"Crude oil prices briefly hit the $100-a-barrel mark and gold prices jumped to an all-time high as investors poured money into commodities on Wednesday amid deepening fears about the weakness of the US dollar."
Showing posts with label Dollar. Show all posts
Showing posts with label Dollar. Show all posts
Wednesday, January 2, 2008
Dollar fear sparks rush to oil and gold
"Crude oil prices briefly hit the $100-a-barrel mark and gold prices jumped to an all-time high as investors poured money into commodities on Wednesday amid deepening fears about the weakness of the US dollar."
Monday, December 31, 2007
US dollar hammered
"THE US dollar posted its biggest weekly drop against the euro since April 2006 as a slumping housing market and upheaval in Pakistan made US financial assets less attractive to global investors."
Monday, December 3, 2007
The U.S. dollar: The long farewell?
"It’s just straws in the wind so far. India’s Ministry of Culture announces that foreign tourists can no longer pay in dollars when visiting the Taj Mahal and other heritage sites; they have to pay in good, hard rupees."
Sunday, November 25, 2007
Forecast: U.S. dollar could plunge 90 pct
"We are going to see economic times the likes of which no living person has seen," Trends Research Institute Director Gerald Celente said, forecasting a "Panic of 2008."
Thursday, November 8, 2007
China signals dollar swap
by Patrice Hill - November 8, 2007
China roiled financial markets around the globe yesterday when it asserted that the dollar is losing its luster as the world's reserve currency and that Beijing will swap some of its $1.4 trillion in reserves out of U.S. dollars and into stronger currencies like the euro and Canadian dollar.
China's verbal assault on the dollar helped trigger a 360-point plunge in the Dow Jones Industrial Average and came as French President Nicolas Sarkozy warned in a speech to Congress that the "disarray" caused by the dollar's steep fall could lead to "economic war."
"The world's currency structure has changed," Xu Jian, a central bank vice director, said in a Beijing conference, according to wire service reports. The dollar is "losing its status as the world currency," he said.
"We will favor stronger currencies over weaker ones, and will readjust accordingly," Cheng Siwei, vice chairman of China's National People's Congress, said at the same meeting.
A spokeswoman for Treasury Secretary Henry M. Paulson Jr. said he remains "strongly committed to a strong dollar," but the Bush administration has done nothing to prevent the currency's recent sharp drop against other major currencies.
Some analysts dismissed the Chinese officials' statements as bluster, but the news left the greenback at a record low near $1.50 to the euro in New York trading, the lowest level in 57 years against the Canadian dollar, and the lowest levels in a generation against the British pound and other currencies.
The dollar's plight added to a raft of woes on Wall Street, where the Dow and other U.S. stock indexes lost 2.7 percent or more of their value amid worries that the weakening dollar is triggering an inflationary spiral in oil and other commodity prices, while making U.S. stocks, bonds and other investments less attractive to foreigners.
"The big issue on any currency is if its rate of depreciation is so fast that it scares away all capital, and the announcement that we heard from China sort of feeds those fears," said Larry Smith, chief investment officer at Third Wave Global Investors.
With the world's largest reserves of dollars, China has been a major investor in U.S. Treasury bonds and debt securities and is the second-largest holder of U.S. government debt next to Japan. China accumulates a lot of dollars because of its lopsided trade surpluses with the United States and its policy of linking its currency to the dollar, which requires it to buy and hold dollars.
While China has been signaling all year that it will gradually change its policies, the blunt and unambiguous statements reported yesterday startled markets.
China already has divested about 5 percent of its $400 billion of Treasury holdings and has set up a $200 billion investment fund to diversify its investments by purchasing stocks and equity ownership positions in companies around the world. The government plans to devote more of its reserves to such alternative investments.
Chinese officials told reporters at the Beijing conference that they are not signaling China will dump dollars and buy euros. But since China continues to fix its currency against the dollar, the practical effect of Beijing's moves away from the dollar is to force up the value of the euro and other currencies that float freely against the U.S. currency, analysts say.
China's policies have helped feed a gigantic run-up of the euro — the European currency has gained nearly two-thirds against the dollar since 2001 — which European leaders say is hurting exports and economic growth on the continent. They have pleaded with the Bush administration to do something about the wild currency swings, and Mr. Sarkozy made his case personally in Washington yesterday.
"Those who admire the nation that has built the world's greatest economy and has never ceased trying to persuade the world of the advantages of free trade expect her to be the first to promote fair exchange rates," Mr. Sarkozy said in his congressional address, alluding to the possibility of economic retaliation by European states stung by the falling dollar.
The French president also blamed China for unfairly undervaluing its currency, but he said that is no excuse for the U.S. failing to act. The Bush administration has been adamant that currencies should be allowed to float freely.
"The dollar cannot remain 'someone else's problem,'" Mr. Sarkozy said. "If we are not careful, monetary disarray could morph into economic war. We would all be its victims."
China roiled financial markets around the globe yesterday when it asserted that the dollar is losing its luster as the world's reserve currency and that Beijing will swap some of its $1.4 trillion in reserves out of U.S. dollars and into stronger currencies like the euro and Canadian dollar.
China's verbal assault on the dollar helped trigger a 360-point plunge in the Dow Jones Industrial Average and came as French President Nicolas Sarkozy warned in a speech to Congress that the "disarray" caused by the dollar's steep fall could lead to "economic war."
"The world's currency structure has changed," Xu Jian, a central bank vice director, said in a Beijing conference, according to wire service reports. The dollar is "losing its status as the world currency," he said.
"We will favor stronger currencies over weaker ones, and will readjust accordingly," Cheng Siwei, vice chairman of China's National People's Congress, said at the same meeting.
A spokeswoman for Treasury Secretary Henry M. Paulson Jr. said he remains "strongly committed to a strong dollar," but the Bush administration has done nothing to prevent the currency's recent sharp drop against other major currencies.
Some analysts dismissed the Chinese officials' statements as bluster, but the news left the greenback at a record low near $1.50 to the euro in New York trading, the lowest level in 57 years against the Canadian dollar, and the lowest levels in a generation against the British pound and other currencies.
