When banks give out loans, they do not give out money that they already have. They simply give the loan which is a promise to pay the actual money which they never really have to do. In the economy, 95% of the money is in the form of bank credit. There is no real currency backing it.

Whenever we borrow money, the bank creates new money. This process constantly (almost) expands the money supply. This dilutes the value of the existing money. This is because total debt has to keep expanding in order for people to be able to pay back what they owe, otherwise there simply won’t be enough money to earn to pay back what we owe. When that happens, we declare bankruptcy, there are foreclosures, unemployment and so on which causes the vicious cycle of deflation.

Current credit based monetary system is a game of musical chairs. As long as the music keeps playing (as long as total debt keeps increasing), system keeps running. The moment debt expansion stops (credit expansion stops), then money creation stops and it becomes impossible to pay existing debt (principal + interest) with the existing credit expanded (~existing money), thus some of us are guaranteed to go bankrupt (standing when the music stops). This is because there simply is not enough money in existence to pay the existing debt principal + interest. An interest free monetary system may be the fix.

Charging interest is bad for the society

As explained above, mathematically, we understand that the existing credit based system, with it’s ever expanding interest demand, can cause deflation and guaranties bankruptcies. The practice of constantly expanding the money supply steals from the savings of honest earners who want to use money as a store of value. Ordinary people should not need a Ph.D. in finance to figure out where to put their savings. Money, however it is defined, should be able to do that job in an uncomplicated way.

Most of us are conditioned to “make money work for us”. It is common wisdom to expect some interest for your money. Adam Smith claimed when individuals maximize their gains, that would ultimately serve the society and move it forward. This is not always the case. Here we have displayed why credit based monetary system that uses interest as a vital component falls short of satisfying the society’s needs. It creates conditions in which the human productivity is curtailed and focused on financial gain instead of supplying the necessities of life. Real economy is being burdened by a large financial economy that has to live off of the effort of the real economy.

Bad for One, Good for All

Religions (notably Islam today, Christianity earlier) forbid the practice of usury. There seems to be valid reasons for this and some think that we need to devise a new system to correct our wrongs. However, until then you need to know the dangers of the current system and operate accordingly (Threat of inflation, deflation, unemployment, risk of default, currency devaluation, business cycles to name a few).

Here are observations from the society where maximizing one individual’s gain hurts the society.

Sex Selection

In some cultures (India, China), parents prefer a male child. This is because a female child eventually requires the parents to pay a dowry, and the male carries the family name. Thus, to maximize their own good, parents decide to end pregnancies for a female baby, and keep male babies. This eventually brings an imbalance in male / female population ratio such that some males are not able to “carry on the family name” because they cannot find a bride to marry.


Wal-Mart is the store that has the lowest prices. To optimize our own gain, we go and shop there. But it comes with a price. It brings lower wages to the community. Workers have less benefits. Wal-Mart may cause other competitors close down their doors causing unemployment in your community. It will have ripple effects. Therefore, in this example, even though we maximize our personal gain in the immediate future, it effects the community in a negative way.

The Tragedy of the Commons

Here is a story by Garrett Hardin, in his essay "The Tragedy of the Commons, 1968".

There is a pasture owned in common by the residents of a village. The pasture is at full capacity with regard to the number of the sheep the villagers have. It is such that if villagers add one more sheep, it will start degrading the pasture.

With their natural greed and an urge to maximize individual gain, each villager thinks if he adds one more sheep he will make more money. Thus they keep doing this. As they see the pasture land loose it’s productivity, their mentality will be “it is dead anyway, we should get what ever we can” and keep adding sheep as much as possible. This brings them to a state where the pasture will be damaged threatening their entire flock with devastating losses. It would be prudent for them to agree on a balanced production capacity and limit themselves and police the community to make sure everybody obeys. If not policed, volunteers will be hurt by others who grab their share. Thus, volunteering does not work in these cases.

This story is similar to the loan interest situation. Some volunteers may deny doing business with interest. But this is not enough to save the society. Law must forbid interest or it won’t work.

Paying Off Debt

Here is a poll, from September 4, 2009 CNN Money:

In the light of the above videos, this chart sums up the mood. People are trying to pay off debt. Since our entire money supply is borrowed money, when we pay it off, the money supply shrinks. This is why FED is trying to print money to counter the deflationary forces. That will probably have bad inflationary effects later down the road. But for now, we are heading into deflation. The credit bubble is shrinking.

more HERE

Posted by Mr Thx Thursday, December 31, 2009 0 comments

By Jeff Clark in Casey's Daily Dispatch:

Long-term readers know that gold moves inversely to the dollar, meaning if the dollar drops, gold tends to rise (and vice versa). This happens with about 80% regularity. But what many gold writers haven’t acknowledged is the leveraged movement our favorite metal has demonstrated this year to the world’s reserve currency.

The U.S. dollar index, a six-currency gauge of the greenback’s value, has dropped 7.1% so far this year. Meanwhile, gold is up 34% year-to-date. In other words, for every 1% drop in the dollar index, gold has risen 4.7%. If that approximate percentage holds over time, one can begin to estimate what the gold price might be if you know what the dollar might do.

While the dollar is likely to bounce at some point, making gold correct, the long-term fate of the dollar has already dried in cement. If the dollar were simply to return to its March 2008 low of 71.30 next year - a 5% drop from current levels - this would imply a rise in gold of 23.5% and a price of about $1,437 an ounce.

The long-term scenario is more dramatic. If you believe the dollar will lose half its value from current levels, this would imply a gold price around $2,735. If you believe it will lose 75% of its value, gold would reach about $4,103. Doug Casey has called for a $5,000 gold price; if he’s right, guess what that implies for the dollar?

And think about this: these calculations ignore what else might “show up,” such as when price inflation shows up in the economy, the greater public shows up to buy gold, or the Chinese don’t show up at an auction. Could $5,000 gold be too low?

Unless you think the dollar’s problems are solved, its eventual demise is gold’s eventual glory. Prepare, and invest, accordingly.

source HERE

Posted by Mr Thx Wednesday, December 30, 2009 0 comments

As we enter the new year investors will be wise to focus on the risks of 2009. Although the crisis appears long behind us it’s important to keep an eye on the bigger picture. Little has changed in terms of the structure of our global economy therefore the risks remain largely the same. Let’s take a moment to highlight some of these risks as we begin to prepare for a new year:

1) Those darned analysts

It would be comforting to think that Wall Street’s analysts were in fact doing us all a great big favor with their expert analysis, but the truth is, more often than not, they aren’t. As we have seen with my proprietary expectation ratio, the analysts have been behind the curve at every twist and turn of the crisis. They remained too bullish heading into 2007 & 2008 and then were behind the curve as operating earnings tanked and they turned very bearish in Q408 and Q109. Like clockwork, the ER bottomed and the market soon followed. The greatest risk heading into 2010 is an analyst community that becomes wildly bullish and sets the expectation bar too high for corporate America to hurdle itself over. Early readings show this is not a great risk at this point, but it continues to tick higher.

2) Stimulus, stimulus, stimulus.

There is little doubt that the greatest mean reversion in modern economic times has been largely due to government stimulus. The bank bailouts, housing bailouts/stimulus and auto bailouts all helped stop the bleeding during a time when the economy appeared to be on its deathbed. Unfortunately, government spending isn’t the path to prosperity and the private sector will be forced to pick up the slack sooner rather than later. 2010 is likely to largely hinge on this transition. The government will begin to sap the economy of its massive stimulus as the year drags on and with that comes increased risks that the equity markets will struggle on without big brother’s aid.

3) Anything China

China has grown to become the hope of the global economy. With their booming growth, growing consumerism, and fiscal prudence, China is the envy of the economic world. The rally in commodities and manufacturing continues to chug along with a great deal of help from China. If anything goes wrong in China (and we mean anything) equity markets will tumble.

4) The almighty bond market

Low interest rates and benign bond market action have helped to stabilize the global economy. But as the United States and Japan print paper like it’s going out style the risks in the global bond market continue to increase. As Julian Robertson (and recently David Teppers) said, bond investors will not put up with signs of inflation for long. If bond investors get antsy and yields spike in 2010 the party is over. And the party might quickly turn into a nightmare. If any country begins to dump U.S. Treasuries on the market mortgage rates would spike and that the Fed would be unable to maintain their accommodative stance. The Peter Schiff’s of the world would rejoice as the global economy tanks, a potential dollar crisis ensues and that yellow metal sky rockets higher.

5) Banks. ALL OF THEM.

Our zombie banking system continues to hold back the economy. As we copy the Japanese the battle between bank survival and loan growth continues to this day. Banks remain wary lenders as they attempt to reduce their balance sheet risks, maximize the quality of their earnings, and minimize their dependence on the Federal government. Meanwhile, the king zombie, the Central Bank of the United States, continues its boom bust policy of low interest rates and “accommodative” money. This is not only a 2010 risk, but likely a risk for the rest of this new decade. The banks are likely to be fixing their balance sheets for some time to come and the Fed’s boom bust policy will almost certainly end the same way Greenspan’s boom bust policy ended – right back where we began.

source HERE

Posted by Mr Thx 0 comments

The announcement by the United Nations this week that it will license the minting of silver and gold bullion coins bearing the UN logo may be the button that launches metal prices into orbit.

In its wide-ranging report this fall, the UN Conference on Trade and Development (UNCTAD) stated that the system of currencies and international banking practices within today’s economies were inadequate, and responsible for the present economic crisis. The report advocates that the present monetary system, wherein the dollar acts as the global reserve currency be re-examined “with urgency”.

