USDA Cuts US Corn, Soy Estimates; Grain Mkts Up (2nd UPDATE)

(Updates with closing grain prices; additional analyst comments)

CHICAGO -(Dow Jones)- The U.S. Department of Agriculture Friday cut its projections for 2008 U.S. corn and soybean production, keeping supplies of the commodities tight and helping lift grain prices.

The reduction in crop size, which was the result of poor growing weather in August, could be the start of a trend, especially because the crops were already lagging developmentally because of delayed planting and spring floods in parts of the Midwest, grain analysts warned.

The USDA estimates U.S. 2008 corn production at 12.072 billion bushels, down 216 million from the agency’s August estimate. The soybean crop is expected to come in at 2.934 billion bushels, down 39 million bushels from last month’s forecast. In both cases, the agency said, weather during August lowered the average yield for each crop, thereby lowering total production.

Read moreUSDA Cuts US Corn, Soy Estimates; Grain Mkts Up (2nd UPDATE)

China may cut its dollar holdings – CICC

China, which holds a fifth of its currency reserves in Fannie Mae and Freddie Mac debt, may cut the portion held in US dollars, according to China International Capital Corp (CICC), one of the nation’s biggest investment banks.

The US government this week seized control of the two mortgage-finance companies, which account for almost half of the home-loan market in the world’s biggest economy, to prevent defaults from crippling them. China holds up to $400 billion in the two firms’ debt, CICC Chief Economist Ha Jiming said in a report Thursday.

“The crisis has made Chinese officials realize it’s a bad idea to put all their eggs in one basket,” wrote Hong Kong-based Ha. “This will likely lead to greater diversification of foreign exchange reserve investments.”

China held $447.5 billion of US agency bonds as of June 2008, according to the CICC calculations using disclosures by the US Treasury. It is likely to reduce the portion of reserves in dollar assets from the current 60 percent by purchasing more non-dollar assets with new reserves, he said.

Read moreChina may cut its dollar holdings – CICC

N.Y. Fed calls meeting to forestall Lehman collapse

SAN FRANCISCO (MarketWatch) — As U.S. Treasury officials made it clear the government will not bail out Lehman Bros., the Federal Reserve Bank of New York met Friday night with Wall Street executives in an effort to forestall the collapse of the investment firm and shore up rapidly weakening financial markets.

The New York Fed called the emergency meeting Friday evening with the heads of major financial institutions and the group reportedly plans to continue meeting throughout the weekend if necessary to come up with a plan to save the ailing Lehman Bros. (LEH:Last: 3.76, -0.46, -10.90%) and prevent further damage among financial companies.

Read moreN.Y. Fed calls meeting to forestall Lehman collapse

Bailouts Will Push US into Depression


Source: YouTube

The end result of the global economic slowdown may be the U.S. announcing national bankruptcy as the government cannot afford the bailouts that it promised and the market will not bail out the government, Martin Hennecke, senior manager of private clients at Tyche, told CNBC on Thursday.

“We expect a depression in the United States. We expect a depression, very possibly, also in Europe,” Hennecke said on “Worldwide Exchange.”

The estimated $300 billion cost of the Fannie/Freddie bailout will probably be considered as a loss that the government will have to take, therefore passing it on to taxpayers, he explained.

“We already have $3 trillion of debt, as far as the U.S. government is concerned. These debt figures across the U.S. economy are rising very sharply.”

When the government can no longer pass the United States’ “immense debt” on to taxpayers, it will turn to the holders of U.S. dollars, leading to the eventual downfall of the currency, Hennecke said.

“Definitely, it (the dollar) is not a safe place to be invested in, as real inflation is closer to 10 or 11 percent than the actual inflation numbers given by the U.S. government,” Hennecke said on “Worldwide Exchange”.

Investors should avoid exposure to debt and stay away from leveraging on any investment or asset, including property, Hennecke advised, adding that “banks have been too highly leveraged in the past, private households, everybody.”

Hennecke’s stock allocations are mainly Asian-based, especially in the Chinese market as the country’s government has a large amount of cash and the macroeconomics are fundamentally strong.

He also suggested investing in gold, despite the recent fall in price.