The dollar's plight added to a raft of woes on Wall Street, where the Dow and other U.S. stock indexes lost 2.7 percent or more of their value amid worries that the weakening dollar is triggering an inflationary spiral in oil and other commodity prices, while making U.S. stocks, bonds and other investments less attractive to foreigners.
"The big issue on any currency is if its rate of depreciation is so fast that it scares away all capital, and the announcement that we heard from China sort of feeds those fears," said Larry Smith, chief investment officer at Third Wave Global Investors.
With the world's largest reserves of dollars, China has been a major investor in U.S. Treasury bonds and debt securities and is the second-largest holder of U.S. government debt next to Japan. China accumulates a lot of dollars because of its lopsided trade surpluses with the United States and its policy of linking its currency to the dollar, which requires it to buy and hold dollars.
While China has been signaling all year that it will gradually change its policies, the blunt and unambiguous statements reported yesterday startled markets.
China already has divested about 5 percent of its $400 billion of Treasury holdings and has set up a $200 billion investment fund to diversify its investments by purchasing stocks and equity ownership positions in companies around the world. The government plans to devote more of its reserves to such alternative investments.
Chinese officials told reporters at the Beijing conference that they are not signaling China will dump dollars and buy euros. But since China continues to fix its currency against the dollar, the practical effect of Beijing's moves away from the dollar is to force up the value of the euro and other currencies that float freely against the U.S. currency, analysts say.
China's policies have helped feed a gigantic run-up of the euro — the European currency has gained nearly two-thirds against the dollar since 2001 — which European leaders say is hurting exports and economic growth on the continent. They have pleaded with the Bush administration to do something about the wild currency swings, and Mr. Sarkozy made his case personally in Washington yesterday.
"Those who admire the nation that has built the world's greatest economy and has never ceased trying to persuade the world of the advantages of free trade expect her to be the first to promote fair exchange rates," Mr. Sarkozy said in his congressional address, alluding to the possibility of economic retaliation by European states stung by the falling dollar.
The French president also blamed China for unfairly undervaluing its currency, but he said that is no excuse for the U.S. failing to act. The Bush administration has been adamant that currencies should be allowed to float freely.
"The dollar cannot remain 'someone else's problem,'" Mr. Sarkozy said. "If we are not careful, monetary disarray could morph into economic war. We would all be its victims."
7 Countries Considering Abandoning the US Dollar
by Jessica Hupp - Nov 7, 2007
It’s no secret that the dollar is on a downward spiral. Its value is dropping, and the Fed isn’t doing a whole lot to change that. As a result, a number of countries are considering a shift away from the dollar to preserve their assets. These are seven of the countries currently considering a move from the dollar, and how they’ll have an effect on its value and the US economy.
Saudi Arabia: The Telegraph reports that for the first time, Saudi Arabia has refused to cut interest rates along with the US Federal Reserve. This is seen as a signal that a break from the dollar currency peg is imminent. The kingdom is taking “appropriate measures” to protect itself from letting the dollar cause problems for their own economy. They’re concerned about the threat of inflation and don’t want to deal with “recessionary conditions” in the US. Hans Redeker of BNP Paribas believes this creates a “very dangerous situation for the dollar,” as Saudi Arabia alone has management of $800 billion. Experts fear that a break from the dollar in Saudi Arabia could set off a “stampede” from the dollar in the Middle East, a region that manages $3,500 billion.
South Korea: In 2005, Korea announced its intention to shift its investments to currencies of countries other than the US. Although they’re simply making plans to diversify for the future, that doesn’t mean a large dollar drop isn’t in the works. There are whispers that the Bank of Korea is planning on selling $1 billion US bonds in the near future, after a $100 million sale this past August.
China: After already dropping the dollar peg in 2005, China has more trouble up its sleeve. Currently, China is threatening a “nuclear option” of huge dollar liquidation in response to possible trade sanctions intended to force a yuan revaluation. Although China “doesn’t want any undesirable phenomenon in the global financial order,” their large sum of US dollars does serve as a “bargaining chip.” As we’ve noted in the past, China has the power to take the wind out of the dollar.
Venezuela: Venezuela holds little loyalty to the dollar. In fact, they’ve shown overt disapproval, choosing to establish barter deals for oil. These barter deals, established under Hugo Chavez, allow Venezuela to trade oil with 12 Latin American countries and Cuba without using the dollar, shorting the US its usual subsidy. Chavez is not shy about this decision, and has publicly encouraged others to adopt similar arrangements. In 2000, Chavez recommended to OPEC that they “take advantage of high-tech electronic barter and bi-lateral exchanges of its oil with its developing country customers,” or in other words, stop using the dollar, or even the euro, for oil transactions. In September, Chavez instructed Venezuela’s state oil company Petroleos de Venezuela SA to change its dollar investments to euros and other currencies in order to mitigate risk.
Sudan: Sudan is, once again, planning to convert its dollar holdings to the euro and other currencies. Additionally, they’ve recommended to commercial banks, government departments, and private businesses to do the same. In 1997, the Central Bank of Sudan made a similar recommendation in reaction to US sactions from former President Clinton, but the implementation failed. This time around, 31 Sudanese companies have become subject to sanctions, preventing them from doing trade or financial transactions with the US. Officially, the sanctions are reported to have little effect, but there are indications that the economy is suffering due to these restrictions. A decision to move Sudan away from the dollar is intended to allow the country to work around these sanctions as well as any implemented in the future. However, a Khartoum committee recently concluded that proposals for a reduced dependence on the dollar are “not feasible.” Regardless, it is clear that Sudan’s intent is to attempt a break from the dollar in the future.
Iran: Iran is perhaps the most likely candidate for an imminent abandonment of the dollar. Recently, Iran requested that its shipments to Japan be traded for yen instead of dollars. Further, Iran has plans in the works to create an open commodity exchange called the Iran Oil Bourse. This exchange would make it possible to trade oil and gas in non-dollar currencies, the euro in particular. Athough the oil bourse has missed at least three of its announced opening dates, it serves to make clear Iran’s intentions for the dollar. As of October 2007, Iran receives non-dollar currencies for 85% of its oil exports, and has plans to move the remaining 15% to currencies like the United Arab Emirates dirham.
