Sunday, May 9, 2010
Who are the Lenders to Greece to prevent a domino effect.
See below. Staggering amounts.
Singapore's GDP for 2008 was $182B, which is about $102B.
IMF - up to 30 billion euros
GERMANY - 22.33 billion euros. (Separately, Germany's financial sector will contribute 8.1 billion euros ($10.87 billion) over three years, include Deutsche Bank (DBKGn.DE), insurer Allianz (ALVG.DE) and Munich RE MUNVGn.DE)
FRANCE - 16.77 billion euros
ITALY - 14.74 billion euros
SPAIN - 9.79 billion euros
NETHERLANDS - 4.7 billion euros.
BELGIUM - 2.86 billion euros
AUSTRIA - 2.29 billion
PORTUGAL - 2.06 billion euros
FINLAND - 1.48 billion euros
IRELAND - 1.31 billion euros
SLOVAKIA - 820 million euros
SLOVENIA - 390 million euros
LUXEMBOURG - 210 million euros.
CYPRUS - 160 million euros
MALTA - 70 million euros
Sunday, April 25, 2010
Please read prior posts.
My idiot proof view.
BUY!
Only if you have a long term horizon.
Consider ICBC, not money changers and under your pillows.
Earlier, I've provided an article that is for the revaluation.
Now read this, by Yasheng Huang is professor of political economy and international management at Sloan School of Management, Massachusetts Institute of Technology. He is the author of “Capitalism with Chinese Characteristics.” which also makes sense.
Many of the criticisms of the Chinese exchange rate policy are quite sensible, especially those that identify other developing countries as bearing some of the burdens of the Chinese policy (mostly in the form of forgone export opportunities).
But I think advocates for a stronger renminbi have exaggerated the benefits of such a move for other developing countries and may have under-estimated some of the risks for China.
The benefits of a revaluation on other developing countries will not be instantaneous. It took China 10 to 15 years to build its powerful export clusters in the coastal regions and that was already considered as a supersonic speed. Adjusting China’s exchange rate, while moving things in the right direction, is not going to solve the immediate challenge of jump-starting growth during this round of global recession.
For China itself, the calculation is quite complicated. In the medium term (3 to 5 years), China needs to have more flexibility in its exchange rate policy. It is important to emphasize that it is not only the revaluation per se that matters; how it’s done also matters.
The most likely policy course is to allow a gradual, controlled rise of the currency value against the U.S. dollar. China did this between 2005 and 2008 and all the indications suggest that they may do it that way again.
But such a policy course has risks. The market consensus is that the renminbi is undervalued by 30 to 40 percent (whether this is accurate or not is irrelevant.) Thus an appreciation by 5 or 6 percent will first tell the speculators that the currency policy is now flexible and will leave them to believe that they still have much to gain by investing in renminbi-dominated assets today.
What are those assets? Mostly real estate. China is already in the middle of a huge real estate bubble. A gradual exchange rate adjustment will make it worse — and thus will make its eventual bursting even more of a calamity.
So why not move the exchange rate all the way to the market consensus level to kill the speculative expectations? This gets to some of the fundamental fragilities of the Chinese economy and I believe that this is the foremost concern in the minds of the Chinese policy makers.
Chinese export growth is labor intensive but its G.D.P. growth is capital-intensive. In the last 10 years and in 2009 in particular, Chinese G.D.P. growth has been powered by massive investments that are financed by off-budget debt of local governments.
This kind of growth gives you good economic numbers (which then invite all these criticisms of the renminbi policy) but it does not give you the things that truly matter — such as jobs and decent income growth for average Chinese.
Those export factories, which many think of as dreary sweatshops, are sources of decent income for millions; some estimates suggest that almost 100 million rural Chinese work in coastal provinces and many of them are employed in those factories. If the exchange rate is revalued by 40 percent overnight, many of those export factories will go bankrupt. That will be very unpleasant, economically, socially and politically.
This is not to argue that keeping the renminbi value artificially low is a good policy, only that the policy priority is elsewhere. China should start immediately reducing what in effect is a huge capital subsidy given to the state sector and using the money to improve the income of Chinese households.
