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Market Outlook - Short Term
Tracked by: 0 Boarder
The Media often gets away with many things because public memory is just short!
This is one thing you can keep shorting nakedly and get away with it time and time again.
After all there is a disclaimer for everything a Business channel does!
So Udayan gets away with this
First the stock markets go down, then economic indicators and then then the media changes tune to make news!
Note conveniently Udayan sings
ahead of CEOs CII the government and neatly turns the table donning the hat of an Economist in saying the whole system was in denial mode!
Last quarter I wrote a critcal message on INFOSYS( which was being backed by Udayan terming the market as being unfair to its rupee guidance)
My message was deleted! I assume it was because I called INFY a trojan horse!
Now He concedes " The Market in its wisdom sensed it". Mind you he was down right shouting against it! He even got endorsements from the then reputed Indian arm of the Big five of wall street!
Who is to question his integrity? or that of the channel!
Who is he batting for? The Investor at Large after the ship has turned turtle!
Did he not carry the Bluff? You can say how can he foresee!!!
I will ask this How is he foreseeing now of gloom of quarters ahead?
You can be assured that he knows the magnitude of the credit crisis ahead of any of us and the inevitability of the fall!
More than Blaming him its the gullible viewers and channel managers who get away with it!
one has to own responsibility for one`s mistakes
The Media is the last person to be accountable in public!That`s the arbitrage of news and society!
I do call Infosys a Trojan Horse! During good times they inflate the economy and heat it quickly and during hard times the lucky ones get to hide inside their Trojan dollar belly!
I call this despite my full knowledge of the IT revolution brought about by their success and the turn of the Indian economy!
This is because they are Just that an Offshore vessel anchored conveniently in Indian waters in good times and safely in International waters during a financial tsunami!
That is their disconnect with the native economy! ...
In reply to:
Worse slowdown yet to hit markets
Posted by :
Udayan Mukherjee
On Earnings:
Earnings is a different matter altogether. While GDP growth will fall, I think the pace at which earnings might fall could be even more dramatic than GDP growth, because there is lot of elements to GDP other than just pure corporate earnings or manufacturing sector. So you could probably see a lot more deterioration in the corporate earnings profile over the next few quarters if things continue like this. So at the micro level the damage might be far more.
Two months back the assumption was that we are not growing that fast any more, so last year we were thinking about 20% growth so sadly we will have to get resigned to 15% growth, but 15% is in the bag, do not question that. Now I have heard a couple of people talk about 10% growth. What if at the end of the next couple of quarters, we go back and say there is no growth or corporate earnings for a large number of companies is absolutely flat? Has the stock market price that in fully or a completely flat earnings growth profile?
You can imagine that a large number of sectors like real estate, autos and metals are probably going to show you negative growth. By the end of this year,many commodities, real estate, autos perhaps many other sectors, which are dependent on commodities, natural resources could all report negative growth. So what is so sacrosanct about the overall index earnings not becoming flat? In that case, you are talking about earnings recession as well. So then does 10-11 times look so cheap?
The only point one is making is this is not an environment where you need to be complacent about. Do not assume things for given that this economic growth, this earnings growth is in the bag and that is my metric with which I construct valuation and stock price levels. Things are not very fluid; they could turn out easily far worse which the stock market has tried to price in. I think a lot of pricing has happened.
The one thing is that yes things are bad but the stock market is also at 10,000 now. The stock market is no longer at 14,000, so a lot of it has been priced in maybe a bit more needs to be priced in and I am sure that the market will do it at its chosen pace.
-Udayan Mukherjee, Managing Editor,CNBC TV18 
Tracked by: 110 Boarders
Dear Frends,
Still the possibility of becoming situation more & more worse in the market can not be rouled out. The total investment by FIIs at the end of Dec 07 was Rs 3,22,330.70 Crores. and till 08.10.2008 out of that they sold only Rs 1,16,833.50 and sensex has came down from 21132.97 to 10527.85 means by sale of only 36.25% the sensex has fallen 50.18% but now FIIs and Domestic Mutual Funds both are net sellers.