11 Sep 2008

Source: CNBC

Washington Mutual shares sink below $2 on capital worry

NEW YORK (Reuters) – Washington Mutual Inc (WM.N: Quote, Profile, Research, Stock Buzz) shares sank below $2 for the first time since 1990 as anxiety grew about the largest U.S. savings and loan’s mortgage losses, capital needs and survival prospects.

Its shares were down 17 cents, or 7.3 percent, at $2.15 on Thursday on the New York Stock Exchange, but fell to $1.75 earlier in the session. The stock has plunged 44 percent in the previous two days.

Wall Street is worried that Washington Mutual, like Lehman Brothers Holdings Inc (LEH.N: Quote, Profile, Research, Stock Buzz), may not have time to right itself, and that new the chief executive, Alan Fishman, will not find a buyer or raise enough capital for the Seattle-based thrift.

Read moreWashington Mutual shares sink below $2 on capital worry

Report: Oil Agency Ran Amok, Interior Dept. Inquiry Finds Sex, Drugs, Corruption

Government officials in charge of collecting billions of dollars worth of royalties from oil and gas companies accepted gifts, steered contracts to favored clients and engaged in drug use and illicit sex with employees of the energy firms, federal investigators reported yesterday.

Investigators from the Interior Department’s inspector general’s office said more than a dozen employees, including the former director of the oil royalty program, took meals, ski trips, sports tickets and golf outings from industry representatives. The report alleges that the former director, Gregory W. Smith, also netted more than $30,000 from improper outside work.

Read moreReport: Oil Agency Ran Amok, Interior Dept. Inquiry Finds Sex, Drugs, Corruption

Tens of thousands to be laid off every week as UK falls into recession

MPC member warns of ‘horrible surprise’
Gloomy assessment sends London shares falling

Tens of thousands of people could be laid off every week in the run-up to Christmas as the UK economy falls into recession, David Blanchflower of the Bank of England’s monetary policy committee warned today.

Blanchflower told MPs to expect “a large increase in unemployment”, and warned that a “horrible surprise” could be just around the corner. The gloomy assessment sent shares in London falling, and also weakened sterling yet further against the dollar.

Blanchflower, who has repeatedly tried and failed in recent months to persuade the MPC to cut interest rates, predicted that the unemployment count will rise by 60,000 a month for several months in a row, probably starting in October.

“I believe we will see a deeper economic decline than other people think,” Blanchflower told the Treasury select committee, ruling out the possibility that the UK GDP will not shrink.

Read moreTens of thousands to be laid off every week as UK falls into recession

Recession forecast for Germany, Spain and UK

Germany, the UK and Spain all face recessions this year, the European Commission forecast yesterday, dashing finally any remaining hopes that Europe would avoid a sharp economic downturn. France and Italy would fare little better, it said.

The steep downward revisions in growth forecasts by the European Union’s executive arm showed it had accepted that tumbling business and consumer confidence was hitting economic activity – even though the European economy had been “generally sound” prior to the credit crisis .

Joaquin Almunia, economics and monetary affairs commissioner, described the environment as “difficult and uncertain”. As well as financial turmoil and a near doubling of oil prices over the past year, significant housing market corrections in some countries were taking their toll, he said.

Read moreRecession forecast for Germany, Spain and UK

Japan wholesale prices rise 7.2 percent in August

TOKYO (AP) – Japan’s wholesale inflation remained near a 27-year high in August, the government said Wednesday, as the soaring costs of energy and raw materials continued to pressure businesses.

The index for domestic corporate goods prices rose 7.2 percent from a year ago, the Bank of Japan said.

Read moreJapan wholesale prices rise 7.2 percent in August

Freddie, Fannie Scam Hidden in Broad Daylight

Sept. 9 (Bloomberg) — When the history is written on the collapse of Fannie Mae and Freddie Mac, it will go down in the annals of corporate scandals as one of the greatest accounting scams committed in broad daylight.

All anyone had to do to know the government-guaranteed mortgage financiers were insolvent was read their financial statements. You didn’t need a trained professional eye to discern this open secret, only a skeptical one.

Just last month, Fannie and Freddie said their regulatory capital was $47 billion and $37.1 billion, respectively, as of June 30. The Treasury Department now says it may have to inject as much as $200 billion of capital into the two companies. Nothing much changed at the companies in that span. They just couldn’t get the government to keep up the ruse any longer.

Read moreFreddie, Fannie Scam Hidden in Broad Daylight