monetary tightening suggested it was worried about a possible resurgence of inflation later this year.
The central bank said it would raise commercial banks' reserve ratios by a full percentage point in June, twice the hike which the market had expected. It is the first time since December that reserve ratios are being raised a full point within a single month.
Even before the monetary tightening announcement, stocks had been under pressure from plans for a huge initial public offer by China State Construction Engineering Corp.
The IPO could raise some $6 billion in Shanghai this month, making it China's largest IPO so far this year, and investors fear the market may have trouble absorbing the fresh equity.
ICBC, VANKE PLUNGE
Industrial and Commercial Bank of China (601398.SS), the biggest bank, tumbled 8.35 percent to 5.38 yuan on Tuesday while the largest listed property developer, Vanke (000002.SZ), plunged its 10 percent limit to 17.70 yuan.
Top oil refiner Sinopec (600028.SS) sank 8.39 percent to 12.34 yuan after the head of the State Energy Bureau said the government had postponed plans for energy price reform.
This was taken as a sign that due to the inflation threat, the government would not permit Sinopec to raise domestic fuel prices any time soon, and that its refining margins would therefore stay under pressure. (for story, click on
China United Telecommunications (600050.SS), the most active stock, dropped 8.46 percent to 7.57 yuan after falling 15.81 percent over the previous four sessions in the wake of a restructuring announcement by Hong Kong-listed affiliate China Unicom (0762.HK).
Among gainers, FangDa Carbon New Material (600516.SS) rose 1.86 percent to 17.49 yuan after forecasting net profit in the first half of 2008 would soar over 500 percent.
Banks and property shares led the declines as buyers fled the market, fearing more action by the central bank in coming months. Weakness in global equities markets, which are being hit hard by high oil prices, also dragged down Chinese stocks.
The Shanghai Composite Index (.SSEC) closed at 3,072.333 points, not far from the day's low of 3,045.058, leaving it 50 percent below last October's record peak. Tuesday's slide in the Shanghai and Shenzhen markets erased about $240 billion of value.
Losing Shanghai stocks overwhelmed gainers by 891 to 20, while more than 530 shares plunged their 10 percent daily limits. Turnover in Shanghai A shares was very thin at 60.3 billion yuan ($8.7 billion).
"Nobody dares to buy in a market like this -- confidence is gone," said Chen Jinren, analyst at Huatai Securities, adding that the index had a good chance in coming days or weeks of testing its 13-month low of 2,990 points, hit on April 22.
The government intervened to support the market in April by cutting the stock trading tax, and many investors see a good chance of another rescue attempt -- perhaps the long-delayed introduction of margin trade and securities lending, which would benefit brokerages and could draw some buyers back to the market.
But many analysts think high inflation, the prospect of more monetary tightening and poor supply/demand conditions for shares could continue to weigh on the market for months. "Official steps to help the market may not work," said Chen.
GLOBAL CYCLE
Cao Xuefeng, analyst at Western Securities, said he believed authorities would do what was necessary to prevent financial market instability in the run-up to the Beijing Olympic games in August, a politically sensitive time.
But he and others said investors worried China could get caught up in a regional or global cycle of high inflation, tightening monetary policy and sliding equities prices.
The stock market crash in Vietnam, where inflation has been in the double digits, is receiving heavy Chinese media coverage and while the two economies are very different, investors are starting to draw parallels between the markets, Cao said.
Sources familiar with the data told Reuters on Tuesday that China's May consumer price inflation, to be officially announced on Thursday, was 7.7 percent, down sharply from April's 8.5 percent.
But Zhang Qi, analyst at Haitong Securities, said this figure would not be low enough to reassure investors, especially as the central bank's aggressive monetary tightening suggested it was worried about a possible resurgence of inflation later this year.
The central bank said it would raise commercial banks' reserve ratios by a full percentage point in June, twice the hike which the market had expected. It is the first time since December that reserve ratios are being raised a full point within a single month.
Even before the monetary tightening announcement, stocks had been under pressure from plans for a huge initial public offer by China State Construction Engineering Corp.
The IPO could raise some $6 billion in Shanghai this month, making it China's largest IPO so far this year, and investors fear the market may have trouble absorbing the fresh equity.
ICBC, VANKE PLUNGE
Industrial and Commercial Bank of China (601398.SS), the biggest bank, tumbled 8.35 percent to 5.38 yuan on Tuesday while the largest listed property developer, Vanke (000002.SZ), plunged its 10 percent limit to 17.70 yuan.
Top oil refiner Sinopec (600028.SS) sank 8.39 percent to 12.34 yuan after the head of the State Energy Bureau said the government had postponed plans for energy price reform.
This was taken as a sign that due to the inflation threat, the government would not permit Sinopec to raise domestic fuel prices any time soon, and that its refining margins would therefore stay under pressure. (for story, click on
China United Telecommunications (600050.SS), the most active stock, dropped 8.46 percent to 7.57 yuan after falling 15.81 percent over the previous four sessions in the wake of a restructuring announcement by Hong Kong-listed affiliate China Unicom (0762.HK).
Among gainers, FangDa Carbon New Material (600516.SS) rose 1.86 percent to 17.49 yuan after forecasting net profit in the first half of 2008 would soar over 500 percent.
Monday, June 9, 2008
Oil seen hitting $150 this summer: Goldman analyst
KUALA LUMPUR (Reuters) - Oil prices are likely to hit $150 a barrel this summer season, the global head of commodities research at Goldman Sachs (GS.N) said on Monday, as tighter supplies outweigh weakening demand.
"I would suggest that the likelihood of that happening sooner has increased tremendously ... sometime in summer," Jeffrey Currie told an oil and gas conference in the Malaysian capital, referring to oil at $150 a barrel.
Goldman Sachs, the most active investment bank in energy markets and one of the first to point to triple-digit oil more than two years ago -- a once unthinkable level -- said last month oil could shoot up to $200 within the next two years as part of a "super spike."
Forecasts that oil could head towards $150 and above have multiplied over the past month as prices broke through several records, the latest being last Friday, when oil soared more than $11 a barrel on Friday, its biggest one-day gain ever.
Oil hit an all-time high of $139.12 on Friday on the back of a weak U.S. dollar and mounting tensions between Israel and Iran.
Goldman Sachs forecast almost a month ago that U.S. crude would average $141 a barrel in the second half of 2008, up from a previous projection of $107, due to tight supplies.
