Tuesday, September 23, 2008

Today's Headlines


- The US dollar rose against the euro for the first time in five days as crude oil prices declined and traders speculated the greenback's biggest drop since January 2001 yesterday was too big to sustain.

- U.S. Securities and Exchange Commission Chairman Christopher Cox said Congress should grant authority to regulate the credit-default swaps market amid concern the bets are helping fuel the global financial crisis. Lawmakers should ``provide in statute the authority to regulate these products to enhance investor protection and ensure the operation of fair and orderly markets,'' Cox told the Senate Banking Committee today at a hearing in Washington.

- Federal Reserve Chairman Ben S. Bernanke said the U.S. economy will shrink if markets don't begin functioning normally, joining Treasury Secretary Henry Paulson in urging skeptical lawmakers to quickly pass a $700 billion rescue for financial institutions.

- Paulson & Co., whose main hedge fund made a sixfold return last year betting on a collapse in U.S. subprime mortgages, said it's wagering four of the U.K.'s five largest financial-services stocks will decline. The disclosures were required under rules pushed through by the U.K.'s Financial Services Authority last week.

- Europe's manufacturing and service industries contracted at the fastest pace in almost seven years in September as the credit-market seizure intensified and companies scaled back production in response to slowing orders.

- Derivatives indicating the cost of shipping coal and iron ore in the fourth quarter fell 13% in European trading. Forward freight agreements indicating the average price of hiring capsize carriers in the quarter fell to $67,000 a day from $76,969 a day yesterday, according to prices from Imarex ASA.

- Michael Aronstein, president of Marketfield Asset Management, sees ‘stabilization’ of housing. (video)

- U.S. lawmakers may seek to include commodity speculation limits in legislation designed to rescue banks from bad mortgage investments after a squeeze in oil trading sent crude to a record gain. Crude oil for October delivery yesterday climbed more than $25 a barrel in New York Mercantile Exchange trading, before settling 16 percent higher at $120.92 as the contract expired. The fluctuation, the biggest since Nymex crude trading started in 1983, prompted the Commodity Futures Trading Commission to say it was ``closely monitoring'' prices for manipulation.

- Crude oil fell for the first time in a week on skepticism that a U.S. government bailout plan for financial companies will bolster economic growth and fuel demand. Oil dropped as much as 3.7 percent as lawmakers debated how the rescue measure should be structured, threatening early enactment.

- Chrysler LLC, the U.S. automaker most dependent on truck sales, plans a full line of plug-in electric vehicles and will sell a battery-powered car in its home market in 2010.

Wall Street Journal:
- GE Capital’s Head Winds. Finance Arm May See Rough Road in Real Estate, Business Loans.

- There are more than 900 stocks that cannot be shorted — but getting around the rule is not difficult for investors with knowledge of the options market.

NY Times:
- Silicon Valley Barely Touched by Financial Crisis.

Washington Post:

- The federal government's dramatic reshaping of Wall Street has thrown the hedge-fund world into turmoil, threatening the viability of some of these massive investment pools that have become increasingly critical for pension funds and endowments and a source of financing for a wide range of consumer loans. This year has already been the worst in at least a decade for the $2.5 trillion hedge-fund industry, associations say. But last week's collapse of Lehman Brothers and an unexpected, temporary ban by the Securities and Exchange Commission on the short selling of financial stocks -- a widespread hedge-fund practice that bets a share price will fall -- sent shockwaves through the industry. Several funds are now teetering. In 2007, pension funds had about $76.3 billion in hedge funds, up from about $50.5 billion the previous year. Endowments have invested about $75 billion, according to a recent study. Some pension funds and endowments that have relied on hedge funds for a stable, higher-than-average source of investment returns have been watching the unfolding trouble with alarm. Richard H. Baker, president of the Managed Funds Association, the largest U.S. hedge-fund association, said he is pushing for a meeting with the Treasury and the Securities and Exchange Commission to lobby them to overturn the ban on short-selling financials, which blindsided many hedge-fund managers.

Lloyd’s List:
- The price shipowners get for selling vessels as scrap is undergoing its largest and longest decline, citing Anil Sharma, president of Global Marketing Systems Inc. Falling steel prices and constricted lending markets over the past month have caused a 30% drop in what Indian, Pakistani and Bangladeshi buyers are prepared to pay. Global Marketing is a cash buyer that handles 40% of the ships that go to the three countries for demolition.


- Less than a week before a crucial vote to decide the fate of its flagship fund, RAB Capital cannot tell its investors that things are turning around. The renewed attention of manager Philip Richards, who left his post as CEO of the firm to focus on the firm’s sinking Special Situations Fund, has not helped. The fund has fallen a further 30% over the past month, and is down 56.5% on the year, Financial News reports.

- Russian food retailers are delaying payments to their suppliers as they can’t borrow enough funds from banks and lenders back away from investments.

- The office rental market in Tel Aviv had only just begun to recover from the explosion of the high-tech bubble early this decade before, and it now seems to be on the verge of a second crisis. Industry sources speak of a price drop of at least 10%-15%.

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