Wednesday October 29 Housing and Economic stories

TOP STORIES:

'Worst financial crisis in human history': Bank boss's warning as pound suffers biggest fall for 37 years - (www.dailymail.co.uk) October 27 - MarketNews International: "The UK is possibly facing the biggest financial crisis in human history, according to Bank of England Deputy Governor Charles Bean... 'We have had bank crises in the past but what is unique about this event is its sheer scale. It is global. It originated in the United States but its tentacles have spread across the world. Particularly in the last six weeks when financial markets really ground to a halt, and trust in the financial positions of a whole range of institutions have come into question. This is a once in a lifetime crisis, and possibly the largest financial crisis of its kind in human history'."

Winton's Harding `Worries' About Exchange Shutdowns, Holds Cash - (www.bloomberg.com) David Harding, founder of $15.5 billion Winton Capital Management LLC, said he is holding more cash on the possibility that exchanges may be closed. ``The thing I worry about is they shut exchanges,'' Harding said at the Hedge 2008 conference in London yesterday. ``If at all possible, I don't want to be exposed to that with my clients' money.'' Harding, 47, who is the ``H'' in the AHL Diversified Plc computerized trading program founded in 1987 and run by Man Group Plc, said Winton has about 95 percent of its assets in U.S. Treasury bills and cash or cash equivalents. That compares with about 90 percent a year ago. Futures markets require less cash up front to buy contracts than other investments such as stocks. Winton's cash balances are held in segregated accounts at two different custodian banks, rather than with prime brokerages, which Winton doesn't use. Nouriel Roubini, the New York University Professor who spoke at the same conference, told delegates ``don't be surprised'' if policymakers shut exchanges. Italian Prime Minister Silvio Berlusconi roiled markets on Oct. 10, first saying world leaders were discussing shutting down global financial exchanges, and then saying he didn't mean it.

GLG chief Emmanuel Roman warns thousands of hedge funds on brink of failure - (www.telegraph.co.uk) Emmanuel Roman, the co-chief executive of Europe’s biggest hedge fund GLG, has warned that thousands of hedge funds are on the brink of failure as the global economy contracts with unexpected severity. Emmanuel Roman, of GLG Partners, said 25pc-30pc of the world’s 8,000 hedge funds would disappear "in a Darwinian process", either going bust or deciding meagre profits are not worth their efforts. "This will go down in the history books as one of the greatest fiascos of banking in 100 years," said Mr Roman, who with Noam Gottesman, co-runs GLG, a former division of Lehman Brothers Holdings with assets of $24bn (£14.8bn). "There need to be some scapegoats, and the regulators are going to go hunt people. That will be good in the long run." His views were echoed by Professor Nouriel Roubini, a former US Treasury and presidential adviser known for his accurate prediction of financial crises, who estimated that up to 500 hedge funds would fail within months

Georgia's Alpha Bank & Trust Fails; Toll Rises to 16 - (www.bloomberg.com) 16th bank failure of the year. As usual, the US tries to hide it in Friday night financial news.

Russia's Micex Halts Trading Until Next Week After Stocks Slump - (www.bloomberg.com) Russia's Micex Stock Exchange suspended trading at 2:10 p.m. until next week after shares slumped. The next session will start on Oct. 28, Alexei Gerasyuk, a spokesman for the Moscow bourse, said by telephone. The so-called technical index fell more than 10 percent, triggering the halt, according to data on the exchange's Web site.

Baby boomers spending less will contribute to a slowing economy ... - (www.presstelegram.com) "Baby Boomers have pumped up the global economy with their profligate ways for nearly two decades. It's been a great party. Now the music's over. Generalizations about the 79 million people born between 1946 and 1964 are overdone and easy to debunk... But what Baby Boomers of all persuasions have done, without dispute and to an unprecedented degree, is spend money instead of saving it... When Boomers ran out of cash, they financed their dreams. The U.S. household saving rate plunged to 2% of income in the 2000-2005 period, when Boomers were hitting their earning peak, from 10% during the early 1980s."

Turmoil May Make Americans Savers, Worsening `Nasty' Recession - (www.bloomberg.com) The U.S. may be on its way to becoming a nation of savers, whether Americans like it or not. With home and stock prices declining and credit hard to come by, consumers who have fallen out of the savings habit are being forced to curb borrowing and rein in spending. That is bad news for companies catering to them, which will have to retrench as well. Detroit automakers may need to slash costs and merge as Americans hold onto their cars longer. Shopping malls might be forced to shut as retail traffic trails off. Hotels may have to shelve expansion plans as vacationers become stingier with their dollars. The big concern is that households, spooked by the turmoil in financial markets, will cut back rapidly and sharply, plunging companies into bankruptcy and deepening a recession that many economists say has already begun. ``If we did have a quick cut in spending, it could turn a pretty nasty recession into possibly the worst downturn we've seen in the postwar period,'' says Michael Feroli, a former Federal Reserve official now at JPMorgan Chase & Co. in New York. Even without a collapse of consumer spending, Feroli expects the economy to contract by 2 percent in both this quarter and the next.