Major FII investors are going on to become bancrupt. then who will invest at this stage. whatever Domestic Mutual Funds & Indian Investors will bring money in the market, the FIIs will eat away.
Technically the 20 day moving average of sensex is bellow by 814.21 points from 40 day moving average. If we presume that rates will remain unchaged even then this gap will make max diffrence 1509.37 points on 31.10.2008 and then this diffrence will start reducing. Hence during Oct 08 there is no scope of any rise in the market. looking the bad financial conditions of FIIs it can not be said that 20 day average will come over the 40 day average during Nov 08
Therefore I don`t see any upmove just in near future even after Nov 08. however speed of fall may halt in Nov 08. Later on what will be the situation will be discussed during Nov 08 till then I suggest to stay away from the market. ...
In reply to:
WILL NIFTY HIT 3600 & SENSEX TOUCH 12000
Posted by : novice1000
dear snvaish,
As you rightly said markets wont move anywhere in hurry.Except in select stocks that too in very small lots, one doest need to go in hurry for buying stocks at this time.
Markets will offer ample time as the consolidation is going to be real long..
regards
Tracked by: 0 Boarder
I think the present financial crises internationally is due to internal crises in the respective countries as it is not a blade issue but it is bound to happen in the long run in the past period but incumbents not take of the issue and not properly auditing the happenings. So it make that country as worst performer. Govt. should book the culprits under law to save the immage of the country. It may be a terrorism in financial sector....
In reply to:
Has your confidence in equities been shattered?
Posted by : MMB Messenger
Dear Boarders,Do let us know your views and opinions on the poll.-MMB Messenger
Tracked by: 0 Boarder
Fox also was the only owner of the wine, another important characteristic of the collection. Wine can be sold and resold to many owners before it`s finally consumed. If it hasn`t been properly stored and transported, the quality can suffer
The Fox collection brought in nearly $11.2 million to become the fourth largest wine auction in history and the largest cellar sold this year. That was well above expectations that ranged from $6.8 million to $10.2 million.
"It was challenging," said Hart, who worried ahead of the auction that the dive in the stock market could keep many bidders away. It didn`t.
Alternative means
For those not willing or able to go those lengths to invest in wine, there are a handful of funds open to investors in the U.S. like the Cayman Islands-based Vintage Wine Fund and the U.K.-based Wine Investment Fund, though they are small, carry hefty fees and have high minimum investment requirements.
The newest to the pack is the Elevation Wine Fund, a limited partnership which got off the ground last year but didn`t start accepting investors until August at $250,000 each. The fund has about $1.5 million invested in about 1,000 bottles, said Leon Dreimann, a partner in the start up. The fund`s Web site says the value of its wine portfolio has risen 27% since June 2007.
Though the Securities and Exchange Commission treat wine funds like hedge funds, Dreimann thinks of Elevation Wine Fund more like private equity. Investors make the financial commitment but don`t have to put up the money until the fund finds the right deal.
Dreimann and his partners are putting their money, well, where their mouths are. They put up the seed money to begin accumulating wines and are building a purse to pursue deals.
So far, there are 14 investors and he expects to have about $5 million in the first full year as a fund.
"It`s not so much about getting a lot of money in but a steady flow over the next few years of investors that allows us to buy the wines as opposed to sitting on the money," said Dreimann, the retired co-founder of home-appliance maker Salton Inc. who is a long-time wine collector.
"It`s difficult for us to find wines with the proper history and at a price that we can see appreciate," he said. Elevation`s wines are stored at the Sabina Vineyards in Napa Valley, Calif.
"We`re careful of whom we buy wine from and what we buy," he said, recounting an experience in China where he was served a glass of 1982 Lafite Rothschild Latour. "There`s a Lafite Rothschild and a Latour, but the two don`t go together on the same table," he told those at the dinner. He and his partners make contacts throughout the world from their own extensive business backgrounds.
Elevation investors can draw their dividends in cash or in wine. "If nothing else, I get to drink the proceeds," Dreimann said
BY Jennifer Waters, Chicago.
...
