Thread: Is the world heading into recession?

and the Japanese banks have till the end of March to come clean.

^When do you think the Thai banks have until...?

Oh dear - another turn for the worse: Port Authority of New York cann ot borrow money at less than 20% due to credit crunch!

See:

Bloomberg.com: Worldwide

Feb. 13 (Bloomberg) -- Bonds sold by U.S. municipal borrowers with rates set through periodic auctions failed to attract enough buyers as banks including Goldman Sachs Group Inc. and Citigroup Inc. that run the bidding won't commit their own capital to the debt.

Rates on $100 million of bonds sold by the Port Authority of New York and New Jersey, with bidding run by Goldman, soared to 20 percent yesterday from 4.3 percent a week ago, according to data compiled by Bloomberg. Presbyterian Healthcare in Albuquerque and New York state's Metropolitan Transportation Authority also experienced failures, officials said.

What began three weeks ago with too few bidders for auction-rate debt backed by relatively small entities, such as Georgetown University and Nevada Power, has widened in recent days to include large issues of state governments, such as New York state's Dormitory Authority. The auction failures provide new indication of Wall Street's unwillingness to commit capital amid $133 billion in credit losses and asset writedowns.

``It's the beginning of the end for the auction-rate market,'' said Matt Fabian, a senior analyst with Concord, Massachusetts-based Municipal Market Advisors. ``Banks have stopped supporting the market.''

The OP cited recession as a worry. The Port Authority of Ney York having to pay 20% on its borrowings is an indication that depression might be more apt..

Saw another story about students loans in one state being suspended because of the trickle effect of the sup-prime meltdown,

I am not sure why nobody is panicking yet,

Originally Posted by WSJ

Credit Woes Hit Student Loans
Michigan announced a halt to student loans, and other states could soon follow, as the securities auctions that fund borrowers ranging from municipalities to student-loan authorities have gone into a deep freeze.

^Well they should start to panic soon. Seems no-one can raise cash by selling Bonds right now, including that risky, fly-by-night outfit, New York City's Health and Hospitals Corp. UBS joins the list of brokers unable to help...:

Bloomberg.com: Worldwide

Feb. 14 (Bloomberg) -- UBS AG won't buy auction-rate securities that fail to attract enough bidders, joining a growing number of dealers stepping back from the $300 billion market, said a person with direct knowledge of the situation.

The second-biggest underwriter of the securities, whose rates are reset periodically at auctions, notified its 8,200 U.S. brokers of the decision yesterday, said the person, who declined to be identified because the announcement wasn't publicly disclosed. Goldman Sachs Group Inc., Lehman Brothers Holdings Inc. and Citigroup Inc. allowed failures of auctions they managed by not purchasing securities that didn't sell.

Bank of America Corp. estimated in a report that 80 percent of all auctions were unsuccessful yesterday. That may mean as much as $20 billion of bonds failed to find buyers, based on the $15 billion to $25 billion of auction bonds that are scheduled for bidding daily, said Alex Roever, a JPMorgan Chase & Co. fixed income analyst.

``We're hearing it's a general reaction to the auction market,'' said Marlene Zurack, senior vice president for New York City's Health and Hospitals Corp., whose auction yesterday of $64.9 million of bonds failed. ``The truth is our credit is good, our ratings are good, our bond insurer is unscathed, and it still happened.''

Auctions of bonds sold by cities, hospitals and student loan agencies are failing as confidence in the creditworthiness of insurers backing the securities wanes, and as loss-plagued banks seek to avoid tying up their capital. More than 129 auctions failed yesterday, said Anne Kritzmire, a managing director for closed-end funds at Nuveen Investments in Chicago.

Four-Fifths Fail

Rohini Pragasam, a spokeswoman for UBS, the second-biggest underwriter of municipal auction-rate debt after Citigroup in 2006 according to Thomson Financial, declined to comment. UBS, the dealer on the hospital corporation's auction, today posted the biggest-ever loss by a bank for the fourth quarter. The stock declined 2.38 francs ($2.15), or 5.8 percent, to 38.48 francs at 11 a.m. in Zurich.

Auction bonds have interest rates that are determined by bidding that typically occurs every seven, 28 or 35 days. When there aren't enough buyers, the auction fails and bondholders who wanted to sell are left holding the securities. Rates at failed auctions are set at a level spelled out in official statements issued at the initial bond sale.

Won't Bid

Until recently, UBS and other banks that collect fees for running auctions have stepped in with their capital to prevent failures when bidding falters. These firms have grown unwilling to commit their money to auction-rate securities after suffering at least $133 billion in credit losses and mortgage writedowns stemming from the subprime mortgage collapse.

``If you talk to the dealers, their balance sheets are getting flooded with these auction-rate certificates right now,'' said Doug Dachille, who oversees $7 billion in fixed- income securities as chief executive officer of First Principles Capital Management LLC in New York. ``Right now, the way they're dealing with the issue is they won't bid. That's why we're seeing failed auctions.''

