Wednesday November 5 Housing and Economic stories

TOP STORIES:

Gulf Citizens Beg for Bailout as Stock Rout Signals End of Boom - (www.bloomberg.com) Abdullah Hajeri led a march on the Emir's palace in Kuwait this week, demanding the oil-rich nation's ruler stop stocks from plunging. Adnan Mohammed Saleh, down the Persian Gulf coast in Dubai, said he wants more government protection from the global financial crisis. ``Every day the market is crashing,'' said Saleh, a 42-year- old trader, staring dumbfounded last Tuesday as company names scrolled across the Dubai Stock Exchange's outdoor ticker in red. The region's rulers are under pressure from citizens to shore up investors, not just banks, as they try to fend off what may be the worst economic crisis since December 1998, when oil at $10.35 a barrel forced them to slash spending. Crude prices have fallen 50 percent from a record $147.27 in July, and stock indexes in Dubai and Saudi Arabia are down by as much this year. Gulf economies are more susceptible to financial turmoil than in the past because of their greater dependency on international expertise, investment and tourists to diversify away from oil. While Dubai, home to the world's tallest building and the man-made Palm Island, is considered most at risk, no part of the Persian Gulf will go untouched. ``There is no way you can say that any trouble in Dubai is going to be isolated,'' Georges Makhoul, Morgan Stanley's president for the Middle East and North Africa, said in an interview in London. ``The biggest threat is going to be local confidence in the local economy, whether it's in Dubai or Abu Dhabi or anywhere else.''

Jordan's Queen Rania warns Arab youth unemployment 'ticking time bomb' - (www.latimes.com) Somewhat related to previous story. Jordan's Queen Rania has warned that rising unemployment among Arab youth is a "ticking time bomb" that has to be defused before it causes unrest.Rania says the number of unemployed people under 30 in the Middle East could increase from 15 million today to 100 million by 2020. The region already has the highest rate of youth unemployment in the world.

New York Faces $47 Billion Deficit Over Four Years (Update1) - (www.bloomberg.com) New York state faces a $12.5 billion budget shortfall next year and the prospect of a record $47 billion gap through 2012 as a weakening economy, financial slump and Wall Street job losses slice tax collections. Estimated gaps over the next four years have increased by more than $20 billion since July, including a $1.5 billion shortfall in the current year ending in March, Governor David Paterson said at a briefing in Manhattan today, citing Division of Budget figures. ``New York is at the epicenter of an extraordinary financial crisis on Wall Street,'' Paterson, a Democrat, said. ``We will have no choice but to take bold and aggressive action to reduce state spending.'' New York, which typically derives 20 percent of its tax revenue from Wall Street, expects the state's financial-sector job losses to total 45,000, higher than after the 2001 terrorist attacks, when cuts totaled 30,000. Total job losses in the state during this economic slowdown will reach 160,000, Paterson's Budget Director Laura Anglin said.

BT radical pension fund shake-up - (business.timesonline.co.uk) This is not necessarily a bad thing. This is one of the reasons why pension funds are bankrupt. Company looks at increasing retirement age to 65 from 60, upping staff contributions and basing payouts on a career average. BT plans sweeping reforms to its £35 billion pension scheme as it seeks to chop costs after the telecoms giant’s shock profit warning last week. It wants to limit future liabilities by increasing the retirement age to 65 from 60, upping staff contributions and basing payouts on a career average instead of final salary. If approved, it would mean that 65,000 members of the scheme - one of the largest in the country - would have to work longer for less. The reforms would bring BT into line with the Royal Mail, which was hit by strike action last year before workers approved a shake-up. Talks are taking place with the Communication Workers Union and Connect, which represents BT managers. Proposals will be sent to members in the next few weeks at the start of a formal consultation. BT’s pension trustees, chaired by Rod Kent, who led the ailing Bradford & Bingley before it was nationalised, must also back the plan. It comes as investors fret that BT will be forced to cut its final dividend because of weak cashflows.