Russia: Iran is not alone in its desire to establish an alternative to trading oil and other commodities in dollars. In 2006, Russian President Vladmir Putin expressed interest in establishing a Russian stock exchange which would allow “oil, gas, and other goods to be paid for in Roubles.” Russia’s intentions are no secret–in the past, they’ve made it clear that they’re wary of holding too many dollar reserves. In 2004, Russian central bank First Deputy Chairmain Alexei Ulyukayev remarked, “Most of our reserves are in dollars, and that’s a cause for concern.” He went on to explain that, after considering the dollar’s rate against the euro, Russia is “discussing the possibility of changing the reserve structure.” Then in 2005, Russia put an end to its dollar peg, opting instead to move towards a euro alignment. They’ve discussed pricing oil in euros, a move that could provide a large shift away from the dollar and towards the euro, as Russia is the world’s second-largest oil exporter.
What does this all mean?
Countries are growing weary of losing money on the falling dollar. Many of them want to protect their financial interests, and a number of them want to end the US oversight that comes with using the dollar. Although it’s not clear how many of these countries will actually follow through on an abandonment of the dollar, it is clear that its status as a world currency is in trouble.
Obviously, an abandonment of the dollar is bad news for the currency. Simply put, as demand lessens, its value drops. Additionally, the revenue generated from the use of the dollar will be sorely missed if it’s lost. The dollar’s status as a cheaply-produced US export is a vital part of our economy. Losing this status could rock the financial lives of both Americans and the worldwide economy.
It’s no secret that the dollar is on a downward spiral. Its value is dropping, and the Fed isn’t doing a whole lot to change that. As a result, a number of countries are considering a shift away from the dollar to preserve their assets. These are seven of the countries currently considering a move from the dollar, and how they’ll have an effect on its value and the US economy.
Saudi Arabia: The Telegraph reports that for the first time, Saudi Arabia has refused to cut interest rates along with the US Federal Reserve. This is seen as a signal that a break from the dollar currency peg is imminent. The kingdom is taking “appropriate measures” to protect itself from letting the dollar cause problems for their own economy. They’re concerned about the threat of inflation and don’t want to deal with “recessionary conditions” in the US. Hans Redeker of BNP Paribas believes this creates a “very dangerous situation for the dollar,” as Saudi Arabia alone has management of $800 billion. Experts fear that a break from the dollar in Saudi Arabia could set off a “stampede” from the dollar in the Middle East, a region that manages $3,500 billion.
South Korea: In 2005, Korea announced its intention to shift its investments to currencies of countries other than the US. Although they’re simply making plans to diversify for the future, that doesn’t mean a large dollar drop isn’t in the works. There are whispers that the Bank of Korea is planning on selling $1 billion US bonds in the near future, after a $100 million sale this past August.
China: After already dropping the dollar peg in 2005, China has more trouble up its sleeve. Currently, China is threatening a “nuclear option” of huge dollar liquidation in response to possible trade sanctions intended to force a yuan revaluation. Although China “doesn’t want any undesirable phenomenon in the global financial order,” their large sum of US dollars does serve as a “bargaining chip.” As we’ve noted in the past, China has the power to take the wind out of the dollar.
Venezuela: Venezuela holds little loyalty to the dollar. In fact, they’ve shown overt disapproval, choosing to establish barter deals for oil. These barter deals, established under Hugo Chavez, allow Venezuela to trade oil with 12 Latin American countries and Cuba without using the dollar, shorting the US its usual subsidy. Chavez is not shy about this decision, and has publicly encouraged others to adopt similar arrangements. In 2000, Chavez recommended to OPEC that they “take advantage of high-tech electronic barter and bi-lateral exchanges of its oil with its developing country customers,” or in other words, stop using the dollar, or even the euro, for oil transactions. In September, Chavez instructed Venezuela’s state oil company Petroleos de Venezuela SA to change its dollar investments to euros and other currencies in order to mitigate risk.
Sudan: Sudan is, once again, planning to convert its dollar holdings to the euro and other currencies. Additionally, they’ve recommended to commercial banks, government departments, and private businesses to do the same. In 1997, the Central Bank of Sudan made a similar recommendation in reaction to US sactions from former President Clinton, but the implementation failed. This time around, 31 Sudanese companies have become subject to sanctions, preventing them from doing trade or financial transactions with the US. Officially, the sanctions are reported to have little effect, but there are indications that the economy is suffering due to these restrictions. A decision to move Sudan away from the dollar is intended to allow the country to work around these sanctions as well as any implemented in the future. However, a Khartoum committee recently concluded that proposals for a reduced dependence on the dollar are “not feasible.” Regardless, it is clear that Sudan’s intent is to attempt a break from the dollar in the future.
Iran: Iran is perhaps the most likely candidate for an imminent abandonment of the dollar. Recently, Iran requested that its shipments to Japan be traded for yen instead of dollars. Further, Iran has plans in the works to create an open commodity exchange called the Iran Oil Bourse. This exchange would make it possible to trade oil and gas in non-dollar currencies, the euro in particular. Athough the oil bourse has missed at least three of its announced opening dates, it serves to make clear Iran’s intentions for the dollar. As of October 2007, Iran receives non-dollar currencies for 85% of its oil exports, and has plans to move the remaining 15% to currencies like the United Arab Emirates dirham.
Russia: Iran is not alone in its desire to establish an alternative to trading oil and other commodities in dollars. In 2006, Russian President Vladmir Putin expressed interest in establishing a Russian stock exchange which would allow “oil, gas, and other goods to be paid for in Roubles.” Russia’s intentions are no secret–in the past, they’ve made it clear that they’re wary of holding too many dollar reserves. In 2004, Russian central bank First Deputy Chairmain Alexei Ulyukayev remarked, “Most of our reserves are in dollars, and that’s a cause for concern.” He went on to explain that, after considering the dollar’s rate against the euro, Russia is “discussing the possibility of changing the reserve structure.” Then in 2005, Russia put an end to its dollar peg, opting instead to move towards a euro alignment. They’ve discussed pricing oil in euros, a move that could provide a large shift away from the dollar and towards the euro, as Russia is the world’s second-largest oil exporter.
What does this all mean?
Countries are growing weary of losing money on the falling dollar. Many of them want to protect their financial interests, and a number of them want to end the US oversight that comes with using the dollar. Although it’s not clear how many of these countries will actually follow through on an abandonment of the dollar, it is clear that its status as a world currency is in trouble.