The UNCTAD Report was the first time a major multinational institution had forwarded such a suggestion or measure, although a number of countries, including Russia and Brazil have supported replacing the dollar as the world's reserve currency. China's central bank chief Zhou Xiaochuan has mentioned that the dollar could become a basket of currencies instead.

The UN commission dismissed such a widening, saying a multiple-country system "may be equally unstable, and not transparent."

The panel is seeking more monetary balance for developing countries, and a means for them to retain their reserves and domestic savings independent of foreign agencies and arrangements.

Panel Chair US economist Joseph Stiglitz, a Nobel economics laureate, has made plain that there was "a growing consensus that there are problems with the dollar reserve system. Developing countries are lending the United States trillions dollars at almost zero interest rates when they have huge needs themselves," Stiglitz stated.

"It's indicative of the nature of the problem. It's a net transfer, in a sense, to the United States, a form of foreign aid."

A report contributor, Detlef Koffe, concluded that "Replacing the dollar with a bullion currency would solve some of the problems related to the potential of countries running large deficits and would help stability,"

US Fed spokesperson Patrick Paulsen acknowledged that there could be some strong reaction in the US to the global currency, and that it would “…be viewed as a step toward a New World Order. But those same people have probably lost patience with the money-changers as well.”

He clarified that he would “…nonetheless anticipate that the western currencies will continue to depreciate, given Asia’s ascendancy in trade and manufacturing, to find their own value and enable their economies to compete. This is a UN perogrative we cannot and should not control, it’s returning to what we had with Bretton-Woods.”

The UN decided to provide a “public option” savings currency, whereby currency mints will be licensed to mint two kinds of bullion coins the size of the 1€ coin - the Uno (silver ~$5) and the Oro (gold, ~$500). The names were adopted from the book “The Humanist”, which foresees the UN being better funded by 2015 via its licensing fees, expected to be 10-15%.

The coins have a marker chemical in them that enables their authentication and processing by modified retail ATM and exchange machines in Europe, which will be distributed globally. Any licensee, public or private, can produce such bullion coinage under contract. The United Nations is doing no more than what most countries do already, except that the value of its coins will reflect their bullion weight.

Armand Dufour of the European Bank welcomes their introduction. “People have enough Fiat currency options, government and banks cannot intrude on bullion coins – they will have their own inviolable value.”

He does have one concern, however. “If we see a dismounting from the US dollar, as is inevitable in the main view, there will be a strong move to the Oro, which may drive its price up to the point where governments will not allow its circulation; they will try to isolate it.”

“That’s when the fun begins.” he said.

source HERE

Posted by Mr Thx Thursday, December 24, 2009 0 comments

WASHINGTON: Treasury Secretary Timothy Geithner said Tuesday the Obama administration is confident it will prevent a repeat of last year's financial crisis, the worst in seven decades.

"We are not going to have a second wave of financial crisis," Geithner said in an interview with National Public Radio.

"We cannot afford to let the country live again with a risk that we are going to have another series of events like we had last year. That is not something that is acceptable."

Geithner, interviewed on NPR's "All Things Considered" program, rejected the idea that a serious new crisis could be triggered by lingering problems with commercial real estate loans or with a sudden weakening in the value of the dollar.

"We will do what is necessary to prevent that and that is completely within our capacity to prevent," he said.

Geithner spoke on a day when President Barack Obama met with executives from a number of community banks, reiterating his plea for banks to do more to lend to small businesses.

Obama took a more conciliatory tone with the leaders of the smaller community banks than he had in a meeting last week with leaders of the country's largest banks.

Geithner, referring to the actions of the large banks in last year's crisis, said he did not believe they yet understood that they had lost the "confidence and trust of the American people."

He said bankers had a "long way to go" to restore that confidence.

Geithner defended his numerous contacts with executives from the largest banks, contacts that were revealed in telephone calendars obtained in October by The Associated Press under the Freedom of Information Act.

Geithner said that he also spent a considerable amount of time talking to owners of small businesses and to small banks as well.

He called it a "misperception" that he was devoting too much time conferring with the largest banks.

He said the conversations he had right after taking office should be viewed in the context of the serious crisis facing the financial system last winter and spring.

"I'm the secretary of the Treasury. I have to spend time figuring out what it's going to take to fix the things that are broken in the financial system," he said.

Asked about the economy, Geithner said there were a number of signs that economic conditions were beginning to improve in terms of consumer and business confidence rising.

He said it was likely that overall economic growth in the current quarter is accelerating, but he cautioned that dealing with the economy's troubles would take time.

"We were in a very deep hole and it is going to take a long time to repair the damage done to confidence," he said. - AP

source HERE

Posted by Mr Thx Wednesday, December 23, 2009 0 comments

In a long-term assessment of employment data released last week, the Bureau of Labor Statistics surveyed the country's jobs landscape and developed a picture of how it's likely to evolve over the next ten years.

As the population ages and manufacturing jobs wane, much of the next decade's employment growth is expected to be in service industries -- such as health care services or business services -- which are projected to make up a whopping 96% of the increase in new employment.

But if some industries flourish in the new economy, others are likely to deteriorate -- and slash jobs. And in the report, the government pointed to ten struggling industries that it says are likely to hemorrhage the most jobs in the next decade.

Did your industry make the list? Check them out below:

#10 Wired telecommunications carriers, -73,000

The Bureau of Labor Statistic predicts that the wired telecommunications industry, which provided 666,000 jobs in 2008, will lose 11% of its employment opportunities by the end of the next decade.

#9 Gasoline stations, -75,000

By 2018, the number of gas station industry jobs, which in 2008 stood at 843,000, is likely to be cut by 9%, according to the government report.

#8 Support activities for mining, -76,000

The Bureau of Labor Statistics forecasts that around 23% of the jobs in the mining support industry -- which as of 2008 sustained around 328,000 jobs -- will be lost by 2018.

#7 Newspaper publishers, -81,000

Think the worst is over for print media? The government estimates that within the decade that number will dwindle by nearly 25%, to 245,000.

#6 Cut and sew apparel manufacturing, -89,000

Despite widespread outsourcing to overseas manufacturers, in 2008 there were only 155,000 jobs in cut and sew apparel manufacturing in the United States -- the industry with the fewest jobs on this list. The Bureau of Labor Statistics anticipates that the industry will lose 89,000 jobs -- 57% -- by 2018.

#5 Printing and related support activities, -95,000

Whither Kinko's? The printing industry provided 594,000 jobs in 2008, of which the Bureau of Labor Statistics estimates it will lose about 16%, bringing the number down to just under 500,000.

#4 Postal service, -98,000

The postal service employed 748,000 people in 2008, but the government anticipates the number will fall 13% over the next decade to 650,000.

#3 Auto parts manufacturing, -101,000

The auto parts industry contributed about 544,000 jobs to the U.S. economy in 2008. Despite massive bailouts of the Detroit automakers last year, the government predicts the industry that serves those companies will lose almost 19% of its jobs.

#2 Semiconductor and other electronic component manufacturing, -146,000

The Bureau of Labor Statistics projects that the semiconductor manufacturing industry will lose almost 34% of its jobs by 2018. That would bring the industry's total jobs down to 287,000 from the 432,000 jobs the industry supported in 2008.

#1 Department stores, -159,000

In 2008, there were 1,557,000 jobs in department stores -- more than any other industry on this list. But the government forecasts the industry will lose 159,000 of them -- more than 10% -- over the next ten years.

source HERE

Posted by Mr Thx Thursday, December 17, 2009 0 comments

“The Gulf monetary union pact has come into effect,” said Kuwait’s finance minister, Mustafa al-Shamali, speaking at a Gulf Co-operation Council (GCC) summit in Kuwait.

The move will give the hyper-rich club of oil exporters a petro-currency of their own, greatly increasing their influence in the global exchange and capital markets and potentially displacing the US dollar as the pricing currency for oil contracts. Between them they amount to regional superpower with a GDP of $1.2 trillion (£739bn), some 40pc of the world’s proven oil reserves, and financial clout equal to that of China.

Saudi Arabia, Kuwait, Bahrain, and Qatar are to launch the first phase next year, creating a Gulf Monetary Council that will evolve quickly into a full-fledged central bank.

The Emirates are staying out for now – irked that the bank will be located in Riyadh at the insistence of Saudi King Abdullah rather than in Abu Dhabi. They are expected join later, along with Oman.

The Gulf states remain divided over the wisdom of anchoring their economies to the US dollar. The Gulf currency – dubbed “Gulfo” – is likely to track a global exchange basket and may ultimately float as a regional reserve currency in its own right. “The US dollar has failed. We need to delink,” said Nahed Taher, chief executive of Bahrain’s Gulf One Investment Bank.

The project is inspired by Europe’s monetary union, seen as a huge success in the Arab world. But there are concerns that the region is trying to run before it can walk.

more HERE

Posted by Mr Thx Wednesday, December 16, 2009 0 comments

Newsweek. The magazine already has slashed its rate base (circulation guaranteed to advertisers) from 3.1 million to 2.5 million. It has announced further cuts that will take this figure to 1.5 million early next year. The New York Times reported that Newsweek’s advertising fell 29.9% through the first three quarters of 2009. According to the 10-Q for The Washington Post Company (NYSE:WPO), Newsweek ad revenue plunged 47% in the third quarter from the year before. The magazine has lost almost $30 million so far this year. Newsweek had hoped to transform itself into a poor man’s version of the Economist and has largely dropped covering breaking news and reviews of the big stories of the week. The change in the editorial direction of Newsweek may have been the right thing to do, but it came much too late. Newsweek, like many other print products, hopes to rely on internet readership and advertising to improve its fortunes. Audience measurement firm Compete indicates that the audience of Newsweek.com has dropped 15% in the last year to 1.3 million unique visitors a month in October. Audience research firm comScore shows an even sharper decline. That is, by itself, an important indication that the public has not been attracted to the “new” Newsweek. The Washington Post has enough trouble with fixing problems at its flagship paper. Its online news and commentary magazine, Slate.com, had more than 3.8 million visitors in October. Slate has none of the legacy print costs of Newsweek.