Golden girl paid £40m by Barclays - (business.timesonline.co.uk) Good to see bailout money is being well-spent. Bank chief Varley to waive bonus but hands out £300m in fees for Middle East rescue. A COMPANY controlled by Amanda Staveley, the former girlfriend of Prince Andrew, will earn a £40m commission for brokering last week’s capital injection into Barclays by Middle East investors. Staveley’s PCP Capital Partners, a boutique advisory firm, acted for Sheikh Mansour Bin Zayed Al Nahyan, a member of the Abu Dhabi royal family. He is investing £3.5 billion and will control 16% of the bank. For Staveley, 35, it marks the second big deal she has brokered in recent weeks. She also masterminded the takeover of Manchester City football club by the same sheikh. Her firm is thought to have banked £10m in commission for that deal.

Hedge fund giant GLG warns investors about big shake-up - (business.timesonline.co.uk) ONE of Europe’s largest hedge funds, GLG, is sending a letter to investors this weekend saying it is to launch a “liquidity review” of its funds. It is also going to stop investors making withdrawals from its $1.5 billion (£930m) Market Neutral fund for six months. The review will decide the best way to preserve capital in GLG’s 40 funds. The Mayfair-based firm, run by founders Noam Gottesman and Pierre Lagrange, will also tell investors looking to quit the $2.5 billion Emerging Markets fund that they will not receive a full return as a tranche of the fund’s investments is too illiquid to sell. The Emerging Markets fund, which has lost half of its value this year, has been hammered by stockmarket chaos in countries such as Russia where wild price swings have led regulators to suspend trading.

Sears, Home Depot May Lose 8% of Holiday Sales on Credit Limits - (www.bloomberg.com) Home Depot Inc., Sears Holdings Corp. and other retailers may lose as much as 8 percent of their holiday sales this year because lenders and stores are clamping down on financing. Almost a quarter of shoppers say banks cut the spending limits on their credit cards, according to a survey by America's Research Group, which also provided the sales-loss estimate. More people are being rejected for new cards, hurting sales for bigger purchases. Demand is being pinched just as retailers prepare to enter the holiday selling season, which accounts for as much as 35 percent of their annual revenue. ``Banks just don't have the money,'' said David Bassuk, a New York-based managing director at consulting firm AlixPartners LLP. The tightening credit is putting retailers ``at big risk to lose those sales or lose those customers,'' he said. ``There is a big concern there with the holiday spending.''

Skyscrapers portend doom - (www.ft.com) As the Chrysler and Empire State Buildings raced each other to become the tallest in the world, the 1929 crash saw the economy collapse around them. The World Trade Center towers were completed in the dire stagflation of the mid-1970s which saw New York bankrupt, crime-ridden and at its lowest ebb. The passing of the high-rise baton to Asia with the completion of the Petronas Towers saw the collapse of the Asian markets in 1997. Super skyscrapers appear to be bad news for the economy. If they are harbingers of recession, is there a recession architecture, a building style defined by austerity? In response to the Great Depression, Mussolini, Hitler and Roosevelt reacted with huge public building works, almost all of which were executed in the same grand, stripped classical style. Recessions have led architects to retreat into theory and fantasy. The economic meltdown of Weimar Germany led to the austerity of modernism, an architecture from which bourgeois concepts of decoration were expunged. The recession of the late 1980s put paid to the excesses of Post Modernism. Now, to kick-start the economy, Gordon Brown plans a Building Schools for the Future scheme worth an eye-watering £45bn ($73bn) and a huge programme of hospitals and other public works.

