World economy talk

[tidus1203]

FACT OF THE MATTER is in order for Chrysler to escape bankruptcy they have to START MAKING TOP LINE REVENUES. Meaning they have to start selling en masse. I don't care how much fat they trim, pag walang demand pag walang bumibili liquidation pa din ang huling destination! Kaya nga last year pa lang sinasabi ko hayaan na ang Chrysler mag bankrupt and be liquidated orderly by the courts kasi alam naman natin walang demand to keep them alive.

[uls]

yep

exactly

Chrysler should have been dead long ago

Chrysler has failed 3 times in 3 decades

they lose money even in times when competitors make tons of money

In just a few years, Chrysler has been passed like a hot potato from the Germans to American private equity and now to the Italians

it's crazy

let it die

[tidus1203]

And the Italians to eventually the taxpayers of the United States bwahahaha...

[tidus1203]

As a believer of problematic inflation later on I think it gives me even greater confidence if the world's most popular investor thinks like-wise...

And with political leaders showing little inclination to raise taxes, one sure way to pay for excess spending is to inflate the value of the currency, Buffett said. The biggest losers in a surge of inflation, he added, would include holders of bonds and other fixed-income assets.
"I haven't had my taxes raised," said Buffett, who has run Berkshire for more than four decades. "My guess is the ultimate price will be paid by a shrinkage of the value of the dollar."
The billionaire investor made the comments Saturday morning at the annual meeting of Berkshire Hathaway (BRKA, Fortune 500) shareholders.

http://money.cnn.com/2009/05/02/news...ion=2009050213

[uls]

speaking of Buffett...

Berkshire Hathaway share price way down coz investors are scared about the company's derivatives bets

http://www.bloomberg.com/apps/news?p...DnQ&refer=home

Berkshire held contracts with a combined notional value of $67.3 billion at year-end. While this figure is used mostly for reporting purposes and isn’t indicative of potential losses, it dwarfs the company’s $25.5 billion in cash.

What kind of derivative bets did Buffett enter into?

put options

Buffett is betting that stock market indexes won't fall to a certain level

the people on the other side of the bet pay Buffett premiums

if the indexes fall to levels stated in the contracts, Buffett has to pay out tens of billions

if the indexes do not fall to those levels and the contracts expire, Buffett's profits are the premiums

Berkshire’s derivatives fall into four categories. Because they carry the greatest notional value, at $37.1 billion, most attention is on put options that Buffett sold on stock indexes in the U.S., U.K., euro zone and Japan that expire from September 2019 to January 2028. Berkshire has to pay at expiration if any of the indexes are lower than they were when the puts were written.

aside from equity index put options

Buffett's other dervitaives bets are:

Berkshire hasn’t disclosed sufficient information to fully analyze its other derivatives, Shanker says. One category is simply municipal bond insurance structured as derivatives; the risks here are similar to those for his municipal bond insurer. Another type consists of credit-default swaps through which Berkshire guarantees payment of individual corporate bonds. Those bets were relatively small, totaling $3.9 billion in notional value at the end of last year.

and

Berkshire has sold contracts that require it to pay when credit losses occur at companies that are included in certain unnamed high-yield-bond indexes. The notional value is $7.9 billion.

Most of the derivative contracts Buffett entered into will expire in a few years

for now, he collects premiums

on some contracts, he already had to pay out losing bets

Berkshire took in $3.4 billion in premiums on these contracts and has paid losses of $542 million. The company has also recognized a noncash, $3 billion mark-to-market loss. With these contracts, payments are made when a credit event occurs. They expire from September of this year to December 2013.

Losses on these contracts are accelerating as bankruptcies grow, Buffett said in his shareholder letter in February. “Now with the recession deepening at a rapid rate, the possibility of an eventual loss has increased,” he wrote.

[tidus1203]

If you dig the depts of this thread once upon a time I mentioned that that one of the most unnoticed bubble but has yet to pop was EDUCATION. Tuition fees are too high and don't reflect the economics of people's income and wealth.

“The spending binge by colleges and universities was part of the same trend that created the bubble in the rest of the economy,” says Ronald Ehrenberg, an economics professor at Cornell University in Ithaca, New York, and author of “Tuition Rising: Why College Costs So Much” (Harvard University Press, 2000). “Now we’re seeing it burst.”

http://www.bloomberg.com/apps/news?p...fTI&refer=home

But unlike the other bubbles that bursted were it hurts a lot. I guess for majority of people the bursting of the education bubble might actually be SWEET!