Auctions began stumbling three weeks ago when banks failed to drum up enough demand for auction rate bonds sold by borrowers including Georgetown University and Nevada Power. Since then, auctions have failed for frequent and well-known borrowers, such as Port Authority of New York and New Jersey and New York state's Metropolitan Transportation Authority.

Insurance at Issue

The failures show the widening impact of the bursting of the U.S. housing bubble, which has caused rising defaults on home loans and threatened the credit ratings of the insurance companies that guaranteed structured securities -- such as collateralized debt obligations tied to mortgages -- against default.

The waning strength of some bond insurers has caused investors to trim their exposure to debt backed by companies such as Ambac Financial Group Inc.'s Ambac Assurance Corp., concerned that it may be difficult to sell such debt should insurers' problems grow worse. That has hurt borrowers such as the Port Authority, whose auction debt soared to 20 percent on Feb. 12 from 4.3 percent a week ago even though there is little risk it will default on its debt.

Local governments are obliged to pay the high rates until either the auctions start attracting more buyers or they modify the bonds to some other kind of variable-rate debt or a fixed interest rate. Bankers and borrowers have been working on conversion plans for several weeks.

BBC NEWS | Business | The US sub-prime crisis in graphics

BBC NEWS | Business | Housing meltdown hits US economy

BBC NEWS | Business | Foreclosure wave sweeps America

It's Friday! What will the markets do today?

At least 1 country is doing well...:

China's monthly trade surplus up 22.6 Percent in January

China's monthly trade surplus up 22.6 Percent in January


BEIJING, Feb. 15 (Xinhua) -- China's trade surplus in January jumped 22.6 percent year-on-year to 19.49 billion U.S. dollars, the General Administration of Customs said on Friday.

The figure was slightly lower than the 22.69 billion U.S. dollars in December. Since May last year, the trade surplus had been at least 20 billion U.S. dollars per month.


I wonder what they will do with all that dosh...

Originally Posted by bkkandrew

I wonder what they will do with all that dosh...

Oh, first they'll buy Manhattan.

couple of links .........

The ultimate sell signal

SEATTLE (MarketWatch) -- The resignation of America's unheeded and under-funded chief accountant and watchdog, along with the billion-dollar bullhorn he's been given, are the ultimate sell signals for America's stock investors.

marketwatch.com


.............................


Recession more likely this year - survey

The group said in a report being released Monday that 45% of the economists on its forecasting panel expect a recession this year.

money.cnn.com

Soup kitchens? At least in Thailand it will be tasty soup:
Larry Elliot: Queue for the soup kitchen as we slide towards recession | Business | The Guardian
What we are now seeing is the break-up of Bretton Woods mark 2. The linchpin of this looser and less comprehensive system was the fixed exchange rate between the dollar and the Chinese yuan. By keeping its currency low, Beijing flooded the world with cheap goods and kept US inflation muted. That pushed down interest rates, but led to a massive US trade deficit with China and pushed up asset prices.
Politicians in Washington demanded that Beijing allow its currency to rise. And over the past two and a half years this is what the Chinese have done, in small and gradual steps. It's not really surprising that they have done so, since the flipside of lower inflationary pressure in the west has been a build-up of inflationary pressure in China.
As a result, the writing is on the wall for Bretton Woods 2. Bernanke has sent out the signal that he cares far more about boosting growth than he does about fighting inflation, which is why the dollar has fallen and gold has gone up. So a return to soup kitchens and dustbowl economics should not be ruled out.
(Read the whole thing, it's worth it.)

IATA: Sharply lower January air passenger traffic could signal start of slowdown


KUALA LUMPUR, Feb 27 -- A sharply lower growth of 4.3 percent in year-on-year international passenger demand in January could signal the start of a slowdown due to the fallout from the U.S. credit crunch crisis plus fears of a recession.

Releasing international traffic data for January, the Geneva-based International Air Transport Association (IATA), said this was sharply down from the 6.7 percent growth recorded in December and 7.4 percent chalked up for the full-year of 2007.

"January's traffic results show that we could be at a turning point," said Giovanni Bisignani, IATA’s Director General and chief executive officer.

He said in a statement released from Hong Kong that although month’s data is not enough to define a trend, the sharp shift in demand growth patterns makes it clear that the U.S. credit crunch is negatively impacting air travel.

"Fasten your seatbelts. There is likely to be turbulence ahead," said Bisignani.

"This is an unusual situation for the industry. Asia outside of Japan is looking strong, even as the U.S. economy weakens. This highlights the need for the air transport industry to globalise." he said.

He said the outdated bilateral system and national ownership rules will prevent the industry from responding as a normal business to economic shifts.

"Airlines cannot diversify risk, so the parts of the industry will see the impact of the U.S. credit crunch with very little buffer. This must change,” said Bisignani.

IATA also said that capacity growth of 4.2 percent saw load factors inch up to 75.1 percent.