In reply to:
Fine-wine investing a lot more palatable in these days of market turmoil
Posted by : sambala
On a hot, sunny Friday here in September only days after the first Monday market meltdown, two well-heeled wine buyers battled each other at a private auction for the privilege of shattering a world-record price for a single case of 1982 Chateau Lafite Rothschild.
A Chinese buyer who flew in from Beijing for the Hart Davis Hart Co. auction won with a final bid of $54,970 -- a whopping $4,580.83 a bottle. At its release in 1984, a single bottle would have sold for roughly $100
A case of 1990 Romanee-Conti Domaine de la Romanee-Conti that was released at about $500 a bottle sold for $179,250, or $14,937.50 each. A case of 2000 Chateau Petrus was bought for $57,360, or $4,780 a bottle. At its release, the price was $750 a bottle.
Such dramatic price appreciation is not the norm for wine investments, but it does underscore how lucrative and resilient investing in fine wine can be -- particularly so at a time when market volatility is deflating 401(k) accounts and retirement nest eggs, and low interest rates are choking returns on cash and other investments.
"Historically blue-chip wine prices have risen but at a modest pace compared to some other investments," said Allan Frischman, a senior specialist at Hart Davis Hart. "Over the last couple of years these wines have gone up quite dramatically but it`s hard to say how long that will keep up."
It`s simple supply and demand that is driving up prices. There are scores of new wine drinkers, mostly in emerging economies such as China and Brazil but also in wine bastions like the U.S. and Europe.
And there are only so many bottles of 1982 Chateau Cheval Blanc or the 1995 Screaming Eagle Cabernet Sauvignon left in the entire world and no more will ever be made. That powers the prices for some cult wines as well as those from certain estates and vintages. Some Napa Valley wines like those from the Harlan Estates are bought and sold as investments, but for serious fine-wine collectors the first-growth wines of Bordeaux and Burgundy are the most important.
Investing in wine is not for the faint of heart or the financially strapped. It`s outrageously expensive, takes years -- multiple decades in most cases -- to see the kind of returns the Hart Davis Hart auction produced and, like most investments, can be quite risky. Not every vintage is perfect.
"If you want to be a trader, trade options, equities, corn futures, even coffee if you like that kind of action," said Kevin Swersey, a highly sought-after independent wine consultant. "The world of wine is way too complicated to just jump into."
"Wine is not stock," he said. "It`s a consumable, perishable commodity."
Indeed, it is the only true liquid investment and most investors should be prepared to drink it if the values aren`t there. Many ambitious wine connoisseurs accidentally become investors because they have to sell old wines to make room for new in their cellars.
Wine can be work
Before jumping into wine as an investment, consider the circumstances surrounding last month`s Hart Davis Hart auction. The nearly 1,800 bottles of wine at auction were from the Fox Cellar, what the world of fine wine deems one of the most important and largest single-owner wine collections in existence.
No one but the executives at Hart Davis Hart know who Mr. Fox is -- or even if there is a Mr. Fox -- because they are all sworn to secrecy in confidentiality contracts. But what is known is that he is a long-time collector and avid aficionado who has bought much of his wine through Hart Davis Hart. Even after the sale, there`s still plenty of it left.
"For one person to have this much wine is unbelievable," said Paul Hart, chairman of Hart Davis Hart. "He`s got all the modern vintages that people want in amazing quantities. Instead of one case of `96 Lafite, there are 22 cases.
"The volume and the depth are remarkable," he added.
The Fox collection is also considered special because the owner has gone to great pains to make it that way. He has a long relationship with Hart Davis Hart, which is one of the leading wine auction houses in the U.S. Rising incidents of fraud in the wine industry gives that relationship a point of distinction because he has done business with a highly reputable concern that can vouch for the wines and how they were stored. That`s crucial to investors spending thousands to buy and sell wine.
This too is important information for would-be wine investors: Hart Davis Hart had dated receipts on nearly every case of wine. It also could verify that all of the wines were stored deep underground where temperatures and humidity were closely controlled.
That may be the single most important issue when buying fine wine from any source. Maintaining such a cellar is among the costliest parts of wine investing; simply accumulating wine in your basement is a major faux pas in the world of fine wine.