[uls]

USG dirty tactics in dealing with Chrysler bondholders

Lawyer of hedge fund Perella Weinberg Partners says in a radio interview that the USG threatened to use the White House press corps to destroy the reputation of his client

After intense political pressure, Perella Weinberg finally agreed to accept the deal (before Chrysler filed for bankruptcy)

Creditor's Lawyer Claims White House Threatened His Client
http://www.politicsdaily.com/2009/05...tened-his-cli/

Speaking to WJR, Thomas Lauria said that the White House called the bondholders "vultures" for insisting on their rights as senior creditors and told them that the Obama administration would use the White House press corps to attack them in the media. Corky Boyd has the transcript:

Lauria: Let me tell you it's no fun standing on this side of the fence opposing the President of the United States. In fact, let me just say, people have asked me who I represent. That's a moving target. I can tell you for sure that I represent one less investor today than I represented yesterday. One of my clients was directly threatened by the White House and in essence compelled to withdraw its opposition to the deal under the threat that the full force of the White House Press Corps would destroy its reputation if it continued to fight. That's how hard it is to stand on this side of the fence.

Beckman: Was that Perella Weinberg?

Lauria: That was Perella Weinberg.

here's the actual radio interview:

http://www.760wjr.com/Article.asp?id=1301727&spid=6525

[uls]

an excerpt from John Mauldin's weekly E-newsletter -- Thoughts from the Frontline

And before I close, let me make a few comments about the Chrysler and GM issues. I tell my kids all the time that actions have consequences. If I hold senior secured debt of a company and the government tells me I have to take less than unsecured junior debtors, I am not going to be happy. I may have been dumb to make the loans in the first place, but I did it under a very specific contract and the rule of law.

If the Obama administration arbitrarily changes those rules to favor a political class (unions), then that is going to have a chilling effect on future lending to all corporations. As an aside, they are spending $12 billion to save 54,000 Chrysler jobs (at $22,000 per job). With 600,000 jobs a month being lost, why are these 54,000 jobs more special than those of the rest of the unemployed, who get a fraction of that amount in unemployment benefits?

that's a very dangerous precedent

Corporations rely on bond investors for loans

Seeing what Obama is doing to bondholders, investors will now think twice before investing in bonds of companies with strong unions

Obama has to learn that his actions have unintended consequences

[uls]

GM Bankruptcy Probable as Obama Shields UAW Benefits (Update1)
http://www.bloomberg.com/apps/news?p...d=awCyiNlvcfUA

May 4 (Bloomberg) -- General Motors Corp. may be more likely to end up in bankruptcy based on the Obama administration’s willingness to place Chrysler LLC into court protection to safeguard union health-care benefits.

With GM and its biggest bondholders at odds over resolving $27 billion in unsecured claims by a June 1 deadline, the Chrysler model indicates that President Barack Obama may resort to bankruptcy to end any impasse over that debt, said Martin Fridson, chief executive officer of New York-based credit investment firm Fridson Investment Advisors.

Chrysler filed for protection April 30 after the U.S. was unable to persuade secured lenders to swap $6.9 billion in claims for $2.25 billion in cash. A union retiree health-care trust was offered a 55 percent stake in Chrysler.

under the populist Obama admin,

labor unions > bondholders

[uls]

good news out from China (manufacturing up)

and the US (pending home sales up)

stocks rally

S&P 500 now above 900



a lot of optimism in the air

when the US and China recover, commodities prices rise



is the Philippines ready for higher commodities prices?

[uls]

Philippines inflation:

http://www.rttnews.com/Content/AllEc...aspx?Id=935207

Philippines April Inflation Up 4.8% on Year
32 minutes ago
(RTTNews) - Consumer prices in the Philippines climbed 4.8 percent on year in April, the National Statistics Office said on Tuesday, versus expectations for a 4.7 percent annual increase following the 6.4 percent expansion in the previous month.

Core inflation, which excludes volatile fresh food and energy prices, was up 5.0 percent on year after the 5.6 percent gain in March.

The annual inflation rate in the National Capital Region slowed down to 2.2 percent in April from 3.2 percent in March as the annual price adjustments in the commodity groups improved except in clothing and fuel, light and water, the data showed.

Inflation rate in areas outside the national capital region also continued to register a slower rate of 5.8 percent in April from 7.8 percent in March brought about by the decreases in inflation rates of all the commodity groups except for services and miscellaneous items.

At the national level, annual inflation rate for food alone also moved down to 8.2 percent in April from 11.9 percent in March.

On a monthly basis, inflation was up 0.5 percent - slightly higher than the 0.4 percent increase that had been forecast after the 0.1 percent gain in March. On month, annual price additions in April were slower in all the food groups except for fruits and vegetables whose annual inflation rate was higher at 7.5 percent from 5.6 percent.

Higher prices of selected food items such as fish, miscellaneous food, rice, meat, corn and dairy products were observed during the month. Upward increments in the prices of kerosene, diesel, gasoline and the increased charges on water and electricity rates in some regions including NCR were also noted. Similarly, airplane fares were on the uptrend.

Philippine Inflation Eases, Giving Policy Flexibility
http://www.bloomberg.com/apps/news?p...vDA&refer=home

May 5 (Bloomberg) -- Philippine inflation slowed to a 16- month low in April as fuel and utility prices fell for a fifth month, giving the central bank more room to reduce borrowing costs and stoke economic growth.

Consumer prices rose 4.8 percent from a year earlier, the National Statistics Office said in Manila today. That compares with the median forecast of 4.6 percent in a Bloomberg News survey of nine economists.