"Demand for oil is weak but supplies are even weaker," Jeffrey Currie told the conference, citing supply disruptions in Nigeria and struggling output rise in Russia.
Investment bank Morgan Stanley, another big Wall Street energy player, said on Friday that crude may reach $150 by July 4 due to robust Asian demand and falling inventories.
"I would suggest that the likelihood of that happening sooner has increased tremendously ... sometime in summer," Jeffrey Currie told an oil and gas conference in the Malaysian capital, referring to oil at $150 a barrel.
Goldman Sachs, the most active investment bank in energy markets and one of the first to point to triple-digit oil more than two years ago -- a once unthinkable level -- said last month oil could shoot up to $200 within the next two years as part of a "super spike."
Forecasts that oil could head towards $150 and above have multiplied over the past month as prices broke through several records, the latest being last Friday, when oil soared more than $11 a barrel on Friday, its biggest one-day gain ever.
Oil hit an all-time high of $139.12 on Friday on the back of a weak U.S. dollar and mounting tensions between Israel and Iran.
Goldman Sachs forecast almost a month ago that U.S. crude would average $141 a barrel in the second half of 2008, up from a previous projection of $107, due to tight supplies.
"Demand for oil is weak but supplies are even weaker," Jeffrey Currie told the conference, citing supply disruptions in Nigeria and struggling output rise in Russia.
Investment bank Morgan Stanley, another big Wall Street energy player, said on Friday that crude may reach $150 by July 4 due to robust Asian demand and falling inventories.
Sunday, June 8, 2008
Coming Week: There Will Be Blood
Disoriented investors will try to get their bearings next week with all eyes on black gold.
Oil flooded Wall Street Friday, slamming stocks with the help of more economic pain and financial disarray. After the recent 10% correction in oil futures markets, hopes of further easing got washed away by an epic, one-day, 11-dollar crude rally that sent prices gushing back to a new all-time record above $139-a-barrel.
The Dow Jones Industrial Average, having rallied by more than 100 points Thursday, turned around and fell nearly 400 on Friday. Elsewhere, credit markets are deteriorating again, and the financial industry continues to whither. Inflation is threatening, the dollar is weakening, job losses are mounting and fear is regaining its hold on the stock market.
"This is a train wreck in slow-motion," says Paul Mendelsohn, chief investment strategist with Windham Financial Services.
For the week, the Dow shed 3.4%, while the S&P 500 lost 2.8% and the Nasdaq Composite ended down 1.9%.
High fuel costs resulting from the relentless rise in oil prices are a crushing weight on businesses and consumers, but some investors insist that crude is due for a collapse.
"Oil prices are simply too high," says independent investment strategist Subodh Kumar. "When you see this kind of volatility, it's a clear sign that speculators are driving the market."
Nevertheless, Morgan Stanley analyst Ole Slorer predicted strong demand in Asia could drive prices to $150 by the July 4 holiday.
The smattering of economic data on tap for next week will take on new significance after crude's latest rally and Friday's employment report, which showed that May was the fifth-straight month of a declines in nonfarm payrolls, down 49,000. Worse yet, the unemployment rate spiked to 5.5% during the month from 5% -- its largest one-month increase since 1986.
President Bush said the rise in unemployment is "clearly a sign that is consistent with slow economic growth," in a speech on Friday.
With the Fed set for another policy meeting in late June, investors priced in a lower chance that the central bank will be able to raise rates to fight inflation in 2008, as recession fears grow.
This week, the Fed will release its so-called beige book report on U.S. economic conditions on Wednesday, after the Census Bureau provides a tally of the U.S. trade deficit for April on Tuesday.
"The market will be scouring the Fed's assessment of the manufacturing and employment sectors," says Mendelsohn. "The Fed has an economic slowdown problem, and it's going to deal with that instead of the inflation problem because they can't raise rates at a time when things are so fragile. But inflation is clearly a problem here, and the Fed may well lose control of it."
Investors will get a fresh look at the government's main inflation gauge on Friday when it releases a report on the consumer price index for May. The headline figure is expected to show consumer prices up 0.5% for the month, up from 0.2% in April. Excluding food and energy prices, prices are expected to gain 0.2%, up from 0.1%.
Also Friday, the University of Michigan will release its preliminary consumer sentiment index for June. Economists are forecasting a reading of 57.5, which would mark a rebound from 51.1 in May -- its lowest level since 1990.
On Thursday, the government will report increases in import and export prices in May, and retail sales, which are expected to have increased 0.6% after April's 0.2% decline. Also, the Census Bureau is expected to report that business inventories grew by 0.4% in April from 0.1 in March.
Earnings will be light this week, but Lehman Brothers LEH reportedly is mulling the early release of its second-quarter earnings amid speculation that the nation's fourth-largest investment bank is facing heavy losses on investments tied to the mortgage market.
Bloomberg said that Lehman could report a fresh capital raise of as much as $5 billion, and Wachovia Capital Markets analyst Douglas Sipkin said Lehman could suffer $3 billion of losses tied to asset sales and hedging.
Investors are especially sensitive to Lehman's troubles after the Fed rescued its counterpart, Bear Stearns, from bankruptcy in mid-March and orchestrated a fire sale of the firm to JPMorgan ChaseJPM. Several financials, including Washington MutualWM, WachoviaWB, National CityNCC and American International GroupAIG sank to 52-week lows during Friday's selloff.
Meanwhile, Standard & Poor's downgraded its top credit ratings on bond insurance giants MBIAMBI and AmbacABK, and its counterpart, Moody's Investors Service, warned that it would likely do the same.
The loss of a triple-A credit rating could spell doom for both companies, as they depend on stellar credit in order to write insurance policies on debt securities. Moreover, the downgrades mean the credit ratings agencies will have to downgrade ratings on tens of thousands of securities that are insured by the companies. That comes as the major ratings firms face investigations by regulators and lawmakers amid criticism for pumping up the credit bubble by supplying overly accommodative ratings to the debt issuers that pay them.
These actions raise the specter of counter-party risk, systemic problems and general uncertainty in the financial markets.
"Here we go again," says Mendelsohn.
Oil flooded Wall Street Friday, slamming stocks with the help of more economic pain and financial disarray. After the recent 10% correction in oil futures markets, hopes of further easing got washed away by an epic, one-day, 11-dollar crude rally that sent prices gushing back to a new all-time record above $139-a-barrel.