This is the only way to rein in local government investments. There will be some unemployment but this will be better than bankrupting the export sector. China should also start de-regulation and urban reforms that will encourage the growth of its service sector (which is now abnormally small) so that job creation doesn’t fall disproportionately on the export sector.
The third priority, I believe, is to reform the currency system. Even if exchange rate flexibility is a desirable goal, what’s important is that it be carried out in the right sequence.
If some of you are still unaware of this shift in currency, it's about time.
The Chinese Currency, also know as Renminbi (RMB), is under pressure to revalue itself inthis period of time, before June 30. Is this a good or bad thing to China, is up to debate.
I've quoted a post by Eswar Prasad is a professor at Cornell University and a senior fellow at the Brookings Institution. He is a former head of the International Monetary Fund’s China Division. I thought he pointed out some good issues.
A shift in China’s currency policy is not a panacea for imbalances in either the Chinese or U.S. economies, but it puts in place an important piece to a complex jigsaw puzzle.
The immediate benefit of a modest currency adjustment is that it will cool off some of the overheated rhetoric in China and the U.S., allowing the nations to focus on important economic and strategic issues rather than getting into petty trade disputes.
A modest appreciation of the renminbi will not by itself wipe out America’s trade deficit or China’s trade surplus. But if this move generates momentum towards a more flexible exchange rate, it could help achieve some important objectives. Chinese officials speak of banking reforms as a key priority and consider their huge trade surplus a structural problem having nothing to do with currency policy. There is, in fact, a deep connection between these issues.
Without an independent interest rate policy to guide them, banks will remain handmaidens of local government bureaucrats who want to pump up growth at any cost. This also has the unfortunate effect of keeping bank lending going mainly to politically well-connected large state enterprises rather than dynamic small and medium-sized firms that are more effective at generating jobs. This tilts the economy even more towards dependence on investment and exports to sustain growth.
The government’s desire to maintain a stable exchange rate relative to the dollar means that China is effectively importing U.S. monetary policy, constraining short-term policies and hampering longer-term adjustment.
For instance, even though U.S. interest rates are likely to remain low as the economy here is still weak, China really ought to raise interest rates now to help cool off bank credit expansion, prick incipient asset price bubbles and reduce the risks of inflation.
A flexible exchange rate would allow China to run a monetary policy better suited to its own economic circumstances. This, in turn, would facilitate banking reforms and help to shift credit flows towards private sector firms — both in manufacturing and services — that can generate more jobs.
And a currency appreciation would increase the purchasing power of Chinese households as imports become cheaper. This would boost household consumption, making the Chinese economy more balanced and less dependent on exports or investment.
These changes will ultimately be good for China itself and the U.S., with China able to take in more imports from the U.S. and the rest of the world. A more balanced pattern of growth in China will also aid the global rebalancing effort by creating room for other emerging market economies to allow their currencies to appreciate without fear of losing competitiveness to China.
Tuesday, July 7, 2009
In a different economy, Billy Mitchell and Nicole Drucker of San Francisco might have splurged on a $10,000 engagement ring. But Ms. Drucker is out of work and they need to save for a house. So in April, Mr. Mitchell got down on one knee on the Golden Gate Bridge and proposed with a $4,000 diamond ring he had bought on the Internet.
“We had to decide, where do we want the money?” Mr. Mitchell said. “On her finger?”
In this economy, many consumers would rather keep their money in their wallets than on their fingers, necks or ears. As people re-examine their budgets, jewelry is turning out to be one of the easiest places to cut back — or trade down.
“The half-carat is the new three-carat,” explained Hayley Corwick, who writes under the pseudonym Lila Delilah for Madison Avenue Spy, a blog about designer sales.
Yet the understandable penny-pinching by consumers is putting a painful squeeze on the jewelry industry.
The new frugality has forced diamond mines to curtail production, led to deep discounting at jewelry chains, spurred hundreds of store closings and resulted in job cuts at boutiques and department stores. Because jewelry is expensive inventory that moves slowly even in better economic times, many stores are laden with debt — even though wholesale global prices of polished diamonds were down 15.4 percent in June compared with a year earlier.
