US recession?

[Biggest Fan]

I love the thread. Even though I do not have any I love talking money. It has been very interesting watching the internet and now the USA housing bubbles (burst). Its fun I guess in that I did'nt have any money to loose. Its very much a buyers market in the USA I guess it is'nt quite so clear in Canada.

As far as consumer spending my guess that all depends if the 'inflation' thing pops up. Right now things 'seem' to be going OK as far as most people and their pocket books.

[d_rawk]

So then does this situation favour home buyers? If the mortgage industry is fuÇked, does that mean the consumer can take advantage of it? Speaking in Canada of course.

I don't have any stake in real estate and don't follow it, but from what I gather so far the only real effect from the sub-prime fiasco southward is that lenders here got a free lesson that even though the cheese may look enticing, it probably isn't worth risking the mousetrap for.

[Booche]

Hey Ollie, why the fuck are you renting?????

[Dr_Evil_Mouse]

Time to revisit squatters' rights.

[d_rawk]

Bizarre .. this thread seems as good as any to post it. Warning: Multiple block quotes below.

In a complex set of transactions, Dubai is moving to acquire 19.9 percent of the Nasdaq in New York, placing the Arab government in an ownership position of the key U.S. stock exchange and raising concerns in Congress.

The announcement set off a firestorm of criticism in Washington, prompting President Bush to comment today in a news conference, "We're going to take a good look at it, as to whether or not it has any national security implications involved in the transaction. I'm comfortable with the process to go forward."

Schumer's letter posed five specific questions for Paulson:

1. What national security concerns are raised by allowing a foreign government to own U.S. financial exchanges?

2. Specifically, with respect to Dubai, are there national security concerns about this particular country's influence or control over a U.S. exchange?

3. U.S. exchanges are a critical asset to our national economic infrastructure. What implications would foreign government control or influence have on our economic security?

4. U.S. economic security depends on continued competitiveness in a global financial market. What impact will this transaction have on U.S. financial competitiveness?

5. If national and economic security concerns can be satisfied, should restrictions be placed on this transaction to limit Dubai's control and influence over U.S. exchanges?

World Net Daily article

[ollie]

Hey Ollie, why the fuck are you renting?????

Don't ever change Booche.

[Biggest Fan]

#1 I have no idea on what to think about the ownership (part)of the 'stock exchange'. Good one to think about but

#2 I have always thought 'Why rent when...' but I'm sure there is more than one good reason not to buy.

#3 In all things that have to do about money... I think its funny the GWB is letting truckers from Mexico in across the border but we will not import 'drugs' from the North. Damn Canadians can't trust'em worth a lick (HA HA).

[d_rawk]

The positive perspective on same:

By buying into Nasdaq, Borse Dubai would gain expertise. For Nasdaq, the deal means that its chief executive, Robert Greifeld, can fulfill his goal of creating a more global stock market. He has failed to combine with the London exchange in the past, while the rival NYSE Group successfully merged with Euronext.

Borse Dubai’s chairman, Essa Kazim, said, “Our primary objective is to build a world class, growth-oriented exchange out of Dubai and to become the center for capital markets activities in the emerging markets.â€

Dubai would get 2 of the 16 board seats once Nasdaq merged with OMX and not more than 5 percent of the voting rights. The deal, which would create a stock market operation from the United States across Europe to the Middle East, is still subject to a long list of conditions, including the national security review, and approval by stockholders of the companies involved.

Senator Christopher J. Dodd, the chairman of the Senate Banking Committee and the main author of the recent law, called for an aggressive review of the transaction. Mr. Dodd, a Democrat from Connecticut, added that as a general matter, he supported foreign investment in the United States that “promotes growth and creates good jobs.â€

Senator Charles E. Schumer, Democrat of New York, was one of the few members of Congress to raise questions about the national security implications of the deal, though his remarks were not considered as hostile to the deal as his comments on the Dubai ports transaction were.

“At this early stage, this deal gives me pause,†Mr. Schumer said. “While I am and have been a big proponent of foreign investment in the United States, we must still be careful of the kinds of investments made in our critical infrastructure, financial exchanges, utilities and other areas that are vital to the operation and security of our country.â€

In the House, the speaker, Representative Nancy Pelosi of California, and Representative Barney Frank, Democrat of Massachusetts and chairman of the Financial Services Committee, both said that they were not alarmed by the investment and that it was different from the ports deal.

“In the ports deal, the concern was smuggling something or someone dangerous into ports,†Mr. Frank said. “What are we talking about here — smuggling someone onto a stock exchange?â€

The senior Republican on the committee, Representative Spencer Bachus of Alabama, also praised the deal.