Motorola. The handset and telecom infrastructure company may finally have a future three years after falling from the No.2 spot in global cell phone share to obscurity. The time has come for the company to break itself into pieces and allow buyers to scuttle a brand with a bad reputation. The firm has said it will seek a buyer for its cable and wireless equipment companies for a $4.5 billion price tag. Motorola has a market cap of $19 billion. Motorola has long-term debt of $3.9 billion and cash of about $3 billion. Motorola has three divisions. The one that created most of the company’s value until recently is its mobile devices operation. The revenue from that division fell by almost half in the last quarter from $3.1 billion to $1.7 billion. But the future for the division is brighter, primarily due to its new Droid phone which has sold remarkably well and is being heavily promoted by Verizon Wireless. Industry experts expect that one million of the handsets have been sold in the last month. The value of the Droid is not the Motorola brand but the brand of the Google (NASDAQ:GOOG) Android operating system that runs it. A more successful Motorola handset company would be attractive to Samsung or LG. The most likely buyer is Nokia (NYSE:NOK), which has a modest market share in the US. Motorola still does very well in its domestic market. Nokia does not need the Motorola brand, but it could use a successful Android handset.

Palm. The smart phone company had a modest success with the launch of its Pre. The follow-on product, the Pixi, is not doing as well. The Pre is facing renewed competition from the Motorola Droid and new high-end handsets from Nokia and Samsung. It competes with the two smart phone juggernauts the Apple (NASDAQ:AAPL) iPhone and RIM (NASDAQ:RIMM) Blackberry. In an effort to push sales, Amazon (NASDAQ:AMZN) dropped the price on the Pre to $79.99. Palm needs a deal with both AT&T Wireless (NYSE:T) and Verizon to supplement the one it has with Sprint (NYSE:S). It is not clear that those partnerships will be formed. Pre sales have fallen off, if a number of Wall St. analysts are correct. Many analysts have sharply dropped their stock price targets to $10 based on concerns that Palm will significantly miss its earnings targets. The firm’s stock has decreased from over $18 earlier this year to $11. Nokia has forecast that global handset sales will only rise 10% next year, which will make it nearly impossible for the market to support the number of manufacturers in the business today. Both LG and Samsung, the No.2 and No.3 handset companies, have weak smart phone lines. Each is jealous of its brand. With a market cap of $1.7 billion, Palm is a cheap way to move further into the high-end handset business.

Borders. Borders Group (NYSE:BGP) lost the online and brick-and-mortar bookstore war years ago to Barnes & Noble (NYSE:BKS) and Amazon.com (NYSE:BGP). The company’s stock is down to $1.20 from a 52-week high of $4.48 and its market value is less than $80 million. For the quarter ending in October, the company’s loss from continuing operations was $39.0 million,or $0.65 per share, compared to a loss of $39.0 million, or $0.64 per share, a year ago. Revenue was $595.5 million, down $86.6 million, or 12.7%. Border’s large Waldenbooks division has all but disappeared. That part of Border’s operations is down to 361 stores. With its debt net of cash at $375 million, a competitor like Barnes & Noble could buy $2 billion in annual revenue for a fraction of sales and cut general and administrative costs to improve margins. Borders has been dead for over two years, but no one has been able to dispose of the body.

Blockbuster. Blockbuster’s (NYSE:BBI) stock traded for $10 less than it did five years ago. Shares change hands for $.62 now. The video rental company had an awful third quarter. Revenue for this period of 2009 was $910.5 million, down from $1.16 billion for the same quarter a year ago. The 21% revenue decrease was mostly due to a 14% decline in same store sales. The firm’s net loss was $114 million compared to a $19 million loss in the same period in 2008. Blockbuster has only $141 million in cash and cash equivalents. No one has figured out what to do with Blockbuster. The company has 3,662 stores in the US and 1,703 overseas. Blockbuster has lease liabilities on a number of those stores, but ideally the company would be much smaller. It lost its chance to be in the online video rental business to NetFlix (NASDAQ:NFLX) and its chance at IP-based VOD to a number of internet streaming services and cable set-top box based products. The market value of the company is only $125 million. Blockbuster has bought itself some time by refinancing a large part of its debt and it has been aggressively closing stores. One of the things that Blockbuster mentions in its SEC filings is that its debt load and declining revenue could force it to seek a restructuring of its indebtedness or file for protection under the U.S. Bankruptcy Code. A bankruptcy will do almost nothing to improve Blockbuster’s prospects. Blockbuster does have over $1.7 billion in assets, not all of them saleable, but the firm will almost certainly face liquidation in the relatively near future.

Fannie Mae (FNM) and Freddie Mac (FRE) are intertwined closer than peanut butter and jelly. These two former government sponsored entities are now in government conservatorship. Their influence has largely disappeared. In the 1990’s it was believed that the government would never allow them to fold. It seems today that the GSEs are being kept afloat merely because it is cheaper and easier for the government to keep them in limbo than to repossess them and assume their liabilities. The sad thing is that even if the turnaround in housing lasts, it is just not enough to help Fannie and Freddie. Delinquencies keep rising and using traditional balance sheet analysis is nearly impossible. Whether these stay above $1.00 or not, it also seems that the NYSE keeps these listed because of the high amount of shares traded rather than on the merits of the future of these stocks. Alan Greenspan once said they should be nationalized and relaunched as eight entities that are privately owned. KBW went as far as to say the value of the common and preferred shares are worth zero. There will be some remnants left over in the operations, but these are being kept alive for appearance and convenience rather than because of their solid operating metrics.

Ambac Financial Group, Inc. (ABK) is one of the former solid bond insurers that held the market together. The reality is that its peers may be in the same boat or close behind it, but Ambac is the one with the largest question mark associated with it today. Insuring municipal bonds become very difficult in 2008 and for much of 2009 and its structured finance guarantees brought up what could be an untenable situation. What is sad is that a month ago came the company’s earnings on items which reinvigorated buyers of penny stocks and speculative stocks. Then came the change of heart. It was questionable whether Ambac could stay above regulatory capital requirements, and that was after the company disclosed that it may be forced to file for bankruptcy protection if it was unable to improve its capital position. It did claim enough regulatory capital, but then the Chief Financial Officer Sean Leonard resigned after the company missed a regulatory filing deadline and that is often enough to spook any investor in a troubled company. Back-dated tax refunds may help the company stay afloat longer, as would a new capital raise if it is even possible. But for Ambac to continue to function under normal operations, it seems as though the capital markets would have to revert back to the boom days rather than the after-shock days.

Eastman Kodak Co. (EK) has been on a downward trajectory since even before the end of the last decade. CEO Antonio Perez has not been able to fix the company since he took over in 2005 and Kodak keeps its heavy project investing and has been in a restructuring state for about as long as memory can go back. How much this has recovered from its lows is probably irrelevant today. And the notion that Perez was re-signed through 2013 is almost baffling. This was one of the greatest American brands of the 20th century. But its entrance to digital printing was very late and too many little dot.com me-too companies were able to jump way in front of the company’s digital efforts. The latest financing deal with KKR was for $700 million, and this seemed more like KKR was getting itself into a position to make a run at the company with a seniority position in the credit structure. Kodak won’t cease to exit. It just may wind up in a private equity portfolio with a much leaner and meaner structure. And that might in fact be a take-under rather than by a traditional buyout. It seems as though Eastman Kodak is in the same or an even worse boat than newspapers, with the key difference being that newspapers still have a business if advertising from auto dealers and housing ever comes back.

Sun Microsystems Inc. (JAVA) may be headed into Oracle (ORCL) and it may not. Its fate as a standalone company is however looking more and more like an inevitable fate. IBM (IBM) was interested in Sun, but dropped out. And now the European Commission somehow is worried about too much control of open source in the hands of Oracle even though much of this stuff is free or has been given away by Sun for next to nothing. Maybe having a money-losing model is what the European regulators want. But if the Sun-Oracle merger is blocked, the Sun has to do something and in a hurry. It will be forced to go out and buy a revenue and earnings stream with the main criteria being earnings. The company’s loss history and awful internals (not excluding employee morale) will make this even more so the case. So even if Sun is not acquired, it has to go make a transformative deal and it needs a good economy for its core operations to run at profitable levels. If Sun exists a year out, it seems that it will be a very different company by force more than by choice.