The Dow Jones Industrial Average, having rallied by more than 100 points Thursday, turned around and fell nearly 400 on Friday. Elsewhere, credit markets are deteriorating again, and the financial industry continues to whither. Inflation is threatening, the dollar is weakening, job losses are mounting and fear is regaining its hold on the stock market.
"This is a train wreck in slow-motion," says Paul Mendelsohn, chief investment strategist with Windham Financial Services.
For the week, the Dow shed 3.4%, while the S&P 500 lost 2.8% and the Nasdaq Composite ended down 1.9%.
High fuel costs resulting from the relentless rise in oil prices are a crushing weight on businesses and consumers, but some investors insist that crude is due for a collapse.
"Oil prices are simply too high," says independent investment strategist Subodh Kumar. "When you see this kind of volatility, it's a clear sign that speculators are driving the market."
Nevertheless, Morgan Stanley analyst Ole Slorer predicted strong demand in Asia could drive prices to $150 by the July 4 holiday.
The smattering of economic data on tap for next week will take on new significance after crude's latest rally and Friday's employment report, which showed that May was the fifth-straight month of a declines in nonfarm payrolls, down 49,000. Worse yet, the unemployment rate spiked to 5.5% during the month from 5% -- its largest one-month increase since 1986.
President Bush said the rise in unemployment is "clearly a sign that is consistent with slow economic growth," in a speech on Friday.
With the Fed set for another policy meeting in late June, investors priced in a lower chance that the central bank will be able to raise rates to fight inflation in 2008, as recession fears grow.
This week, the Fed will release its so-called beige book report on U.S. economic conditions on Wednesday, after the Census Bureau provides a tally of the U.S. trade deficit for April on Tuesday.
"The market will be scouring the Fed's assessment of the manufacturing and employment sectors," says Mendelsohn. "The Fed has an economic slowdown problem, and it's going to deal with that instead of the inflation problem because they can't raise rates at a time when things are so fragile. But inflation is clearly a problem here, and the Fed may well lose control of it."
Investors will get a fresh look at the government's main inflation gauge on Friday when it releases a report on the consumer price index for May. The headline figure is expected to show consumer prices up 0.5% for the month, up from 0.2% in April. Excluding food and energy prices, prices are expected to gain 0.2%, up from 0.1%.
Also Friday, the University of Michigan will release its preliminary consumer sentiment index for June. Economists are forecasting a reading of 57.5, which would mark a rebound from 51.1 in May -- its lowest level since 1990.
On Thursday, the government will report increases in import and export prices in May, and retail sales, which are expected to have increased 0.6% after April's 0.2% decline. Also, the Census Bureau is expected to report that business inventories grew by 0.4% in April from 0.1 in March.
Earnings will be light this week, but Lehman Brothers LEH reportedly is mulling the early release of its second-quarter earnings amid speculation that the nation's fourth-largest investment bank is facing heavy losses on investments tied to the mortgage market.
Bloomberg said that Lehman could report a fresh capital raise of as much as $5 billion, and Wachovia Capital Markets analyst Douglas Sipkin said Lehman could suffer $3 billion of losses tied to asset sales and hedging.
Investors are especially sensitive to Lehman's troubles after the Fed rescued its counterpart, Bear Stearns, from bankruptcy in mid-March and orchestrated a fire sale of the firm to JPMorgan ChaseJPM. Several financials, including Washington MutualWM, WachoviaWB, National CityNCC and American International GroupAIG sank to 52-week lows during Friday's selloff.
Meanwhile, Standard & Poor's downgraded its top credit ratings on bond insurance giants MBIAMBI and AmbacABK, and its counterpart, Moody's Investors Service, warned that it would likely do the same.
The loss of a triple-A credit rating could spell doom for both companies, as they depend on stellar credit in order to write insurance policies on debt securities. Moreover, the downgrades mean the credit ratings agencies will have to downgrade ratings on tens of thousands of securities that are insured by the companies. That comes as the major ratings firms face investigations by regulators and lawmakers amid criticism for pumping up the credit bubble by supplying overly accommodative ratings to the debt issuers that pay them.
These actions raise the specter of counter-party risk, systemic problems and general uncertainty in the financial markets.
"Here we go again," says Mendelsohn.
Saturday, June 7, 2008
Dark day on Wall Street
The Dow's 395-point drubbing is its biggest one-day point loss in 15 months, after crude prices' largest one-day advance ever and a poor jobs report.
NEW YORK (CNNMoney.com) -- Stocks tanked Friday, with the Dow industrials shedding 395 points, after oil prices spiked more than $11 a barrel and the May jobs report showed a big jump in the unemployment rate.
Bond prices surged, as investors sought safety in government debt, while the dollar tumbled versus the yen and euro.
The Dow Jones industrial average (INDU) lost 395 points, or 3.1%, its biggest one-day decline on both a point and percentage basis since February of 2007, at the start of the subprime mortgage crisis.
The broader Standard & Poor's 500 (SPX) index lost 3.1%, while the Nasdaq composite (COMP) lost 3%. Both saw their biggest one-day declines on both a point and a percentage basis in more than four months.
The unemployment rate shot up to 5.5% in May from 5.0% in April, the government reported, marking the biggest one-month surge in over 20 years. The report was a clear indication that the economy could be in a recession after all, despite some recent bets that one could be narrowly avoided.
As rattling as the unemployment number was, the stock market was even more spooked by the spike in oil prices, said Bill Stone, chief investment strategist at PNC Wealth Management.
"I think more than anything, it's the shock of oil prices being up this substantially two days in a row," Stone said.
Crude jumped more than $16 in two sessions, with prices settling up $10.75 to $138.54 a barrel Friday on the weak dollar and in response to a Morgan Stanley note that said oil could hit $150 a barrel by July 4.
The spike exacerbated worries about consumer spending, already stretched as gas prices near a national average of $4 a gallon.
"You're definitely seeing the fear trade today, with the dollar down, commodity prices up and bonds rallying," Stone said.
Stocks could be vulnerable to further declines in the week ahead, after the S&P 500 closed below a key technical level that has previously given a floor to the selling. Traders said stocks could be in danger of moving back to the lows of March and January, which were seen as something of a bottom after months of stock declines.
Jobs market deteriorates: The unemployment rate surged to 5.5% from 5.0%, beating forecasts for a rise to 5.1% and showing the biggest one-month jump since 1986.
