Former Primer Minister In Loan Scandal
March 31, 2008
An investigation by Thai authorities has been established to determine what role the former Prime Minister Shinawatr had in the loan to the Myanmar satellite communication deal. According to information on the Assets Examination Committee, the former prime minister is alleged to have given a loan in 2004. The AE Committee was created after the former prime minister was ousted, and it is alleged that he approved the loan that was quite favourable to the borrower.
Cubans Can Book Hotel Rooms
March 31, 2008
Since taking over the presidency, Raul Castro has made various adjustments to life in Cuba. Recently it was announced that he has now made it possible for Cubans to book a hotel. Previously the luxury of staying at hotels was only for visitors or tourists to Cuba. But now three hotels have confirmed that Raul Castro will be allowing Cubans to stay there.
Even though they are able to now stay within a hotel in Cuba, Cuban nationals will not receive a special rate and will be at least twenty times the price that the average worker is paid. The only evidence they will need to show to book a room is their National Identification Card.
HR Head From Brocade Sentenced
March 19, 2008
The former head of human resources for Brocade Communications Systems Inc., Stephanie Jensen, was sentenced on Wednesday to 4 months prison and was also fined $1.25 million for collaborating with former CEO of Brocade, Gregory Reyes, in a scheme to backdate stock options.
Last December Jensen was convicted of both conspiracy and falsifying corporate records.
Reyes was sentenced in January to 21 months in prison and he has been fined $15 million for his part in the backdating scheme.
IFO Project 1.5% Growth For Germany Through To 2012
March 13, 2008
In the first ever medium-term projection released by IFO Institute, Germany has been seen to have a potential growth rate of 1.5% through to 2012.
This prediction, from the Munich-based think-tank, is based upon the belief that in spite of the population decline that Germany is expected to undergo in the next few years, that there will none-the-less be increased participation in the labor workforce and longer work hours are on the cards too.
This hypothesis is also based on the assumption that reforms recently introduced into the labor market of Germany will not be altered, nor will minimum wage. However, according to the release made by IFO, the actual rate of growth will depend on business-cycle factors which cannot be accurately speculated upon.
Democratic Presidential Nominee Likely To Be Obama
March 6, 2008
Just one day before the primaries, U.S. Senator Obama is shaping up to be the Democratic Presidential nominee. If Obama is successful in defeating U.S. Senator Hilary Clinton, his greatest opposition for the role, in either Ohio or Texas primaries, he is in pole position to become the Democratic presidential nominee, pitting him against Republican nominee U.S. Senator, John McCain.
Exit polls taken are showing that the senator from Illinois now has the lead over Clinton in the state of Texas. If Obama wins in Texas and ousts the former first-lady, he will have successfully taken out a power-house in the U.S. presidential race.
Since the onset of the race, and with two very strong candidates stepping up to the plate, the Democratic Party have been extremely careful to avoid causing undue friction within the party itself, as they believe this will lead to a weaker presidential campaign in November. Most members of the party have stressed their backing for both of the candidates, however, so the internal forecast of the party is still quite positive. The party is looking for a clear victory in tomorrow’s primaries as concerns have been raised that the Democratic nominee should already be designated and that undecided voters are not going to favor them if they are too long in deciding the final candidate.
If Clinton manages to capture both the states tomorrow then the race would be extended until April 22, when the Pennsylvanian primary is to be held. Either way, a candidate will be known by the end of April. Concerns are that the Democratic Party is losing valuable time in starting the battle against the Republican nominee. John McCain, Senator for Arizona, has now become the most probable Republican nominee.
With smear campaigns coming out of the Clinton camp, and Obama’s grandmother weighing in on the issues, the in-party nominations are shaping up to be quite tumultuous. Something that the Democrats do not want in the lead up to the election. At this stage, the party is looking to establish as much stability within, so as to be better prepared for November.
The Democratic Party hence is hoping for a distinct win in the primaries tomorrow, as an extended race between Obama and Clinton would only serve to make their presidential victory more uncertain.
Value Of Dollar To Decline Further
March 6, 2008
According to many currency experts, the US dollar is predicted to weaken further in the near future. The dollar has been enduring severe losses in the past few weeks, and according to analysts, it is only going to get worse.
Many analysts are of the view that the greenback is going to be in a bad state until the middle of the year. It is believed that it will receive some sort of relief after this point.
The main reason for the massive decline in value of the dollar this week, is due largely to statements made by the Federal Reserve chairman last week. Ben Bernanke, Federal Reserve chief, had mentioned during his testimony at Capitol Hill last week, that the Federal Reserve might implement another rate slash during the Federal Reserve’s meeting in March, which resulted in the dollar losing a lot of ground.
