The man who trades freedom for security does not deserve nor will he ever receive either. – Benjamin Franklin
NEW YORK (Reuters) – Shares of American International Group fell more than 50 percent in early trading on reports that the insurer had turned to the Federal Reserve for $40 billion in bridge financing to ward off a liquidity crisis and ratings downgrades.
AIG shares dropped 52 percent to $5.82 on the New York Stock Exchange before recouping a bit to $7.41. The shares have fallen 80 percent this year and closed Friday at $12.14.
Eight years ago, Yale superstar professor and MacroMarkets chief economist Robert Shiller famously called the top of the stock market in his book Irrational Exuberance. Then, a year before the housing bubble peaked, he predicted the colossal bust we are now experiencing.
If you recognize Shiller’s name, it’s because the Standard & Poor’s/Case-Shiller home price indexes, which he developed with Wellesley College economist Karl Case, have become the nation’s most authoritative source for home price trends.
In part one of my one-on-one with Shiller, we discuss the grim outlook for U.S. housing, which he tackles in-depth in his new book The Subprime Solution. Highlights of our first discussion include:
Read moreU.S. House Price Decline Could Be Worse than Great Depression, Economist Shiller Says
Dollar and yuan currency at a bank in China. China’s central bank has accumulated about $1 trillion in United States debt.
HONG KONG – China’s central bank is in a bind.
It has been on a buying binge in the United States over the last seven years, snapping up roughly $1 trillion worth of Treasury bonds and mortgage-backed debt issued by Fannie Mae and Freddie Mac.
Those investments have been declining sharply in value when converted from dollars into the strong yuan, casting a spotlight on the central bank’s tiny capital base. The bank’s capital, just $3.2 billion, has not grown during the buying spree, despite private warnings from the International Monetary Fund.
Now the central bank needs an infusion of capital. Central banks can, of course, print more money, but that would stoke inflation. Instead, the People’s Bank of China has begun discussions with the finance ministry on ways to shore up its capital, said three people familiar with the discussions who insisted on anonymity because the subject is delicate in China.
Sept. 2 (Bloomberg) — The best already may be over for the U.S. stock market this year.
The Standard & Poor’s 500 Index, which had the worst first half since 2002, added 0.2 percent this quarter, the only gain among the world’s 10 biggest markets in dollar terms. Shares in the benchmark index for American equity climbed to an average 25.8 times reported profits, the highest valuation in five years. The last time that happened, the S&P 500 fell 38 percent.
Read moreU.S. Stocks at 25.8 Times Earnings Means Rally Can’t Continue
VANCOUVER, B.C. – The U.S. financial crisis has cut so deep – and the government has taken on so much debt in misguided attempts to bail out such companies as Fannie Mae (FNM) and Freddie Mac (FRE) – that even larger financial shocks are still to come, global investing guru Jim Rogers said in an exclusive interview with Money Morning.
Indeed, the U.S. financial debacle is now so ingrained – and a so-called “Super Crash” so likely – that most Americans alive today won’t be around by the time the last of this credit-market mess is finally cleared away – if it ever is, Rogers said.
Aug. 15 (Bloomberg) — Gold plunged below $800 an ounce, silver dropped as much as 12 percent and oil, corn and copper slumped as the dollar’s rebound reduced the appeal of commodities after a six-year boom.
Related article: U.S. Dollar Intervention !!!
Palm oil tumbled as much as 9 percent, and rubber and wheat fell as the dollar headed for its longest winning streak in more than two years and on concern a spreading global economic slowdown will reduce demand for raw materials.
Commodities, measured by the Standard & Poor’s GSCI index, have tumbled 21 percent from their record July 3, descending into a bear market. Oil traded near its lowest for more than three months, gold for eight months and silver for almost a year. Copper and corn reached six-month lows this week.
Read moreGold, Silver Slump, Leading Commodities Drop on Dollar, Growth
The star analyst tells Fortune magazine that housing woes will force banks to keep taking writedowns.
NEW YORK (Fortune) — The credit crisis is far from over, star analyst Meredith Whitney tells Fortune magazine in its upcoming issue.
Whitney, who audaciously – and correctly – predicted last October that Citigroup (C, Fortune 500) would have to cut its dividend, tells the magazine that banks in general today are still facing much bigger credit losses than what they’ve reported so far.
The Oppenheimer & Co. analyst warned last year – and continues to warn today – that the “incestuous” relationship between the banks and the credit-rating agencies during the real estate bubble will have a long-lasting impact on banks’ ability to recover.
NEW YORK (Reuters) – Standard & Poor’s on Thursday cut ratings on all three major U.S. automakers deeper into junk status, citing expected losses due to higher gas prices and a weakening U.S. economy.
S&P cut its ratings for General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz), Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz) and Chrysler Automotive LLC to “B-minus,” or six levels below investment grade, from “B.” It also cut to “B-minus” from “B” the finance arms of Ford, Chrysler and GMAC, which is 49 percent owned by GM.
Related article: GM Posts $15.5 Billion Loss; More Job Cuts Possible
Read moreGM, Crysler and Ford: S&P cuts ratings lower into junk
The International Monetary Fund released its semiannual Global Financial Stability Report, predicting that the economic crisis “is spreading beyond the US subprime market.” The report comes ahead of the IMF and World Bank spring meetings.
The International Monetary Fund said Tuesday the worldwide losses stemming from the US subprime mortgage crisis could hit 945 billion dollars as the impact spreads in the global economy.