Obviously, an abandonment of the dollar is bad news for the currency. Simply put, as demand lessens, its value drops. Additionally, the revenue generated from the use of the dollar will be sorely missed if it’s lost. The dollar’s status as a cheaply-produced US export is a vital part of our economy. Losing this status could rock the financial lives of both Americans and the worldwide economy.
Tuesday, November 6, 2007
Euro hits new high vs. dollar in New York
NEW YORK, Nov. 6 (AP) - (Kyodo)—The euro surged to its new all-time high of $1.4571 on Tuesday morning in New York on the back of persistent fears that subprime mortgage-related losses at U.S. financial institutions will expand.
At 10:15 a.m., the euro was quoted at $1.4550-4560 and 166.70-80 yen, compared with its 5 p.m. quotes of $1.4519-4522 and 166.52-56 yen in Tokyo.
The dollar traded at 114.50-60 yen against 114.67-70 yen in Tokyo.
The U.S. currency would not easily move out of from the current weakness, a U.S. dealer said.
At 10:15 a.m., the euro was quoted at $1.4550-4560 and 166.70-80 yen, compared with its 5 p.m. quotes of $1.4519-4522 and 166.52-56 yen in Tokyo.
The dollar traded at 114.50-60 yen against 114.67-70 yen in Tokyo.
The U.S. currency would not easily move out of from the current weakness, a U.S. dealer said.
Monday, November 5, 2007
Citigroup problems grow
by Jonathan Stempel and Dan Wilchins, Reuters - Nov 5, 2007
Citigroup Inc's (NYSE:C - News) problems deepened on Monday as it was unable to assure investors a potential $11 billion write-down for subprime mortgages won't grow, and its nearly pristine credit rating was downgraded.
The largest U.S. bank also reduced previously reported third-quarter profit because of worsening credit market problems, which it expects to reduce future cash flow. Its shares fell more than 5 percent.
"There's no way I think anyone can give you an assurance of how things are going to move," Chief Financial Officer Gary Crittenden said on a conference call. "We've taken what we think is a reasonable stab."
Citigroup's struggles comes as the bank faces a leadership void following Chairman and Chief Executive Charles Prince's resignation on Sunday.
He left after a four-year tenure during which the bank's shares fell 17 percent amid criticism that Citigroup had grown unwieldy and lacked direction.
Former U.S. Treasury Secretary Robert Rubin, who led the bank's executive committee, was named chairman. Sir Win Bischoff, head of Citigroup's European business, became acting chief executive.
The announcement of an expected $8 billion to $11 billion write-down, equal to $5 billion to $7 billion after taxes, helped drag down shares of rivals such as Bank of America Corp (NYSE:BAC - News), Merrill Lynch & Co (NYSE:MER - News) and Morgan Stanley (NYSE:MS - News).
Investors worry that write-downs for subprime mortgages and other debt might not be isolated.
Citigroup on October 15 wrote off just $1.56 billion for its subprime portfolio for the third quarter, part of a $6.5 billion write-down for a variety of losses. The new write-down reflects problems discovered since then.
Analysts said Merrill Lynch may add to its own announced $8.4 billion write-down. That company ousted its chief executive, Stanley O'Neal, last Tuesday.
"It shows the clumsiness of pricing mechanisms across Wall Street," said Michael Holland, a money manager and founder of Holland & Co. in New York. He said it's difficult to value Citigroup "until the dust settles."
PRINCE ALWALEED
Saudi Prince Alwaleed bin Talal, Citigroup's largest individual shareholder, declined to comment on the company's problems until the "picture becomes clearer," spokeswoman Heba Fatani said.
Alwaleed endorsed bringing back Sanford "Sandy" Weill, who built Citigroup and hand-picked Prince to succeed him, to run the company on an interim basis, CNBC television said. Weill is not interested in returning to run Citigroup, but is willing to do what is needed to help, CNBC said.
Much of Citigroup's trouble relates to $43 billion of so-called collateralized debt obligations, or CDOs, linked to lower-quality mortgages.
While these "super-senior" securities were once considered rock-solid, Crittenden said investors stopped buying them.
Fitch Ratings cut Citigroup's credit rating one notch to "AA," its third-highest grade, from "AA-plus," citing "severe pressure" on capital markets operations and "an inhospitable consumer credit environment" as mortgage delinquencies soar.
Its outlook is negative, meaning another cut is possible within two years. Standard & Poor's said it may also downgrade the bank.
Citigroup lowered third-quarter profit to $2.21 billion, or 44 cents per share, from the reported $2.38 billion, or 47 cents, after writing off $270 million for the CDO portfolio. This brought the total quarterly write-down to $6.8 billion.
"We wouldn't be surprised if additional write-downs were forthcoming," wrote Goldman Sachs & Co. analyst William Tanona, who rates Citigroup "neutral."
SHARES FALL
Citigroup shares fell $1.97, or 5.2 percent, to $35.76 in afternoon trading, after earlier falling to $35.61. They began the year at $55.70. The yield on Citigroup's 6 percent notes maturing in 2017 rose to 1.57 percentage points above U.S. Treasuries from 1.45, according to MarketAxess.
Citigroup's problems come as Rubin and Bischoff try to restore morale while hunting for a permanent chief executive.
Four directors, including Rubin and Time Warner Inc (NYSE:TWX - News) Chief Executive Richard Parsons, are conducting the search.
Parsons is expected later Monday to step down as Time Warner chief executive, to be replaced by Chief Operating Officer Jeffrey Bewkes, but will remain chairman, CNBC said.
On a conference call, Rubin said he wants someone at Citigroup with the capacity to "relate ... to the multiplicity of businesses this institution has."
A candidate needs a "strong international focus, not necessarily enormous international experience," he said.
Citigroup operates in more than 100 countries, and generates nearly half its revenue internationally.
The bank declined to say how long the chief executive position will remain unfilled.
"I look forward to an interesting but relatively short period of months before handing over to the next CEO," Bischoff said.
Citigroup Inc's (NYSE:C - News) problems deepened on Monday as it was unable to assure investors a potential $11 billion write-down for subprime mortgages won't grow, and its nearly pristine credit rating was downgraded.