The spike really caught people by surprise, said Stuart Hoffman, chief economist at PNC Financial Services Group. He said the report makes it clear that at least for so-called Main Street and the labor market, "we are in a recession, regardless of how we economists define it."
He was referring to the fact that GDP has been limping higher and the economy has not been officially declared to be in a recession by the National Bureau of Economic Research.
However, with non-farm payrolls dropping for a fifth consecutive month, it feels to many people like it's a recession, he said. Employers cut 49,000 from their payrolls, the report showed, versus forecasts for a decline of 60,000.
Dollar falls, oil spikes: The dollar continued its slide versus the euro on the weak jobs report and comments Thursday that the European Central Bank could potentially raise interest rates. The dollar also tanked versus the yen.
The dollar's decline contributed to a rally in dollar-traded commodity prices, with U.S. light crude oil for July delivery settling at $138.54 a barrel, a jump of $10.75. The increase was the biggest single-day price gain since record-keeping began in 1983 - taking out the previous session's record.
Oil prices spiked to a record trading high of $139.12 after the close, before pulling back a bit.
Gold and other commodities rallied too. COMEX gold for August delivery rose $23.50 to settle at $899 an ounce.
Gas backs off record: The national average price for a gallon of regular unleaded gas fell to $3.986 from the previous day's record of $3.989, AAA reported. Gas prices had set new records for 28 of the previous 29 days.
Other markets: Treasury prices rallied, lowering the yield on the 10-year note to 3.93% from 4.05% late Thursday. Bond prices and yields move in opposite directions.
On the move: Stock declines were broad based, with all 30 Dow issues falling.
The Dow's financial components were hit the hardest, with American Express (AXP, Fortune 500) and Citigroup (C, Fortune 500) both down 5%, and Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) down more than 4%.
AIG (AIG, Fortune 500) slumped more than 7% on reports that the Securities and Exchange Commission is looking into whether the insurer overstated the value of contracts connected to subprime markets, something AIG denies. Additionally, it was reported that federal prosecutors have asked the SEC for material related to the investigation.
Other big blue-chip losers included General Motors (GM, Fortune 500), down nearly 5%, and Boeing (BA, Fortune 500), down 5.4%.
Intel (INTC, Fortune 500), Oracle (ORCL, Fortune 500), Cisco (CSCO, Fortune 500) and Qualcomm (QCOM, Fortune 500) were among the biggest technology decliners.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by over 4 to 1 on 1.48 billion shares. On the Nasdaq, decliners topped advancers by nearly 4 to 1 on volume of 2.20 billion shares.
Stocks spiked Thursday on a surprise dip in weekly jobless claims, stronger-than-expected May retail sales and a merger in the telecom sector. But the advance was short-lived as Friday's barrage of discouraging economic news and spiking oil prices brought out the sellers.
NEW YORK (CNNMoney.com) -- Stocks tanked Friday, with the Dow industrials shedding 395 points, after oil prices spiked more than $11 a barrel and the May jobs report showed a big jump in the unemployment rate.
Bond prices surged, as investors sought safety in government debt, while the dollar tumbled versus the yen and euro.
The Dow Jones industrial average (INDU) lost 395 points, or 3.1%, its biggest one-day decline on both a point and percentage basis since February of 2007, at the start of the subprime mortgage crisis.
The broader Standard & Poor's 500 (SPX) index lost 3.1%, while the Nasdaq composite (COMP) lost 3%. Both saw their biggest one-day declines on both a point and a percentage basis in more than four months.
The unemployment rate shot up to 5.5% in May from 5.0% in April, the government reported, marking the biggest one-month surge in over 20 years. The report was a clear indication that the economy could be in a recession after all, despite some recent bets that one could be narrowly avoided.
As rattling as the unemployment number was, the stock market was even more spooked by the spike in oil prices, said Bill Stone, chief investment strategist at PNC Wealth Management.
"I think more than anything, it's the shock of oil prices being up this substantially two days in a row," Stone said.
Crude jumped more than $16 in two sessions, with prices settling up $10.75 to $138.54 a barrel Friday on the weak dollar and in response to a Morgan Stanley note that said oil could hit $150 a barrel by July 4.
The spike exacerbated worries about consumer spending, already stretched as gas prices near a national average of $4 a gallon.
"You're definitely seeing the fear trade today, with the dollar down, commodity prices up and bonds rallying," Stone said.
Stocks could be vulnerable to further declines in the week ahead, after the S&P 500 closed below a key technical level that has previously given a floor to the selling. Traders said stocks could be in danger of moving back to the lows of March and January, which were seen as something of a bottom after months of stock declines.
Jobs market deteriorates: The unemployment rate surged to 5.5% from 5.0%, beating forecasts for a rise to 5.1% and showing the biggest one-month jump since 1986.
The spike really caught people by surprise, said Stuart Hoffman, chief economist at PNC Financial Services Group. He said the report makes it clear that at least for so-called Main Street and the labor market, "we are in a recession, regardless of how we economists define it."
He was referring to the fact that GDP has been limping higher and the economy has not been officially declared to be in a recession by the National Bureau of Economic Research.
However, with non-farm payrolls dropping for a fifth consecutive month, it feels to many people like it's a recession, he said. Employers cut 49,000 from their payrolls, the report showed, versus forecasts for a decline of 60,000.
Dollar falls, oil spikes: The dollar continued its slide versus the euro on the weak jobs report and comments Thursday that the European Central Bank could potentially raise interest rates. The dollar also tanked versus the yen.
The dollar's decline contributed to a rally in dollar-traded commodity prices, with U.S. light crude oil for July delivery settling at $138.54 a barrel, a jump of $10.75. The increase was the biggest single-day price gain since record-keeping began in 1983 - taking out the previous session's record.
Oil prices spiked to a record trading high of $139.12 after the close, before pulling back a bit.
Gold and other commodities rallied too. COMEX gold for August delivery rose $23.50 to settle at $899 an ounce.
Gas backs off record: The national average price for a gallon of regular unleaded gas fell to $3.986 from the previous day's record of $3.989, AAA reported. Gas prices had set new records for 28 of the previous 29 days.
Other markets: Treasury prices rallied, lowering the yield on the 10-year note to 3.93% from 4.05% late Thursday. Bond prices and yields move in opposite directions.
