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So they shot themselves in the foot.
Unions would not cut autoworker wages so Senate could not accept the bailout.
Thats wild, you would think they would throw some money at it to look like they really care. All way above my head, I feel for the retired folks. Maybe market shoots up today over 12000.:)
Auto bailout fails
2 hours, 52 minutes ago
By John Crawley and Richard Cowan
WASHINGTON (Reuters) - A proposed bailout of U.S. automakers failed in the Senate on Thursday night, raising the specter of an industry collapse that sent Asian markets reeling and sparked fears it could deepen the recession.
"It's over with," Senate Majority Leader Harry Reid said of congressional efforts this year just before the Democratic proposal to extend up to $14 billion to the stricken industry fell short in voting on a procedural motion.
Pressure immediately shifted to the White House, with calls for President George W. Bush to consider intervening with emergency financing.
General Motors Corp and Chrysler LLC sought billions in aid to see them through March and have warned of potential collapse if they did not receive a bailout.
"I dread looking at Wall Street tomorrow. It's not going to be a pleasant sight," Reid said.
Markets across the Asia-Pacific region fell more than 3 percent on the development, with Japan's Nikkei average and Hong Kong's Hang Seng both down more than 5 percent. European and U.S. stocks were expected to fall about 5 percent.
Shares of Toyota Motor Corp were off 10 percent and Honda Motor Co fell 12.5 percent on worries about massive disruptions in the U.S. economy if one or more of its automakers collapse.
U.S. crude prices fell by more than $2 to $45.90 a barrel, while the yen hit a 13-year high against the U.S. dollar.
Because of their shared suppliers and vendors, industry observers fear the failure of one Detroit manufacturer could drag down the other two as well as other businesses.
Lawmakers have been among the industry's biggest critics. But Democrats and some Republicans -- and the White House in the end -- scrambled to put together a legislative lifeline because no one wanted to be blamed for a deepening U.S. recession if any of the companies went bankrupt.
Job losses hit a 34-year high in November and the unemployment rate reached a 15-year high.
GM, Ford Motor Co. and Chrysler employ nearly 250,000 people directly, and 100,000 more jobs at parts suppliers could hang on their survival. The companies say one in 10 U.S. jobs are tied to the auto sector, which adds up to several million.
BANKRUPTCY CONCERN
GM and Chrysler both said that in the face of their cash crises, they had hired outside advisers to help them explore possible bankruptcy, which they found had too many drawbacks.
"It's going to be very difficult for them not to file for bankruptcy," Erich Merkle, consultant at Crowe Chizek in Grand Rapids, Michigan, said of the two if they did not get help.
"GM has probably got until January and I would suspect the next step would be that GM will provide a date and say that at this date we will file," Merkle said.
The White House called congressional inaction a breakdown and said it would evaluate its options.
"It has now fallen to the president to take action," said Sen. Carl Levin, a Michigan Democrat who has spearheaded efforts for a month to get help for Detroit.
Bush should "move now," said Republican Sen. George Voinovich of Ohio, adding, "The dominoes are already falling" throughout the United States."
Reid and House Speaker Nancy Pelosi called on Bush to immediately explore short-term financial help, including tapping a $700 billion fund created in October for the Treasury Department to assist the financial services industry.
The Bush administration has so far resisted Democratic appeals to take that step.
A Treasury spokeswoman said after the bailout bid collapse on Thursday that its position remained that the funds were only intended to help the financial sector.
Sen. Christopher Dodd, a Connecticut Democrat, said it was possible Congress could take a "second crack" at a rescue in January when Democrats will have larger majorities in both houses. President-elect Barack Obama favors help for automakers.
'THREE WORDS AWAY FROM A DEAL'
The development followed intense discussions on a possible 11th-hour compromise that participants said fell apart over proposed wage concessions by the United Auto Workers union.
"We were three words away from a deal," said Sen. Bob Corker, a Tennessee Republican who proposed the alternative and led the talks.
Dodd said the main issue of disagreement was the date to require the Detroit autoworkers' pay parity with workers at foreign-owned U.S. auto plants.
The UAW could not immediately be reached for comment.
GM and Chrysler, which is owned by private equity group Cerberus Capital Management, sought billions in immediate aid to see them through March.
The industry's fortunes have plummeted in recent months as the credit crunch choked off corporate and consumer lending. Most car buyers finance their purchases. U.S. auto sales fell 36.7 percent in November and most analysts expect the downturn in sales to deepen in 2009 under the financial crisis.
GM said in a statement it would "assess all of its options to continue our restructuring" and to "obtain the means to weather the current economic crisis."