The largest U.S. bank also reduced previously reported third-quarter profit because of worsening credit market problems, which it expects to reduce future cash flow. Its shares fell more than 5 percent.
"There's no way I think anyone can give you an assurance of how things are going to move," Chief Financial Officer Gary Crittenden said on a conference call. "We've taken what we think is a reasonable stab."
Citigroup's struggles comes as the bank faces a leadership void following Chairman and Chief Executive Charles Prince's resignation on Sunday.
He left after a four-year tenure during which the bank's shares fell 17 percent amid criticism that Citigroup had grown unwieldy and lacked direction.
Former U.S. Treasury Secretary Robert Rubin, who led the bank's executive committee, was named chairman. Sir Win Bischoff, head of Citigroup's European business, became acting chief executive.
The announcement of an expected $8 billion to $11 billion write-down, equal to $5 billion to $7 billion after taxes, helped drag down shares of rivals such as Bank of America Corp (NYSE:BAC - News), Merrill Lynch & Co (NYSE:MER - News) and Morgan Stanley (NYSE:MS - News).
Investors worry that write-downs for subprime mortgages and other debt might not be isolated.
Citigroup on October 15 wrote off just $1.56 billion for its subprime portfolio for the third quarter, part of a $6.5 billion write-down for a variety of losses. The new write-down reflects problems discovered since then.
Analysts said Merrill Lynch may add to its own announced $8.4 billion write-down. That company ousted its chief executive, Stanley O'Neal, last Tuesday.
"It shows the clumsiness of pricing mechanisms across Wall Street," said Michael Holland, a money manager and founder of Holland & Co. in New York. He said it's difficult to value Citigroup "until the dust settles."
PRINCE ALWALEED
Saudi Prince Alwaleed bin Talal, Citigroup's largest individual shareholder, declined to comment on the company's problems until the "picture becomes clearer," spokeswoman Heba Fatani said.
Alwaleed endorsed bringing back Sanford "Sandy" Weill, who built Citigroup and hand-picked Prince to succeed him, to run the company on an interim basis, CNBC television said. Weill is not interested in returning to run Citigroup, but is willing to do what is needed to help, CNBC said.
Much of Citigroup's trouble relates to $43 billion of so-called collateralized debt obligations, or CDOs, linked to lower-quality mortgages.
While these "super-senior" securities were once considered rock-solid, Crittenden said investors stopped buying them.
Fitch Ratings cut Citigroup's credit rating one notch to "AA," its third-highest grade, from "AA-plus," citing "severe pressure" on capital markets operations and "an inhospitable consumer credit environment" as mortgage delinquencies soar.
Its outlook is negative, meaning another cut is possible within two years. Standard & Poor's said it may also downgrade the bank.
Citigroup lowered third-quarter profit to $2.21 billion, or 44 cents per share, from the reported $2.38 billion, or 47 cents, after writing off $270 million for the CDO portfolio. This brought the total quarterly write-down to $6.8 billion.
"We wouldn't be surprised if additional write-downs were forthcoming," wrote Goldman Sachs & Co. analyst William Tanona, who rates Citigroup "neutral."
SHARES FALL
Citigroup shares fell $1.97, or 5.2 percent, to $35.76 in afternoon trading, after earlier falling to $35.61. They began the year at $55.70. The yield on Citigroup's 6 percent notes maturing in 2017 rose to 1.57 percentage points above U.S. Treasuries from 1.45, according to MarketAxess.
Citigroup's problems come as Rubin and Bischoff try to restore morale while hunting for a permanent chief executive.
Four directors, including Rubin and Time Warner Inc (NYSE:TWX - News) Chief Executive Richard Parsons, are conducting the search.
Parsons is expected later Monday to step down as Time Warner chief executive, to be replaced by Chief Operating Officer Jeffrey Bewkes, but will remain chairman, CNBC said.
On a conference call, Rubin said he wants someone at Citigroup with the capacity to "relate ... to the multiplicity of businesses this institution has."
A candidate needs a "strong international focus, not necessarily enormous international experience," he said.
Citigroup operates in more than 100 countries, and generates nearly half its revenue internationally.
The bank declined to say how long the chief executive position will remain unfilled.
"I look forward to an interesting but relatively short period of months before handing over to the next CEO," Bischoff said.
OIL prices aren't rising - the US dollar is plummeting!
Source: http://www.wakeupfromyourslumber.com/node/4476
Oil traders increased BETS that December futures will reach $125 a barrel because of possible disruptions to Middle East supplies and rising demand.
Here we are (us, Americans), day after day, listening to the media tell us all about how "traders" are "trading" oil at ever higher prices because they're a-scared of this shortage or that disruption, or this crisis, or that air strike.
And all the while we watch anxiously, preparing to cut back on our gasoline or dish out more dollars for our commutes.
Well, I have news for you.
When someone "BETS" that something is or is not going to happen and then, based on that bet, buys or sells IOUs for other people's tangible goods, they're not "traders," they're bookies.
They call themselves "traders" because they want to be admired, not despised.
But, two-bit bookies is all they are.
Didn't any of you see the movie "Trading Places" with Eddie Murphy and Dan Akroyd??? Billy Ray will tell you!
We pay higher prices not because of REAL crises or REAL shortages but BECAUSE of IMAGINED shortages, and ANTICIPATED disruptions, many of which NEVER HAPPEN.
In short, we PAY for their rampant hysteria and insatiable GREED.
Traders held call options to buy 2,526 contracts, each representing the right to buy 1,000 barrels, of December oil at $125 in New York as of Oct. 29, from 1 lot on June 29, New York Mercantile Exchange data show. BETS on $100 oil are also surging: Traders held options to buy 49.7 million barrels of December oil at that price on Oct. 30, up from 30 million barrels on Jan. 2.
Crude oil for December delivery rose to a record $96.24 a barrel in New York today, the highest since the futures began trading in 1983. Prices have soared 19 percent the past month as demand pared inventories, a weaker dollar spurred investors to switch into commodities, and political tension in Iran and Iraq attracted speculative buying.
"A few years ago, when triple-digit oil was talked about, it was tempered by negative responses," said Anthony Nunan, deputy general manager of risk management at Mitsubishi Corp. in Tokyo. "Slowly, it's becoming a reality. It's not crazy anymore, it's a reasonable target."