E*Trade Financial Corporation (NASDAQ: ETFC) is a great company with a great client base. And it was run into the ground from giving risky loans and acting as the end-user banker. Then it got bailed out in a deal with Citadel which gave the firm an extra layer of trade executions and gave Citadel control over the company’s operations. The dominance of Citadel is not as much as it was in even just a few months ago, but the company is soon to be without its replacement CEO. Things have got better at E*TRADE on operations, and the company’s solid advertising campaign allowed the firm to keep growing at a time in 2008 when suddenly the company appeared to be at-risk. The at-risk issue is one that might not go away for some time because of its loan exposure that it is stuck with and because write downs kept coming. Now, it seems that the wagons may be circling around E*TRADE despite the notion that many dismiss TD AMERITRADE (AMTD) as a suitor. E*TRADE still has a difficult ride if it has to just whether the storm and it may not have the resources needed to ride it out. That will come up for more debate if write downs and charges keep continuing. But for a larger buyer, particularly the non-bank companies that claim to be bank holding companies, then its 2.7 million brokerage accounts and total accounts of more than 4.5 million will be much more valuable to a suitor than to see what is left of the company if the finances turn back south.

source HERE

Posted by Mr Thx 0 comments

Even central bank critic U.S. Rep. Ron Paul is surprised that both his colleagues and the nation now listen to his calls for an audit of the notoriously untouchable Federal Reserve. Paul has represented Texas for 22 years and, as a Libertarian, he actually believes that the Fed should be abolished, but he will settle for the next best step. Meanwhile, even longer than Ron Paul has campaigned against the Fed, Bob Prechter has steadily built the case that the Fed is powerless to change the trends in the economy. He thinks the biggest mistake is to view the Fed as a leader rather than a follower of the markets. Here's an excerpt from his question-and-answer book, Prechter's Perspective, which describes why the financial markets trump the Fed's moves.
Excerpt taken from Prechter's Perspective, originally published 2002, re-published 2004

Aren't there instances in which the government can intervene in ways to throw the Wave Principle off? A lot of people say the Fed stepped in and bought futures after the crash of 1987, for instance. Isn't that an example of enlightened government action?

Bob Prechter: First, remember that the Fed did not prevent the 1987 crash. It happened. Many claim that the Fed averted further collapse, but in our opinion, it acted on the day the market was due to bottom anyway, the evidence being that The Elliott Wave Theorist said in print four days earlier that the two-week cycle was due to bottom on October 20, and the market bottomed that morning. Then there's what happened in 1929 when a consortium of bankers amassed a pool of money to halt the October decline. On the strength of that buying and the resulting euphoria, stocks soared, for one day. Then they fell even harder, utterly ignoring a second attempt at "organized support" on the 28th. History provides several examples of failed attempts to stop a market collapse.

The unprecedented popularity of [former Federal Reserve Chairman] Alan Greenspan suggests that most people believe in the power of the Fed to prevent a crash.

Bob Prechter: The Fed's apparent success in 1987 made people, including Fed governors, confident that they can stop the next crash. But it won't work (more than briefly, anyway), because the wave of selling will be much bigger. When the Fed itself, then the professionals and soon afterward the public, realize that the Fed's attempt is failing, the overall panic will increase, at minimum negating any bullish effects of whatever actions it takes.

But there are no restrictions on the Fed, and, in recent years, especially in "crisis situations," we have seen there is no hesitancy to do whatever it takes to bail out troubled entities. Won't the Fed just lend its way out of the problem?

Bob Prechter: While it is true that the Fed has an unlimited power to offer credit, it cannot create liquidity, because it cannot force businesses and consumers to lend and borrow no matter how cheaply it offers credit. So deflation can happen regardless of the Fed's desires. As I see it, there are only two possibilities: (1) The Fed will act on the bottom day of a collapse and appear to have been effective, or (2) it will try to stem the tide early and fail. Either way, the market's ultimate destiny will be unaffected. Only people's thinking will be affected. Hope-filled bulls will hold on for the slaughter and irresolute bears will give up their positions. In other words, the main effect of this soothing news will be to produce a psychological deterrent to proper investment action.

The Fed has always been a focal point for the financial markets. In recent years, people's attention is absolutely riveted on every Fed meeting. Is this attention misplaced?

Bob Prechter: The obsession with the Fed's meetings is ludicrous. The Fed votes only to change its own rates, and it has always followed the rates set by the free market. In 1999 and 2000, when the Fed raised rates several times, it was repeatedly claimed everywhere that the Fed was conducting a "pre-emptive strike against inflation." But rates had been rising for months, and the Fed simply adjusted to the market, as always. We watch the market, which leads the Fed.

In the wake of an unexpected central bank action, have you ever had a wave pattern that skipped a beat or altered its course in any way?

Bob Prechter: Central bank action is never really unexpected because it's a product of the social mood, which permeates society. When you examine the charts, you can locate waves, but you can't locate central bank actions. Central bankers hope and panic and make decisions the same way the public does. Bankers are people, too, after all. They say, "We've got to react to this new condition. We've got to move money here. We've got to move money there." They are racing back and forth in rhythm with the market.

source HERE

Posted by Mr Thx Tuesday, December 15, 2009 0 comments

DUBAI (Zawya Dow Jones)--Dubai said Monday that it has received $10 billion in financing from Abu Dhabi, which will pay part of the debt held by conglomerate Dubai World and its property unit Nakheel.

Out of this, $4.1 billion will be used to repay Nakheel's Islamic bond, or sukuk, that matures Monday. The remainder of the funds will be used to finance Dubai World's needs up until the end of April 2010.

"We are here today to reassure investors, financial and trade creditors, employees, and our citizens that our government will act at all times in accordance with market principles and internationally accepted business practices," Sheikh Ahmed bin Saaed al-Maktoum said in a statement.

Dubai rocked world markets in late November when it requested a freeze on debt payments by Dubai World in order to restructure the conglomerate. Nakheel's bond had been seen by many as a litmus test for Dubai's ability to repay more than $80 billion of government and corporate debt.

"I think Abu Dhabi saw the adverse market reaction to Nakheel debt restructuring news play out over several days and perhaps decided they had seen enough," said Saud Masud, senior real estate analyst at UBS AG.

Talk that Nakheel could reach a positive outcome helped boost shares in Dubai on Sunday.

The Dubai Financial Market's main index closed up 3.3% at 1695.35, extending Thursday's 7% rally. However, the benchmark is still down about 19% since Dubai World requested the debt freeze.

"This is very positive news, and will be welcomed relief to bondholders in particular. We are expecting a strong positive reaction to U.A.E. and regional markets," said Ali Khan, managing director at Arqaam Capital. "Details yet to emerge, however headline is very positive."

In its statement, Dubai said it will focus on addressing the concerns of Dubai World's creditors and will start discussions with creditors and contractors shortly.

source HERE

Posted by Mr Thx Monday, December 14, 2009 0 comments

KUALA LUMPUR: Permodalan Nasional Berhad (PNB) hari ini mengumumkan agihan pendapatan skim Amanah Saham Berhad (ASB) sebanyak 7.30 sen bagi tahun kewangan berakhir 31 Disember 2009 berbanding 7.00 sen tahun sebelumnya.

Demikian diumumkan Pengerusi PNB, Tun Ahmad Sarji, di sini sebentar tadi. Ia membabitkan pembayaran dividen RM4.95 billion kepada pemegang unit, meningkat 19.56 peratus berbanding RM4.14 bilion tahun kewangan sebelumnya.

PNB juga mengumumkan pembayaran bonus 1.25 sen, membabitkan nilai RM537.65 juta. "Pembayaran itu akan memberi manfaat kepada 6.78 juta pemegang unit yang kini melanggan RM70 bilion unit ASB," katanya.

source HERE

Posted by Mr Thx 0 comments

Russia's Central Bank will increase its gold holdings by around 5% by buying 30 tonnes of gold from the State repository which had been planning to sell the gold on the open market.

Author: Polina Devitt and Robin Paxton
Posted: Saturday , 12 Dec 2009

MOSCOW (Reuters) -

Russia's state repository will sell 30 tonnes of gold worth $1 billion to the central bank next week, a source at the body said on Friday, keeping the metal inside Russia after rethinking a plan to sell it on the market.

Central banks worldwide are building up their gold reserves as the metal trades near record highs. Gokhran, the Russian repository, cancelled plans to sell the gold on the open market after information about the sale leaked.

"The primary aim is to make sure this gold doesn't hit the market and influence prices," said Olga Okuneva, metals and mining analyst at Deutsche Bank in Moscow. "It's also a way for the Russian central bank to diversify more into gold."

Russia had planned to sell between 20 and 50 tonnes on the open market to help plug a budget deficit incurred during its first recession in a decade. The economy has since shown some signs of early recovery, in line with a rebound in oil prices.

With gold trading at record highs of $1,226.10 per ounce last week, boosted by a weaker dollar, analysts said Russia would be reluctant to sell the metal abroad or to push prices down by releasing a large quantity to the market.

Thirty tonnes, or 964,522 ounces, is equivalent to 16 percent of Russia's gold production last year or up to 1.25 percent of global consumption of the metal.

The source at Gokhran, speaking on condition of anonymity, said Russian President Dmitry Medvedev signed a decree on Dec. 7 approving the sale. "Next week, I think, we will conclude everything," the source told Reuters. Finance Minister Alexei Kudrin first announced the sale on Nov. 18, saying Gokhran -- which falls under his ministry's watch -- would sell at market price and use some of the proceeds to buy diamonds from state-run miner Alrosa.

Kudrin, speaking to Reuters on Friday, said the sale would take place by the end of the year. He gave no more details.

Russia holds the world's third-largest gold and foreign exchange reserves -- $451.2 billion as of Dec. 4. It is also the world's fifth-largest gold miner, ranking between Australia and Peru, with an 8 percent share of global production.

The central bank held 19.5 million ounces of gold, or more than $20 billion worth, in its reserves as of Nov. 1.

source HERE

Posted by Mr Thx 0 comments

The amount of nonsense I come across misleading readers, or simply providing bad advice, makes me cringe. Sometimes our own site presents such information like discussing penny stocks and technical analysis.

In general, I distinguish bad advice, misleading or misguided information from that regarding a stock idea that simply did not pan out, of which I have been guilty too -- all of us have hits and misses. However, a post I read on Seeking Alpha promoting gold, with suggestions of doom by tailoring the data to fit the theory. The author supported his point by back-testing only ten years to a known low water mark.