``We are encouraged by the increased flexibility afforded to monetary policy by the continued improvement in the inflation outlook,'' central bank Governor Amando Tetangco said in a mobile-phone text message after the inflation data today. Policy makers next meet on May 28 to decide on borrowing costs.

[uls]

NYMEX crude



USD index

[badsekktor]

If you dig the depts of this thread once upon a time I mentioned that that one of the most unnoticed bubble but has yet to pop was EDUCATION. Tuition fees are too high and don't reflect the economics of people's income and wealth.

http://www.bloomberg.com/apps/news?p...fTI&refer=home

But unlike the other bubbles that bursted were it hurts a lot. I guess for majority of people the bursting of the education bubble might actually be SWEET!

+1

cant wait for the bubble to burst.......

[uls]

watch this video

http://abcnews.go.com/Video/playerIndex?id=7490761

[uls]

+++++++++++++++++++++

[Monseratto]

Oil futures will be hot again...

Oil May Break Resistance, Rise to $71.55: Technical Analysis

May 5 (Bloomberg) -- Crude oil may be headed for $71.55 a barrel after breaking through $56.10 a barrel, according to Barclays Capital.

Should the June crude oil contract push through the high of $56.10 a barrel reached on March 26, futures may climb past the Jan. 6 intraday high of $59.66 to $62 a barrel, Barclays Capital analysts, led by Jordan Kotick, said in a May 4 report.

Oil could jump to $71.55 a barrel as traders attempt to exit the large number of short positions, or bets that prices will fall, creating a so-called short squeeze, the analysts said. This is equal to the upward moves oil has made from a so- called head-and-shoulders bottom pattern starting in December.

“With the outlook for risky and pro-growth assets continuing to improve particularly as U.S. equity markets turn positive for the year, we are growing more constructive on energy markets,” Barclays Capital said.

Crude oil for June delivery was at $53.82 a barrel, down 65 cents, at 3:46 p.m. Singapore time on the New York Mercantile Exchange. Yesterday, it rose $1.27 to $54.47, the highest settlement since Nov. 24. Oil is up 21 percent this year.

Technical analysts use historical chart patterns to predict potential future price movements.

[uls]

oil traders are following equities

economic recovery = more demand for oil

but if you look at the fundamentals, oil should be trading lower

there's a lot of supply

[tidus1203]

I am BULLISH on oil. In fact matagal na akong ipit sa USO ETF hehehe. Medyo mas mataas na sa cost ko pero I have been holding it for more than 6 months na ata walang nangyayari... And I don't agree there is a lot of supply of oil, wait when the pre-August 2008 demand comes back again supply will not be able to catch up. BUY OIL NOW! Hold it for 2 years, thats my strategy for oil.

[uls]

Fed Stress Tests to Show About 10 Banks Need Capital
http://www.bloomberg.com/apps/news?p...GQw&refer=home

May 5 (Bloomberg) -- The Federal Reserve plans to deliver results of stress tests on U.S. banks to executives today that may show about 10 companies need additional capital to weather a deeper recession, people familiar with the matter said.

Banks are formulating plans for filling their capital requirements, much of which would likely come from conversions of preferred shares, the people said. Many of the 19 lenders under review and the government are set to discuss publicly the examinations after markets close May 7, the people said.

according to FBR analyst Paul Miller, 11 of 12 commercial banks need to raise more capital

only JPM doesn't have to

JPMorgan Is Sole Commercial Bank That Won’t Need Funds, FBR Says
http://www.bloomberg.com/apps/news?p...MR0&refer=home

May 5 (Bloomberg) -- JPMorgan Chase & Co. is the only lender among 12 commercial banks being stress-tested by the Treasury that probably won’t need more capital, Freidman, Billings, Ramsey Group Inc. analyst Paul Miller wrote to clients today.

All the commercial banks may need capital under a “more adverse” scenario, Miller wrote. The Treasury is testing 19 of the biggest U.S. financial firms, including credit-card lender American Express Co. and insurer MetLife Inc., with results expected later this week.

[uls]

I am BULLISH on oil. In fact matagal na akong ipit sa USO ETF hehehe. Medyo mas mataas na sa cost ko pero I have been holding it for more than 6 months na ata walang nangyayari... And I don't agree there is a lot of supply of oil, wait when the pre-August 2008 demand comes back again supply will not be able to catch up. BUY OIL NOW! Hold it for 2 years, thats my strategy for oil.

yes, pag bumalik na ang demand, definitely kukulangin na ang supply

pero sa ngayon, during this year long plus recession, mataas ang inventory (low demand)

0815 ET 05May2009-Crude oil falls ahead of inventory data

------------------------------------------------------------------------------

June crude futures fell on Tuesday, as forecasts that U.S. crude

inventories likely rose from their highest level in almost two decades

countered optimism about economic recovery.

Inventories have risen in recent months, as the recession lowers demand for

crude.

The contract dropped 0.6 percent to $54.14.