On the move: Stock declines were broad based, with all 30 Dow issues falling.
The Dow's financial components were hit the hardest, with American Express (AXP, Fortune 500) and Citigroup (C, Fortune 500) both down 5%, and Bank of America (BAC, Fortune 500) and JPMorgan Chase (JPM, Fortune 500) down more than 4%.
AIG (AIG, Fortune 500) slumped more than 7% on reports that the Securities and Exchange Commission is looking into whether the insurer overstated the value of contracts connected to subprime markets, something AIG denies. Additionally, it was reported that federal prosecutors have asked the SEC for material related to the investigation.
Other big blue-chip losers included General Motors (GM, Fortune 500), down nearly 5%, and Boeing (BA, Fortune 500), down 5.4%.
Intel (INTC, Fortune 500), Oracle (ORCL, Fortune 500), Cisco (CSCO, Fortune 500) and Qualcomm (QCOM, Fortune 500) were among the biggest technology decliners.
Market breadth was negative. On the New York Stock Exchange, losers beat winners by over 4 to 1 on 1.48 billion shares. On the Nasdaq, decliners topped advancers by nearly 4 to 1 on volume of 2.20 billion shares.
Stocks spiked Thursday on a surprise dip in weekly jobless claims, stronger-than-expected May retail sales and a merger in the telecom sector. But the advance was short-lived as Friday's barrage of discouraging economic news and spiking oil prices brought out the sellers.
Friday, June 6, 2008
Corn Reaches Record, Soybeans at Three-Month High on Heavy Rain
June 6 (Bloomberg) -- Corn climbed for a third day to a record and soybeans rose to a three-month high in Chicago as excessive rains in the U.S. Midwest flooded some fields, raising concerns about slowing crop development and production losses.
The National Weather Service's six to 10-day outlook issued yesterday showed above-normal precipitation in the U.S. Midwest, including Iowa and Illinois. About 63 percent of the U.S. corn crop was in good or excellent condition as of June 1, down from 78 percent a year earlier, a government report showed June 2.
``Firstly, the sharp rise in prices was catalyzed by wet U.S. weather,'' said John Reeve, associate director for agricultural commodities at UBS AG in Singapore. ``Secondly, and more importantly, the size of the response signals just how low grain and oilseed inventories are.''
Corn for July delivery was up 6 cents, or 0.9 percent, at $6.4925 a bushel at 4:46 p.m. Singapore time in after-hours electronic trading on the Chicago Board of Trade. The price gained 4.7 percent yesterday. Most-active futures are up 73 percent in the past year as demand surged for feed and biofuels.
Soybeans for July delivery rose 10.75 cents, or 0.7 percent, to $14.6275 a bushel, the highest since March 6, at 4:48 p.m. Singapore time. The contract, which touched a record $15.865 on March 3, is up 78 percent from a year earlier.
About 74 percent of the U.S. corn seeds had emerged in the top 18 producing states, down from 92 percent a year earlier and the previous five-year average of 89 percent, the U.S. Department of Agriculture said June 2 in the report.
Planting Delay
Soybeans were 69 percent planted as of June 1, compared with the five-year average of 81 percent, the USDA said. About a third of the crop had emerged from the ground, compared with 64 percent a year earlier.
Corn and soybeans planted in wet, cool soil develop shallow roots, increasing the threat of damage from hot, dry weather in July and August.
More than 4 million acres remained to be planted with corn as of June 1, and 23 million acres awaited soybean seeds, the USDA said earlier this week. U.S. farmers said in a survey in March they would plant 8.1 percent less corn this year and increase soybean acreage 18 percent, according to the USDA.
Wheat for July delivery was up 5 cents at $7.905 a bushel at 4:48 p.m. Singapore time. The price rose 4.3 percent yesterday on speculation that crops in Kansas, the largest U.S. producer of winter varieties, will be damaged by high winds and hail. The price fell 42 percent from a record $13.495 on Feb. 27 as farmers increased seeding of the grain.
Australia
Total grain output in Western Australia, the nation's biggest producing state, may be less than initial government expectations after dry weather in May. Production may be between 10 million metric tons and 12 million tons this harvest, the state's Department of Agriculture and Food said today.
The state said last month output could reach a record should seasonal conditions remain favorable. Today's forecast compares with the state's total grain production last year of 8.5 million ton. Its record output of 14.5 million tons was set in 2004. The state may produce 6.7 million tons of wheat, it said, compared with last year's 6.1 million.
Wheat production in South Australia state may rise 28 percent this year to 2.89 million, Rural Solutions SA, a government agency, said today. The state was the nation's second- largest wheat producer last harvest.
Rice for July delivery added 44.5 cents, or 2.3 percent, at $19.805 per 100 pounds at 4:37 p.m. Singapore time. The contract gained by the daily limit of 75 cents yesterday after the USDA said U.S. export sales in the week ended May 29 more than tripled to 69,400 metric tons from the previous week.
Rice has advanced 89 percent in the past year, reaching a record $25.07 on April 24, after some exporters curbed exports to ensure local supplies.
The National Weather Service's six to 10-day outlook issued yesterday showed above-normal precipitation in the U.S. Midwest, including Iowa and Illinois. About 63 percent of the U.S. corn crop was in good or excellent condition as of June 1, down from 78 percent a year earlier, a government report showed June 2.
``Firstly, the sharp rise in prices was catalyzed by wet U.S. weather,'' said John Reeve, associate director for agricultural commodities at UBS AG in Singapore. ``Secondly, and more importantly, the size of the response signals just how low grain and oilseed inventories are.''
Corn for July delivery was up 6 cents, or 0.9 percent, at $6.4925 a bushel at 4:46 p.m. Singapore time in after-hours electronic trading on the Chicago Board of Trade. The price gained 4.7 percent yesterday. Most-active futures are up 73 percent in the past year as demand surged for feed and biofuels.
Soybeans for July delivery rose 10.75 cents, or 0.7 percent, to $14.6275 a bushel, the highest since March 6, at 4:48 p.m. Singapore time. The contract, which touched a record $15.865 on March 3, is up 78 percent from a year earlier.
About 74 percent of the U.S. corn seeds had emerged in the top 18 producing states, down from 92 percent a year earlier and the previous five-year average of 89 percent, the U.S. Department of Agriculture said June 2 in the report.