Bernanke’s words, along with the other issues already facing the dollar, where enough to send the value of the dollar down the drains. This drop saw the Dollar touching decade lows against many currencies; the Japanese yen, Swiss Franc and the Malaysian ringgit are some of the currencies against which the dollar took an especially large fall. Last week the dollar hit its all time low against the Euro.
Most currency strategists are saying that the weak value of the currency is indicating the economy of the nation is going to go from bad to worse. The dollar last week was very consistent in recording all time lows against the Euro.
Currency analysts are very sure that the dollar is going to stay in its current state for the next month at least, if not longer. The dollar is going to go even further down if the employment report that is scheduled to come out later this week also turns out to be as bad as economists are forecasting. If it indeed turns out to be a depressing report the result might be that the dollar hits rock bottom.
As per the forecasts that have been made recently the dollar is going to hit a top of $1.55 to the fifteen nation currency very soon and this it will drop further in front of the Japanese Yen. The fall might be as low as ¥101 or ¥102.
Although currency experts are united in saying that the dollar will recover towards the middle of the year, as the economy of the nation starts to get back on its legs. The dollar again would reach a more stable position as soon as the Federal Reserve puts a stop to the rate slashes it has been employing so frequently nowadays.
Fed Head calls on the lenders for leniency
March 5, 2008
On the fourth of March the Federal Reserve chairman Ben Bernanke called on the mortgage lenders to show more leniencies towards the homeowners who are facing foreclosures and to help them by decreasing the loan amounts. He made this statement on Tuesday as a result of the large amount of home foreclosures that were happening recently. He urged the lenders across the country to provide extra relief to the suffering homeowners.
On Tuesday, when he was addressing a meeting of a banking group in Orlando, he said that the current situation calls for a spirited response. He warned that although many relief attempts were on their way from both the government as well as the industry the number of foreclosures and delayed repayments of home mortgages are going to be very high for some more time at least.
The very high numbers of foreclosures that are happening in the country are now contributing to worsening the various problems that exist in the country’s housing market. Bernanke also said that this was again making the economy of the nation look more fragile. It also strengthens the beliefs that the economy is in a recession or is on the verge of one.
The chairman of the Fed said that if the rates of stoppable foreclosures were to be reduced it would help in providing economic steadiness to the households, neighborhoods as well as to the nation. Acknowledging the efforts many service’s and lenders have already undertaken an action, Bernanke said that more needs to be done to get the housing market out of the mess it is already in. He especially appreciated the efforts the lenders have taken in widening the various loss-mitigating methods.
Talking to the meeting of the banking group he suggested that the numerous mortgage companies must decrease the amount of their loans and offer more support to the struggling home owners. He also said that reductions in the principal would help in refurbishing some amount of equity for the owners. This would, according to him, be a better way to avoid delinquencies and foreclosures. Bernanke admitted that this was going to be a very difficult idea to sell to the lenders. This is because the lenders are very unenthusiastic about writing down principals. This is because the lenders feel that if they wrote down the principals and if the house prices were to take another fall, they might yet again be pressurized to write down the principals.
An official from the banking association responded to this suggestion of the Fed head and said that they will discuss the issue amongst the bankers. He also said that the decision was going to a very difficult one. Another official was of the view that if every one was going to be given reliefs it would anger many people who had taken mortgages they could handle. If such a move was to be made it would create a lot of animosity amongst many people. Bernanke however countered these arguments saying that such long terms will have to be taken if some improvements were to be made in the nations housing sector.
Clinton clinches Ohio
March 5, 2008
On the 4th of March Hilary Clinton managed to triumph in the Democratic presidential primary that was held in the states of Ohio and Rhode Island. The other Democratic nominee hopeful, Barack Obama managed to take the state of Vermont according to the news from CNN, NBC and Fox news. The wins that Clinton managed to get greatly unsettled the momentum that Obama was carrying with him since the Super Tuesday of February. Since the 5th of February Obama has now managed to take 12 out of the 14 nominating races including the Vermont primary over Clinton.