“This is a win-win for both exchanges,†he said. “Nasdaq’s brand is respected worldwide. This is exactly the kind of foreign investment in U.S. companies we should foster and encourage.â€

The deal was also applauded by Mayor Michael R. Bloomberg, who said it was “good news for both New York and the nation.â€

“This deal will extend Nasdaq’s reach in both Europe and the growing markets of the Middle East and lead to higher regulatory standards in Dubai,†Mr. Bloomberg said. “Like all such deals, this one should undergo all the appropriate scrutiny, but I hope that that discussion does not devolve into the kinds of demagogic attacks that could cost Americans jobs and threaten New York’s place as the financial capital of the world.â€

"Mild Reaction in Capitol to a Dubai Nasdaq stake" (New York Times)

[Biggest Fan]

Globalization is much like 'Pandoras Box' in that once it was opened... it was opened. For better or worse it is todays reality and there is no way around it.

[Biggest Fan]

-n- thanks 'd rawk' your post seemed to break it into Its 'simplest' terms.

[d_rawk]

Can't keep statues of St. Joseph on the shelves, as home-sellers in the US look for divine intervention in the face of a slumping market

[Biggest Fan]

It pretty strange to see how the housing issue as 'morphed' into the 'credit crunch'. To cap it all off the 'dollar' issue. No more cuts by the Central Bank to keep all of the 'traders' happy. Needless to say pretty interesting stuff. It should be even more so if our economy takes a significant turn for the worse. *All with a big election coming up. Just imagine taking over this mess.

[d_rawk]

I suspect that Bernanke does in fact cut again. Looks like a good time to get in for a dip, and then get the hell out. Another rate cut isn't going to fix anything, but it will make the market ecstatic for a moment.

[d_rawk]

Today: Goldman Sachs joins Merrill Lynch in declaring that the US is now officially in - or entering - a recession. Goldman Sachs Sees Recession in 2008 (Reuters)

So, if history is any indication, I guess this means that the recession is actually over?

GS expects the fed to cut rates down to 2.5%

Gold, anyone?

[The Chameleon]

You know it's a recession when gold is steadily going up. That means world investors are scared and looking to cling to something stable and of value, which also means they are dumping the US greenback.

Burn baby burn like a disco inferno.

[Birdy]

hah! i have an appointment at 1 today to buy me some gold!

[phishtaper]

careful birdy, when gold drops (and it will), it drops fast. very fast.

[d_rawk]

NEW YORK (AP) -- Gold soared to a record high Thursday after Federal Reserve Chairman Ben Bernanke pledged to cut interest rates, undermining the dollar and boosting demand for the metal as a safe investment.

The thing about gold is that everyone is pilling in .. I think that there is still a fair amount of upside, but when people start getting shaken out on dips I'd fear a mass exodus.

Birdy, are you buying physical gold? At least with the ETFs or something unhedged like Barrick you could set tight stops and be protected from any sharp decline. But wouldn't be surprised to see $1000/ounce, so I would imagine the physical stuff would be safe for awhile yet too.

[d_rawk]

More giant write downs hittings the wires this AM

Merrill Lynch is expected to suffer $15 billion in losses stemming from soured mortgage investments, almost double its original estimate, prompting the firm to raise additional capital from an outside investor.

Merrill, the nation’s largest brokerage firm, is expected to disclose the huge write-down when it reports earnings next week, according to people who have been briefed on its plans. The loss far exceeds the $12 billion hit many Wall Street analysts had forecast.

To shore up its deteriorating finances, Merrill is now in discussions with investors in the United States, Asia and the Middle East, including American private equity firms, to raise about $4 billion in the coming days, these people said.

The developments underscore the rising toll that the mortgage crisis is taking on many once-proud Wall Street banks. In recent months Merrill and several other firms have grabbed financial lifelines from wealthy foreign governments. Further investments by so-called sovereign wealth funds could prompt scrutiny by Congress.

Fan, meet Shit. Shit, Fan. I'll leave you two alone to get better acquainted.

[Birdy]

Birdy, are you buying physical gold? At least with the ETFs or something unhedged like Barrick you could set tight stops and be protected from any sharp decline. But wouldn't be surprised to see $1000/ounce, so I would imagine the physical stuff would be safe for awhile yet too.

It's through an ETF. I was told the exact same thing by a good friend of the family when he suggested I move my stuff around.

[d_rawk]

Cool man. Which ETF did you go with?

I'm still looking for a correction before finishing up, but may not get it if Bernanke surprises early. Will probably complete the following position in increments over about 30 days -

40% Barrick

20% streetTracks Gold ETF (bullion, baby)

15% Yamana

15% Eldorado

10% Golden Star (just to have a junior in there)

The basket ETFs are likely a wiser decision than that sort of cherry-picking, but you know ... testosterone and hubris, etc..

[d_rawk]

Jan. 15 (Bloomberg) -- Citigroup Inc. posted the biggest loss in the U.S. bank's 196-year history as surging defaults on home loans forced it to write down the value of subprime-mortgage investments by $18 billion.

The fourth-quarter net loss of $9.83 billion, or $1.99 a share, compared with a profit of $5.1 billion, or $1.03, a year earlier, the biggest U.S. bank said today in a statement. New York-based Citigroup also cut its dividend by 41 percent, announced 4,200 job cuts and said it will receive $14.5 billion from outside investors to shore up depleted capital.