Chrysler said it would continue "to pursue a workable solution to help ensure" the company's future viability.
Ford, in a better cash position, had asked for a hefty line of credit. It had no immediate comment.
The three have been cutting thousands of salaried and hourly workers and closing plants in North America due to those market share losses, driven in part by slack demand for big gas-guzzling sport utility vehicles that had driven profits.
An industry that pioneered large-scale assembly line production and was the backbone of industrial America for most of the past century was unable to persuade enough senators to support the rescue effort. Republicans are concerned the companies were not restructuring fast enough and the bailout would become a bottomless pit for taxpayers.
SUPPORT COMES UP SHORT
The House of Representatives on Wednesday passed its version of a Democratic-sponsored bailout that was virtually identical to the measure that fell in the Senate. Democrats hold a razor-thin majority in the Senate, which voted 52-35 in favor, short of the 60 votes needed to advance the measure.
"These companies could be saved. I've said I think they are bloated, their management is bloated. These companies either already failed or are fading and that is a shame," said Alabama Republican Richard Shelby, who has opposed any bailout.
Though nearly three dozen senators rejected the rescue, some of the most vocal opponents were senators with foreign auto plants in their states, including Alabama and Tennessee.
Years of market share losses to Japanese rivals such as Toyota and Honda have weakened the Detroit companies.
Polls show Americans split on bailing out Detroit, widely criticized for fighting tougher fuel efficiency standards and poor model designs that have left the companies gasping with a stable of products losing popularity with consumers.
The lack of a bailout also leaves vulnerable U.S. auto parts suppliers with deep exposure to the "Detroit Three" such as American Axle and Visteon Corp.
(Additional reporting by Ross Colvin, Matt Spetalnick, Kevin Drawbaugh, Kevin Krolicki, Julie Vorman, Tom Ferraro, Jeremy Pelofsky, David Bailey, Donna Smith; Editing by Eric Walsh)
Copyright © 2008 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.
Copyright 2008 © Yahoo! Inc. All rights reserved.
NICE!! thanks!!
Nortel explores bankruptcy, government aid scenarios: report
Wed Dec 10, 4:22 AM
(Reuters) - Nortel Networks Corp has sought legal advice to study a bankruptcy protection scenario in the event that its restructuring plan fails and has also been exploring potential assistance from the Canadian government, the Wall Street Journal reported.
On the subject of legal advice for studying a bankruptcy scenario, the WSJ cited people familiar with the situation, while on the potential government aid scenario, it cited a person familiar with the situation.
Nortel's spokesperson said no bankruptcy filing was imminent though the Toronto-based company has engaged several advisors to plan ahead, the newspaper reported.
Nortel could not be immediately reached for comment by Reuters.
Nortel, North America's biggest maker of telephone equipment has lost billions of dollars and cut tens of thousands of jobs since the technology bubble burst at the beginning of this decade.
The company has been unable to recover since then, with its problems exacerbated by the global economic slowdown.
RBC Capital Markets analyst Mark Sue said in November the company faced significant liquidity concerns, with bankruptcy a distinct possibility before 2011.
(Reporting by Eric Yep in Bangalore; Editing by Erica Billingham and Andrew Callus)
Copyright © 2008 Reuters Limited. All rights reserved. Republication or redistribution of Reuters content is expressly prohibited without the prior written consent of Reuters. Reuters shall not be liable for any errors or delays in the content, or for any actions taken in reliance thereon.
Copyright 2008 © Yahoo! Inc. All rights reserved.
December 6, 2008
Your Money
It May Be Time to Think About Buying a House
By RON LIEBER
Five or 10 years from now, when the financial crisis has ended and housing prices are up smartly once more, we will look in the rearview mirror and realize that we missed a golden age for first-time home buyers.
Then, everyone who sat on their down payment savings accounts for a few years too long will kick themselves for not taking advantage of what may turn out to be the buying opportunity of a lifetime for those who can qualify for a mortgage.
Unfortunately, we do not know when this golden age will begin, because we will be able to identify a bottom to the housing market only with the benefit of hindsight. But as it does with the stock market, the moment will probably arrive when everyone is feeling the most pessimistic.
That moment is certainly getting closer. Housing prices have fallen drastically from their peak levels in many areas of the country. Rates on 30-year fixed-rate mortgages are already close to 5.5 percent, and this week there were suggestions that the federal government might try to drive them down to 4.5 percent, a truly incredible figure to be able to lock in for three decades.
