World economy talk

[tidus1203]

Right. Without inflation (that is printing of more money, rather than what the mainstream economists want you to believe as rising prices), this fractional reserve system we use will collapse. So unless we go back to hard asset backed money expect prices to trend up in the longer term interrupted by times of deflation when bubble bursts.

[gearhead]

There is an industry that has a big chance of actually growing in an economic downturn:

http://www.convinceandconvert.com/in...the-recession/

There are some groups that are actually open to investment into this category for interested parties.

[uls]

there are a number of sectors that will still do well in a recession

Like health care, defense, food and consumer staples, tobacco and alcohol

[tidus1203]

And this being Tsikot.com, cars are one of the worst hit by a recession. All brands in the US have their sales drop. The Japanese are not spared either, coupled with stronger Japanese Yen malaki talaga problema nila.

[Monseratto]

The US carmakers are queued behind the troubled banks and insurance companies.

Sales continue to crash in US car markets

The misery in the US car market deepened yesterday when General Motors (GM), Ford and Toyota reported dire sales for last month.

General Motors sales crashed 45 per cent to 170,585 vehicles while Ford’s sales fell 30 per cent compared with the same month last year. It sold 132,838 vehicles in October compared with 190,195 a year earlier. Toyota fared slightly better but still suffered a drop of 26 per cent to 152,101.

GM, which makes Cadillacs, is attempting a merger with Chrysler in order to try to pool cash and create a stronger joint organisation. GM has asked the US Government for up to $10 billion (£6.3 billion) in cash to help to smooth the merger, though there is speculation this has been rejected.

Chrysler has described the downturn in the US market as unprecedented. Bob Nardelli, chief executive, made the remark as he explained recent cutbacks in a letter to Chrysler’s staff. Chrysler is cutting about 5,000 administrative and managerial jobs.

If GM does merge with Chrysler, some industry analysts predict that more than 30,000 jobs could be lost because of the large overlap of the two struggling companies. Unions are growing increasingly concerned.

Ken Lewenza, head of the Canadian Auto Workers union, said yesterday: “We don’t think a merger is in the interests of our members. I don’t see how you can take two sick patients and turn them into a healthy one.”

Mark LaNeve, GM’s vice-president for North American sales, said: “We are obviously disappointed in our results, which reflect a difficult comparison with a strong year-ago October performance. More importantly, it also reflects an unprecedented credit crunch that is dramatically impacting the entire US economy.”


Meanwhile Ford, the second-biggest US motor manufacturer, will come under pressure on Friday to demonstrate that it is tackling the sharp downturn. It is due to publish third-quarter figures, after an $8.7 billion net loss in the second quarter. The carmaker could announce fresh plant shutdowns or a shorter week.

Poor consumer confidence, the economic downturn and a lack of credit took their toll across Ford’s range of cars but hit its sports utility and fuel-hungry vehicles the hardest. Sales of Ford’s SUVs plunged 54 per cent, while its Volvo premium brand suffered a 52 per cent drop in sales of cars and light trucks in the US in October.

Porsche sales in the US more than halved last month. The luxury carmaker, which is trying to take over Volkswagen, said sales fell 52 per cent to 1,427 cars.

[Monseratto]

Any takers? Barrack will inherit an almost depleted piggy bank...

US treasury sells bail-out bonds

The United States government plans to sell bonds worth $55bn
(£34bn) next week in an effort to finance its bank rescue programme.

In a first $25bn auction on Monday, the Treasury Department will launch a new type of bond, which will reach maturity after three years.

The rest of the amount will be raised later next week through the sale of traditional 10-year and 30-year bonds.

US bonds earn a fixed rate of interest every six months until maturity.

Mounting deficit

By selling bonds and notes the US government will finance the rescue package aimed at buying up Wall Street's bad debts in an effort to ease the credit crunch which is crippling the US economy.

The US Treasury expects to raise up to $550bn by the end of 2008.

The administration will use some of the money raised through bonds to purchase toxic assets from troubled banks, hoping that they will increase in value once the crisis has passed.

The Treasury argued that launching the new type of bonds was critical in a moment when other sources of revenue were diminishing.

"The deterioration in the economy and financial markets has led to a commensurate decline in individual and corporate tax receipts", it said in a statement.

The US administration expects the total deficit for the 2008 financial year to raise to $455bn, with the forecast for 2009 close to $1 trillion.