International cargo demand growth remained sluggish. At 4.5 percent for January, it was largely unchanged from the 4.7 percent year-on-year growth in December, it said. (BERNAMA)

enews.mcot.net

There is a lot of talk about the US. Why??? We do not need the US what you can see if you watch the $ - it gets worthless like the country. The day is here when the US navy (their hardware) will rust in their harbors. Perhaps ladies in Pattaya will miss some of them - but the rest of the world? Hello China and Africa!!! Perhaps the US will one day try to have the Euro. Might sound strange - but the $ goes to next to nothing EVERY day.

Home foreclosures hit record high

By JEANNINE AVERSA, AP Economics Writer 14 minutes ago

WASHINGTON - Home foreclosures soared to an all-time high in the final quarter of last year, underscoring the suffering of distressed homeowners and the growing danger the housing meltdown poses for the economy.

The worsening foreclosure and late payment figures come as fears grow that the country is teetering on the edge of a recession or in one already.

Home foreclosures hit record high - Yahoo! News

For all of you brilliant Nobel prize winning economists on this board who feel that the US is an economic island and that this will have not great knock on effect for every other country....keep writing your brilliant analyses for so long as you start whining about how it's hit you personally.

Homeowner equity is lowest since 1945

By J.W. ELPHINSTONE, AP Business Writer 1 hour, 21 minutes ago

NEW YORK - Americans' percentage of equity in their homes fell below 50 percent for the first time on record since 1945, the Federal Reserve said Thursday.

That marks the first time homeowners' debt on their houses exceeds their equity since the Fed started tracking the data in 1945.

Moody's Economy.com estimates that 8.8 million homeowners, or about 10.3 percent of homes, will have zero or negative equity by the end of the month. Even more disturbing, about 13.8 million households, or 15.9 percent, will be "upside down" if prices fall 20 percent from their peak.

Homeowner equity is lowest since 1945 - Yahoo! News

I really can't recall this much negative news on fundamentals in my lifetime in the largest economy in the world.

Most top execs see U.S. in or bound for recession

31 minutes ago NEW YORK (Reuters) - The majority of top U.S. business executives think the country is either already in recession or heading for one in the next six months, according to a survey conducted by the Boston Consulting Group.

Most top execs see U.S. in or bound for recession - Yahoo! News

Originally Posted by chinthee

keep writing your brilliant analyses for so long as you start whining about how it's hit you personally.

Not whining here, making a nice living shorting the US financials and real estate right down the toilet, round the u-bend and off to the sewer.

Jingle Mail, and off to the YMCA. Som nam na!

The US got rich flooding the world with its overvalued paper money.
Now its adjustment time.
Unfortunately we will all pay, no matter where you live.

When it comes down to basics, economies run on tangible goods and services.
Speculation on paper money has replaced that in recent decades and now someone has to take a cut in living standards to get things back in balance. And as always, its the normal everyday working person who will be hit hardest.

Stocks drop amid credit concerns

By JOE BEL BRUNO, AP Business Writer 8 minutes ago

NEW YORK - Stocks tumbled Thursday as the ailing credit market and a spike in home foreclosures intensified the market's worries about a sagging economy. The Dow Jones industrials gave up 214 points.

Stocks drop amid credit concerns - Yahoo! News


The hits just keep on comin'

Getting better everyday, even on week-end

Originally Posted by WSJ

FBI Investigates Countrywide

Countrywide faces an FBI inquiry into whether officials misrepresented its financial position and the quality of its mortgage loans in filings. People familiar with the matter said its losses may be much greater than it has said.

Originally Posted by WSJ

March May Be Quite Cruel

Meetings between companies and lenders to go over the books are likely to be more tense this year with credit and patience in short supply.

Just took a look at a few stocks I have been following over the past six months and some have started to tank. Google has lost half its value! It was up near 800 dollars now its 450 and they are talking about 350. Some people out there are really suffering, especially those who were planning to use stocks for their retirement. If they can wait someday these stocks may be back up there. The financial experts are proving to be way off in terms of what the stocks are doing. Those that bought in in the past couple months are probably seeing instant losses. I really wish there were a way to make those financial people who use the media as their pulpet accountable for their words. Many of them are just babbling idiots who lead those outside of the financial arena to their financial deaths.


Can TD get a gloomy smilie so I can add it to my posts. Maybe I'll make one.

Originally Posted by Norton

My sense is the market has yet to fully react to the realities of the economic problems faced in the US.

I think you are right, its the uncertaintly of the extent of losses that the financials are sitting on that is driving the markets lower(that and the economic data regarding jobs,manufacturing etc etc in the US). Nobody knows the exact numbers and the markets react wildly to little bits of news and gossip each day.
The way the fed stepped in with their emergency rate cut of 0.75% recently when the dow futures were down 1000 points on 22 Jan for me is extremely telling. The fed knows more about the overall situation than they are letting on and I suspect they know that the whole thing could tank a lot further than it is now.

^ except your guys are forgetting one thing, low interest. With no incentive to save, it forces the investors to find alternative, yet more risky, investments