Meanwhile, first-time home buyers have the same advantage they have always had, which is that they do not have to sell their old place before buying a new one. That is an added advantage in areas where many available houses simply are not moving, because the people trying to sell them will not be bidding against you.
If you’re hoping for a recovery in the housing market, you ought to be cheering on the first-time home buyers. When they purchase homes, their sellers are free to move on or move up, stimulating further sales.
But if you are a potential first-time buyer yourself, or lending or giving the down payment to one, you are probably as frightened as you are tempted by all the “For Sale” signs that have become “On Sale” signs. So let’s quickly review some of the still-grim pricing data in certain areas — and consider the reasoning offered up by first-time buyers who have forged ahead anyhow.
As is always the case with real estate, much depends on location. One study, “The Changing Prospects for Building Home Equity,” tries to predict where today’s first-time buyers in the 100 biggest metropolitan areas may actually have less home equity by 2012 as a result of continued price declines. The verdict was that buyers in 33 of the markets could see a decline by 2012, including potential six-figure drops on an average home in the New York City, Los Angeles, San Francisco and Seattle metropolitan areas.
This is obviously scary. (I’ve linked to the study, a joint effort of the Center for Economic and Policy Research and the National Low Income Housing Coalition, from the version of this article at nytimes.com/yourmoney.) It’s worth noting, however, that these predictions came before the government made its most recent move to reduce borrowing costs.
Also, the price projections in the study are based, in part, on the fact that the ratio of purchase prices to annual rents is still higher in many areas than the historical average, which is roughly 15 times rents. While past figures may well have some predictive value, I have never been convinced that first-time buyers compare a home that they could own and one that they would rent in purely or even primarily economic terms.
When Jaime and Michael Proman moved this fall to Minneapolis, his hometown, from New York City, they craved a different sort of life after two years together in a 450-square-foot studio apartment. “We didn’t want a sterile apartment feel,” said Mr. Proman, who is 28 (his wife is 26). “We wanted something that was permanent and very much a reflection of us.”
The fact is, in many parts of the country there are few if any attractive rentals for people looking to put down roots and enjoy the sort of amenities they may spot on cable television home improvement shows. Comparing a rental with a place that you may own seems almost pointless in these situations, especially for those who are now grown up enough to want to make their own decisions about décor without consulting the landlord.
Still, for anyone feeling the urge to buy, a number of practical considerations have changed in the last year or two. The basics are back, like spending no more than 28 percent of your pretax income on mortgage payments, taxes and insurance. Even if a lender does not hold you to this when you go in for preapproval, you should hold yourself to it.
You will also want to start now on any project to improve your credit score because it may take several months to get it above the 720 level that qualifies you for many of the best mortgage rates.
John Ulzheimer, president of consumer education for credit.com, a consumer credit information and application site, suggests starting to pay down and put away credit cards months before you apply for a loan. That is because the credit scoring system could penalize you if you use a lot of credit each month, even if you always pay in full. Also, check your three credit reports (it’s free) at annualcreditreport.com and dispute errors.
While no one can easily predict the likelihood of losing a job, Friday’s startling unemployment figures suggest the need for caution if you think you might be vulnerable. A. C. Panella, who teaches communications at Pasadena City College in California, waited until she had a tenure-track job before buying a home in the Highland Park section of Los Angeles with her partner, Amy Goldman, a lawyer for a nonprofit organization. “We could afford the mortgage payment on one salary, were something to come up,” Ms. Panella, 31, said. “It’s really about being able to stay within our means.”
For many first-time home buyers, that philosophy stretches to the down payment, too. Ms. Panella and her partner put down 20 percent when they bought their home in September, as did the Promans when they bought their home in the Lowry Hill neighborhood of Minneapolis.
Alison Nowak, 29, put just 3 percent down on a Federal Housing Administration-backed loan last month when she and her partner, Lacey Mamak, bought a $149,900, 800-square-foot home several miles south of where the Promans live. “Anything that is an opportunity also has a bit of risk,” she said. Her house was in foreclosure before a plumber bought it and fixed it up. “One way we mitigated it was that we bought a really tiny house in a very good neighborhood.”
One other strategy might be to buy new instead of used. Ian Shepherdson, chief United States economist for the research firm High Frequency Economics, says he believes that a steep drop-off in inventory of new homes is coming soon, thanks to a rapid decrease in home builder activity.
Since prices generally soften in the winter, it may make sense to start looking seriously once the mercury bottoms out. “If you look at new developments next spring, you may not have the choice you thought you would have or be in the bargaining position you thought you would be,” Mr. Shepherdson said. Also, if you wait after June 30, you will miss out on a $7,500 federal tax credit for income-eligible first-time home buyers that works like an interest-free loan.