The fact is, these insane spikes in the price of oil have far less to do with supply and demand of OIL than they have to do with the supply and demand of DOLLARS.
With the dollar plummeting down to the pits of hell, people are dumping it left and right.
All that money has to go somewhere - after all, MONEY WAS NOT MADE TO STORE UNDER YOUR COUCH!
These traders know that! So, instead of storing it under their couch, where it just sits there without "appreciating," they "store" it by "buying" something of value (anything but the dollar, which is worthless).
Since the real estate market is officially DEAD and BURIED (because people can defer buying a house), they choose to "invest" their "money" in the types of commodities that they know that people CANNOT LIVE WITHOUT - thus, oil (and food) is perfect (last I checked a gallon of milk was $4).
So, that's what it all boils down to - the price of oil is skyrocketing not because oil is getting more "expensive," but because the dollar is becoming WORTHLESS.
Next time someone tries to convince you that they're "traders," tell them you know better.
Oil traders increased BETS that December futures will reach $125 a barrel because of possible disruptions to Middle East supplies and rising demand.
Here we are (us, Americans), day after day, listening to the media tell us all about how "traders" are "trading" oil at ever higher prices because they're a-scared of this shortage or that disruption, or this crisis, or that air strike.
And all the while we watch anxiously, preparing to cut back on our gasoline or dish out more dollars for our commutes.
Well, I have news for you.
When someone "BETS" that something is or is not going to happen and then, based on that bet, buys or sells IOUs for other people's tangible goods, they're not "traders," they're bookies.
They call themselves "traders" because they want to be admired, not despised.
But, two-bit bookies is all they are.
Didn't any of you see the movie "Trading Places" with Eddie Murphy and Dan Akroyd??? Billy Ray will tell you!
We pay higher prices not because of REAL crises or REAL shortages but BECAUSE of IMAGINED shortages, and ANTICIPATED disruptions, many of which NEVER HAPPEN.
In short, we PAY for their rampant hysteria and insatiable GREED.
Traders held call options to buy 2,526 contracts, each representing the right to buy 1,000 barrels, of December oil at $125 in New York as of Oct. 29, from 1 lot on June 29, New York Mercantile Exchange data show. BETS on $100 oil are also surging: Traders held options to buy 49.7 million barrels of December oil at that price on Oct. 30, up from 30 million barrels on Jan. 2.
Crude oil for December delivery rose to a record $96.24 a barrel in New York today, the highest since the futures began trading in 1983. Prices have soared 19 percent the past month as demand pared inventories, a weaker dollar spurred investors to switch into commodities, and political tension in Iran and Iraq attracted speculative buying.
"A few years ago, when triple-digit oil was talked about, it was tempered by negative responses," said Anthony Nunan, deputy general manager of risk management at Mitsubishi Corp. in Tokyo. "Slowly, it's becoming a reality. It's not crazy anymore, it's a reasonable target."
The fact is, these insane spikes in the price of oil have far less to do with supply and demand of OIL than they have to do with the supply and demand of DOLLARS.
With the dollar plummeting down to the pits of hell, people are dumping it left and right.
All that money has to go somewhere - after all, MONEY WAS NOT MADE TO STORE UNDER YOUR COUCH!
These traders know that! So, instead of storing it under their couch, where it just sits there without "appreciating," they "store" it by "buying" something of value (anything but the dollar, which is worthless).
Since the real estate market is officially DEAD and BURIED (because people can defer buying a house), they choose to "invest" their "money" in the types of commodities that they know that people CANNOT LIVE WITHOUT - thus, oil (and food) is perfect (last I checked a gallon of milk was $4).
So, that's what it all boils down to - the price of oil is skyrocketing not because oil is getting more "expensive," but because the dollar is becoming WORTHLESS.
Next time someone tries to convince you that they're "traders," tell them you know better.
Saturday, November 3, 2007
Sinking Currency, Sinking Country
by Patrick J. Buchanan - November 2, 2007
The euro, worth 83 cents in the early George W. Bush years, is at $1.45.
The British pound is back up over $2, the highest level since the Carter era. The Canadian dollar, which used to be worth 65 cents, is worth more than the U.S. dollar for the first time in half a century.
Oil is over $90 a barrel. Gold, down to $260 an ounce not so long ago, has hit $800.
Have gold, silver, oil, the euro, the pound and the Canadian dollar all suddenly soared in value in just a few years?
Nope. The dollar has plummeted in value, more so in Bush’s term than during any comparable period of U.S. history. Indeed, Bush is presiding over a worldwide abandonment of the American dollar.
Is it all Bush’s fault? Nope.
The dollar is plunging because America has been living beyond her means, borrowing $2 billion a day from foreign nations to maintain her standard of living and to sustain the American Imperium.
The prime suspect in the death of the dollar is the massive trade deficits America has run up, some $5 trillion in total since the passage of NAFTA and the creation of the World Trade Organization in 1994.
In 2006, that U.S. trade deficit hit $764 billion. The current account deficit, which includes the trade deficit, plus the net outflow of interest, dividends, capital gains and foreign aid, hit $857 billion, 6.5 percent of GDP. As some of us have been writing for years, such deficits are unsustainable and must lead to a decline of the dollar.
A sinking dollar means a poorer nation, and a sinking currency has historically been the mark of a sinking country. And a superpower with a sinking currency is a contradiction in terms.
What does this mean for America and Americans?
As nations realize that the dollars they are being paid for their products cannot buy in the world markets what they once did, they will demand more dollars for those goods. This will mean rising prices for the imports on which America has become more dependent than we have been since before the Civil War.
U.S. tourists traveling to the countries whence their ancestors came will find that the money they saved up does not go as far as they thought.
U.S. soldiers stationed overseas will find the cost of rent, gasoline, food, clothing and dining out takes larger and larger bites out of their paychecks. The people those U.S. soldiers defend will be demanding more and more of their money.
U.S. diplomats stationed overseas, students and businessmen are already facing tougher times.
U.S. foreign aid does not go as far as it did. And there is an element of comedy in seeing the United States going to Beijing to borrow dollars, thus putting our children deeper in debt, to send still more foreign aid to African despots who routinely vote the Chinese line at the United Nations. {Funny how they never mention aid to Israel} (Administrator's comment)
The Chinese, whose currency is tied to the dollar, and Japan will continue, as long as they can, to keep their currencies low against the dollar. For the Asians think long term, and their goals are strategic.