US banks have been struggling since the middle of 2007 with rising mortgage defaults and a credit crisis that has virtually frozen inter-bank lending and severely restricted lending to consumers.

http://news.bbc.co.uk/2/hi/business/7711533.stm

[uls]

hehehe

[tidus1203]

Another one of those will happen in the next decade. Watch out as central banks around the world are re-inflating the system again.

[uls]

yup

global rate cuts...

race to ZERO

the BoE cut 1.5%, ECB .5%

[tidus1203]

I think ECB is being the most disciplined and they realize that cutting interest rates is just a psyco tool rather than a real tool. Because its not the cost of money, its the fear of not being repayed that is the problem and lower interest rates won't solve that.

[uls]

Ya even if the central banks keep cutting rates, the banks are still hoarding cash

They arent so enthusiastic to lend...

They know the borrowers will have a hard time paying back loans.

People can lose their jobs anytime

Companies are reporting losses, laying off employees

Everyone has a cash flow problem

Credit card deliquencies are on the rise

[Monseratto]

The numbers are coming in and its hitting where it hurts... Only Wally Mart seems to be thriving...

Vanishing jobs, stressed consumers feed downturn

WASHINGTON – Ford plans to cut about 2,260 more jobs, the latest in a vicious cycle of vanishing jobs and stresses on American consumers that is spelling deeper trouble for the already sinking U.S. economy.

In reporting Friday that it lost $129 million in the third quarter and went through $7.7 billion in cash, Ford Motor Co. said it will cut another 10 percent of its North American salaried work force costs as it tries to weather the worst economic downturn in decades.

And more ominous news was looming Friday.

• The Labor Department's unemployment report was expected to show net job losses for October to total about 200,000. The unemployment rate, now 6.1 percent, is expected to rise to 6.3 percent. If it does, it would match the highest unemployment rate that was logged after the last recession, in 2001. The jobless rate hit 6.3 percent in June 2003 and then started to drift downward.

• And General Motors was expected to release a gloomy earnings report for the third quarter.

All the economy's woes — a housing collapse, mounting foreclosures, hard-to-get credit and financial market upheaval — will confront President-elect Obama when he assumes office early next year. Obama has shifted from campaign mode to the task of building a new Democratic administration. A top priority will be quickly assembling his economics team, including the secretaries of Treasury, Commerce and Labor.

On the crucial jobs front, the situation is likely to move from bad to worse next year.

Employers have slashed jobs in the first nine months of this year. A staggering 760,000 losses have been racked up so far.

Many expect the jobless rate to climb to 8 percent, possibly higher, next year. In the 1980-1982 recession, the unemployment rate rose as high as 10.8 percent before inching down.

Stressed consumers are cutting back on their shopping and trying to trim their debt. Economists believe consumers cut back on borrowing in September, as another report to be released Friday is expected to show.

Nearly half a million Americans filed new claims for unemployment benefits in the last week alone, and skittish shoppers handed many retailers their weakest sales since 1969, government reports out Thursday showed.

The Labor Department said new filings for jobless benefits clocked in at 481,000, a dip from the previous week but a still-elevated level that suggests companies are resorting to big layoffs to cope with the economy's downturn.

Hartford Financial Services Group Inc., Circuit City Stores Inc., drug maker GlaxoSmithKline PLC, chip maker Advanced Micro Devices Inc., auto parts maker Dana Holding Corp., cable operators Comcast Corp. and Cox Communications Inc. and Fidelity Investments are among the companies that recently have announced layoffs.

To provide fresh relief, House Speaker Nancy Pelosi said Democrats, in a lame-duck session later this month, would push to enact another round of economic stimulus to provide more relief, which could include extending jobless benefits.

A $168 billion package, including tax rebates for people and tax breaks for businesses, was rolled out earlier this year. Short of a package of $100 billion or more, the House could press the Senate to pass a smaller $61 billion measure that would bankroll public works projects to help generate new jobs and would extend unemployment benefits.

Companies are begging for help, too. The leaders of General Motors, Ford and Chrysler and the president of the United Auto Workers union came to Capitol Hill to discuss billions of dollars more in financial help.

Reeling from layoffs and watching their wealth shrink as home values and nest eggs have been clobbered, shoppers turned extra frugal last month and sent sales at many retailers down sharply.

Michael P. Niemira, chief economist at the International Council of Shopping Centers, summed up the situation as "awful."

According to the ICSC-Goldman Sachs index, sales fell 1 percent, the weakest October performance since at least 1969 when the index began.