The news from the Republican camp is that the Arizona Senator John McCain managed to confirm his nomination after the other contestant Mike Huckabee gave up as he lost out on the primaries that were held in the states of Ohio, Texas, Rhode Island and Vermont. Now that the republican nominee has been finalized all eyes are now on the Democratic primaries. The result of the Texas primary, which is scheduled to come out on the 5th of March, is going to be very influential. The state of Texas also happens to be the biggest state that voted on the 4th. The results were still too close for the Democrats to call as the day came to a close on the fourth. Even though Clinton managed to take the crucial state of Ohio, the pressure exerted on her by Obama is mounting as she has now lost 12 out of the 14 nominating competitions that were held since the super Tuesday ballots. However she would have been greatly relieved to find that she still has a very large and significant following amongst the traditional voters of the Democratic Party.
According to an unofficial count that is being done by the Green Papers, the Democratic nominee hopeful Barack Obama has till date a total of 1,129.5 pledged delegates which is 119 more than what the other Nominee hopeful Clinton has. For any candidate to get the nomination he or she will have to get a total of 2.025 delegates. On the fourth of March all the states holding primaries had a total of 370 pledged delegates which were given quantitatively on the basis of votes. The delegates in the state of Texas are selected through a combination of primary and caucus.
Talking about her win in the state of Ohio, Clinton said that the news was going to be very critical for the general election prospects of both the parties. Her tagline for the day was ‘as Ohio goes, so goes the nation.’ She also expressed her belief that the ‘nation is coming back and so is her campaign.’
On his defeat, the Republican hopeful Huckabee said that the republican nominee had run an honorable campaign and had deserved to win as he was an honorable man. McCain is scheduled to fly to Washington on the 5th of March to get the endorsement of President George W. Bush. McCain who had lost out on the nomination in 2000 when he ran against Bush said that he was now prepared to take on the nomination with humility, confidence, and an overwhelming sense of responsibility.
Credit disaster proves to be an economic threat
March 4, 2008
What a year ago was just one amongst many other problems has now become one of the most serious threats to the economy of the USA. On the 2nd of March a group of experts got together to come to the alarming conclusion that the credit crisis that is occurring in the country is becoming a huge threat to the nation’s economy. In fact many economists are of the view that this is the gravest risk the economy is facing now.
The results of the survey which was conducted by the associates of the National Association for Business Economics would come out on the 3rd of March. The overwhelming thing that caught the attention of many is that, 34 percent of the total number of economists who participated in the meeting was of the view that ranked the turbulences in the financial market out of loan defaults as the number one threat to the country for the coming two years.
The rise in opinion is by almost double. The last time the survey was conducted in the month of August the percentage of economists who had ranked a credit crisis as the prime threat was only 18 percent. At that point of time 20 percent of the economist saw the rising terrorism and conflicts of the Middle East as the gravest threat.
The interesting thing, and a rather alarming thing, to note here is that one year ago the risks of credit crisis were not even considered as a considerable threat. The fact that it has risen to the number one spot in this relatively small time period shows how grave the situation is. The recent survey which was conducted found out that almost 18 percent of the members pointed out to massive debts which are held by the businesses and households as the main problem right now.
The survey was conducted by questioning 259 economists from across the country. It was conducted in the first 14 days of February. As a result of the various other things that have happened since then the credit crisis have been highly underscored.
On the 29th of February the INDU (Dow Jones industrial average) took a dive by 315.79 points. The main reason for this steep decline was because of the number of disheartening economic reports that had come in during the week. One of the economic data that came in was from the UBS Securities which said that losses that the financial system would have to suffer from those securities are backed by mortgages and other such debts which would equal to almost $600 billion. This figure was a lot more than what the economists had projected till then. The previous prediction the economists had made was that the total was going to come up to $400 billion.
The main problem behind the credit crisis is the securities which are backed by different sub prime mortgages. Most of these people defaulted on their loans as a result of the crash which the housing market took.
Government keen on helping people but not babysitting them
March 4, 2008
On the second of March, word came out from the white house that the government of the nation was very much concerned about paying heed to the woes of its subjects but babysitting the people was impossible. The news came out in a time when a lot of hue and cry was being sounded about the government not doing enough to help the housing market of the nation. President Bush however said that some of the plans with which the Congress are coming up, to help the victims of the housing crisis, would be nothing but the reckless use of the tax paid by the citizens. Henry Paul the Treasury Secretary also shared this idea with the President.
The Democrats, who hold the majority in the Congress at the moment, responded to this statement of the President by saying that the Bush administration was more concerned about saving the Wall Street rather than the people of the nation. They said that all the plans with which the Congress had come lately were solely for the purpose of bailing out the victims of the crash in the housing and mortgage market.
However, even while all this is happening, more and more sustenance offers are being tossed around to help the suffering people. The latest one to get approval from the administration was Project Lifeline.