Experts say that when the shakeout is over, far fewer jewelers will be left standing. About 20 percent more American jewelers will go out of business this year than did last year, according to Kenneth Gassman, president of the Jewelry Industry Research Institute, an independent research practice.
The jewelry chains that have filed for bankruptcy in the last year or so include Fortunoff, Whitehall Jewelers, Friedman’s, Christian Bernard and Ultra Stores (which operated jewelry departments inside Filene’s Basement and other chains).
Still in business but posting losses, meanwhile, are big jewelry chains, both high end and low — from Harry Winston and Bulgari to Zales and Claire’s Stores.
And while the venerable Tiffany & Company is still making money, sales have dropped 34 percent at its stores in this country that have been open at least a year.
Major mass-market retailers including Wal-Mart, J. C. Penney, BJ’s Wholesale Club and Costco have cited jewelry as one of their worst-performing categories this year. Even online jewelry and watch sales are down, declining 7 percent in the first quarter, according to the Web analysis firm comScore.
“You’re seeing the traffic fall off a cliff at all price points,” said Stacey Widlitz, a retailing analyst with Pali Research.
Of the consumers still buying jewelry, many are trading down. Blue Nile, the giant online jeweler, said some people were opting for less costly engagement rings made of semiprecious stones instead of diamonds.
And yet, sales of diamond rings and wedding bands seem to be holding up better than for other kinds of jewelry. Retailers and analysts say a decent engagement ring is still seen as a necessity for men hoping to get a yes to a marriage proposal.
Even Mr. Mitchell, of San Francisco, who knew the outcome because his fiancée had collaborated in the planning, considered the ring to be “hugely” important. And he spent hours learning about diamonds on BlueNile.com. But “we knew that we only wanted to spend so much,” he said, “and this Web site really enabled you to get the best diamond for the dollar.”
Many consumers still intent on expanding their jewelry collections are now doing so with costume and vintage pieces instead of new, fine jewelry.
Megan Wishnow of Long Island City, Queens, trolls eBay for pieces. “It’s become a little bit gauche in a way to walk around, to flaunt, whether you have it or not,” said Ms. Wishnow, who sells vintage clothes on the Web after years of working in public relations for high-end fashion brands like Gucci. “I think women are definitely more conscious of how they come off. And everyone wants to be respectful of what’s going on, especially in New York City.”
Instead of buying jewels, some people are even renting them by the week or month for glamorous events or for gallivanting around town, as one might do in a leased Mercedes. At Avelle, an online rental site for swanky goods, more and more consumers are signing up to rent jewelry by the likes of Chanel and Louis Vuitton, resulting in double-digit year-over-year growth in jewelry rentals, according to the company’s senior vice president of product management, Dana Palzkill.
Some bargain hunters have taken to haggling — even at Tiffany. After all, consumers are loath to overpay in a down market.
“I think everyone feels compelled to ask the question for fear of being, feeling foolish after the fact,” Michael J. Kowalski, chairman and chief executive of Tiffany, said last month at a Thomson Reuters luxury and retail industry conference in New York.
Tiffany has lowered prices on diamond engagement rings, a core part of its business, by about 10 percent since the holiday season.
“We’re not going to discount or run short-term sales,” Mark L. Aaron, vice president for investor relations at Tiffany, said in a telephone interview. “We’re simply going to take a little bit less gross margin in the engagement category. It was our gesture to a young couple. We just made it a little bit more affordable.”
Tiffany hopes it is laying the groundwork for a lifelong relationship with the newly betrothed.
Not surprisingly, the more expensive the jewelry, the greater the sales declines in the last year. In Tiffany’s most recent reporting period, sales of jewelry above $50,000 were softest.
Even selling midpriced jewelry has been brutal for chains because the market is awash in marked-down goods from so many liquidation sales. “This is forcing luxury players to make one of two decisions,” said Ms. Widlitz of Pali Research. “You either chase the consumer downstream or you stay the course. Tiffany is staying the course.”
As a result, Tiffany is among the jewelers expected to gain market share amid the industry shakeout.