This is not to say that there is not something of value to be gleaned from the story which is about more than gold, but the author chooses to give space to extreme views and some suspect data points.

There is a simple reason that over long periods of time gold under performs a broad based basket of equities available in the stock market. The price of gold fluctuates with demand that is created by fear, and the perception of scarcity. Like stocks, gold may be a good value at times, and not others. Is it really wise to invest in anything when it is at an all-time high, and driven by fear?

A review of history indicates that the price of gold fluctuates wildly and has not even kept up with inflation over the past 35 years.

The following chart comes from Gold Price

more HERE

Posted by Mr Thx Saturday, December 12, 2009 0 comments

1. Cut Your Credit Cards and Set A Budget

Every family that finds themselves in debt should cut up all their credit cards and live on a cash budget, keeping a log of each and every expenditure made. Use the following formula to set a budget. Keep in mind that the "life" category includes is everything from groceries, to gadgets to entertainment. Housing: 35%, Debt: 15%, Life: 25%, Transportation, 15%, Savings 10%.

2. Reduce Your Interest Rates

Reducing your interest cost is one way to fast track your way out of debt. Some people have interest rates as high as 30%, when they pay their monthly minimum, all they're doing is paying off interest rather than chipping away at the principal. By calling to negotiate with creditors, high interest rates can be brought down. If you call and a representative says they can't help you, ask to be connected to a supervisor until you get to someone with the authority to reduce your rates.

3. Bring In Extra Money

Do anything you can to bring in extra money to throw at your debt, even if you work a full time job. Consider overtime at work, dog walking, baby sitting, tutoring, or using any skill that's unique to you to bring home the bacon…some creative ideas we've seen on the show: web designing, party planning, teaching music lessons and much, much more!

4. Get Your Priorities Straight

When deciding how to tackle debt and putting a plan in place to save for the future, you have to consider all of your options. Ask yourself the tough questions and prioritize…if going to grad school is important, then maybe you can be a student but take on a part-time job. If having a child is important, do you need to take a full maternity leave? Should you consider buying a home - maybe renting is a smarter option? Make a list of things you want to do and discuss them thoroughly with your partner to help make the best decisions for you and your relationship.

5. Chip Away At The Debt

To reduce debt, make a list of every single debt that you have and rank them in order of the highest interest rate, not the highest balance. Pay off the highest interest rate card first. Every time you have extra money, throw it at the debt you've targeted until it's gone and then stop using that card! Reward yourself by making a checklist and crossing out the debt, you'll feel better as you start to see it disappear. When your debt is paid off, take the money you were allocating for debt repayment and put it towards savings.

6. Keep Things In Perspective

Getting out of debt isn't easy, but you have to remember that you cannot let debt consume you and hurt your relationship. You and your partner need to work through the debt together, making sacrifices but focusing on what's important as well - your family and your relationship. Get a babysitter and make time to do something special with your spouse so you can remember why you fell in love, set time aside to do group activities as a family to involve the kids as well. Don't let your debt get the best of you.

7. Getting Out of Debt Doesn't Mean You Can't Ever Spend Again

When working your way out of debt you can still spend on things that are important to you, you just need to plan and save for them. So for example, if you're planning to get married, don't rush out and cancel your wedding - re-think your wedding plans and see if there are cheaper alternative ways to spend on what you want. If you really love to travel, don't cancel your trip for the year, figure out a way to do it on a tighter budget and save a little each month for it so you don't have to put it on credit cards.

8. Stop Eating Out

Eating out costs way more than buying food and cooking at home, not to mention that the latter option is much healthier as well. Make cooking dinner a family activity, something that can be done to together to make the experience more enjoyable -- and when you're done cooking, sit down and have dinner together, discuss the day's events and catch up. Having dinner parties at home is also a way to cut down on entertainment with friends. If you're planning a romantic dinner consider taking the kids to their grandparents' and having dinner at home rather than in a restaurant. If you're going to get together with friends, consider the same thing. Remember, it's not about the food, it's about the company.

9. Get Organized

When it comes to working your way out of debt it's all about organization -- believe it or not getting your documents in order will help you pay down your debt because it puts you in control. Organize your paperwork so you know where every important document is and so that all documents are easily accessible. Use a collapsible file folder, label the tabs clearly and most importantly, do this with your spouse so you both understand the system.

10. Be Willing To Part With Toys

Sometimes to get out of debt you'll have to sell something that's really important to you or that you love. The reality is dealing with the heartbreak of losing material things will be far less than dealing with the damage that these things can do to your finances. If you have to sell a car, house, piece of jewelry, artwork or anything else, take a deep breath and realize that what you're doing will help your future and your finances -- and just let it go.

source HERE

Posted by Mr Thx 0 comments

In a report entitled "Worst-case debt scenario", the bank's asset team said state rescue packages over the last year have merely transferred private liabilities onto sagging sovereign shoulders, creating a fresh set of problems.

Overall debt is still far too high in almost all rich economies as a share of GDP (350pc in the US), whether public or private. It must be reduced by the hard slog of "deleveraging", for years.

"As yet, nobody can say with any certainty whether we have in fact escaped the prospect of a global economic collapse," said the 68-page report, headed by asset chief Daniel Fermon. It is an exploration of the dangers, not a forecast.

Under the French bank's "Bear Case" scenario (the gloomiest of three possible outcomes), the dollar would slide further and global equities would retest the March lows. Property prices would tumble again. Oil would fall back to $50 in 2010.

Governments have already shot their fiscal bolts. Even without fresh spending, public debt would explode within two years to 105pc of GDP in the UK, 125pc in the US and the eurozone, and 270pc in Japan. Worldwide state debt would reach $45 trillion, up two-and-a-half times in a decade.

(UK figures look low because debt started from a low base. Mr Ferman said the UK would converge with Europe at 130pc of GDP by 2015 under the bear case).

The underlying debt burden is greater than it was after the Second World War, when nominal levels looked similar. Ageing populations will make it harder to erode debt through growth. "High public debt looks entirely unsustainable in the long run. We have almost reached a point of no return for government debt," it said.

Inflating debt away might be seen by some governments as a lesser of evils.

If so, gold would go "up, and up, and up" as the only safe haven from fiat paper money. Private debt is also crippling. Even if the US savings rate stabilises at 7pc, and all of it is used to pay down debt, it will still take nine years for households to reduce debt/income ratios to the safe levels of the 1980s.

The bank said the current crisis displays "compelling similarities" with Japan during its Lost Decade (or two), with a big difference: Japan was able to stay afloat by exporting into a robust global economy and by letting the yen fall. It is not possible for half the world to pursue this strategy at the same time.

SocGen advises bears to sell the dollar and to "short" cyclical equities such as technology, auto, and travel to avoid being caught in the "inherent deflationary spiral". Emerging markets would not be spared. Paradoxically, they are more leveraged to the US growth than Wall Street itself. Farm commodities would hold up well, led by sugar.

Mr Fermon said junk bonds would lose 31pc of their value in 2010 alone. However, sovereign bonds would "generate turbo-charged returns" mimicking the secular slide in yields seen in Japan as the slump ground on. At one point Japan's 10-year yield dropped to 0.40pc. The Fed would hold down yields by purchasing more bonds. The European Central Bank would do less, for political reasons.

SocGen's case for buying sovereign bonds is controversial. A number of funds doubt whether the Japan scenario will be repeated, not least because Tokyo itself may be on the cusp of a debt compound crisis.

Mr Fermon said his report had electrified clients on both sides of the Atlantic. "Everybody wants to know what the impact will be. A lot of hedge funds and bankers are worried," he said.

source HERE

Posted by Mr Thx Friday, December 11, 2009 0 comments

Greece’s debt has just been downgraded, and experts say that if the country goes belly up, the euro could be in big trouble.

"The Greek problem will be an acid test for the currency union," a senior German government official told German magazine Der Spiegel.

Fitch Ratings cut Greece’s credit rating to BBB+, the third-lowest investment grade.

Meanwhile, Standard & Poor's placed Greece's A- rating on watch for a possible downgrade, meaning it could be slashed within 60 days.

Greece is the lowest-rated country in the euro zone.

“Volatility is likely to continue for some time,” analysts at Barclays Capital wrote in a note to clients.

Greece is struggling with a weak economy and a massive debt burden.

The economy contracted 1.7 percent in the third quarter from a year earlier, and the budget deficit totals 12.7 percent of GDP.

While the government has plans to cut the gap, many analysts are skeptical.

"The likely rise in public debt to more than 120 percent of GDP next year and further to 125 percent in 2011 would leave the public finances highly exposed to shocks," Fitch analysts wrote in their report.

Experts are concerned that a Greek bankruptcy could spread to other countries in Europe.

“Greece is a whole lot more important than Dubai,” Uri Landesman, a fund manager at ING Investment Management, told Bloomberg.

“There are a lot of banks, in Europe especially, that have exposure to Greece.”

European Central Bank President Jean-Claude Trichet has said the euro-zone economy faces a rough road to recovery.

"The real economy is back to growth but we don't declare it (crisis) over. It is a bumpy road ahead, we have the sentiment that growth remains modest and we have to remain alert," Trichet said in an interview with the Europarltv, a television channel of the European Parliament.

source HERE

Posted by Mr Thx 0 comments

The IMF has grown tired of increasing government spending in Ukraine. The agency had agreed to loan the nation $16.8 billion to offset its large national deficits. It is now withholding the latest $3.5 billion installment. The nation desperately needs the capital. According to The New York Times, “The monetary fund has forecast that Ukraine’s economy will contract 15 percent this year, with inflation running above 16 percent.”