Tracked by: 0 Boarder
On a hot, sunny Friday here in September only days after the first Monday market meltdown, two well-heeled wine buyers battled each other at a private auction for the privilege of shattering a world-record price for a single case of 1982 Chateau Lafite Rothschild.
A Chinese buyer who flew in from Beijing for the Hart Davis Hart Co. auction won with a final bid of $54,970 -- a whopping $4,580.83 a bottle. At its release in 1984, a single bottle would have sold for roughly $100
A case of 1990 Romanee-Conti Domaine de la Romanee-Conti that was released at about $500 a bottle sold for $179,250, or $14,937.50 each. A case of 2000 Chateau Petrus was bought for $57,360, or $4,780 a bottle. At its release, the price was $750 a bottle.
Such dramatic price appreciation is not the norm for wine investments, but it does underscore how lucrative and resilient investing in fine wine can be -- particularly so at a time when market volatility is deflating 401(k) accounts and retirement nest eggs, and low interest rates are choking returns on cash and other investments.
"Historically blue-chip wine prices have risen but at a modest pace compared to some other investments," said Allan Frischman, a senior specialist at Hart Davis Hart. "Over the last couple of years these wines have gone up quite dramatically but it`s hard to say how long that will keep up."
It`s simple supply and demand that is driving up prices. There are scores of new wine drinkers, mostly in emerging economies such as China and Brazil but also in wine bastions like the U.S. and Europe.
And there are only so many bottles of 1982 Chateau Cheval Blanc or the 1995 Screaming Eagle Cabernet Sauvignon left in the entire world and no more will ever be made. That powers the prices for some cult wines as well as those from certain estates and vintages. Some Napa Valley wines like those from the Harlan Estates are bought and sold as investments, but for serious fine-wine collectors the first-growth wines of Bordeaux and Burgundy are the most important.
Investing in wine is not for the faint of heart or the financially strapped. It`s outrageously expensive, takes years -- multiple decades in most cases -- to see the kind of returns the Hart Davis Hart auction produced and, like most investments, can be quite risky. Not every vintage is perfect.
"If you want to be a trader, trade options, equities, corn futures, even coffee if you like that kind of action," said Kevin Swersey, a highly sought-after independent wine consultant. "The world of wine is way too complicated to just jump into."
"Wine is not stock," he said. "It`s a consumable, perishable commodity."
Indeed, it is the only true liquid investment and most investors should be prepared to drink it if the values aren`t there. Many ambitious wine connoisseurs accidentally become investors because they have to sell old wines to make room for new in their cellars.
Wine can be work
Before jumping into wine as an investment, consider the circumstances surrounding last month`s Hart Davis Hart auction. The nearly 1,800 bottles of wine at auction were from the Fox Cellar, what the world of fine wine deems one of the most important and largest single-owner wine collections in existence.
No one but the executives at Hart Davis Hart know who Mr. Fox is -- or even if there is a Mr. Fox -- because they are all sworn to secrecy in confidentiality contracts. But what is known is that he is a long-time collector and avid aficionado who has bought much of his wine through Hart Davis Hart. Even after the sale, there`s still plenty of it left.
"For one person to have this much wine is unbelievable," said Paul Hart, chairman of Hart Davis Hart. "He`s got all the modern vintages that people want in amazing quantities. Instead of one case of `96 Lafite, there are 22 cases.
"The volume and the depth are remarkable," he added.
The Fox collection is also considered special because the owner has gone to great pains to make it that way. He has a long relationship with Hart Davis Hart, which is one of the leading wine auction houses in the U.S. Rising incidents of fraud in the wine industry gives that relationship a point of distinction because he has done business with a highly reputable concern that can vouch for the wines and how they were stored. That`s crucial to investors spending thousands to buy and sell wine.
This too is important information for would-be wine investors: Hart Davis Hart had dated receipts on nearly every case of wine. It also could verify that all of the wines were stored deep underground where temperatures and humidity were closely controlled.
That may be the single most important issue when buying fine wine from any source. Maintaining such a cellar is among the costliest parts of wine investing; simply accumulating wine in your basement is a major faux pas in the world of fine wine....