Now with the presidential elections this close the government officials are likely to come out with more number of plans, proposals and rescue missions to rescue the borrowers and debtors. This is because all the presidential nominees have been quick to take hold of the issue of the housing market which has been doing very badly for the last many months.
One thing both parties in the nation are very careful about while proposing new measures is to make sure that these plans are only meant for the assistance of homeowners and not for the money lenders and mortgage providers. This is almost impossible as both the other categories are mutually related and helping one while not helping the other is not going to happen, especially in the current scenario when the economy is going through a very bad patch.
Since all the ‘bailout’ plans with which the parties come out will be just dead rubber when it arrives, what matters the most is how well they have been framed. It is mandatory to make sure that these plans are designed as a stop gap measure to help the housing market as well as the nation’s economy and not as a means to aid the individual investors or lenders.
It has been found in the past also that the congress has always been dramatic about coming out with many such bailout plans. But what, according to many senior lawmakers in the nation, is that necessary action had to be taken. This must not get hung on a debate as to whether or not it is a bailout plan or not. Many are of the opinion that the Bush administration must go ahead with the proposals of the Congress as the taxpayers would eventually be paid back when the economy returns to a stable state.
The Democratic fundraising makes the GOP edgy
March 3, 2008
As the Grand Old Party watches the amount of cash the two Democratic Party nominees are sweeping in as campaign funds the Republicans are starting to feel a bit edgy. Many people in the country believe that what is happening is a look into the future. The Republican Party members, when they see Hilary Clinton and Barack Obama raking in tons of cash suddenly get the feeling that they may be outrun in the race just because of lack of funds.
The fact that the amount of money the Republican is certain for the presidential elections have been able to get is only one by seventh of what the 2 democratic nominees put together was able to get. This itself reflects the amount of cash the Democrats are receiving in the form of donations. Out of the two Democrat nominations, Barack Obama especially has been able to develop a very broad base of enthusiastic donors. The good thing for him about this is that the help that these people are willing to give is far more than just money. This is what is ringing the alarm bells in the Republican camp.
The gap that had been existing between the 2 parties since the mid term election in 2006, has been maintained by the Democrats with fervent vigor. Even the republicans have started to feel that the Democrats raise more money, have better crowd support and a lot of excitement during their campaign trail. If all these put together with the fact that the Democrats have more turnout during their campaigns, the Grand Old Party is going find it very tough during the fall when the elections will be held.
In the month of January Barack Obama raised close to $36 million and in the month of February Hilary Clinton was able to raise $35 million according to her campaign aides. It is estimated that Obama would have received at least $50 million as funds in the month of February. But the amount of money McCain was able to raise in the month of January was only $12 million. It is said and believed that he is going to get only the same kind of money in the month of February as well.
The amount of money that is flowing into the Democratic camp hints strongly towards the possibilities of a presidential candidate for the first time since the Watergate scandal forgoing public finance for the purpose of General Elections. This would result in the setting aside of almost $85 million for the months of September and October if he or she is able to raise more money.
As if the Republican Party is sensing this, McCain had been asking Obama to agree on holding the general elections using public funds. But it is learnt that the Democrats are advising Obama not to give ears to the Republican request. This is because they fear that the republicans would then use outside parties to raise any amount of cash to flatten any advantage the Democrats may have in terms of cash.
White house to go against the foreclose bill
February 27, 2008
The White House on the 26th of February said that it is going to veto a foreclosure bill that will reach there. The bill seeks to follow the recent economic stimulus package with many other proposals to get the struggling housing market to stand up on its own. The bill also seeks to reduce the number of foreclosures that are happening in the country.
The democrats in the senate had wanted to begin the debate on the issue as soon as possible but all action on the topic has been postponed to a later date in the week as the republicans are keen on keeping the subject of Iraq in the prime position.
The housing bill with which the Democrats came up with would change the bankruptcy laws that are there in the land and would provide the judges to decrease the interest rates and cut down on the money the borrowers owe the mortgage providers. It would also provide $4 billion to communities to buy and recuperate the already foreclosed houses. It also tries to make the sub prime mortgage loans more transparent to make sure that the borrowers would not be surprised by some big payment increases.
The White House however said that the amount of $4 billion is too high for the purpose of buying foreclosed homes. It also said that if the bill was passed it would serve as a bailout for the loan providers and the lenders were doing nothing to help the homeowners who are struggling to cling on to their homes. The White House also said that both the provisions that are mentioned in the bill would actually result in delaying of the recovery of the housing market.