Target Corp. and Costco were among the many retailers reporting sales declines last month. Even teens stayed away from malls. American Eagle Outfitters Inc. and Abercrombie & Fitch Co. reported drops in sales. But Wal-Mart Stores Inc., the world's largest retailer, logged a sales gain as shoppers hunted for bargains.

The Federal Reserve ratcheted down interest rates last week to 1 percent and left the door open to further reductions in a bid to prevent a drawn out recession in the United States.

The country's economic state has rapidly deteriorated in just a few months. The economy contracted at a 0.3 percent pace in the July-September quarter, signaling the onset of a likely recession. It was the worst showing since 2001 recession, and reflected a massive pullback by consumers.

As U.S. consumers watch jobs disappear, they'll probably retrench even further.

That's why analysts predict the economy is still shrinking in the current October-December quarter and will contract further in the first quarter of next year. All that more than fulfills a classic definition of a recession: two straight quarters of contracting economic activity.

http://news.yahoo.com/s/ap/20081107/...ncial_meltdown

[uls]

Yep

Wire Services | 07 Nov 2008 | 09:19 AM ET
U.S. employers cut payrolls by 240,000 in October, much more severely than expected, while September registered the biggest monthly loss in jobs in nearly seven years, according to a government report on Friday that showed U.S. labor markets were sharply deteriorating.

Job losses in the US since the beginning of the year: approx. 1.2M

half of those lost in the last 90 days.

[tidus1203]

Expect more job losses in the future. There are now talks about bailing out car makers if that fails watch out for a huge spike in unemployment.

[uls]

yes, keep an eye on GM, Ford, and Chrysler

they are on the edge of the abyss

[tidus1203]

Ford is burning cash much faster than those DOT-COMS burned their IPO cash during the DOT-COM mania And to be honest there is no solution to this, bottomline they are not selling enough cars to cover their cost their business model is broken. No matter how much money you throw at them, they will burn it so fast that it wouldn't matter. My solution (at the expense of short term super pain) is let it go bankrupt and go to the proper bankruptcy courts. Malay nyo, the money making carmakers like Toyota and Honda might wanna pickup some of Ford's assets and brands. Like a true free market, the incompetents should perish and the competents (Toyota and Honda) should take over the assets of the incompetent and start over.

[uls]

haha

everyone wants a bailout

U.S. Carmakers Said to Seek $50 Billion in U.S. Loans (Update1)
By John Hughes
Nov. 7 (Bloomberg) -- General Motors Corp., Ford Motor Co. and Chrysler LLC, strapped for cash as sales plunge, are seeking $50 billion in federal loans to help them weather the worst auto market in 25 years, a person familiar with the matter said.

The package would be $25 billion for health-care spending and $25 billion for general liquidity that could be delivered in different ways, including short-term borrowing from the Federal Reserve, said the person, who asked not to be identified because the plan isn't public. In return, the companies would be willing to take steps such as granting stock warrants, the person said.

[Monseratto]

I wonder why there's no news from Capitol Hill about any rescue plan. And even after the release of those bad figures by Ford and GM, the Dow still manage to close on the upside...

GM: Almost out of cash

NEW YORK (CNNMoney.com) -- General Motors shook an already embattled auto industry Friday as it reported a huge quarterly loss that was much worse than expected and warned it is in danger of running out of cash in the coming months.

But the most shocking news came in its statements about its cash position. GM said it had burned through $6.9 billion during the quarter and warned that it "will approach the minimum amount necessary to operate its business" during the current quarter.

In addition, the company said that in the first half of next year its "estimated liquidity will fall significantly short" of what it needs to continue operating. It said the only thing that would save it would be a significant improvement in economic and automotive industry conditions, help from the federal government, better access to capital markets or some combination of those options.

The report was by far the most grim assessment by a company that has insisted it is not considering filing for bankruptcy court protection. While the release did not mention the threat of bankruptcy, the outlook appeared to raise the possibility of such a dramatic step.

In response to questions on a conference call after the report, CEO Rick Wagoner said he would not speculate on whether GM would need to file for bankruptcy protections.

"We're convinced the consequences of bankruptcy would be dire and extend far beyond General Motors," Wagoner said. "We need to find a way to get through this and that's our focus."

Shares of GM (GM, Fortune 500) fell 9% Friday to $4.36, a nearly 60-year low.

Industry experts said the incredibly weak October U.S. auto sales that GM and the rest of the industry reported Monday, coupled with Friday's report, mean that bankruptcy for GM is a very real risk.