Ukraine does not have access to other capital. The global debt markets will not fund a sovereign government that cannot get money from the IMF and the Ukraine economy is too weak for the country to raise taxes on individuals or businesses.

The events that have caused the IMF to withdraw its support have many of the earmarks of a country about to defer or default on payments for its sovereign debt.

Early this year, a number of global debt experts said that they expected a Ukraine default despite IMF aid. Ratings agencies downgraded Ukraine paper and several capital markets experts said that the nation did not have the resources to cover it bond obligations.

It is too early to say if the IMF loan is absolutely critical to Ukraine fulfilling its sovereign debt obligations. It is too early to say whether the IMF will “blink” and clear the next part of its loan to the country to prevent the global capital markets disaster that could result from a default.

It is clear that the number of nations teetering on the brink of failing to make payments on their debt is rising.

source HERE

Posted by Mr Thx 0 comments

Thursday, December 10, 2009 3:34 PM

Mexico has allocated $1.2 billion to an options strategy that will protect it if oil drops below $57 a barrel.

Mexico bought put options, giving it the right – but not the obligation – to sell oil at that price next year, the Finance Ministry said in a statement.

The $57 level represents a 20 percent decline from current levels.

“We want this as an insurance policy,” said Finance Minister Agustin Carstens, according to Bloomberg. “If we don’t collect any resources from this transaction, it’s OK, because that means oil would have been above $57 a barrel.”

The oil price decline since the middle of last year and a plunge in production at Mexico’s state-owned oil company, Petroleos Mexicanos, cost the country $23.3 billion of oil revenue this year, Bloomberg reports.

Pemex accounts for about 40 percent of the government’s revenue. In November, Fitch Ratings cut Mexico’s credit rating to BBB, the second-lowest investment grade level.

Fitch made the move because Mexico’s budget deficit has exploded to a 20-year high, thanks largely to the decrease in oil revenue.

This year Mexico has made $5.1 billion hedging oil at $70 per barrel, the Finance Ministry said.

If Deutsche Bank’s crystal ball is accurate, Mexico won’t have to worry about exercising its options next year.

The bank predicts that oil prices will average $65 next year, with a possible low of $60.

And if oil legend T. Boone Pickens is accurate, an upgrade may be in store for Mexico’s credit rating.

He forecast at a recent conference that oil will rise to $100 next year, as global production is “maxed out” at 85 million barrels a day.

Earlier this week, veteran Wall Street economist Henry Kaufman warned that a bubble has formed in commodities as "speculative fervor" returns to markets after the global financial crisis.

"There are bubbles in commodities," and probably in the gold market as well, Kaufman, president of financial consulting firm Henry Kaufman & Co Inc in New York, told the Reuters Investment Outlook Summit in New York. He cited the return of leveraged bets as one driver.

The U.S. Energy Information Administration also has slashed its forecast for global oil demand in 2010, citing a weaker-than-expected economic recovery from major crude consumers, such as the United States.

World oil consumption next year is now expected to increase 1.1 million barrels per day to 85.22 million barrels a day. In November, the agency thought global petroleum consumption would grow 1.26 million barrels a day to 85.40 million barrels a day.

source HERE

Posted by Mr Thx 0 comments

On December 8, Fitch Ratings announced that “Latvia and Lithuania’s ratings are under pressure from the sharp deterioration in public finances.” (Bloomberg) The same agency also just cut its rating on Greek government bonds, and Standard and Poor's shifted its outlook for Spain's debt from "stable" to "negative."

All that less than three weeks after Dubai defaulted on its debt through its subsidiary Dubai World.

You can see a common theme in all these stories: too much debt. But the rating agencies haven't been the only ones forecasting trouble.

Three months ago, on September 18, EWI's Jason Farkas published his regular "Weekly Insight" column inside EWI's Currency and Interest Rates Specialty Services. Here is an excerpt:

Baltics Ready to Blow
We talked about the situation in the Baltics earlier this summer, but I would like to cover the topic again to highlight my belief that a devaluation of the Latvian currency is nearly certain. Although it hardly sounds as if that event could affect the global economy, history tells us otherwise; the tiny country of Latvia may signal the return of risk-avoidance in the region and beyond.

When we first covered the Baltics back in June, we focused on the similarities between present day Latvia and 1997 Thailand. Both countries had a pegged currency, and their respective governments' coffers were being drained by a defense of the peg. In Thailand, the abandonment of the peg led to the Asian contagion that swept across the globe rapidly and affected all emerging and developed markets. Latvia is coming perilously close to devaluation because its tax receipts, and thus its ability to defend the currency peg, are plummeting along with its economy.

The International Monetary Fund loaned Latvia 7.5B euros late last year, but banks loan you an umbrella when it's sunny and demand it back as it starts to rain. When the likelihood of currency devaluation becomes larger, lenders will typically withdraw capital from the region, which leaves businesses and consumers without access to credit. Although foreign banks continue to talk about a continuation of their lending operations, currency devaluation could change that instantly.

Since 90% of Latvian loans are denominated in foreign currency, devaluation would make debt repayment impossible. Swedbank, the largest lender in Latvia, recently noted that 54% of its mortgage loans are underwater. Those are problems for the lender as much as the borrower, and devaluation would force banks to curtail loans as a replay of the 1930 Great Depression European banking crisis begins.

The OMX-Baltic Benchmark Index tracks stocks from Latvia, Estonia and Lithuania. All three countries are on the brink of devaluation as a result of economic turmoil, and devaluation in one would quickly spread to the others and throughout the region (Belarus, Ukraine, Bulgaria, the Czech Republic, Hungary and the Balkans). The Latvian currency is also showing signs of a potential turn.

A five-wave rally in USD/LVL ran from April 2008 into October 2008 unfolded as the USD gained 33% versus the Latvian Lat. The rally coincided with increased devaluation talk. Since that time, as devaluation talk receded, a three-wave corrective decline has unfolded. From here, basic Elliott wave analysis suggests a new five-wave advance to begin, probably as devaluation becomes reality.

It seems likely that we’ll see the USD/LVL begin to rally prior to headlines of problems in Latvia and the Baltic region, so watching the pair closely is advised. Once a turn has been made, one potential powder keg of problems will be ready to blow.

source HERE

Posted by Mr Thx 0 comments

Long since thought of as "the rotting corpse" of the currency markets, the U.S. dollar reawakened to new life this week by rallying to its highest level in more than a month. For many -- namely those affiliated with the financial mainstream -- the dollar's revival came as a huge surprise.
Reason being: The two main fundamentals that supposedly drove the dollar to its 2009 "deathbed" were still very much in force. To wit:
The Interest Rate Factor: According to the usual pundits, the persistent, easy money policies of the Federal Reserve have held the dollar's head below water. Those being: Ten rate cuts in 12 months to a historic low of 0%. Here, a recent Wall Street Journal writes:
"Ultra-low rates have weighed on the dollar as investors use cheap dollars to fund bets in riskier assets, such as the euro and other high-yielding currencies... For [a sustained change in the dollar's trend], the Fed would have to be moving clearly toward an exit of its extraordinary easing measures."
Flash to December 7: That day, the Federal Open Market Committee released a very "dovish" periodic statement in which chairman Ben Bernanke reaffirmed his commitment to an "extended period of low rates." YET -- the U.S. dollar has continued to soar.
Next, the Economic Factor: Here, I'll let the following news item do the talking: "For most of 2009, the paradigm in the currency markets has been that good economic data was bad for the dollar as investors shun the low-yielding greenback... on hopes of a faster recovery." (Wall Street Journal)
YET -- in the wake of a recent, better-than-expected Jobs report, the dollar experienced its strongest single-day rise in a year.
(Will the Dollar Rise Again? The latest Financial Forecast Service teams up to offer the most comprehensive coverage of the near-, and long-term trend changes in store for the U.S. currency. Get the full story today, absolutely risk-free.)
Here are the facts, as they objectively stand: The most recent uptrend in the U.S. dollar got started on November 26, with a powerful burst to five-week highs on December 4. Whatever has been going on in the fundamental backdrop, the dollar's rise has been uninterrupted.
And, few saw that coming with more clarity and consistency than EWI's Short Term Update. Here, the following excerpts from recent issues tell the story:
November 25 Short Term Update: "The US Dollar Index is making a 'final probe' to complete the wave structures. When viewed in the context of the daily chart, the decline from the November 3 high still looks best as a fifth wave, which is an ending wave. A rise above __ level will be the initial signal that a low is in place."
December 4 STU: "A Bottom in the US Dollar Index. The initial leg of this turn up should be sharp, as overleveraged dollar bears are forced to cover their position."

source HERE

Posted by Mr Thx Thursday, December 10, 2009 0 comments

Investors of the Amanah Saham Bumiputera (ASB) fund may see better dividend distribution this year, since the country's economy has been showing a positive growth rate.

Permodalan Nasional Bhd (PNB) president and group chief executive Tan Sri Hamad Kama Piah Che Othman said the state-owned company has been providing good returns through its various funds to its investors every year.

"Our past record revealed that despite facing economy slowdowns, PNB continued to offer a promising dividend rate," he told reporters after he paid PNB's business tithes amounting to RM1.7million for the financial year 2008 to Tengku Mahkota Pahang, Tengku Abdullah Sultan Ahmad Shah at Istana Abdulaziz in Kuantan yesterday. Tengku Abdullah is the Pahang Islamic Affairs and Malay Customs Council president.

Earlier, Hamad Kama Piah said Pahang is the fourth state to receive the business tithes from PNB for 2008.