Some of the other features that are there in the democratic bill are the provisions taken from the Senate’s version of the stimulus bill to encourage the mortgage revenue bonds. It will also add a decent amount of flexibility to help the homeowners get a refinance done on their sub prime loans. The measures would also allow the homebuilders as well as many other money losing businesses to reclaim those taxes which were paid previously.
This bankruptcy measure which the Democrats are trying to get approved is being vociferously opposed by many lenders and mortgage providers not to mention the long list of Republicans. They say that if such a bill got approved it would hurt the borrowers as it would then mean higher interest rates and increased down payments to reduce the risk of the homeowners trying to file for bankruptcy and get a court intervention.
The Democrats as a response to this claim of the Republicans and the money lenders said that they would tighten the bankruptcy provision that is mentioned in the bill so that only those borrowers of a sub prime loan would be able to get the benefits of the provisions. They also said that in order get the benefits the borrowers of the sub prime loans they will have to prove that they are not in a position to afford their current mortgage.
Oil price goes up again
February 26, 2008
The oil prices on the 25th of February went up higher to reach almost $100 for a barrel. The increase in oil price led to a hike in the gas price as well. The gas price went up by almost 2 cents in the last 2 weeks. The gas price on Friday went up to such an extent to become the highest in the last seven months.
The ongoing increase in oil price has already resulted in the gasoline price going up by 2.2 cents for a gallon. The analysts of the economy are expecting gas prices to be somewhere around $3.75 and $4 by the time spring arrives. The current national average of $3.137 is the highest since the month of June 2007. The rise in gas price that is going to happen in spring is going to be a record growth. The Energy Department is predicting the gas prices to reach its highest level of $3.40 per gallon in the coming spring.
However some other experts in the field are of the view that this steep hike in price of gas is solely because of record growth of oil price which even touched $101 a barrel in the previous week. They also feel that the inventory levels at a decade high will not be able to sustain this kind of a price. They say that even though the prices are at a record high at the moment the inventories are not tight enough. They believe that the gasoline market in the country is right now facing bear market conditions.
They say that the gas inventories have been accumulating on a continual basis throughout the last 15 weeks. This is mainly because the demand is usually weak in the winter season. But the fact is that the demand this year has been weaker than the previous year which contributed to the speed at which these inventories are getting accumulated.
The price of crude oil for the month of April went up by 24 cents to $99.05 a barrel in the New York Mercantile Exchange. Earlier the price had gone as high as $99.70 per barrel as a result of supply concerns. These supply concerns were heightened by the rumors of a Turkish incursion into the northern parts of Iraq and warnings by Iran against more international sanctions.
Another factor which creates volatility in the market is that many investors have invested in crude oil. These heavy investments have been made in the belief that the price of crude oil will continue to rise. The price of crude oil went up in Europe as well. The price was up by 52 cents to become $97.53 per barrel.
In other areas of trade, the price of heating oil went up by 1.8 cents to become $2.7810 for a gallon. Natural gas on the other hand lost 3.1 cents to become $9.115 per 1,000 cubic feet. It is believed that this was just a temporary drop and that it will be up in the next 2 days.
Stocks drop again
February 22, 2008
The stocks, on Thursday the 21st of February, dropped again. This time the cause for the slide was the mounting fear of a recession. The investors were not too keen to go forward with their investments after a manufacturing report aggravated the already existing worry that the US economy is going to be in a recession soon, or probably is in one now.
The broader index of Standard & Poor’s 500 (SPX) took a slide of 1.3 percent while the Dow Jones industrial average (INDU) went down by 1.2 percent. The tech heavy NASDAQ composite (COMP) also took a fall of 1.2 percent. However what surprised most economists was that the Philadelphia Fed index which is a local reading on manufacturing toppled over to -24.0 in this month from -20.9 in the previous month. The economists were surprised because they were expecting a small improvement in the manufacturing sector in the month of February. The negative reading in the manufacturing implies a contraction in the segment.
The Philadelphia manufacturing reading that came out was enough to wipe out all the gains the stock had made in the morning. In the early trading period the stocks were able to gain a bit due to the virtue of the Tech market. The Tech market was doing well at the time as a result of an up gradation of Cisco Company and a positive profit prediction from the makers of the BlackBerry mobile phone, Research in Motion. Research in Motion (RIMM) went further up by 9 percent after the group reconfirmed its fourth quarter profit guidance and took off its net subscription outlook. The Cisco group (CSCO, Fortune500) was able to gain a bit as a result of Citigroup’s offer to buy them rather than hold them. . The Citigroup said that this was because they thought that Cisco offers a good value for long term investors.
