Tag: Economy & Business

Billionaires’ $$$ Get Slammed

So far in October, almost $1.24 billion in stock has been sold by CEOs and other executives to cover debts, according to Ben Silverman, director of research at InsiderScore.com, which monitors SEC filings. Another $250 million in stock sales may also be related to so-called margin calls—when lenders force the sale of stock to cover debts.

The point was driven home on Tuesday, Oct. 21, when billionaire Kirk Kerkorian‘s Tracinda Corp. disclosed it sold off 7.3 million shares in Ford Motor (F) and may sell the rest of its stake in the automaker. Originally valued at almost $1 billion, Kerkorian’s stake has lost more than two-thirds of its value as Ford’s stock price has plummeted. It closed Tuesday at 2.17 a share, down 7% for the day. Though the exact reasons for Kerkorian’s sale aren’t clear, he had borrowed $600 million to buy the Ford stake and recently needed to use casino holdings to back that debt.

First Sumner Redstone, chairman of Viacom (VIAB) and CBS (CBS), sold $233 million in stock to help cover a loan. Then John Malone, chairman of Liberty Media (LCAPA), sold $49.5 million in stock to pay back a loan to Bank of America (BAC). Continue reading “Billionaires’ $$$ Get Slammed”

Chins Has Its Own Systemic Market Problems Too

At the heart of the crisis that toppled Lehman Brothers Holdings Inc. is an out-of-control system built on debt. At the heart of China’s problems is frantic development that also cuts corners to meet overambitious targets. The habits of both have huge implications, but aren’t easily changed because they are ingrained. The common dynamic is greed, meeting over-inflated goals, creative accounting and a sense of hubris.

Just as the credit crisis has shaken Wall Street to its core, safety concerns are a bigger problem for China than many realize. It’s one thing to fake DVDs and Prada bags. When a lack of regulation and oversight forces companies such as Unilever, Cadbury Plc and Japan’s Kanematsu Corp. to recall goods, China has a true dilemma on its hands.

A critical mass of China’s 1.3 billion people isn’t ready to create a domestic market. Nor can China easily find other export markets to offset Group of Seven economies. China can keep cutting rates, increasing infrastructure spending and tweaking taxes, yet that may not be enough.

The worst financial crisis since the Great Depression won’t leave China unscathed. If things get that bad, Chinese officials will have more to cry over than tainted milk.

via Bloomberg.com: Opinion

Moscow’s Trafiic Grid Locked

You think we have infrastructure problems…Moscow ground to a halt today as traffic jams blocked 500 kilometers (310 miles) of roads leading into the city center.

“Traffic jams paralyzed practically all the major arteries of the capital on Tuesday morning,” state broadcaster Vesti-24 reported. “The overall length of traffic jams in the capital at 9:45 a.m. exceeds 500 kilometers.”

Moscow and the surrounding region lose 400 billion rubles ($15 billion) a year, or 6 percent of the area’s gross regional product, because of added transport costs and shipping delays, Transport Minister Igor Levitin said on Oct. 1. Moscow’s network lacks up to 400 kilometers of roads, resulting in an average of 650 traffic jams every day, he said.

via Bloomberg.com: Latin America

Credit Default Swap Fears Still Freeze Lending

Lehman Brothers former chief executive Dick Fuld has faced heavy criticism
Lehman Brothers former chief executive Dick Fuld has faced heavy criticism

Those on the wrong side of these Lehman debt contracts – known as credit default swaps (CDS) – must come up with the money by Tuesday, the next D-Day in the ever-fraught calendar of the credit markets. There has been a deafening silence so far.

There is no easy way of finding out who they are, so every bank and insurer is suspect. The $55,000bn CDS market is “completely lacking in transparency and completely unregulated” in the words of Chris Cox, the chairman of the US Securities and Exchange Commission.

The settlement auction on Lehman CDS contracts last week was in itself a bombshell. Creditors retrieved just nine cents on the dollar from the Lehman wreckage. As Naked Capitalism put it, the bank had “vaporised”.

Fears of Lehman’s CDS derivatives haunt markets – Telegraph

Will Obama Still Raise Taxes?

AN OBAMA PANIC? – New York Post
Recently, Obama said he wants to expedite loans to small businesses, so he seems to have a clue that they produce much of the country’s job growth. Yet his income-tax hike on upper brackets will hit vast numbers of small businesses (Sub Chapter-S Family Corporations) – they’d face the highest rates they’ve seen in decades.

Overall, his plan includes some of the most lethal tax increases imaginable, including a jump in the capital-gains rate. He’d expand government spending massively, with everything from new public-works projects to increases in foreign aid to a surge in Afghanistan – plus hand out a token $500 welfare check that he calls a tax cut to everyone else. Continue reading “Will Obama Still Raise Taxes?”

Mortgage Mess Cartoon Slideshow

While it doesn’t go into Credit Default Swaps, this PowerPoint cartoon does follow our mortgage meltdown, from after home-ownership was mandated on the Lenders by the Federal Government. This explains how the creative financial instruments tried to turn this lemon into lemonade, which we are all drowning in now. Click on the link. You’ll need PowerPoint o view it. Or download and install the free PowerPoint viewer from Microsoft. Thanks to Barbara Herwald mortgagemessexplained

Progressive Corporatism

The government will be much more active in economic management (pleasing a certain sort of establishment Democrat). Government activism will provide support to corporations, banks and business and will be used to shore up the stable conditions they need to thrive (pleasing a certain sort of establishment Republican). Tax revenues from business activities will pay for progressive but business-friendly causes — investments in green technology, health care reform, infrastructure spending, education reform and scientific research.

If you wanted to devise a name for this approach, you might pick the phrase economist Arnold Kling has used: Progressive Corporatism. We’re not entering a phase in which government stands back and lets the chips fall. We’re not entering an era when the government pounds the powerful on behalf of the people. We’re entering an era of the educated establishment, in which government acts to create a stable — and often oligarchic — framework for capitalist endeavor.

After a liberal era and then a conservative era, we’re getting a glimpse of what comes next.

Op-Ed Columnist – The Establishment Lives! – Op-Ed – NYTimes.com

Banks Call In The Plumbers

ANY good tradesman will tell you the importance of the bits of a house that you cannot see. Never mind the new kitchen: what about the rafters, the wiring and the pipes? So it is with financial markets. The stockmarkets are the most visible: as they soar or swoon, the headline-writers get to work. The money markets, however, are the plumbing of the system. Normally, they function efficiently and unseen, allowing investment institutions, companies and banks to lend and borrow trillions of dollars for up to a year at a time. They are only noticed when they go wrong. And, like plumbing, when they do get blocked, they make an almighty stink.

So it is safe to say that, until the money markets behave more normally, the financial crisis will not be over. And until the financial crisis is over, the global economy may not recover. So today the Fed moved to guarantee Commercial Paper and European Finance Ministers met in Emergency session to free up the plumbing. Click on the Economist link for a clear explanation of  the plumbing of the  Financial world.

Blockages in the money markets | Blocked pipes | The Economist