Other states were Sarawak totalling RM2.7 million, Malacca RM900,000 and Penang RM2.2million.
The business tithes paid by PNB is calculated based on profit derived by the institution from investment holdings, property managment, unit trust management and consultation services.

source HERE

Posted by Mr Thx Wednesday, December 9, 2009 0 comments

The recent earthshaking announcement from Dubai World indicates that the U.S. is not alone in dealing with an overleveraged economy. In fact, many countries are in more dire straits than the U.S. As with real earthquakes, the financial aftershocks of Dubai World’s semi-default will be felt far and wide, particularly farther to the north in Europe. (Be sure to read our Special Section on Dubai, p. 34.)

Some of the weakest European countries have their own acronym, which runs counter to the positive overtone of the BRIC economies (Brazil, Russia, India and China). They are collectively called the PIGS (Portugal, Italy, Greece and Spain). Each of these economies has problems, but none more so than Greece. It has the least-loved bond market in the EU, as evidenced by its having to offer the highest interest rates. It also has the lowest bond rating in the union and the highest debt-to-GDP ratio at over 91%.

Many of Greece’s problems stem from problem banks. Greek banks poured money into the capital-starved Balkans to take advantage of the higher earnings potential. However, now that the Balkan economies have stopped growing, the potential for losses is staggering: Banks have extended loans to the region equal to 20% of Greece’s GDP. So, in 2008, Greece followed virtually every other nation as it bailed out its banks that weren’t smart enough to see a recession coming.

The Greek bank bailout cost 28 billion euros, which is equal to 10% of Greece’s GDP. Was it enough to prevent further bank problems? The President of the National Bank of Greece thinks so, as he recently stated that the naysayers are wrong and that the “rumors [of default] are exaggerated.” It reminds us of Bear Stearns CEO’s comment, “There is absolutely no truth to the rumors of liquidity problems,’’ six days before Bear Stearns was acquired before it had to declare bankruptcy.

Further problems are on the horizon for Greece with its budget deficit projected at 12.7% of GDP this year (4 times the EU limit). Greek businesses are hurting from a stronger euro, which has crimped tourism. Construction and shipping, of which Greece claims 20% of the world’s fleet, have also been slow due to the global recession. Add to these problems the fact that Greece needs $75 billion this year to meet expenses and for debt repayments. This leaves higher taxes and loans from the IMF or EU as the only likely stopgaps.

Both the stock and bond markets in Greece suggest economic weakness is dead ahead. The Greek stock market has rallied in corrective three waves with two equal legs up from its March low. And it’s already fallen 25% from its October 15th high. Investors in the Greek bond market demand almost 2% more from Greece than they do from Germany on a 10-year bond; investors see a fracture in the EU. The EU has stated that it won’t let Greece default, but it’s clear that investors have concerns.

U.S. investors should remember that Greece is simply one nation of many that are likely to produce further shocks to the global economy. Therefore, capital safety still seems to be the best option for most investors, while speculators may want to focus on the PIGS, and Greece specifically, for downside opportunities.

source HERE

Posted by Mr Thx 0 comments

As you read this, the Chinese government is doing an extraordinary thing... something nearly unheard of in the modern world.

It is encouraging citizens to put at least 5% of their savings into precious metals.

The Chinese government is telling people gold and silver are good investments that will safeguard their wealth. After last year's meltdown in the stock market, people believe it. After all, Chinese citizens don't receive government retirement money... and they don't have company pension plans like people in many other countries do.

This is why folks in China are lining up outside of banks, post offices, and the new official mint stores to buy gold and silver (they especially like silver because it's cheaper per ounce).

The Chinese attitude toward gold and silver is a striking contrast to the American attitude right now. I don't recall a TV or radio ad from my congressman or President Obama encouraging me to buy gold or silver. Does your bank sell silver bars? Are gold mints popping up in your neighborhood? Are any of your friends, family, or coworkers scrambling to buy precious metals?

In spite of a few ads on television and satellite radio, buying gold and silver in the U.S. is still largely seen as a fringe-group activity. That's not the case in China. And in the big picture, there are three distinct trends occurring in China today that many in the Occidental world are not paying attention to.

more HERE

Posted by Mr Thx Tuesday, December 8, 2009 0 comments

Jim Chanos, head of investment firm Kynikos Associates and famous for his call to short Enron in 2001, has found his next big target.

Chanos and other China bears say the country has overcapacity in just about every sector of its economy, and the government's massive stimulus isn't working. They think China is simply covering things up with faulty statistics.

For example, they point to the huge reported increases in car sales in contrast to numbers showing little growth in gasoline consumption, which suggests state-run companies are buying huge numbers of cars and putting them in storage.

Chanos thinks the collapse of China could be just as bad for the global markets as the U.S. housing crash.

Traders interested in playing this trend could consider shorting big names like China Life Insurance, China Mobile, and PetroChina, or buying the UltraShort FTSE/Xinhua China25 Proshares ETF (FXP).

source HERE

Posted by Mr Thx 2 comments

When it comes to the 2010 outlook for commodities, who better to ask than commodities whiz Trader Vic?

Victor Sperandeo (also known as "Trader Vic") is one of the world's most outspoken commodities traders, with over 40 years of market experience. He has invested independently for the likes of George Soros, Leon Cooperman and BT Alex Brown, and has written a book, "Trader Vic on Commodities." Mr. Sperandeo also created the popular Diversified Trends Indicator, a long/short rules-based trading methodology based on a highly diversified basket of commodity and financial futures contracts.

At last month's "Inside Commodities" conference, HAI Associate Editor Lara Crigger caught up with Trader Vic between sessions to ask about his general outlook for commodities in 2010.

Lara Crigger, associate editor, HardAssetsInvestor.com (Crigger): Which commodities do you think are going to do well next year?

Victor Sperandeo, "Trader Vic" (Sperandeo): Well, I'm on record across the world as saying that gold is the best investment in the world for the next two to three years. It's fundamentally obvious, but when you're printing huge amounts of paper vs. something that is considered money, the paper will depreciate and the hard assets will go up. So gold and silver will do well—silver a little less so—but gold certainly.

Even when it was about $830-$850/oz, I basically said, "I don't see any scenario where it can come down." But I wouldn't say that it can't correct at any given moment. When the Fed decides to raise interest rates, at that point, gold will sell off. It will be a steep correction.

But it's also a buying opportunity, because if they raise rates, it would only be to try to stabilize the dollar. But it wouldn't affect the kinds of huge deficits and the printing of money that's going on for the next 10 years. It's unsustainable. So gold, that's my most favorite, if you will.

Crigger: What about the idea that gold's starting to move into bubble territory?

Sperandeo: I don't agree. If you go back to its lows, and you compound where it is today, it's about 6.5 percent compounded. That isn't a bubble. You know, when oil went from $10 to $150 in 10 years, that was more froth.

Crigger: You just mentioned that you thought silver would rise "a little less so" than gold. But many analysts have suggested that silver actually has better long-term prospects than gold.

Sperandeo: Possibly, except that gold has been universally and historically seen as money. It is the preference to silver. I'm not saying that you shouldn't own silver. I'm only saying that gold is the preferred item. There is an industrial use for gold, yes, and in jewelry, but it's more used as money. Silver has several other industrial uses.

Crigger: What's your outlook for some of the other precious metals, like platinum or palladium?

Sperandeo: I like those two. They've obviously done well. But they are more connected to economic circumstances. So as you get more and more problems from these economic circumstances that come about because of the huge deficits and inflationary times, they will run into more resistance.

So when I say I think gold's the best investment in the world for the next two to three years, I'm trying to take a lot into account. Because you may not see me again for awhile, so I can't correct myself.

Crigger: Let's switch gears and talk industrial metals. Do you think China will continue to drive demand into 2010?

Sperandeo: I think they will, and if I were China, I'd be selling my Treasury bonds and I'd be buying things like copper and platinum and palladium—other industrial metals, like aluminum, etc., that you need to produce. Especially with interest rates at zero. So if China gets that, then you'll have a real bull market. Buy the stuff, not the paper.

Crigger: Recently both China and Russia have publicly called for a move away from the dollar as the world's reserve currency. Do you think this will ever happen?

Sperandeo: I do think it will happen. It's not easy, because with the nature of the U.S. dollar as a world currency and acting as reserves to many banks and loans, there are just not enough assets to take the place of the dollar right now. But I believe it will eventually occur.

Crigger: What takes the dollar's place?

Sperandeo: It will be a basket. Not just one currency, but a multicurrency basket. I would guess gold would be in there for sure.

Crigger: In terms of regulation, where do you come down on the debate? Do you think position limits would be useful for the commodity markets?

Sperandeo: Well, I think indexes should be exempt for sure, because that's how institutions get exposure. But the bottom line is: Every 30 years, you will get an attempt like the Hunts trying to corner silver, for example. But it's very few and far between, with the regulations the way they are now. They're very rare. The only reason a bureaucrat would want to change things is so that he could promote more of the printing and borrowing of money that commodities offset. So they're trying to have their cake and eat it too.

Crigger: What do you think is the best strategy for investors approaching the commodities space?

Sperandeo: It's got to be a long/short strategy. So whether it's indexes—we have indexes that are long/short—or it's a managed futures approach, you should take a long/short approach. With long-only, you don't go anywhere. You just don't make money.

source HERE

Posted by Mr Thx 0 comments

Gold fell almost 5% [on Friday] to below $1,160 an ounce on the latest jobs data. Unemployment unexpectedly fell to 10%. Employers only cut 11,000 jobs in November. That's the least since the recession began, and less than the 130,000 expected cuts. This could be the beginning of the gold correction so many are predicting...