China – growing at 10 percent a year for two decades and now growing at close to 12 percent – is willing to take losses in the value of the dollars it holds to keep the U.S. technology, factories and jobs pouring in, as their exports capture America’s markets from U.S. producers.
The Japanese will take some loss in the value of their dollar hoard to take down Chrysler, Ford and GM, and capture the U.S. auto market as they captured our TV, camera and computer chip markets.
Asians understand that what is important is not who consumes the apples, but who owns the orchard.
Other nations that have kept cash reserves in U.S. Treasury bonds and T-bills are watching the value of these assets sink. Not fools, they will begin, as many already have, to divest and diversify, taking in fewer dollars and more euros and yen. As more nations abandon the dollar, its decline will continue.
The oil-producing and exporting nations, with trade surpluses, like China, have also begun to take the stash of dollars they have and stuff them into sovereign wealth funds, and use these immense and growing funds to buy up real assets in the United States – investment banks and American companies.
Nor is there any end in sight to the sinking of the dollar. For, as foreigners demand more dollars for the oil and goods they sell us, the trade deficit will not fall. And as the U.S. government prints more and more dollars to cover the budget deficits that stretch out – with the coming retirement of the baby boomers – all the way to the horizon, the value of the dollar will fall. And as Ben Bernanke at the Fed tries to keep interest rates low, to keep the U.S. economy from sputtering out in the credit crunch, the value of the dollar will fall.
The chickens of free trade are coming home to roost.
The euro, worth 83 cents in the early George W. Bush years, is at $1.45.
The British pound is back up over $2, the highest level since the Carter era. The Canadian dollar, which used to be worth 65 cents, is worth more than the U.S. dollar for the first time in half a century.
Oil is over $90 a barrel. Gold, down to $260 an ounce not so long ago, has hit $800.
Have gold, silver, oil, the euro, the pound and the Canadian dollar all suddenly soared in value in just a few years?
Nope. The dollar has plummeted in value, more so in Bush’s term than during any comparable period of U.S. history. Indeed, Bush is presiding over a worldwide abandonment of the American dollar.
Is it all Bush’s fault? Nope.
The dollar is plunging because America has been living beyond her means, borrowing $2 billion a day from foreign nations to maintain her standard of living and to sustain the American Imperium.
The prime suspect in the death of the dollar is the massive trade deficits America has run up, some $5 trillion in total since the passage of NAFTA and the creation of the World Trade Organization in 1994.
In 2006, that U.S. trade deficit hit $764 billion. The current account deficit, which includes the trade deficit, plus the net outflow of interest, dividends, capital gains and foreign aid, hit $857 billion, 6.5 percent of GDP. As some of us have been writing for years, such deficits are unsustainable and must lead to a decline of the dollar.
A sinking dollar means a poorer nation, and a sinking currency has historically been the mark of a sinking country. And a superpower with a sinking currency is a contradiction in terms.
What does this mean for America and Americans?
As nations realize that the dollars they are being paid for their products cannot buy in the world markets what they once did, they will demand more dollars for those goods. This will mean rising prices for the imports on which America has become more dependent than we have been since before the Civil War.
U.S. tourists traveling to the countries whence their ancestors came will find that the money they saved up does not go as far as they thought.
U.S. soldiers stationed overseas will find the cost of rent, gasoline, food, clothing and dining out takes larger and larger bites out of their paychecks. The people those U.S. soldiers defend will be demanding more and more of their money.
U.S. diplomats stationed overseas, students and businessmen are already facing tougher times.
U.S. foreign aid does not go as far as it did. And there is an element of comedy in seeing the United States going to Beijing to borrow dollars, thus putting our children deeper in debt, to send still more foreign aid to African despots who routinely vote the Chinese line at the United Nations. {Funny how they never mention aid to Israel} (Administrator's comment)
The Chinese, whose currency is tied to the dollar, and Japan will continue, as long as they can, to keep their currencies low against the dollar. For the Asians think long term, and their goals are strategic.
China – growing at 10 percent a year for two decades and now growing at close to 12 percent – is willing to take losses in the value of the dollars it holds to keep the U.S. technology, factories and jobs pouring in, as their exports capture America’s markets from U.S. producers.
The Japanese will take some loss in the value of their dollar hoard to take down Chrysler, Ford and GM, and capture the U.S. auto market as they captured our TV, camera and computer chip markets.
Asians understand that what is important is not who consumes the apples, but who owns the orchard.
Other nations that have kept cash reserves in U.S. Treasury bonds and T-bills are watching the value of these assets sink. Not fools, they will begin, as many already have, to divest and diversify, taking in fewer dollars and more euros and yen. As more nations abandon the dollar, its decline will continue.
The oil-producing and exporting nations, with trade surpluses, like China, have also begun to take the stash of dollars they have and stuff them into sovereign wealth funds, and use these immense and growing funds to buy up real assets in the United States – investment banks and American companies.
Nor is there any end in sight to the sinking of the dollar. For, as foreigners demand more dollars for the oil and goods they sell us, the trade deficit will not fall. And as the U.S. government prints more and more dollars to cover the budget deficits that stretch out – with the coming retirement of the baby boomers – all the way to the horizon, the value of the dollar will fall. And as Ben Bernanke at the Fed tries to keep interest rates low, to keep the U.S. economy from sputtering out in the credit crunch, the value of the dollar will fall.
The chickens of free trade are coming home to roost.
Friday, November 2, 2007
Dollar hit by US housing troubles
AFP - Nov 2, 2007The dollar fell against the euro on Friday as continuing uncertainty over the US subprime housing sector weighed on the US currency, dealers said.
In early European trade, the European single currency rose to 1.4482 dollars from 1.4422 dollars in New York late on Thursday.
Investors are worried over banks' exposure to the United States' high-risk mortgage sector, which is facing severe problems after they lent cash to borrowers with patchy credit histories.
Such concerns have helped undo much of the optimism generated by Wednesday's quarter point cut in US interest rates to 4.50 percent, with dealers saying the market has slipped back into worry mode about the US economic outlook.