Tracked by: 0 Boarder
Paulson: I`m quite confident this plan will work...
In reply to:
Paulson`s Poison & Antidote
Posted by : sambala
We can and will do both. The Presidents Working Group on Financial Markets and all financial regulators are working together to achieve our necessary goal of restoring stability and orderliness to our financial markets. Every effort will require careful analysis, deliberation and transparency, and some measure of patience from the American people as we create the most effective process possible.
We have already taken a number of extraordinary bold actions on the liquidity front that I am convinced have been exactly the right policy steps, including the emergency action to provide a guarantee to our money market funds, actions to stabilize the GSEs and drive down mortgage rates, and the Fed`s new program to provide 90-day liquidity to commercial paper issuers.
It is the policy of the federal government to use all resources at its disposal to make our financial system stronger, to safeguard depositors and savers, to help ensure an adequate flow of credit, and to minimize systemic risk. The Congress has recently provided the Treasury with broad powers to acquire financial assets, to make capital available, and to strengthen the balance sheets of individual institutions. The Federal Reserve has also been given new authority to ensure that the system has sufficient liquidity. The FDIC has the authority and the access to resources necessary to protect the banking system. The Treasury, the Federal Reserve and the FDIC will use all their authorities to promote the process of repair and recovery and to contain risks to the financial system that might arise from problems at individual institutions.
But patience is also needed because the turmoil will not end quickly and significant challenges remain ahead. Neither passage of this new law nor the implementation of these initiatives will bring an immediate end to current difficulties. It will take time and bipartisan leadership, cooperation and collaboration, as well as well-conceived and executed policies to overcome the challenges our nation is facing. And we will overcome them. Despite our problems, the U.S. economy is the largest and wealthiest in the world. We will, as we have in the past, emerge stronger and better able to provide new opportunities for our workers and increased prosperity for our families.
Thank you.
Tracked by: 0 Boarder
We can and will do both. The Presidents Working Group on Financial Markets and all financial regulators are working together to achieve our necessary goal of restoring stability and orderliness to our financial markets. Every effort will require careful analysis, deliberation and transparency, and some measure of patience from the American people as we create the most effective process possible.
We have already taken a number of extraordinary bold actions on the liquidity front that I am convinced have been exactly the right policy steps, including the emergency action to provide a guarantee to our money market funds, actions to stabilize the GSEs and drive down mortgage rates, and the Fed`s new program to provide 90-day liquidity to commercial paper issuers.
It is the policy of the federal government to use all resources at its disposal to make our financial system stronger, to safeguard depositors and savers, to help ensure an adequate flow of credit, and to minimize systemic risk. The Congress has recently provided the Treasury with broad powers to acquire financial assets, to make capital available, and to strengthen the balance sheets of individual institutions. The Federal Reserve has also been given new authority to ensure that the system has sufficient liquidity. The FDIC has the authority and the access to resources necessary to protect the banking system. The Treasury, the Federal Reserve and the FDIC will use all their authorities to promote the process of repair and recovery and to contain risks to the financial system that might arise from problems at individual institutions.
But patience is also needed because the turmoil will not end quickly and significant challenges remain ahead. Neither passage of this new law nor the implementation of these initiatives will bring an immediate end to current difficulties. It will take time and bipartisan leadership, cooperation and collaboration, as well as well-conceived and executed policies to overcome the challenges our nation is facing. And we will overcome them. Despite our problems, the U.S. economy is the largest and wealthiest in the world. We will, as we have in the past, emerge stronger and better able to provide new opportunities for our workers and increased prosperity for our families.
Thank you.
...
In reply to:
Paulson`s Poison & Antidote
Posted by : sambala
To further support the availability of mortgage credit, Treasury also has established a program to purchase agency MBS directly. The program began in September. This will complement the capital provided by the GSEs and help facilitate mortgage availability and affordability.