Planting Delay
Soybeans were 69 percent planted as of June 1, compared with the five-year average of 81 percent, the USDA said. About a third of the crop had emerged from the ground, compared with 64 percent a year earlier.
Corn and soybeans planted in wet, cool soil develop shallow roots, increasing the threat of damage from hot, dry weather in July and August.
More than 4 million acres remained to be planted with corn as of June 1, and 23 million acres awaited soybean seeds, the USDA said earlier this week. U.S. farmers said in a survey in March they would plant 8.1 percent less corn this year and increase soybean acreage 18 percent, according to the USDA.
Wheat for July delivery was up 5 cents at $7.905 a bushel at 4:48 p.m. Singapore time. The price rose 4.3 percent yesterday on speculation that crops in Kansas, the largest U.S. producer of winter varieties, will be damaged by high winds and hail. The price fell 42 percent from a record $13.495 on Feb. 27 as farmers increased seeding of the grain.
Australia
Total grain output in Western Australia, the nation's biggest producing state, may be less than initial government expectations after dry weather in May. Production may be between 10 million metric tons and 12 million tons this harvest, the state's Department of Agriculture and Food said today.
The state said last month output could reach a record should seasonal conditions remain favorable. Today's forecast compares with the state's total grain production last year of 8.5 million ton. Its record output of 14.5 million tons was set in 2004. The state may produce 6.7 million tons of wheat, it said, compared with last year's 6.1 million.
Wheat production in South Australia state may rise 28 percent this year to 2.89 million, Rural Solutions SA, a government agency, said today. The state was the nation's second- largest wheat producer last harvest.
Rice for July delivery added 44.5 cents, or 2.3 percent, at $19.805 per 100 pounds at 4:37 p.m. Singapore time. The contract gained by the daily limit of 75 cents yesterday after the USDA said U.S. export sales in the week ended May 29 more than tripled to 69,400 metric tons from the previous week.
Rice has advanced 89 percent in the past year, reaching a record $25.07 on April 24, after some exporters curbed exports to ensure local supplies.
Thursday, June 5, 2008
滑稽的大马政策
大马的涨价风潮
终于完全在预料中，汽油，柴油都涨价了。学生预料不到的是这次首相豁出去了！这一涨就是40%。恭喜你首相，您的在任日子不长了。我想您也开始有了为自己移民到国外准备的意念了。您应该在3月8号后感觉到了。所以才有这种冲动。大捞一笔后，希望您能还记得我们。您喝的是人民的血汗，您吃的是人民的眼泪，您住的是人民的苦。您的世世代代将受到大马人民的“爱戴”。
这次的宣布让人民感到了恐慌。这已经不是政治海啸了。这是一种马来西亚的经济海啸前奏。有人觉得欢喜，因为您的宣布中加了附加题，那就是在新津贴制度下，政府每年将为2000cc引擎及以下的小型轿车提供625令吉的现金补贴。这相等于800公升的汽油津贴（即800公升乘以78仙计算）。您成功了！成功的骗到了一些无知的支持者。您的支持者认为您每年会分钱给他们。他们想的只是汽油津贴，却忘了油价涨后，万物一起涨！您的官方数字显示通货膨胀会在4%-5%。这是在您们上流社会里的数据。人民的世界和您们大不同！去年您说我国通货膨胀在3%以下时，人民已经感受到有如10%的压力了。有时候学生我在怀疑您的通货膨胀报告和您的国家成长率报告是不是换了封面？
这四年来，汽油起了5次之多。人民的负担越来越重了。您不要老是拿新加坡来比。新加坡人如果没有能力负担汽油，但是他们国家的交通发达。只要搭上MRT或巴士，没有去不到的地方。可是反观落后的马来西亚，没有了汽车，就别想出门了。虽说有巴士，“慢铁”。但那种卫生糟糕和不理想的交通工具，的确不值得花钱受罪。也不是所有地方都有设备。
接下来学生相信您会公布一些甜头来安抚人民。这就是您的作风。拿了人民的一千块，还回50块后还要人民感激。您在汽油上的现金补贴不也是如此？万事都是拿了钱再说。谁知道支票能不能兑现。这也不是第一次了。再来，就是在现金回扣下实行一些复杂的程序让人民永远没有办法得到。例如索取加油站收据等。。。用最简单的说法就是几年前买电脑能在所得税上回扣一样，有几个人真正得到利益？今年的财政预算案应该不难算了吧！中央政府省下了大约40亿的石油津贴，您们却忘了这40亿将从人民身上挖取。
您永远不能体会人民的生活。在您眼里，马来西亚人民都很有钱。每个家庭平均收入在3千以上，因为您身边的人都因为您的关系而富有了！您永远接触不到真正的马来西亚穷人。如今，人民只有等待接下来的涨价风潮。加价吧！马来西亚。