"The optimism expressed by the (US central bank) in its statement on Wednesday that 'strains in financial markets have eased somewhat on balance' is up for debate after the sudden upturn in risk aversion on fears that large financial institutions have not revealed the true scale of losses relating to the sub-prime mortgage fallout," said economist Derek Halpenny at The Bank of Tokyo-Mitsubishi in London.
The market will get a better picture of the health of the world's largest economy later Friday with the release a key monthly US labour market report that Wall Street expects to show 80,000 new jobs were created in October.
US data released overnight was patchy. A government report showed that US consumer spending rose a softer-than-expected 0.3 percent in September as a persistent housing downturn and tighter credit squeezed households.
The report also showed that personal income rose 0.4 percent, matching most analysts' forecasts.
A separate snapshot on home foreclosures by private firm RealtyTrac showed banks and mortgage firms filed notices against 446,726 homes during the third quarter, almost double the number lodged a year earlier.
The US property market has been in a slump since early 2006 and foreclosures have surged in the past year as hundreds of thousands of Americans have struggled to pay their mortgages.
In European trade on Friday, the euro changed hands at 1.4482 dollars, against 1.4422 dollars late Thursday, at 166.12 yen (165.18), 0.6950 pounds (0.6935) and 1.6701 Swiss francs (1.6699).
The dollar stood at 114.72 yen (114.54) and 1.1535 Swiss francs (1.1575).
The pound was at 2.0835 dollars (2.0793).
In London, the price of gold rose to 790.93 dollars per ounce at the morning fixing from 790.25 dollars late on Thursday.
Thursday, November 1, 2007
Gulf Arabs could drop dollar pegs in unison
A customer counts U.S. banknotes at a money changer in a file photo. Gulf Arab oil producers, torn between rising inflation and exchange rates fixed to a sliding dollar, could consider switching together to a currency basket to buy time for a troubled monetary union project.by Daliah Merzaban - Nov 1, 2007
Gulf Arab oil producers, torn between rising inflation and exchange rates fixed to a sliding dollar, could consider switching together to a currency basket to buy time for a troubled monetary union project.
A region-wide shift could catch investors unawares after months of market speculation that the United Arab Emirates or Qatar would break ranks with their neighbors and unshackle their currencies from the dollar as Kuwait did this year.
So far, most bets on currency appreciation have focused on signs that Gulf states are drifting apart after Oman chose not to join monetary union by 2010, Kuwait switched to a currency basket in May and a U.S. rate cut divided central banks in the world's top oil-exporting region.
But signals from the banks and growing pressure on Saudi Arabia to tackle inflation suggest markets waiting for one country to revalue may be barking up the wrong tree.
"I think they will stick to multilateralism," said Marios Maratheftis, regional head of research at Standard Chartered Bank.
"They have been hinting at a more flexible option to the dollar peg. The debate is on, at a multilateral level," he said.
That is not the view of most analysts. Thirteen of the 17 economists polled by Reuters last month tipped the UAE as the top candidate for a unilaterally change in currency policy, with 11 saying a revaluation was likely by the end of 2008. For poll summary click on (ID:nL12723561: Quote, Profile, Research)
CLOSING RANKS
Yet UAE Central Bank Governor Sultan Nasser al-Suweidi has always said he would not act alone, even while calling for a regional review of exchange rates in January. "We have to decide on a pan-Gulf basis," he told .Commerce magazine this month.
Suweidi and his counterparts have closed ranks since Kuwait threw plans for monetary union into disarray by abandoning a dollar peg the six states had agreed would stay in place until they created single currency in 2010.
"Credibility is quite serious for central bankers," said John Sfakianakis, chief economist at SABB bank, the Saudi affiliate of HSBC. "The likelihood of moving in unison is greater than the likelihood of moving alone."
Kuwait said the dollar's slide to record lows was driving up inflation by making imports more expensive. It also cited delays to monetary union as reason for scrapping the dollar peg.
With all six countries agreeing the 2010 deadline is difficult, if not impossible to meet, investors have been waiting for one or more of Kuwait's neighbors to follow its lead.
But markets watching for a widening rift over currency policy got nothing from a weekend meeting of finance ministers and central bankers.
"There was agreement that there is no need to change the current foreign exchange policy with consensus of all member states," Saudi Governor Hamad Saud al-Sayyari said after the talks.
The central bankers have not put up a united front on interest rates, one of six criteria agreed for currency union.
Unlike their neighbors, Oman, Saudi Arabia and Bahrain ignored a U.S. Federal Reserve rate cut on September 18, choosing to ride out pressure on their currencies to appreciate rather than risk stoking inflation.
The news fired market speculation of a revaluation that took the Saudi riyal to a 21-year high, but IMF official Mohsin Khan said talk of divergence was overdone.
"Even though there were slight gestures to lowering interest rates in the Gulf, most countries did not lower interest rates," said Khan, IMF director for the Middle East and Central Asia.
Kuwait and Qatar left their benchmarks unchanged, cutting other interest rates instead. The UAE, which does not have a benchmark rate, reduced three key rates by as much as 25 basis points after the Fed cut by 50 basis points.
RIYADH'S POLICY
More importantly statements from Saudi Arabia, the country tipped as least likely to revalue in the Reuters poll, have begun to more closely reflect those coming from the UAE.
"There is no change at the present time," Sayyari said of exchange rate after a September central bankers meeting, one of a series of remarks that allude to an eventual change in policy.
Signals from Saudi Arabia, the biggest Gulf economy, are crucial to understanding the Gulf debate on currency reform.
"If Saudi Arabia moves alone then the others will probably move all together," said Sfakianakis, who said he does not expect the Saudi central bank to change policy "in the short term".
Pressure on Riyadh's policy has rarely been greater.
Inflation hit a seven-year high of 4.4 percent in August and is becoming a political issue in Saudi Arabia, unlike in Qatar or the UAE which have smaller, wealthier populations consisting primarily of expatriates.
As the king summons officials to explain rising prices and his advisory council calls for a national wage hike, the Saudi central bank is running out of options.
Another 25 basis point Fed cut, which economists expect this year, would take the interest rate gap between the Saudi riyal and dollar to one percentage point for the first time since 2002.
"Introducing flexibility is going to become a stronger debate by the end of the year with the possibility of more rate cuts," Maratheftis said.
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