Tight Credit Curbs Growth in India - (www.nytimes.com) Customers come in a tiny trickle to the showroom of Uppal Motors, a Honda motorcycle dealership near here in an upscale satellite of India’s capital. This time of year, the showroom is usually packed, for it is the week before the Hindu festival of Diwali, when many Indians buy gifts and more costly items. But not this year. The call center workers and software programmers who normally shop here could afford a new motorcycle — if only the banks would lend to them, said Virender Uppal, the dealership’s owner, who added that sales were down 10 percent. “They cannot meet the terms and conditions of the bankers,” he said. “Money is not being extended to them.” Like so many countries, India is experiencing a credit crisis. The country, like many emerging markets, had little exposure to subprime home lending or to Western financial institutions. Still, the government is pulling out all its tools to combat the global financial turmoil, whose effects have been compounded by earlier decisions to tighten the money supply. And local businesses are grappling with a rapidly slowing economy.

Stockton, Calif., tries digging out - (www.usatoday.com) Two years ago, Sharon Halligan drove from Kentucky to California lamenting that she couldn't afford a home in the high-priced state. Her job search brought her here, and she rented. Then the 61-year-old Halligan watched prices tank as the subprime lending mess engulfed home after home. This month, the human resources manager moved into her $260,000 two-story home in Stockton after losing seven other bids on foreclosed homes. Thirty months ago, her new house appraised for $608,000. "Isn't it amazing?" she says, standing next to her U-Haul. Stockton, a boom-and-bust town hit early and hard by the nation's foreclosure crisis, is digging out of the financial excesses of its past. Here, two hours from the San Francisco Bay Area, more than 7,500 homes and condominiums have been lost to foreclosure since the end of 2006, says real estate researcher MDA DataQuick. The glut has cut median home prices by more than half, spurring multiple offers on foreclosed homes and record sales.

So When Will Banks Give Loans? - (www.nytimes.com) - In point of fact, the dirty little secret of the banking industry is that it has no intention of using the money to make new loans. But this executive was the first insider who’s been indiscreet enough to say it within earshot of a journalist. It is starting to appear as if one of Treasury’s key rationales for the recapitalization program — namely, that it will cause banks to start lending again — is a fig leaf, Treasury’s version of the weapons of mass destruction. In fact, Treasury wants banks to acquire each other and is using its power to inject capital to force a new and wrenching round of bank consolidation. As Mark Landler reported in The New York Times earlier this week, “the government wants not only to stabilize the industry, but also to reshape it.” Now they tell us. Indeed, Mr. Landler’s story noted that Treasury would even funnel some of the bailout money to help banks buy other banks. And, in an almost unnoticed move, it recently put in place a new tax break, worth billions to the banking industry, that has only one purpose: to encourage bank mergers. As a tax expert, Robert Willens, put it: “It couldn’t be clearer if they had taken out an ad.”

Slime-ball Greenspan Says He Was Wrong On Regulation, Tries to Blame Free Market for not Functioning Properly; Rep. John Yarmuth Should Have His Balls Cut Off for Bill Buckner Reference - (www.washingtonpost.com) Alan Greenspan, once viewed as the infallible architect of U.S. prosperity, was called on the carpet yesterday, pilloried by a congressional committee for decisions that contributed to the financial crisis devastating world markets. The former chairman of the Federal Reserve said the crisis had shaken his very understanding of how markets work, and agreed that certain financial derivatives should be regulated -- an idea he had long resisted. When he stepped down as Fed chairman less than three years ago, Congress treated Greenspan as an oracle, one of the great economic statesmen of all time. Yesterday, many members of the House Oversight and Government Reform Committee treated him as a hostile witness. "You found that your view of the world, your ideology was not right, it was not working?" said Rep. Henry A. Waxman (D-Calif.), the committee chairman. "Absolutely, precisely," Greenspan said. "You know, that's precisely the reason I was shocked, because I have been going for 40 years or more with very considerable evidence that it was working exceptionally well." Even Greenspan seemed genuinely perplexed yesterday by all that had happened, hard-pressed to explain how formerly fundamental truths about how markets work could have proved so wrong. Members of Congress who not long ago would seek Greenspan's blessing for their preferred public policies were at turns combative and disdainful. Rep. John Yarmuth (D-Ky.) called him a "Bill Buckner," referring to the Boston Red Sox first baseman who missed an easy ground ball against the Mets in the 1986 World Series, costing the team the game.

U.S. has plundered world wealth with dollar: China paper - (www.reuters.com) The United States has plundered global wealth by exploiting the dollar's dominance, and the world urgently needs other currencies to take its place, a leading Chinese state newspaper said on Friday. The front-page commentary in the overseas edition of the People's Daily said that Asian and European countries should banish the U.S. dollar from their direct trade relations for a start, relying only on their own currencies. A meeting between Asian and European leaders, starting on Friday in Beijing, presented the perfect opportunity to begin building a new international financial order, the newspaper said. The People's Daily is the official newspaper of China's ruling Communist Party. The Chinese-language overseas edition is a small circulation offshoot of the main paper. Its pronouncements do not necessarily directly voice leadership views. But the commentary, as well as recent comments, amount to a growing chorus of Chinese disdain for Washington's economic policies and global financial dominance in the wake of the credit crisis. "The grim reality has led people, amidst the panic, to realize that the United States has used the U.S. dollar's hegemony to plunder the world's wealth," said the commentator, Shi Jianxun, a professor at Shanghai's Tongji University. Shi, who has before been strident in his criticism of the U.S., said other countries had lost vast amounts of wealth because of the financial crisis, while Washington's sole concern had been protecting its own interests.