“Tiffany has the balance sheet to really withstand a prolonged period of weakened demand,” said Bob Drbul, a retailing analyst with Barclays Capital who tracks the company. The company’s stock price peaked around $56 in autumn 2007 and fell to about $17 this March before rebounding. The shares closed Monday at $24.70, up 41 cents.
To weather the recession, many chains are slowing new store growth and making cuts to capital expenditures, inventory and their advertising budgets. Harry Winston, Tiffany, Zales and De Beers have collectively cut hundreds of jobs.
In February, Finlay Enterprises — a major operator of licensed fine jewelry counters in department stores like Macy’s, Dillard’s and Lord & Taylor — said it would exit the department store business and close about 40 of its approximately 100 specialty jewelry stores, which include Bailey, Banks & Biddle.
For the retailers the good news, relatively speaking, is that the chains say the rate of deceleration has slowed in the last three months. No one is declaring a recovery, or even that the market has reached a bottom. But Tiffany, which has been selling its signature six-pronged diamond solitaire engagement rings through booms and busts since 1886, is confident the sparkle will return once again.
“We’re going through a business cycle,” said Mr. Aaron of Tiffany. “There will eventually again be a rising tide of affluence around the world.”
Thursday, June 11, 2009
I will attempt to do a reflection of what happened since our last bull run and the events that occured during this period. For those you who have followed the events closely might find this boring, so just bear with me.
In the year end of 2008, the credit crunch, threatened to be Wall Street’s biggest crisis since the Great Depression. Hundreds of billions in mortgage-related investments soured and reputable investment banks crumbled.
Borrowings almost went to a stop due to liquidity worries affecting businesses of all sizes.
In response, the
The last credit crisis is the burst of the tech bubble of the late 1990’s. Sock market began a steep decline in 2000 and US went into recession the following year and interest rates were sharply in hope to limit the damage.
Due to the lower interest rates, houses became cheaper and demand for homes increased, sending prices up. It also gave homeowners the opportunities to refinance their loans.
Things turned sour when home buyers had to leverage themselves to the max to make a purchase. Defaults began to rise in 2006, but lending/borrowing did not slow. The highly intelligent institutions, Banks and other financial institutions, devised complex financial instruments to distribute and resell the mortgage-backed securities and to hedge against any risks.
“The First Bomb”
The first bomb was when2 hedge funds owned by the MIGHTY Bear Stearns collapse. Foreclosures, in fact, helped speed up the fall of housing prices, and default on mortgages increased.
In a very bold move, the Fed helped in “closing the deal” by selling Bear Sterns to JP Morgan at the initial price of USD $2/share. This amount I think/read/assume should be lower than the price of the Manhattan Office building, Bear Stearns owned.
“The Giants”
In August, stock prices of Fannie Mae and Freddie Mac went into a free fall and the
“It never rains but pours.” In Sept again, talks to salvage Lehman Bro broke down and the news of this investment giant’s collapse sent shockwaves throughout the globe, not only the financial systems. In the same time frame, Merrill Lynch another GIANT, sold itself to Bank of American to avoid bankruptcy. At this point, things became very clear. All hopes seemed lost.
In the same month, American Insurance Group, was thankfully bailed out by
Such companies which were supposed to be known for it’s capital management intelligence, failed in their own playing field.
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Long story... to be continued.
Monday, June 1, 2009
President Obama will push General Motors into bankruptcy protection on Monday, making a risky bet that by temporarily nationalizing the onetime icon of American capitalism, he can save at least a diminished automaker that is competitive.
The company will also have to shed 21,000 union workers and close 12 to 20 factories, steps that most analysts thought could never be pushed through by a Democratic president allied with organized labor.
To assist in the restructuring, the automaker is expected to hire the consulting firm Alix Partners, which has worked on several major bankruptcies, including those for Enron and Kmart. One of the firm’s partners, Al Koch, is expected to manage the liquidation of corporate assets that G.M. will shed during its Chapter 11 restructuring, people with knowledge of the strategy said.
On Monday, Mr. Obama is expected to argue that any alternative to his plan would be worse, and that a liquidation of G.M. — the only other real option — would send the unemployment rate soaring over 10 percent and would radiate damage throughout the economy.
http://www.nytimes.com/2009/06/01/business/01auto.html?pagewanted=1
Thursday, May 28, 2009
Article by Jason Zweig, Author of the Intelligent Investor
It is sometimes said that to be an intelligent investor, you must be unemotional. That isn't true; instead, you should be inversely emotional.