Following this Philly report was another similar reading on the manufacturing sector in the New York area. This reading was also a rather drab reading. The New York reading prompted the addition of bets regarding the broader slowdown in the sector.
The massive sell off in stock that followed the report shows that more and more investors are convinced that these weak economic reports, that have come out lately, are hinting towards the possibility of a recession. Some economists however believe that this apprehension is already being combated with by the signs which are actually virtual bargains to be found in sections of the market that have taken a good deal of loss in the recent past.
The main reasons that are adding to the increasing volatility on a day to day basis are the issues concerning the impact of the recession, if it happens, and how deep it would run in the event of its happening. The other important factor which is contributing to the volatility is the massive amounts of stocks that have been sold off in a hard way. This then leads to the value of such stocks attaining decent values.
Crude prices at record $100.01
February 20, 2008
On the nineteenth of February the crude oil prices reached a record $100.01 barrel and the price of gold and other commodities as well went higher. This resulted in the stocks sliding down which erased the small gains it had achieved in the session. The increase in oil and gold prices is raising many worries about what the impact of inflation would be on the already troubled US economy.
Another factor which prompted the stocks to slide towards the end of the day was the weakness of the telecom stocks and the problems the banking sector is going through currently.
INDU (the Dow Jones industrial average) and the SPX (Standard & Poor’s 500) index finished the session with small declines while COMP (the NSADAQ composite) lost 0.7 percent in the end of the day. As the trading came to an end the computer maker HP announced its fiscal first quarter sales which was higher than the forecasts.
The day’s trading had started well and was doing well till mid day when the prices of crude oil went up. The 3 main indexes in the country had posted significant gains but this got erased by afternoon as the increase in crude price gained momentum. The fact that the increase in prices happened during a period when there are widespread worries of OPEC cutting down on its oil production made the situation even worse.
Even while the increase in oil prices will help in boosting the value of energy stocks the very high price is definitely going to weigh deep down in the minds of investors. The fact that the price of gold also increased on the 19th also will make the investors hesitant in making their moves. The gold prices increased by almost $24 per ounce on the nineteenth. The increase in gold and other commodities is considered as a clear cut indication of inflation starting off.
As a result of the slide of stocks the treasury prices took a dip. The slump in treasury prices led to raising the yield on the benchmark ten year note to 3.89 percent from 3.78 percent on Friday. The US dollar dropped against the other currencies of the world.
The banking sector in the country continues to be trouble. The Lehman Brothers dropped by 2.5 percent on 19th after it was reported that they could face a write-off because of its contact to various bad mortgage bets. The Credit Suisse Group (CS) also went down by 5.2 percent after they said that they would have to slice its profit by $1 billion in the first quarter after the traders priced the value of its holdings in asset backed securities at a very high level of almost $3 billion. The European bank later reported that these traders have been suspended.
20th is going to be very important for the investors as many reports regarding the consumer prices, housing starts and building permits will be coming out on the day. The Minutes from the Federal Policy meeting will also be published by the evening of 20th.
Venezuela to keep exporting oil to USA
February 19, 2008
On February seventeen, the Venezuelan President Hugo Chavez reassured the people of America that he will not be cutting off the oil supply to the great nation. This comes as a great relief to the nation as only last week he had threatened to cut off the oil supply to the United States to show his displeasure when Exxon Mobil Corp. successfully convinced the courts in the United States of America and Europe to freeze the Venezuelan assets. He however on this Sunday said that Venezuela was not planning to halt the shipments of oil. His earlier statements had led to widespread havoc in the oil markets in the previous week.
Chavez made the remark while on a visit to the heavy oil projects in the Orinoco river basin in Venezuela which is very rich in petroleum. He said that Venezuela at present has no plans to stop the shipment of oil to the United States of America. He however made it clear that if the United States was to attack or try and harm Venezuela in any way they would not hesitate in halting the oil supply. This is the umpteenth time he is saying this because he has always warned against the chances of an upcoming US invasion of Venezuela so that USA would have control over immense oil reserves of Venezuela. The fact that USA is dependant on Venezuela for getting almost 10 percent of the oil it requires adds substance to this belief of the socialist leader. However the United States officials have said that no such scheme exists.
The Venezuelan government led by Hugo Chavez is currently engaged in a legal encounter with a Texas based company, Irving, over the issue of compensation for the nationalization of a heavy oil project in the Orinoco river basin. Exxon Mobil is currently trying to freeze billions of dollars of Venezuelan assets which are there in United States and Europe. This they were trying to do to make sure that a payoff would follow and if in case they win they manage to win a decision by an international arbitration panel.