GM's announcement came on the same day that Ford Motor reported a $3 billion loss in the period, excluding special items. Even Japanese rival Toyota Motor (TM), which has a much better cash position coming into this crisis, announced Thursday that its third quarter earnings had plunged nearly 70%, as it slashed its full fiscal-year outlook by 50%.

[Monseratto]

There goes the American Dream...

Layoffs hit every corner

NEW YORK (CNNMoney.com) -- The first week of November has been brutal for the job market, with nearly 15,000 announced job cuts from a slew of companies across multiple industries.

Eight companies announced job cuts this week as a means of cost-cutting during desperate times, representing industries as widespread as retail, finance, leisure, pharmaceutical and toy and automobile manufacturing.

On Friday, the Labor Department reported that the U.S. economy sloughed nearly 1.2 million jobs through October. Just in the month of October, the economy lost 240,000 jobs, raising the unemployment rate to 6.5%.

[size=3]"We're losing jobs just about everywhere," said Robert Brusca, chief economist and Fact and Opinion Economics. "People are slowing their spending on everything. Now, even wealthier people are reluctant to spend money."[/size]

Circuit City (CC, Fortune 500), an electronics retailer based in Richmond, Va., kicked off the week by announcing on Monday that it was reducing its domestic workforce by 17%. The company would not comment on the number of employees that would be affected, but according to a recent 10K filing, Circuit City employs about 43,000 people in the U.S. That would mean roughly 7,300 positions are being lost, the biggest of the cuts in November so far.

On Tuesday, the Connecticut-based insurer Hartford Financial (HIG, Fortune 500) reported 500 cuts.

The following day, the British drug company GlaxoSmithKline (GSK) said it would cut 1,000 sales positions.

Thursday was particularly gloomy, with four companies announcing cuts: 1,300 from Fidelity Investments of Boston, 1,000 from toy maker Mattel (MAT, Fortune 500), based in El Segundo, Calif., 375 from Borgata Hotel Casino of Atlantic City, N.J., and 850 from La-Z-Boy (LZB), a furniture producer and retailer based in Monroe, Mich.

Ford Motor (F, Fortune 500) was the most recent to announce job cuts, with 2,600 cuts announced on Friday. The battered auto maker said it was trying to hold on to its dwindling cash reserves as it reported a $3 billion operating loss for the third quarter.

Most of the cuts are slated for the U.S., though Mattel said its job cuts will affect its global workforce.

"You have essentially every sector, every industry, furloughing workers, so it's going to get bad - considerably worse - before it gets better," said Richard Yamarone, director of economic research at Argus Research. "If the automotive sector falls, and it's on the ledge, then you could very easily have double-digit employment."

Lakshman Achuthan, managing director of the Economic Cycle Research Institute, said that Hartford and Fidelity are getting squeezed by the plunging value of the stock markets. But he said the other companies - and even the drugmaker GlaxoSmithKline - are getting stifled by a consumer lock-down on any type of spending that is not totally necessary.

"You don't have to buy a La-Z-Boy today, but you might have to go to the doctor, you have to eat, and you have to pay rent," said Achuthan. "[The companies] are seeing that the consumer has been stunned or is frozen and will not make any purchases that he will not absolutely have to make."

As for Glaxo, Achutan said that many Americans get their health insurance through their jobs, and when they lose their jobs, it affects the drugmakers. He said newly-uninsured people are spending their money on food and housing, instead of drugs.

Lawrence Mishel, president of the Economic Policy Institute, dismissed any notion that the job market would pick up in 2009, given the omnipresent nature of the layoffs, and the fact that they stem from a "credit freeze on top of a recession caused by a housing meltdown."

"The fact is that we're going to have very high unemployment for several years," said Mishel.

http://money.cnn.com/2008/11/07/news...ion=2008110717

[Monseratto]

Should Capitol Hill really help them out?

Those against giving Detroit cash complain it would be throwing good money at a broken industry.

They say these companies are too big. They promised too much to past workers. Earlier government loans have failed to spur real change.

Many wonder why this time would be any different. Maybe it is time to face the music.

Unlike the bank bailout which was designed to address credit and lending, this bailout is more about saving jobs.

Analysts argue that while big, the auto industry is not nearly as crucial as it once was. They say the money would be better spent retraining displaced workers and getting them different jobs.

And then there is the moral hazard issue. Where do we draw the line? If taxpayers bailout the car companies, who will be next? Airlines? Construction? There isn’t enough money to bailout every company hurt by in this downturn.