Massive Effort to Save Mortgages - (online.wsj.com) J.P. Morgan Chase & Co. launched an ambitious plan Friday to modify the terms of $70 billion in mortgages for borrowers who are behind on their payments or soon could be. The move by the New York bank will cover as many as 400,000 borrowers. They'll be moved into loans carrying lower interest rates, smaller principal amounts or other more-affordable terms. The changes will particularly focus on a type of loan structured in such a way that the borrower's outstanding balance sometimes grows month after month. J.P. Morgan inherited $54 billion of such loans with its takeover of the beleaguered thrift Washington Mutual Inc. in September. The plan comes amid intense national focus on a root cause of global financial turmoil: rising home foreclosures, and what the role of banks and government should be in helping struggling homeowners. The banking industry is under much political pressure address the foreclosure problem. J.P. Morgan's exposure to the problems increased sharply when it acquired the assets of the Seattle-based Washington Mutual. WaMu, which was seized by regulators, had a large exposure to the difficult housing market of California. In taking it over, J.P. Morgan acquired $16 billion of subprime mortgages. The mortgages affected by J.P. Morgan's program represent 4.7% of the home loans it owns or that are serviced by one of the bank's units, EMC Mortgage Corp. While the program to give these mortgages easier terms is likely to cost J.P. Morgan billions of dollars in interest payments and loan fees, it is also likely to save the bank from the costly and lengthy process of foreclosing homes and selling them. The plan expands upon programs already in place at the bank to help strapped homeowners.


OTHER STORIES:

Brown Looks to Arab States for IMF Funding - (www.cnbc.com)
Private Banks Soon to Get Shot at Bailout Money - (www.cnbc.com)
Coming Soon: Congress Is Back With 'Stimulus-2' - (www.cnbc.com)
JPMorgan Halts Foreclosures, to Redo Mortgages - (www.cnbc.com)

October a cruel month for markets - (www.ft.com) Stocks in worst monthly loss in 21 years
Obama poised to gain most from early vote - (www.ft.com) Poll suggests 20m remain undecided
MasterCard to issue diamond-studded cards - (www.ft.com) Kazakh bank aims for ‘best VIP customers’

Congress Skimps on Highways, Caterpillar Sees Gap - (www.bloomberg.com) "U.S. city and regional transit providers may be at risk of defaulting on as much as $16 billion in financing unless the U.S. Treasury and Federal Reserve act to stabilize them, leaders of the House transportation panel said. More than 30 of the nation's largest transportation agencies may be in danger of collapse after private guarantors including American International Group Inc. had their credit ratings cut, violating terms of loans from 1988 to 2003, lawmakers said..."
Wild October Makes Way For Mellow November - (www.cnbc.com) Stocks will be volatile but a little calmer in November after the brutally wild weeks of October. The presidential election should give the market a bounce in the week ahead, but the focus will quickly shift back to the economy.
Stocks Could Get a Short Post-Election Bounce - (www.cnbc.com)

US stocks bouyant despite grim economic data - (www.ft.com) Chevron doubles profits in third quarter
The Long View: The markets’ no-lose election - (www.ft.com)
Barclays hit by backlash over Mideast deal - (www.ft.com) Claims executives were focused on bonus
Bernanke mulls over Fannie and Freddie - (www.ft.com) Casts doubt on returning to former role
Many Homeowners Owe More Than House Is Worth - (www.cnbc.com)
Drop in Gasoline Prices May Not Spur Driving Again - (www.cnbc.com)

Is Credit Card Relief Coming? - (www.ml-implode.com) - Banks, which are losing billions because many card holders aren't paying anything, seek OK to forgive up to 40% of strapped cons...
Germans freeze £21bn property funds - (www.ml-implode.com) - Nearly €30bn of German property funds were frozen between Tuesday and Friday last week in what industry experts fear could fores...
British PM appeals for IMF funds - (www.ml-implode.com) - We can't imagine the sovereign wealth block being warm to this -- "If you are lucky, we will let you bail us out, playing by our...

Hedge funds take beating in global turmoil - (news.yahoo.com/s/afp)
For Asia, Crisis Takes a Different Turn: Not as Deep as '97, but Likely Longer - (online.wsj.com)
Skyscrapers portend doom - (www.ft.com)
Hedge funds: What they told clients - (business.timesonline.co.uk)
Discord on Economies In a World Of Trouble - (www.washingtonpost.com)
When Chips Are Down - (www.newsweek.com)
Why Did I See it Coming and “They” Didn’t? - (www.debtdeflation.com)
Financial crisis: World round-up - (news.bbc.co.uk)