Only one month earlier had a British court ordered an injunction which provided for the freezing of almost $12 billion in assets of a government run unit known as Petroleos de Venezuela SA or PDVSA. Last week, on the 14th, the oil minister for Venezuela let it be known that the demand that Exxon Mobil Corp. was making was far beyond the scope of rational thinking. He said that the demand Exxon Mobil Corp. was making was at least more than 10 times the compensation it might deserve from the country for nationalizing one of its own oil venture.
Chavez was therefore very specific last week when he said that his country was going to cut off the oil shipments to make it very clear to USA and Europe that they would not appreciate it if the assets from Venezuela were frozen.
Consumer confidence at a 16 year low
February 18, 2008
As tensions of a looming economic recession and massive job cuts is very much in the air the confidence of the US citizens are plummeting to record lows. According to the University of Michigan the consumer sentiment index which was at 78.4 in January fell to 69.6 as we crossed mid February. This current standing is the lowest the index has seen in the last 16 years. The report which was formulated after a close survey has found out that the index was this low only during previous recessions. The findings of the report become all the more depressing as it is coming only days after the Federal Reserve chairman Ben Bernanke said that the viewpoint of the US economy is deteriorating very fast indeed. The two cuts in the interest rate which happened in the month of January was a stab at enhancing consumer spending to widen the economy of the country. Both, the consumer sentiment as well as the economy was seriously affected by the collapse of the US housing sector.
Many economists in the country feel that the present scenario is just horrible. Says Ian Shepherdson, the chief US economist at High Frequency Economics, the latest report about the consumer sentiment in the country was just too horrible and too difficult to believe. The reason according to him, which are responsible for making the citizens of the country so miserable are the prolonged instability that is existing in the various markets, the increased rates of food and energy sources and the ongoing upheaval in the housing market.
Many others feel that the current reading is further evidence of a growing recession. These people are the believers of the theory that consumer sentiments will go this low only during the time of a recession. Most of them like Keith Hembre, the chief economist at FAF advisers feel that this is another recession type reading.
Keith Hembre also went on to say that the current industrial figures are nothing but ugly. According to separate data that came out late last week from the Fed the US industrial production has risen by just 0.1 percent in the month of January. This was happening for the second month in a row. Various other economic data which came out in the recent past was also equally depressing.
The service sector in the country has contracted for the first time in the last five years and the employment level across the country also took a fall for the first time since August in 2003. Various other data which were let out lately were also not good signs for the economy. The report of the manufacturing activity in New York was also in a bad state.
The surprise rise in the retail sales in the month of January were some of the only positive things that happened in the month which rose by 0.3 percent. This alone however would not be enough to enhance the consumer sentiments.
Mortgage rates almost unchanged
February 15, 2008
As the week comes to an end the mortgage rates were mixed throughout the country but remained largely unchanged. The mortgage rates did not go through any amount of significant change even as the labor productivity went higher than the predictions this week and the pending sales of the innumerable homes weakened as per the report of Freddie Mac on Thursday this week. This left the people who are trying to get a refinance done in a tricky position.
The loan purchaser who is sponsored by the Government said that the thirty year fixed rate loans were averaged at 5.72 percent as the week came to an end. This was actually higher than the previous week’s standing, which was at 5.67 percent. But Freddie Mac said that last year at the same time the rate was averaged at a figure of 6.3 percent. The rates for a fixed rate loan for 15 years averaged at 5.25 percent which was higher than last week’s rate of 5.15 percent. The rate for a fifteen year fixed rate loan at the same time last year was however averaged at 6.03 percent. When the rates for a five year adjustable rate loan were averaged at 6.01 percent in the previous year, this week it was averaged at 5.19 percent after it came down from last week’s average of 5.21 percent.
The average rates of one-year Adjustable Rate Mortgages (ARMs) which are indexed by the treasury were at 5.03 percent at the end of the week and this was the same average in the previous week too. The average rate of this one year ago at the same time was however 5.52 percent.
Since the amount of economic data that was let out was relatively small the present state of the economy remained in a situation of haze and doubt. According to Freddie Mac vice president and chief economist Frank Nothaft, this was one of the main reasons as to why the mortgage rates remained almost unchanged. Freddie Mac however believes that once more data regarding the present scenario of the current economic situation is let out the confusions that are present now about the credibility of the economy would clear. This would ultimately lead to the mortgage rates changing by a significant amount. Now that the stimulus plan has been authorized by the President the home owners are going to find getting a refinance for their home relatively more easy.