钱又花光了吗？
在学生时代时，老妈子老是重复一句话对着我说：怎么啦？这个月的零用钱又花光了？你为什么不好好学习储蓄呢？当时不懂事的我，老是觉得钱是从天上掉下来的。花光了，就得和父母撒娇。长大后才明白，原来不管身上有没有钱，我的父母都不舍得我挨饿！回头想想还有点内疚，因为钱都花在不该花的地方了。
如今，我国人民也该像父母一样反问我国中央政府一句：怎么啦？钱又花光了？连续几个在野党执政的州属都彬彬传来全年发展拨款在短短几个月就被上届政府花光了。这是事实还是狡辩呢？如果只是狡辩而已，为什么前任政府不跳出来澄清？如果是事实的话，您公布这些消息的目的是要人民去查呢，还是您们想要查？如果时您们想追查的话，告诉我们结果就行了。我们不需要知道过程。再来，您们公布的目的不是在推卸责任吧！您们想告诉人民您们没钱做发展吗？既然已经作了人民代表，也领了人民给的薪水，那么就想想办法吧！如果这么好办，那么就不需要投您们一票了。我们都知道国阵的腐败，所以才有反风。不需要再从提了，好好的干完五年后拿出成绩吧！
奇怪？其他州属都还没把拨款花光吗？副首相纳吉在爆发南马大水灾的一周前宣布，政府拨出马币八千万元作为东海岸水灾的救灾经费。刘镇东说，八千万元不是小数目，若善加利用，应可有效防范水灾，但是由于公共领域策划及协调状况百出，拨款化为实际行动时往往已经“贬值”，无法达至目标效果，因而衍生许多天灾人祸。这些拨款又跑到哪儿去了？人民又收到救济金吗？我不知道，因为我不是受害者。这八千万说拨就拨吗？政府还有多余的钱吗？如果有，为什么几个月后，纳吉有放话说如果我国继续提供石油津贴给人民的话，马来西亚就要破产了！几个月后，这名“国宝”又想拨出46亿来建太空大学。还有大选前的各地走廊呢？这令学生很混淆，到底政府还有钱吗？
当国内贸易与消费人事务部长沙里尔沙末宣布，一旦政府在今年8月落实新的燃油津贴制度后，汽油与柴油的价格将不再受到管制时。我明白了，中央政府也没钱了。政府这几年的大型计划及投资都纷纷落败，导致人民的血汗钱就像江水东去。不过，中央政府里有很多精明的“太极”师傅。他们每次所作出来的报告可以随着人民的意念去做改变。当人民投诉电费太高，政府就会掏出一大堆证据显示国能在亏钱。当人民怀疑国能能力时，这些人又能作出国能赚钱的报告给人民看。这也发生在不少的政府机构。
看到了许多世界报道显示大马在世界各地的“傻瓜”投资都是白米换番薯的手法。换来的番薯又不会煮，然后就让他烂掉。可是每年大马公积金的常年报告都显示赚大钱。这是为什么？是您在谝我们还是世界在欺骗我？
再看看大马旅游局驻某国家的官员因喝酒后企图非礼女性的报道让回教徒蒙羞。一个自称是回教强国的马来西亚，回教官员既然可以喝酒？是不是意味着领袖们都喜欢到外国的原因？马来西亚不好吗？您们忍心让这美丽的土地给糟蹋吗？您不爱马来西亚吗？如果爱，当南马水灾时，首相阿都拉巴达威利用从委内瑞拉回国转机的短暂时间奔到柔佛抱抱小孩拍一拍照，就飞到澳洲旅行；房屋及地方政府部长黄家定和科学、天然资源及环境部长阿兹米卡立（Azmi Khalid）在八万国民遭遇水灾危难的当儿尚在国外度假，整个政府机构似乎完全没有危机感，仅把水灾当作日常事务管理。您们看到中国政府如何赈灾吗？当中国政府驻大马大使馆的官员在这次赈灾筹款只对马来西亚私人机构致谢时，您们不感到羞耻吗？
今天钱不够用了，低下头向人民认个错或许身为您们衣食父母的我们会接受。不认错，反而宣布让石油价格八月起自由浮动？这是在水深火热生活的人民身上浇油吧！这么一来您们以为只有石油起价？告诉您吧,万物价格将会狂飙！通货膨胀将会很严重。您们的经济学人才到哪去了？如果可以的话，也让您们这些庸才的薪水和津贴像石油一样自由浮动好吗？有表现就给薪水，没表现就没薪水好吗？
政府没钱了，人民希望不要拿我们来开刀。最多今年少做一些走廊，少让部长家人到处旅行，少办一些没有意义的国际活动和少建一些回教堂的话，我国还是可以渡过世界经济衰退的难关的。最见效的办法还是让中央政府少做一些假聪明的政策就行了。最后还是想问一句：老实说吧，还剩下多少钱？
终于完全在预料中，汽油，柴油都涨价了。学生预料不到的是这次首相豁出去了！这一涨就是40%。恭喜你首相，您的在任日子不长了。我想您也开始有了为自己移民到国外准备的意念了。您应该在3月8号后感觉到了。所以才有这种冲动。大捞一笔后，希望您能还记得我们。您喝的是人民的血汗，您吃的是人民的眼泪，您住的是人民的苦。您的世世代代将受到大马人民的“爱戴”。
这次的宣布让人民感到了恐慌。这已经不是政治海啸了。这是一种马来西亚的经济海啸前奏。有人觉得欢喜，因为您的宣布中加了附加题，那就是在新津贴制度下，政府每年将为2000cc引擎及以下的小型轿车提供625令吉的现金补贴。这相等于800公升的汽油津贴（即800公升乘以78仙计算）。您成功了！成功的骗到了一些无知的支持者。您的支持者认为您每年会分钱给他们。他们想的只是汽油津贴，却忘了油价涨后，万物一起涨！您的官方数字显示通货膨胀会在4%-5%。这是在您们上流社会里的数据。人民的世界和您们大不同！去年您说我国通货膨胀在3%以下时，人民已经感受到有如10%的压力了。有时候学生我在怀疑您的通货膨胀报告和您的国家成长率报告是不是换了封面？
这四年来，汽油起了5次之多。人民的负担越来越重了。您不要老是拿新加坡来比。新加坡人如果没有能力负担汽油，但是他们国家的交通发达。只要搭上MRT或巴士，没有去不到的地方。可是反观落后的马来西亚，没有了汽车，就别想出门了。虽说有巴士，“慢铁”。但那种卫生糟糕和不理想的交通工具，的确不值得花钱受罪。也不是所有地方都有设备。
接下来学生相信您会公布一些甜头来安抚人民。这就是您的作风。拿了人民的一千块，还回50块后还要人民感激。您在汽油上的现金补贴不也是如此？万事都是拿了钱再说。谁知道支票能不能兑现。这也不是第一次了。再来，就是在现金回扣下实行一些复杂的程序让人民永远没有办法得到。例如索取加油站收据等。。。用最简单的说法就是几年前买电脑能在所得税上回扣一样，有几个人真正得到利益？今年的财政预算案应该不难算了吧！中央政府省下了大约40亿的石油津贴，您们却忘了这40亿将从人民身上挖取。
您永远不能体会人民的生活。在您眼里，马来西亚人民都很有钱。每个家庭平均收入在3千以上，因为您身边的人都因为您的关系而富有了！您永远接触不到真正的马来西亚穷人。如今，人民只有等待接下来的涨价风潮。加价吧！马来西亚。
钱又花光了吗？
在学生时代时，老妈子老是重复一句话对着我说：怎么啦？这个月的零用钱又花光了？你为什么不好好学习储蓄呢？当时不懂事的我，老是觉得钱是从天上掉下来的。花光了，就得和父母撒娇。长大后才明白，原来不管身上有没有钱，我的父母都不舍得我挨饿！回头想想还有点内疚，因为钱都花在不该花的地方了。
如今，我国人民也该像父母一样反问我国中央政府一句：怎么啦？钱又花光了？连续几个在野党执政的州属都彬彬传来全年发展拨款在短短几个月就被上届政府花光了。这是事实还是狡辩呢？如果只是狡辩而已，为什么前任政府不跳出来澄清？如果是事实的话，您公布这些消息的目的是要人民去查呢，还是您们想要查？如果时您们想追查的话，告诉我们结果就行了。我们不需要知道过程。再来，您们公布的目的不是在推卸责任吧！您们想告诉人民您们没钱做发展吗？既然已经作了人民代表，也领了人民给的薪水，那么就想想办法吧！如果这么好办，那么就不需要投您们一票了。我们都知道国阵的腐败，所以才有反风。不需要再从提了，好好的干完五年后拿出成绩吧！
奇怪？其他州属都还没把拨款花光吗？副首相纳吉在爆发南马大水灾的一周前宣布，政府拨出马币八千万元作为东海岸水灾的救灾经费。刘镇东说，八千万元不是小数目，若善加利用，应可有效防范水灾，但是由于公共领域策划及协调状况百出，拨款化为实际行动时往往已经“贬值”，无法达至目标效果，因而衍生许多天灾人祸。这些拨款又跑到哪儿去了？人民又收到救济金吗？我不知道，因为我不是受害者。这八千万说拨就拨吗？政府还有多余的钱吗？如果有，为什么几个月后，纳吉有放话说如果我国继续提供石油津贴给人民的话，马来西亚就要破产了！几个月后，这名“国宝”又想拨出46亿来建太空大学。还有大选前的各地走廊呢？这令学生很混淆，到底政府还有钱吗？