Finally, allow yourself to consider how it would feel if you bought and then prices dropped another 10 or 15 percent. It might not bother you if you plan to stick around. Plenty of people seem to be making a longer commitment to their homes. According to a survey that the National Association of Realtors released last month, typical first-time buyers plan to stay in their home 10 years, up from 7 last year.
Perhaps people are more aware that they will not be able to build equity as rapidly as others did in the real estate boom. Or they simply have more confidence in hard, hometown assets now than in other markets.
“We wouldn’t let another decline bother us,” said Michael Proman. “You can never time a bottom. This is a long-term investment for us, and it truly is the best investment we have in our portfolio right now.”
Breaking News Alert
The New York Times
Sunday, December 7, 2008 -- 6:11 PM ET
-----
Tribune Tries to Stave Off Bankruptcy Filing
The newspaper company has hired bankruptcy advisers in an
effort to stave off a potential bankruptcy filing, people
briefed on the matter said.
Breaking News Alert
The New York Times
Friday, December 5, 2008 -- 8:33 PM ET
-----
Leaders in Congress Agree on Auto Bailout Plan
Details were not immediately available but senior aides said
that the bailout would include billions in short-term loans.
Read More:
http://www.nytimes.com/?emc=na
Allen-Vanguard unit wins potential $7.5-million deal
2008-12-05 08:15 ET - News Release
Mr. David Luxton reports
ALLEN-VANGUARD AWARDED COUNTER-IED SERVICES CONTRACT WORTH UP TO $7.5 MILLION FOR U.S. DEPARTMENT OF DEFENSE (DOD)
Allen-Vanguard Corp.'s wholly owned subsidiary, Hazard Management Solutions Inc., has been awarded a contract to provide Crew vehicle receiver/jammer training and operational support to the U.S. Department of Defense. The initial contract carries a base-year value of approximately $2.1-million. The program provides for two optional years totalling $5.4-million, for a potential three-year value of approximately $7.5-million. All amounts are in Canadian dollars unless otherwise stated.
"We are very pleased to contribute vital support to the warfighter in the ongoing effort against the lethal hazard of improvised explosive devices," said David E. Luxton, president and chief executive officer of Allen-Vanguard. "This contract award today recognizes our highly specialized capability in Counter-IED and reflects the expectation of ongoing demand for solutions to the IED threat, which continues to be described as persistent, global and evolving."
Thanks, I think you are right on...G/L.
$40 was my first stop with a double short ETF, but I am thinking that $30 is not impossible. However, please note that oil companies are operating at a large deficit at these prices, so expect a violent whiplash in prices. When is the ultimate trader's question.
My plan was go long at $40 initially and if that is not the bottom, buy 20-30% stake long between $30 and $40.
Don't quote me as WTHDIK!
JMO
ou
OIL $42.05 now....how low do you think it can go?
Gold down too!
Bailout hearing for US automakers in one hour
Allen-Vanguard receives further loan payment extension
2008-11-28 07:14 ET - News Release
Mr. David Luxton reports
ALLEN-VANGUARD ANNOUNCES FURTHER EXTENSION OF LENDER ACCOMMODATION
Allen-Vanguard Corp.'s lenders have extended the accommodation agreement announced in Stockwatch Oct. 31, 2008.
The accommodation further defers compliance with certain financial covenants and payment of the $10-million quarterly principal repayment that was due Sept. 30, 2008, until Dec. 10, 2008.
"Our lenders continue to work with us and to provide support in our efforts to recapitalize the company, and we expect to conclude on a preferred transaction prior to Dec. 10," said David E. Luxton, president and chief executive officer. "We understand that there continues to be uncertainty about our working capital position and our ability to fund our growth, particularly following our recent announcement of strong backlog and order growth as well as expanded partnerships and teaming agreements. We anticipate that when this refinancing process is concluded management and stakeholders can refocus on the intrinsic value of Allen-Vanguard and its business opportunities and proprietary technologies as a global leader in protection and countermeasures against hazardous devices."
Westaim calls for meeting of Nucryst shareholders
2008-12-01 17:46 ET - News Release
Also News Release (C-NCS) Nucryst Pharmaceuticals Corp
Mr. Drew Fitch of Westaim reports
THE WESTAIM CORPORATION REQUISITIONS MEETING OF SHAREHOLDERS OF NUCRYST PHARMACEUTICALS TO RETURN CAPITAL TO NUCRYST SHAREHOLDERS
The Westaim Corp. has requisitioned a special meeting of shareholders of Nucryst Pharmaceuticals Corp. to consider a return of capital to Nucryst shareholders of approximately $15-million (U.S.) or 80 U.S. cents per share. Westaim will continue to review alternatives to maximize the value of its 74.5-per-cent stake in Nucryst. Under the Alberta Business Corporations Act, Nucryst's board of directors has 20 days to call a meeting of shareholders when requisitioned.