He however said that one of the good things that happened in the week is that the labor productivity went higher than what was expected in the last quarter of the year 2007. Another thing that happened in the labor sector is that the profits in the labor expenses slowed. But he also said that the existing sale of homes which were pending went down in the month of December. This was reason enough to indicate that the home sales were going to be very weak in January and February as well.
Home prices drop again
February 15, 2008
As the week came to an end the home prices across the country continued its fall. The prices which have been falling throughout the last year managed to create a record for being the highest ever drop in home prices on a quarterly basis. The realtors however were of the opinion that the prices have fallen at a faster pace in many other places around the world in the same period of time. The fall that the national median price took this time was of 5.8 percent. That is from $206,200 to $219,300, which was the steepest fall that was ever recorded by the National Association of Realtors (NAR). NAR has been amassed by this report since 1979 and was quite disturbed by the recent fall of such a big magnitude. They said that the reason for this drop was mainly because of a liquidity squeeze that has been happening since last summer. Because of this the homeowners were finding it difficult to obtain mortgage finances, especially for the more costly properties.
The reason the home prices are still going down is mainly because very few expensive properties were sold in this time, which ultimately brought down the median prices. This can be seen from the high cost markets like California, South Florida, and D.C. etc. in contrast to the year 2006, all the four regions in USA reported loss in the last quarter of the year 2007. The region which was the worst affected was the West which was at 8.7 percent. The prices dropped by 4.8 percent in the Northeast region, 5.4 percent in the South, and by 3.2 percent in the Midwest.
As a result of the decreasing home prices many of the nation’s real estate markets came up with profits. 73 of the 151 real estate markets in the country were able to record a price gain. As the prices in Youngstown, Ohio dropped by 9.2 percent to reach $72,000 the cheapest single family home market in USA got even cheaper.
Condo prices however fared better than the home prices. The prices of condos changed to some extend in the last quarter of last year. But it was not the case in all the places, all the places lying in the Sun Belt had to take remarkable price hits. The home prices were 2.7 percent lower in the last quarter of the year 2007 as compared to the last quarter of the year 2006. The housing markets which are not doing well at the moment are those which have experienced a job loss or population loss or both. Once this problem is overcome the housing markets will start gaining and will get out of the current crisis. The other reason which has deeply affected the housing market is the high number of foreclosures in the country. Very high numbers of empty homes and ‘for-sale’ boards adversely affected the housing market in the country.
President admits economic vagueness
February 13, 2008
The US President George W bush on Monday this week admitted that the country is suffering from a bad case of uncertainness in most spheres of its economy. He therefore asked the congress to give as much help as possible to all those people as well as businesses that have been upset by the credit crunch and the housing slump. He also conveyed his hopes during his brief introductory speech before he presented the annual economic report that the $168 billion economic stimulus plan would help the economy to keep growing and the people of the nation working. The stimulus plan was passed by the congress last week and it has provisions for massive tax rebates for the tax payers of the nation. It gives rebates to all single as well as married people in the country. And in addition to that it also has provisions which give a rebate of 300 to disabled men of war, elderly people and other low income citizens. The bill is expected to reach the President’s table later this week for his authorization. According to the measures that are given in the plan the money will go directly to the workers, individuals, and families of America. Bush expressed his utmost confidence in the plan and said that it would help a great deal in getting rid of the uncertainties that are there in the economy currently.
The President however felt that other steps needed to be taken to bring the economy to a stronger position than it used to be in. He said that even though the stimulus plan has provisions for giving tax rebates for businesses and people many other steps also have to be taken by the Congress to reinforce the economy. For this, he asked the Congress to make this reduction in tax a permanent measure and also to give ample help to those people who are struggling to retain their homes. The President also feels that the congress should endorse legislations which allow state housing agencies to give tax-free bonds to homeowners to help them do a well needed refinance.
The collapse of the housing market and the ongoing credit crunch has taken the number of home foreclosures to a record number. This then led to the financial companies facing multi billion dollar losses in the form of bad mortgage investments. Ultimately all this led to the country’s economy taking a powerful blow. The growth of the economy had come to a near standstill by the last three months of 2007 and is currently growing at a snail’s pace of just 0.6 percent. Another thing that the economists are worrying about is the rumors of an upcoming recession. Many such economists now believe that the US economy has finally started shrinking. The president however chose to play it safe and called the current scenario one full of uncertainties and that there is considerable risk to the future growth of the country. He however reinstated his belief that the stimulus plan would help the country in getting back to its prime glory soon.
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