OTHER STORIES:

The Worst U.S. Condo Markets - (www.ml-implode.com) - Watch the slide show. Lucky for condo markets, if energy prices stay generally high, they will benefit from the atrophy of the ...
Dollar strength is an illusion - (www.ml-implode.com)

Forecasters Race to Call the Bottom to the Market - (www.nytimes.com) Just as financial analysts competed for attention on the way up, the pundit class seems compelled to out-gloom the next guy.
Global Financial Troubles Reaching Into Gulf States - (www.nytimes.com) Major oil-producing countries had seemed to be insulated from the crisis shaking the foundations of the international financial system.
US foreclosure filings up 71 percent in 3Q - (biz.yahoo.com)
Fed Funds Rate Cut - (www.ml-implode.com) - Of course the FOMC just sets the target rate. The effective Fed Funds rate has already been at or under 1% for the last couple ...
Another Bubble Bursts - Subprime mortgages were just the beginning. - (www.ml-implode.com) - The Fed's liquidity burst nonetheless sent markets for a 14-month loop, as the nearby charts indicate. The Fed created a commodi...
But Have We Learned Enough? - (www.ml-implode.com) - The Fed and the Treasury Department, intent on avoiding the early policy inaction that let the Depression unfold, have been work...

US Housing Prices Tumble in August as Foreclosures Surge - (www.bloomberg.com)
Central Valley Business Times - (www.centralvalleybusinesstimes.com)
San Fernando Valley prices fell by 37% from year ago - (latimesblogs.latimes.com)
Creative - not total - destruction - (optionarmageddon.ml-implode.com)
The problem with banks is even bigger than you think - (www.marketwatch.com)
Don't Ban Foreclosures! - (www.minyanville.com)
Banks Mine Data and Woo Troubled Borrowers - (www.nytimes.com)

To Survive, Net Start-Ups Slow Their Metabolism - (www.nytimes.com) To preserve cash during the current downturn, many tech start-ups are rushing to lay off employees and cut expenses.
Citadel Projects Calm; Call to Merge the Regulators - (www.nytimes.com) The hedge fund’s chief executive delivered a strong case for calm Friday, and a call to combine the Securities and Exchange Commission and the Commodity Futures Trading Commission
US-Iraq troop deal "crushing defeat" for Bush - (www.ml-implode.com)
INFLATION VS. DEFLATION... NOPE - STAGFLATION - (www.ml-implode.com)
Crude Oil Prices May Head Below $50 a Barrel - (www.cnbc.com)
US public pension funds face big losses - (www.ft.com) State governments under pressure
Greenspan admits mistake that helped crisis - (msnbc.msn.com)
Greenspan Concedes to Flaw in His Market Ideology - (www.bloomberg.com)

South Korea Announces Record Interest Rate Cut - (www.cnbc.com)
San Fernando Valley prices fell by 37% from year ago - (latimesblogs.latimes.com)
Creative - not total - destruction - (optionarmageddon.ml-implode.com)
The problem with banks is even bigger than you think - (www.marketwatch.com)
Don't Ban Foreclosures! - (www.minyanville.com)
Banks Mine Data and Woo Troubled Borrowers - (www.nytimes.com)

South Korea Seeks Urgent Action on Economy - (www.cnbc.com)
One Quarter of Hedge Funds May Close by Year-End - (www.cnbc.com)
Nervous Investors Awaiting Two Big Events This Week - (www.cnbc.com)
IMF unveils plans for $16.5bn Ukraine loan - (www.ft.com) Banks and economy hit by global crisis - 20:37
Emergency moves to defend Ukraine banks - (www.ft.com)
Central Valley Business Times - (www.centralvalleybusinesstimes.com)
Greenspan admits mistake that helped crisis - (msnbc.msn.com)
Greenspan Concedes to Flaw in His Market Ideology - (www.bloomberg.com)
The Week Ahead: Does the Bottom Draw Closer? - (www.cnbc.com)
Mounting Layoffs: Why They're Different This Time - (www.cnbc.com)
Market's Ready to Make a Bull Run: Pimco's Gross - (www.cnbc.com) I am quickly losing respect for this opportunist who is pushing for government bailouts to help his own cause.

Chrystia Freeland: Four effects of US pension losses - (www.ft.com)
Bank delays hit Lehman unwinding - (www.ft.com) Administrators talk of slow co-operation
Wave of profit warnings expected - (www.ft.com) Earnings forecast to fall by 40% by end of 2009
Foreclosures in California on steep rise - (www.sfgate.com)
Hawaii foreclosures take huge jump - (www.starbulletin.com)
Long Island prices fall 6.2 percent - (www.newsday.com)