In addition to its 74.5-per-cent stake in Nucryst, Westaim has net assets of approximately $15-million including cash of approximately $20-million; third party asset-backed commercial paper with a book value of $5-million; and liabilities of approximately $11-million. In addition, Westaim has approximately $100-million in tax pools available for use against future income.
Westaim's cash position will be strengthened by approximately $13-million pending the return of capital to be considered at the meeting of Nucryst shareholders.
"Westaim's board of directors has considered all strategic alternatives to maximize the value of its assets," said Drew Fitch, president and chief executive officer, Westaim. "Given the current liquidity and credit crisis and the related scarcity of available new debt and equity capital, we believe our cash resources position us well to pursue new investment opportunities to grow the value of the company and realize maximum returns for our shareholders."
TSX tumbles over 600 points;U.S. markets retreat on signs of worsening economy
51 minutes ago
By Malcolm Morrison, The Canadian Press
TORONTO - The Toronto stock market was down more than 600 points late in the morning, its slide led by big losses in energy and financial stocks - the two most powerful sectors - erasing almost half of its 14 per cent gain last week.
The S&P/TSX composite index fell 640.7 points to 8,629.9.
Political turmoil in Ottawa and the prospects that the federal Conservative minority government could be ousted likely had some impact on the selloff, but analysts noted investors have plenty of other worries right now - including a disappointing start to the U.S. holiday season that has deepened worries about the American economy.
"I'm not saying that political instability or uncertainty can't affect the market," said Jeff Rubin, chief strategist CIBC World Markets.
Rubin said he thinks it's still too early to determine the effect of the political turmoil on the market, but there are other issues catching investor attention and "right now the fundamental reasons have been the U.S. economy that will probably shrink by around four per cent in the fourth quarter and still a lot of financial market deleveraging."
In Ottawa, sources said the Liberals and NDP have drafted a plan for Canada's first coalition federal government since the First World War, aiming to govern jointly until the middle of 2011. But they would need support from the Bloc Quebecois. Meanwhile, the Conservative minority government on Sunday moved the budget date ahead to Jan. 27.
The political uncertainty and another tumble in oil prices sent the Canadian dollar down 0.12 cent to 80.72 cents US.
New York markets were also hit with steep declines as weak expectations for the U.S. holiday shopping season persuaded investors to cash in some of the money made last week as American markets also surged.
The Dow Jones industrial average fell 378.4 points to 8,450.6 after powering ahead almost 10 per cent last week. Investors were glum as initial reports on holiday shopping pointed to better sales than some retailers and analysts had forecast, but consumers are cautious and a difficult season is still expected.
"After a slow start to November, we believe strength on Black Friday (the day after Thanksgiving that is traditionally one of the biggest shopping days of the year) was not enough to save the month," said John Morris, an analyst at Wachovia Capital Markets.
"The strength did not carry through the remainder of the weekend, as business fell off sharply on Saturday, according to our field team."
Losses in New York accelerated amid signs of a worsening American economy.
The Nasdaq composite index fell 82.57 points to 1,453 while the S&P 500 index gave back 45.5 points to 850.75 after The Institute for Supply Management reported that its index of manufacturing activity hit a 26-year low in November.
Canadian economic data painted a bright picture of stronger economic growth.
Statistics Canada said the economy expanded 0.1 per cent in September, which most economists believe was the last month of growth before what could be a prolonged decline. The third quarter of the year showed 0.3 per cent growth in gross domestic product.
The energy sector was a major loser in early TSX action, down more than 10 per cent as the January crude oil contract fell $3.87 to US$50.56 a barrel on the New York Mercantile Exchange after OPEC did not cut production at a weekend meeting in Cairo. OPEC meets again Dec. 17.
EnCana Corp. (TSX:ECA) fell $6.37 to $53.63 while Petro-Canada (TSX:PCA) surrendered $4.42 to $29.32.
Financial stocks were down seven per cent ahead of earnings reports from four of the six big banks later this week. Royal Bank fell $3.30 to $39.91 while TD lost $2.71 to $43.29
The gold index pulled back 10 per cent as bullion fell $44.20 to US$772 an ounce on the Nymex. Barrick Gold Corp. (TSX:ABX) was down $3.55 to $34.17.
