Weekday NEWS to Comfort the Disturbed and Disturb the Comfortable.
Tues 11.27.2007
Goldman ups U.S. '08 recession probability to 43% from 30% Goldman Sachs economists on Tuesday said they now expect the U.S. Federal Open Market Committee to cut interest rates to 3% by mid-2008, down from its earlier forecast of 4%. "The main reason is that the worsening housing downturn has pushed the risk of a U.S. recession in 2008 to 40%-45%, from around 30% previously," Goldman said.
Home prices falling everywhere: S&P U.S. home prices were falling in every region of the country in September, according to a closely watched index of home prices released Tuesday. Home prices fell in September in all 20 major cities covered by the Case-Shiller price index, even in cities that had been holding up, Standard & Poor's reported. For the national Case-Shiller home price index, prices fell 1.7% in the third quarter compared with the second quarter, and were down a record 4.5% in the past year. It was the largest quarter-to-quarter price decline in the 20 years covered by the index. In the 20-city index, prices fell a record 4.9% year-over-year. Prices were down 5.5% year-over-year in the original 10-city index, the largest drop in the 10-city index since 1991.
Citigroup gets $7.5 billion infusion from Abu Dhabi Citigroup said it has received a $7.5 billion injection from the Abu Dhabi Investment Authority, a much-needed shot in the arm as the banking giant weighs massive job cuts and slashing the value of debt securities on its balance sheet. "This investment, from one of the world's leading and most sophisticated equity investors, provides further capital to allow Citi to pursue attractive opportunities to grow its business," said Win Bischoff, acting CEO. Citigroup in a statement issued late Monday, said the "long-term" investor will receive no more than 4.9% of its capital and won't get a seat on the board. This holding would exceed the 3.6% controlled by Prince Alwaleed bin Talal bin Abdul Aziz al Saud of Saudi Arabia.
The cost of Christmas: $19,507 The price tag rises for gold rings and geese, and minimum-wage milkmaids get a pay increase, as an annual 'Twelve Days' index rises 3.1% over 2006 prices. The cost of Christmas climbed 3.1% this year, spurred in part by the soaring price of gold, which has been trading north of $840 an ounce recently.The price of five 14-karat gold rings now totals $395, a 21.5% increase over 2006's $325 (although it's still nowhere close to 1989 prices, when the rings hit an all-time high of $750). The cost of maids a-milking also rose this year, as unskilled laborers got a 13.6% increase in the federally mandated minimum wage. The cost of an hour of work from eight milkmaids -- who hadn't gotten a raise since 1997 -- rose to $46.80.
China's economic plan: Blame U.S. Beijing knows it needs to rein in runaway growth for the good of the nation's long-term health. And pinning economic problems on foreigners might actually make it politically palatable. Is China planning to use a slowdown in the U.S. economy as an excuse to slow its own economy in 2008? Sure looks like it: Nov. 15 gave investors the first clue of how China would justify the kind of economic pain it needs to inflict on its people in order to stop runaway inflation and financial speculation. The solution? Blame a U.S. economic slowdown for a plunge in Chinese export growth that will put an end to China's double-digit economic growth. Certainly, putting the blame overseas is a whole lot easier politically than taking the heat for deciding the economy has to slow in the short term for China's long-term health.
HSBC's bailout puts pressure on Citi, 'superfund' HSBC Holdings' $35 billion bailout of its structured investment vehicles puts pressure on a group of rival banks that are working on a broader solution to one of the major sources of this year's global credit crisis. The SIV market, a roughly $300 billion business, is at the center of the current credit crisis. The vehicles borrow money short term and use the cash to buy longer-term debt. The longer-term assets usually pay higher interest rates than the short-term debt, and money is made on the difference. As defaults surged on subprime mortgages this year, confidence in these products wilted, and SIVs struggled to refinance short-term debt.
Foreclosures to Hit Metro Areas Rising foreclosures will lead to billions of dollars in lost economic activity next year in the nation's major metropolitan areas, but homeowners and financial institutions have the ability to work together to contain the effects, according to a report compiled for the U.S. Conference of Mayors. The report was released Tuesday ahead of a meeting of mayors from across the country in Detroit, where they hope to create policy recommendations to help address the nation's housing crisis. Prepared by forecasting and consulting firm Global Insight, the report said weak residential investment, lower spending and income in the construction industry and curtailed consumer spending because of falling home values will combine to hold back the nation's economic activity.
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