Even after recent turbulence, the Dow Jones Industrial Average is up roughly 30% since its low in March. It is natural for you to feel happy or relieved about that. But Benjamin Graham believed, instead, that you should train yourself to feel worried about such events.
At this moment, consulting Mr. Graham's wisdom is especially fitting. Sixty years ago, on May 25, 1949, the founder of financial analysis published his book, "The Intelligent Investor," in whose honor this column is named. And today the market seems to be in just the kind of mood that would have worried Mr. Graham: a jittery optimism, an insecure and almost desperate need to believe that the worst is over.
You can't turn off your feelings, of course. But you can, and should, turn them inside out.
Stocks have suddenly become more expensive to accumulate. Since March, according to data from Robert Shiller of Yale, the price/earnings ratio of the S&P 500 index has jumped from 13.1 to 15.5. That's the sharpest, fastest rise in almost a quarter-century. (As Graham suggested, Prof. Shiller uses a 10-year average P/E ratio, adjusted for inflation.)
Over the course of 10 weeks, stocks have moved from the edge of the bargain bin to the full-price rack. So, unless you are retired and living off your investments, you shouldn't be celebrating, you should be worrying.
Mr. Graham worked diligently to resist being swept up in the mood swings of "Mr. Market" -- his metaphor for the collective mind of investors, euphoric when stocks go up and miserable when they go down.
In an autobiographical sketch, Mr. Graham wrote that he "embraced stoicism as a gospel sent to him from heaven." Among the main components of his "internal equipment," he also said, were a "certain aloofness" and "unruffled serenity."
Mr. Graham's last wife described him as "humane, but not human." I asked his son, Benjamin Graham Jr., what that meant. "His mind was elsewhere, and he did have a little difficulty in relating to others," "Buz" Graham said of his father. "He was always internally multitasking. Maybe people who go into investing are especially well-suited for it if they have that distance or detachment."
Mr. Graham's immersion in literature, mathematics and philosophy, he once remarked, helped him view the markets "from the standpoint of eternity, rather than day-to-day."
Perhaps as a result, he almost invariably read the enthusiasm of others as a yellow caution light, and he took their misery as a sign of hope.
His knack for inverting emotions helped him see when markets had run to extremes. In late 1945, as the market was rising 36%, he warned investors to cut back on stocks; the next year, the market fell 8%. As stocks took off in 1958-59, Mr. Graham was again pessimistic; years of jagged returns followed. In late 1971, he counseled caution, just before the worst bear market in decades hit.
In the depths of that crash, near the end of 1974, Mr. Graham gave a speech in which he correctly forecast a period of "many years" in which "stock prices may languish."
Then he startled his listeners by pointing out this was good news, not bad: "The true investor would be pleased, rather than discouraged, at the prospect of investing his new savings on very satisfactory terms." Mr. Graham added a more startling note: Investors would be "enviably fortunate" to benefit from the "advantages" of a long bear market.
Today, it has become trendy to declare that "buy and hold is dead." Some critics regard dollar-cost averaging, or automatically investing a fixed amount every month, as foolish.
Asked if dollar-cost averaging could ensure long-term success, Mr. Graham wrote in 1962: "Such a policy will pay off ultimately, regardless of when it is begun, provided that it is adhered to conscientiously and courageously under all intervening conditions."
For that to be true, however, the dollar-cost averaging investor must "be a different sort of person from the rest of us ... not subject to the alternations of exhilaration and deep gloom that have accompanied the gyrations of the stock market for generations past."
"This," Mr. Graham concluded, "I greatly doubt."
He didn't mean that no one can resist being swept up in the gyrating emotions of the crowd. He meant that few people can. To be an intelligent investor, you must cultivate what Mr. Graham called "firmness of character" -- the ability to keep your own emotional counsel.
Above all, that means resisting the contagion of Mr. Market's enthusiasm when stocks are suddenly no longer cheap.
Credit to: Dow Jones & Company, Inc.