Base metals gave back almost 11 per cent with Teck Cominco Corp. (TSX:TCK.B) off 78 cents to $5.22.
The TSX Venture Exchange declined 19.46 points to 746.89.
Overseas markets were also down sharply on deepening worries about economic conditions.
London's FTSE 100 index fell five per cent, while Frankfurt's DAX retreated 6.1 per cent and the Paris CAC 40 slid 5.1 per cent as specialist financial services company London Scottish Bank announced that it has gone into administration.
Asian markets closed lower with the Nikkei 225 stock average in Tokyo down 115.05 points, or 1.4 per cent, at 8,397.22 after advancing 7.6 per cent last week.
Markets in South Korea, Australia and Singapore also fell, while India's benchmark Sensex index reversed early gains and closed with a loss of 2.8 per cent at 8,839.87 in the wake of the Mumbai terrorist attacks.
Copyright © 2008 Canadian Press
Copyright 2008 © Yahoo! Inc. All rights reserved.
Speed of recent change breathtaking - November 26, 2008
By Peter G. Hall, Vice-President and Chief Economist, Export Development Canada
The adage “one month does not a trend make” was shattered in October. The speed of change in key economic indicators was breathtaking, and wasn’t confined to single economies, industries or ideologies. Analysts’ views on the economy’s near-term path, disparate just weeks ago, now vary only on the severity of the downturn. The dust kicked up by the rapid change and resulting post-October volatility has clouded the economic line of sight significantly.
How swift were the changes? Consider stock markets. Octobers in the past would be hard to beat on the decline scale, but this one made the grade. To exceed the 17% beating the S&P 500 took last month, you have to go back to October of 1987, and prior to that, only May of 1940 and the Dirty Thirties compare. Indexes for most other large economies yield similar results. The TSX index, more influenced by commodities, has seen just three October-style drops since 1940.
Consider also commodities. They are well known for their volatility, but October was a standout. Oil prices have only experienced a one-month tumble greater than last month’s once in the past 25 years – when prices were in freefall in 1986, unwinding the oil price shocks of the 1970s. Base metals also had a rough month. Nickel prices were battered yet again, but the drops in zinc, and more alarmingly in copper–the most prescient base metal–were unprecedented in recent years.
Currencies also shifted radically. The trade-weighted US currency – which measures the greenback’s fluctuations against key trading-partner currencies, rose by 6.7% in October, the largest monthly gain recorded in at least 38 years. The jump reflects global flight to quality US assets during the month, rapid covering of short US dollar positions and foreign bank recapitalization activities. The drop in the Canadian dollar was likewise without precedent, and was even more pronounced at 11.7%, given the additional effect of lower commodity prices.
Other yet-unreleased October indicators will likely tell a similar tale. Confidence, which usually reflects concurrent economic behaviour, tumbled badly in the month. Pundits aren’t waiting for all the data, though. Forecasts are being revised downward swiftly. For example, the IMF has taken the highly unusual step of revising its October 2008 World Economic Outlook just days after its release. Most others are also scrambling to adjust their outlooks downward.
Speaking of speed, governments have vaulted into action. From bailouts of the financial sector to provisions of liquidity, interest rate cuts, statements of confidence and intent, and massive stimulus packages, governments around the world have wasted little time crafting and enacting policies to meet the challenges head-on. And more is expected before the dust settles.
The bottom line? The speed of change seen in October was alarming, and the effects are continuing. Further bad near-term economic news is almost a certainty, and as such, market volatility is likely to persist. There are no models that pinpoint economic behaviour in today’s environment, adding considerably to the challenge of forecasting. The current economic tumble is bad – but not bottomless. And we know we are now nearer to the economy’s true floor than we were two months ago. When October’s dust settles, the path to recovery will become clearer.
lol ... does that mean I should peek at ....????
GM up 40% ... bailout in the air tonight?!!
November 24, 2008
Citigroup to Halt Dividend and Curb Pay
By ERIC DASH
As part of a rescue agreement with federal regulators, Citigroup will effectively halt dividend payments for the next three years and will agree to restrictions on and review of certain executive compensation, it was announced on Monday. The bank will also put in place the Federal Deposit Insurance Corporation’s loan modification plan, which is similar to one it recently announced.
Federal regulators announced late Sunday night that the government had approved a radical plan to stabilize Citigroup in an arrangement in which the government could soak up billions of dollars in losses at the struggling bank. President Bush said on Monday that more such rescues could be arranged if they became necessary.