``Our financial results are clearly unacceptable,'' Chief Executive Officer Vikram Pandit, who was installed in December after Charles ``Chuck'' Prince stepped down amid mounting subprime losses, said in the statement. ``We are taking actions to enhance our risk-management processes and to improve expense productivity.''

Citigroup racked up record losses as it misjudged the depth of the mortgage crisis. The writedown for subprime home loans and related securities was almost double what the company expected as recently as November. The bank also said it set aside $4.1 billion more in the fourth quarter of 2007 to cover loan losses.

Citigroup's markdown is the biggest so far, exceeding the $14 billion reported by Zurich-based UBS AG, Europe's biggest bank.

`Bad News to Come'

``Things are still bad out there for financials, and there's more bad news to come,'' said Jon Fisher, who helps oversee $22 billion at Minneapolis-based Fifth Third Asset Management. ``The balance sheet is a mess, they've got to raise capital, and the charges keep going up every day.''

The net loss exceeded analysts' estimates of 97 cents a share, according to a survey by Bloomberg. Citigroup has slumped 47 percent in New York Stock Exchange composite trading during the past year. The shares rose to $29.50 in early trading from $29.06 at the close on the New York Stock Exchange yesterday.

Bank of America Corp., which may report an 80 percent drop in fourth-quarter net income next week, fell 27 percent in the past 12 months and JPMorgan Chase & Co., which may post a 31 percent decline in earnings tomorrow, lost 14 percent of market value.

Founded in 1812 as the City Bank of New York, Citigroup cut the quarterly dividend to 32 cents a share from 54 cents. The reduction, the first since the merger of Citicorp and Travelers Group Inc. in 1998, will help save the company about $4.4 billion annually. The company said as recently as November that it had no plans to lower the payout to shareholders.

Preferred Shares

Citigroup also had to turn to outside investors for fresh capital for the second time in two months. The bank said it raised $6.88 billion by selling convertible preferred shares to an investment fund controlled by the government of Singapore. Similar shares were sold to Capital Research Global Investors, Capital World Investors, the Kuwait Investment Authority, the New Jersey Division of Investment, Saudi Prince Alwaleed bin Talal and former Citigroup CEO Sanford I. Weill.

In November, the bank got a $7.5 billion injection from the ruling family of the Middle Eastern emirate Abu Dhabi. Alwaleed, the 52-year-old billionaire, already owns 4 percent of the company. He has been Citigroup's biggest individual shareholder since the early 1990s, when soured investments in commercial real estate left corporate predecessor Citicorp short of funds.

Weill, 74, spent 17 years building Citigroup through a series of bank, brokerage and insurance-company mergers before retiring as CEO in 2003 and naming Chuck Prince his successor.

Capital Ratios

Without a capital infusion, Citigroup's so-called Tier 1 capital ratio, which regulators monitor to assess a bank's ability to withstand loan losses, would fall below the company's target to about 7 percent, Goldman Sachs Group Inc. analyst William Tanona estimated last month.

The fourth quarter may be the worst earnings period for the financial industry since the Great Depression. Analysts estimate Merrill Lynch & Co., the biggest U.S. brokerage, will report a record loss of more than $3 billion after writing down the value of mortgage-related securities, and Bank of America, the second- largest U.S. bank by assets after Citigroup, may report its biggest profit decline since its formation in 1998 from the merger of BankAmerica and NationsBank.

Merrill, the biggest U.S. brokerage, said earlier today it raised $6.6 billion by selling preferred shares to a group including the Kuwaiti Investment Authority and Japan's Mizuho Financial Group Inc.

Two days after becoming CEO on Dec. 11, Pandit, 51, bailed out seven so-called structured investment vehicles, shifting $49 billion of assets onto Citigroup's balance sheet and obliging the company to increase its capital cushion. The decision increased the chances that Pandit would have to cut the dividend, according to CIBC World Markets analyst Meredith Whitney. The payouts to shareholders cost Citigroup about $2.7 billion a quarter.

[d_rawk]

Holy good crap. Goldsplosion on the Fed news

[Biggest Fan]

I've heard what I thought were few interesting bit os information recently: As stated earlier in this thread the biggest problem with the subprime thing is the fact that Americans can no longer used the value of their houses to borrow from in that the they aint worth what they use to be. The 2nd was Greenspan saying that he felt interest cuts were not the way to deal with this problem. On a related note with a weak dollar we could see inflationary pressures as a result of higher costs for imported products. So the once great american 'consumer' could be in a situatiion in which not only do they have less buying power but they will be unable to buy as much with the higher costs. Now if this pans out we could see some 'intersting' times.

*Oddly enough as per top of the page I believe the US and Canada are near each other in overall debt payment v. % of GDP. I could not believe it when I saw it.

[Biggest Fan]

Do not get me wrong however the USA faces a huge problem 1 Debt, 2 Cost of war, and 3 future govt. payments i.e. retirement = GDP (consumer spending- no way)