Economist David Rosenberg says we're in a secular bull market for gold. He says central bank purchases, led by China, will eventually push gold to $2,600. Like Jim Rogers, though, Rosenberg thinks the short dollar/long gold trade is crowded. He expects a short-term correction in gold of as much as 20%. That would bring gold near its 200-day moving average of $970 without violating the trendline.

Making a gold correction even more likely, Rosenberg's biggest gold catalyst, China, already said it won't recklessly chase prices up...

"We must keep in mind the long-term effects when considering what to use as our reserves," said Hu Xiaolian, the vice-governor of the central bank. "We must watch out for bubbles forming on certain assets and be careful in those areas."

With China's $2.3 trillion in reserves, it's difficult to buy gold without moving the market. Expect China to buy on the dips, creating a floor for the metal.

source HERE

Posted by Mr Thx Monday, December 7, 2009 0 comments

- Clive Maund

What was really odd about yesterday was that we saw a big dollar breakout, but Treasuries fell heavily. We are now believed to be on the verge of another massive deflationary downwave, similar to last year, but worse. However, this time it is very possible that while we will see a flight to cash, we will not witness a stampede into Treasuries, or at least not on anywhere near the same scale. So what is going on here? - what are the principal underlying dynamics? Anyone who has had the misfortune to watch a nuke exploding, misfortune because you get irradiated, knows that first you see a very bright flash, then there is a period of tranquillity as the flash dies down and the mushroom cloud starts to rise, before the shockwave hits, when things get pretty rough to say the least.

Youv'e seen the flash - now get ready for the shockwave...

What happened in Dubai just over a week ago was the bright flash, and the media have used the intervening period before the shockwave hits to reassure everyone that everything is going to be just fine - "You just relax, nothing will come of it, it's only $60 billion down the drain or whatever - have a cup of tea". The trouble is that it's not $60 billion at all - the reality is that this is a default on a massively larger scale. Dubai was a vast sinkhole into which western banks and governments unquestioningly poured not just billions but trillions of dollars which was then leveraged enormously by means of derivatives enabling Dubai to build itself up into a latter day Rome, with a level of opulence and extravagence that would have made Caesar green with envy.

When people think of Dubai the things that come to mind are the massively extravagent 7-star hotels, the towering record breaking skyscraper, palm-shaped island resort complexes etc and forests of new office buildings and apartments etc. What the vast majority don't realize is that the stupendous leverage afforded by derivatives has in addition enabled Dubai to create an immense global empire of businesses, most of the elements of which are broke, having racked up staggering levels of debt. Dubai is the nexus of the derivatives pyramid and it is flat, stony broke.

Where did all the money come from to pay for all these things? - why from taxpayers and pension fund contributors the world over of course, but especially in the US, with Wall St acting as a giant conduit sluicing a torrent of cash into Dubai. The interesting thing is that there was never any accountability - countries and companies vied with each other for the privelege of pumping money into the exalted kingdom, seduced by its supposedly limitless oil wealth, and requesting or requiring guarantees was regarded as impolite. Now that Dubai is broke, the Dubai government has suddenly distanced itself from Dubai World, and the attitude towards the Western banks and governments who have poured trillions into Dubai is "Tough luck - you lose, suckers".

What this means is that trillions of dollars which are now counted as assets on the balance sheets of banks worldwide and especially in the US are actually liabilities. So what do you think is going to happen to the stock prices of these banks - and stockmarkets generally, when the world wakes up and acknowledges this reality - when the shockwave hits?? Small wonder that the charts for Goldman Sachs and J P Morgan look very like the market charts before the '87 crash, but that was "small potatoes" compared to what is coming down the pipe this time.

more HERE

-Philip Bowring

Malaysian and other Islamic bond issuers could suffer

The revelations of Dubai's monster debt problems have come at an unfortunate time for Malaysia's push to promote itself as both global centre and international mentor in the field of Islamic finance.

Even if the there is eventually no default on Dubai's sukuk (Islamic bond) issues the image of sukuk as potentially safer than conventional instruments has suffered a blow. Malaysia itself may have little exposure to Dubai, or other over-extended Gulf borrowers, but as the world's leader in sukuk issues it could well see a marked slowdown in what has been a very rapidly expanding business.

The first test will come by December 14 when Nakheel, the property developer arm of state-owned Dubai World, has a big sukuk maturing. Despite a statement Sunday by the United Arab Emirates central bank that it stands behind domestic and foreign banks operating in Dubai, later tests will come if defaults arise and battles begin over how civil courts interpret legal rights under shariah law. There may also be battles if Nakheel or subsequent debtors favor sukuk over conventional bondholders or vice versa. A sukuk is supposed to have an element of risk lacking in secured bonds, but practice is another matter in an industry which is still young.

That is bad luck for a Malaysian industry which can reasonably claim to be both innovative and well-organized. Malaysia accounts for roughly 60 percent of total global sukuk issues totalling around US$100 billion. These are roughly divided between ringgit and US dollar issues, mostly by local entities but also by the World Bank and the Islamic Development Bank. Malaysia has been hoping to attract other big-name foreign institutions to its market.

But Dubai is unlikely to represent a permanent setback to Islamic finance, which has been growing in many parts of the world and establishing niches in developed Muslim-minority countries such as the UK.

more HERE


Dubai World Shock Sends Asian Sukuk Yields Higher

The shock from Dubai World's restructuring and call for a standstill on its group debts sent yields on Islamic bonds issued from Asian borrowers sharply higher Thursday. The sukuk of the Indonesian government and Malaysia's national oil company Petronas were particularly hard hit. But many were convinced it was a knee-jerk reaction. The yield on Petronas' 2014 sukuk traded around 0.15 percentage point wider over U.S. Treasury yields. "It may be temporary," said Rajeev De Mello, a fund manager at Western Asset Management in Singapore. The credit event could even have the opposite impact of eventually attracting money into Asia's sukuk" because Middle Eastern investors might want to diversify a bit more into non-Middle Eastern sukuk," he said.

The Dubai government said Wednesday that it would restructure its largest corporate entity, which has interests spanning real-estate and ports. Dubai World, which has almost $60 billion worth of liabilities, will seek a six-month "standstill" on its debts with all lenders, the government said.

Some players sold the sukuks from Indonesia and Petronas on the fear that some of these bonds may be held by Middle Eastern investors, who may opt to unload some of their holdings after the Dubai government's announcement, according to a fund manager.

more HERE

- Wade Slome

Introducing Sukuk: Islamic Loophole for Dubai Debt Debacle

Islamic followers can be capitalists too. Although oil prices (currently around $77 per barrel) have fallen from the peak near $150 per barrel in 2008, oil rich nations have gotten creative in how they raise debt-like financing. Critical to fueling the speculative expansion in some oil rich areas has been the growth in sukuk bonds, which have been created as a function of loophole exploitation in Islamic finance principles.

U.S. Does Not Have Monopoly on Debt Driven Greed

The pricked debt bubble that spanned the range of Icelandic banks to Donald Trump (read more) has now spread to Dubai commercial real estate, evidenced by the plastering of recent global headlines. At the center of the storm is Dubai World, a quasi-government owned conglomerate of Dubai, which is in the process of negotiating a $26 billion debt restructuring with the government and sukuk bondholders.

This overleveraged Dubai market ($80 billion in total debt) helped finance the tallest building in the world, largest man-made islands, and a ski-resort based in the desert, in the face of collapsing real estate prices. Critical to Dubai World’s debt restructuring is a $3.5 billion sukuk bond issued by its commercial real estate subsidiary Nakheel Development (“Nakheel”). So what exactly is a sukuk (plural of sakk)?

Investopedia lists the following definition for sukuk:

“An Islamic financial certificate, similar to a bond in Western finance, that complies with Sharia, Islamic religious law. Because the traditional Western interest paying bond structure is not permissible, the issuer of a sukuk sells an investor group the certificate, who then rents it back to the issuer for a predetermined rental fee. The issuer also makes a contractual promise to buy back the bonds at a future date at par value.”

more HERE


M'sian Islamic banks not affected by Dubai crisis

PETALING JAYA: The debt payment crisis of conglomerate Dubai World will not adversely affect the Islamic finance industry in Malaysia as it has limited exposure to the sheikhdom’s debt, according to industry observers.

CIMB Islamic Bank Bhd CEO Badlisyah Abdul Ghani said the situation in Dubai was purely a credit issue and applicable for both conventional interest-based and Islamic capital market in the Middle East.

Credit issue was not exclusive to Islamic capital market and the problem Dubai was facing had no bearing on the structure of the sukuk market or its instruments in particular, he said in an email reply to StarBiz.

“What’s happening in Dubai has no impact on Islamic finance in Malaysia as Malaysian Islamic banks are not exposed to the Dubai market, with most concentrating on doing business in Malaysia only or regionally in South-East Asia. If (there is) any, exposure would be extremely insignificant,” he added.

The Malaysian Islamic finance industry, he said, was unparallelled in terms of depth and sophistication and had gone through two major global financial crises with one involving Malaysia directly and emerged practically unscathed both times.

Ernst & Young Advisory Services head of assurance Abdul Rauf Rashid agreed, saying that there was limited direct implication to the local financial industry as not many investors were directly exposed to Dubai or papers issued by organisations from the Gulf Cooperation Council (GCC) countries.

In response to a query, Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said: “The Malaysian conventional and Islamic banks have limited exposure to Dubai and the recent development has not had an impact on their operations.

“The fundamentals of the banking system remain strong and continue to support the economic recovery process.”

more HERE

Posted by Mr Thx 0 comments
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Sekapur Sirih Seulas Pinang

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