In pledging similar assistance, President Bush said, “We have made these kind of decisions in the past, made one last night, and if need be we’re going to make these kind of decisions to safeguard our financial system in the future.”
Speaking from the steps of the Treasury Building with Secretary Henry M. Paulson Jr. beside him, the president said Mr. Paulson was working closely with the transition team of President-elect Barack Obama, and that the new president would be kept informed.
“It’s important for the American people to know that there is close cooperation,” Mr. Bush said.
The complex rescue plan calls for the government to back about $306 billion in loans and securities and directly invest about $20 billion in Citigroup. The plan, emerging after a harrowing week in the financial markets, is the government’s third effort in three months to contain the deepening economic crisis and may presage other multibillion-dollar financial rescues.
Citigroup executives presented a plan to federal officials on Friday evening after a weeklong plunge in the company’s share price threatened to engulf other big banks. In tense, round-the-clock negotiations that stretched until almost midnight on Sunday, it became clear that the crisis of confidence had to be defused now or the financial markets could plunge further. Citigroup shares were up 66 percent on Monday, to $6.26.
Whether this latest rescue plan will help calm the markets is uncertain, given the stress in the financial system caused by losses at Citigroup and other banks. Each previous government effort initially seemed to reassure investors, leading to optimism that the banking system had steadied. But those hopes faded as the economic outlook worsened, raising worries that more bank loans were turning sour.
Mr. Obama was also working over the weekend to shore up confidence in the rapidly faltering economy. Mr. Obama signaled that he would pursue a far more ambitious plan of spending and tax cuts than he had outlined during his campaign and planned to announce his economic team on Monday. Some Democrats in Congress, meantime, were calling for the government to spend as much as $700 billion to stimulate the economy over the next two years. The Federal Reserve chairman, Ben S. Bernanke, was involved in the discussions.
Mr. Obama’s choice for Treasury secretary, Timothy F. Geithner, the president of the Federal Reserve Bank of New York, played a crucial role in the negotiations on Friday but took a less active role once news of his appointment was circulated. While the initial focus of government officials was to help the embattled company, they may also seek to draw up an industrywide plan that could help other banks.
The plan could herald another shift in the government’s financial rescue. The Treasury Department first proposed buying troubled assets from banks but then reversed course and began injecting capital directly into financial institutions. Neither plan, however, restored investors’ confidence for long.
“By intervening, they are giving the market some heart to temporarily stave off some fear — but you can only push that so much,” said Charles R. Geisst, a financial historian and professor at Manhattan College.
Banking industry officials said the decision to support Citigroup, while necessary, could draw a firestorm of criticism from institutions that were not so big that their potential failure was considered a threat.
Under the agreement, Citigroup and regulators will back up to $306 billion of largely residential and commercial real estate loans and certain other assets, which will remain on the bank’s balance sheet. Citigroup will shoulder losses on the first $29 billion of that portfolio.
Any remaining losses will be split between Citigroup and the government, with the bank absorbing 10 percent and the government absorbing 90 percent. The Treasury Department will use its bailout fund to assume up to $5 billion of losses. If necessary, the F.D.I.C. Corporation will bear the next $10 billion of losses. Beyond that, the Federal Reserve will guarantee any additional losses.
In exchange, Citigroup will issue $7 billion of preferred stock to government regulators. In addition, the government is buying $20 billion of preferred stock in Citigroup. The preferred shares will pay an 8 percent dividend and will slightly erode the value of shares held by investors.
The government said it was taking the step to bolster the economy while protecting taxpayers. “We will continue to use all of our resources to preserve the strength of our banking institutions and promote the process of repair and recovery and to manage risks,” the regulators said in a joint statement on Sunday.
Inside Citigroup’s Park Avenue headquarters, the mood was tense. Through the weekend, Robert E. Rubin, the former Treasury secretary and an influential executive and director at Citigroup, held several discussions with Mr. Paulson.
Vikram S. Pandit, Citigroup’s chief executive, spoke to regulators and lawmakers. Mr. Pandit also met with Citigroup’s board on Saturday, and there was no indication that they would seek to replace him.
Once the nation’s largest and mightiest financial company, Citigroup lost half its value in the stock market last week. Although Citigroup executives maintain the bank is sound, investors worry that its finances are deteriorating. Citigroup has suffered staggering losses for a year now, and few analysts think the pain is over. Many investors worry that it needs more capital.
With more than $2 trillion in assets and operations in more than 100 countries, Citigroup is so large and interconnected that its troubles could spill over into other institutions. Citigroup is widely viewed, both in Washington and on Wall Street, as too big to be allowed to fail.