当国内贸易与消费人事务部长沙里尔沙末宣布，一旦政府在今年8月落实新的燃油津贴制度后，汽油与柴油的价格将不再受到管制时。我明白了，中央政府也没钱了。政府这几年的大型计划及投资都纷纷落败，导致人民的血汗钱就像江水东去。不过，中央政府里有很多精明的“太极”师傅。他们每次所作出来的报告可以随着人民的意念去做改变。当人民投诉电费太高，政府就会掏出一大堆证据显示国能在亏钱。当人民怀疑国能能力时，这些人又能作出国能赚钱的报告给人民看。这也发生在不少的政府机构。
看到了许多世界报道显示大马在世界各地的“傻瓜”投资都是白米换番薯的手法。换来的番薯又不会煮，然后就让他烂掉。可是每年大马公积金的常年报告都显示赚大钱。这是为什么？是您在谝我们还是世界在欺骗我？
再看看大马旅游局驻某国家的官员因喝酒后企图非礼女性的报道让回教徒蒙羞。一个自称是回教强国的马来西亚，回教官员既然可以喝酒？是不是意味着领袖们都喜欢到外国的原因？马来西亚不好吗？您们忍心让这美丽的土地给糟蹋吗？您不爱马来西亚吗？如果爱，当南马水灾时，首相阿都拉巴达威利用从委内瑞拉回国转机的短暂时间奔到柔佛抱抱小孩拍一拍照，就飞到澳洲旅行；房屋及地方政府部长黄家定和科学、天然资源及环境部长阿兹米卡立（Azmi Khalid）在八万国民遭遇水灾危难的当儿尚在国外度假，整个政府机构似乎完全没有危机感，仅把水灾当作日常事务管理。您们看到中国政府如何赈灾吗？当中国政府驻大马大使馆的官员在这次赈灾筹款只对马来西亚私人机构致谢时，您们不感到羞耻吗？
今天钱不够用了，低下头向人民认个错或许身为您们衣食父母的我们会接受。不认错，反而宣布让石油价格八月起自由浮动？这是在水深火热生活的人民身上浇油吧！这么一来您们以为只有石油起价？告诉您吧,万物价格将会狂飙！通货膨胀将会很严重。您们的经济学人才到哪去了？如果可以的话，也让您们这些庸才的薪水和津贴像石油一样自由浮动好吗？有表现就给薪水，没表现就没薪水好吗？
政府没钱了，人民希望不要拿我们来开刀。最多今年少做一些走廊，少让部长家人到处旅行，少办一些没有意义的国际活动和少建一些回教堂的话，我国还是可以渡过世界经济衰退的难关的。最见效的办法还是让中央政府少做一些假聪明的政策就行了。最后还是想问一句：老实说吧，还剩下多少钱？
原文章转自：教授学生(keadilan.ws)
Wednesday, June 4, 2008
What's wrong with this picture: Oil falls, and so do stocks
On Wall Street, you always have to be careful what you wish for.Many investors have been praying for a drop in crude oil prices, and we got that today, thanks in part to Federal Reserve Chairman Ben S. Bernanke's move to boost the dollar.
Near-term oil futures slid $3.45, or 2.7%, to end at $124.31 a barrel -- the lowest closing price since May 15. Crude now has fallen 6.6% from its all-time high of $133.17 on May 21. Fire up the Hummer!
But the pullback in oil triggered the same action in energy stocks today, and that hit the broad market: Energy issues were the worst performers of the 10 major industry sectors in the Standard & Poor's 500 index, falling 1.8% on average. The S&P index overall dropped 8.02 points, or 0.6%, to 1,377.65, recovering from a loss of 1.1% at the day’s low.
Wait a minute, though. Shouldn't investors have been shifting their energy-stock profits into other sectors, betting that what's bad for oil will be great for most of the market?
Maybe they would have made that shift -- except for the sudden fear that brokerage Lehman Bros. could follow Bear Stearns Cos. into oblivion. Lehman shares were briefly down nearly 15% today on rumors that it was having funding problems and was forced to borrow from the Federal Reserve as a last resort. Shades of the March market meltdown all over again.
The company denied the rumors, however, and said it ended May with $40 billion in liquid assets, up from $34 billion three months earlier. The stock recovered somewhat but still lost 9.5% for the day, ending at $30.61, down $3.22 -- below the previous multiyear closing low of $31.75 on March 17.
The possibility of another big financial-company failure was too much for the bulls to handle today, despite oil's gift, said Art Hogan, veteran market analyst at Jefferies & Co. in Boston. "They were thinking, 'Maybe this is the next shoe to drop,' " he said.
And the suspense may not lift soon: Lehman won't report its full results for the fiscal quarter ended May 31 until mid-June.
So we're left to ponder: How low does oil have to go to more than offset another round of serious doubts about the financial system's health?
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