Citigroup executives reached out to the Federal Reserve and the Treasury last week as they sought to stabilize the company’s stock price. All major bank stocks have been battered in recent weeks, including those of Bank of America, Goldman Sachs, JPMorgan Chase and Morgan Stanley.
Citigroup’s shares have been hit particularly hard. A year ago they were trading at about $30; on Friday they closed at $3.77.
The plan under discussion is reminiscent of the one that Citigroup and the F.D.I.C. worked out in October with Citigroup’s proposal to buy the Wachovia Corporation. That deal fell through, however, when Wells Fargo swept in with a higher offer.
Under that plan, Citigroup agreed to bear a certain level of Wachovia’s losses, with the federal agency absorbing the rest. In exchange, Citigroup agreed to give the F.D.I.C. preferred stock.
It is also similar to an effort orchestrated by Swiss financial regulators for UBS, another big global bank. Last month, the Swiss central bank and UBS reached an agreement to transfer as much as $60 billion of troubled securities and other assets from UBS’s balance sheet to a separate entity.
Gretchen Morgenson, Louise Story and David Stout contributed reporting.
Oil is a long?
Gold is now a long?
Cons Beacon ordered to pay debenture holders $554,000
2008-11-20 12:10 ET - Street Wire
by Mike Caswell
Consolidated Beacon Resources Ltd. must pay $554,000 to three debenture holders, the Supreme Court of British Columbia has ordered. The debenture holders, Christopher Vorberg, Ramona Vorberg and Nazinin Jamshidi, claimed that the company failed to pay their debentures, despite demands.
They filed a motion on Nov. 13, 2008, asking for an order that the company pay the debentures without a full hearing. A judge agreed, and granted their request on Nov. 17.
Vorberg's statement of claim
Mr. Vorberg and the other plaintiffs sued the company on July 30, 2008. They claimed that they purchased convertible debentures on March 6, 2006.
The debentures bore interest at 8 per cent per year, and were convertible at 40 cents, at the option of the holder, according to the suit. They matured on Sept. 6, 2006.
The company was unable to repay those debentures on time, so it issued amended debentures to the plaintiffs on Jan. 22, 2007, the suit states. The amended debentures reduced the conversion price from 40 cents to 10 cents, and had a maturity date of Feb. 23, 2008.
(The stock was at 51 cents when the original debentures were issued, eight cents when they were amended and is now at three cents.)
When the new maturity date came up, the company was still unable to pay, the suit alleged. On May 16, 2008, the plaintiffs demanded repayment of the $500,000 in principal plus $37,890 in interest.
"Since February 23, 2008, the Defendant has failed, refused or neglected to pay the sum due on the three amended convertible debentures," the suit stated.
The suit sought $500,000 in principal plus $46,000 in unpaid interest. The suit was filed on behalf of the plaintiffs by Rod Anderson of Harper Grey LLP.
Consolidated Beacon's statement of defence
The company filed a two-page statement of defence on Aug. 29, 2008, that contained few details. Consolidated Beacon "denied that it entered agreements to sell the alleged debentures or any debentures ... at all."
The company said that even if it did enter agreements to sell the debentures, it did not owe the plaintiffs any money.
The statement of defence also said that there was "no consideration to support the alleged contract" and if there was "the alleged consideration is a past consideration and is not sufficient in law to support the alleged contract."
The company asked that the claim be dismissed with costs. It was represented by Paul Miller of Boughton Law Corp.
Change of management
Consolidated Beacon is under different management than it was when it issued the debentures. On July 31, 2007, it appointed Richard Hawes as its president and chief executive officer. He replaced Nathan Hansen. The company also appointed Norman Johnson as its chief financial officer.
In its June 30, 2008, second quarter financials the company acknowledged that it owed $575,000 to debenture holders. It said it was negotiating to settle the debt, but should the negotiations fail it "would have a serious impact on the Company's ability to continue operations."
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I may be wrong, but I sense a reversal soon in the price of oil. Is $20 a bottom or do we have to collapse to $25 first?
I hope someone helps the retired people....Sad.
If the government gets involved they might get something, otherwise if they just sink with no rescue package, I doubt if they will get any corporate pension.
jmo
Sorry for double post, Ihub acting little strange, showed error on post.
Question OU...If / when GM goes bankrupt and by a chance emerge,
re-issue new stock...do the retired people get to keep their
pension/ retirement checks?
Question OU...If / when GM goes bankrupt and by a chance emerge,
re-issue new stock...do the retired people get to keep their
pension/ retirement checks?
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