Stabilizing Fannie and Freddie to support mortgage availability has been constructive. As the rest of our markets experienced increased turmoil the interest rate on a 30-year fixed rate mortgage has come down from its peak of 6.6 percent earlier this year to as low as 5.9 percent this week - a decrease that helps American households reduce monthly mortgage payments and increases the potential for more homeowners to refinance mortgages at lower rates. As Treasury and the GSEs increase their purchases, mortgage affordability should improve for Americans. If we were not actively engaged at the GSEs, we would have expected that rate to increase and further slow the progress of the housing correction.
International Coordination
We see evidence every day that world economies and financial markets are more connected and interdependent than at any time in history. Economic momentum has slowed substantially across the industrialized countries as a consequence of the ongoing financial turmoil, the acute stresses facing our financial institutions, continuing housing markets adjustments in the United States and other countries, and volatile - albeit moderating - commodity prices. Emerging markets are also beginning to show signs of slowing. We see evidence that the freezing of credit markets is having a tangible impact on the everyday lives of citizens all around the world.
Addressing these challenges requires the dramatic steps we are taking here in the United States and it requires strong international partnerships. Governments have and must continue to take individual and collective actions to provide much-needed liquidity, strengthen financial institutions through the provision of capital and the disposition of troubled assets, prevent markets abuse, and protect the savings of our citizens.
We must also take care to ensure that our actions are closely coordinated and communicated so that the action of one country does not come at the expense of others or the stability of the system as a whole.
Over the past twelve months President Bush and I have been in regular contact with our international counterparts, and we have collaborated in a variety of ways. This weekend I will be meeting with my G-7 colleagues to discuss the steps that each of us are taking to confront this crisis and ways to further enhance our collective efforts. In addition, in consultation with Brazil, the G-20 President, I am calling for a special meeting of the G20 that will include senior finance officials, central bankers, and regulators from key emerging economies to discuss how we might coordinate to lessen the effects of global market turmoil and the economic slowdown on all of our countries.
Although the tasks are not easy, I am regularly heartened as I work with my international colleagues who are also committed to securing stability and growth in their domestic economies, and to promoting the orderly functioning of the international financial system.
The Road Ahead
While most Americans understand that economic cycles occur, we are experiencing some extraordinary and difficult challenges at home and abroad - challenges that make it clear Congress was correct to take swift and bold action, and that we have no time to waste implementing the new law. We also know that getting it right is as important as getting it done quickly.
Cont.....
Tracked by: 0 Boarder
To further support the availability of mortgage credit, Treasury also has established a program to purchase agency MBS directly. The program began in September. This will complement the capital provided by the GSEs and help facilitate mortgage availability and affordability.
Stabilizing Fannie and Freddie to support mortgage availability has been constructive. As the rest of our markets experienced increased turmoil the interest rate on a 30-year fixed rate mortgage has come down from its peak of 6.6 percent earlier this year to as low as 5.9 percent this week - a decrease that helps American households reduce monthly mortgage payments and increases the potential for more homeowners to refinance mortgages at lower rates. As Treasury and the GSEs increase their purchases, mortgage affordability should improve for Americans. If we were not actively engaged at the GSEs, we would have expected that rate to increase and further slow the progress of the housing correction.
International Coordination
We see evidence every day that world economies and financial markets are more connected and interdependent than at any time in history. Economic momentum has slowed substantially across the industrialized countries as a consequence of the ongoing financial turmoil, the acute stresses facing our financial institutions, continuing housing markets adjustments in the United States and other countries, and volatile - albeit moderating - commodity prices. Emerging markets are also beginning to show signs of slowing. We see evidence that the freezing of credit markets is having a tangible impact on the everyday lives of citizens all around the world.
Addressing these challenges requires the dramatic steps we are taking here in the United States and it requires strong international partnerships. Governments have and must continue to take individual and collective actions to provide much-needed liquidity, strengthen financial institutions through the provision of capital and the disposition of troubled assets, prevent markets abuse, and protect the savings of our citizens.
We must also take care to ensure that our actions are closely coordinated and communicated so that the action of one country does not come at the expense of others or the stability of the system as a whole.
Over the past twelve months President Bush and I have been in regular contact with our international counterparts, and we have collaborated in a variety of ways. This weekend I will be meeting with my G-7 colleagues to discuss the steps that each of us are taking to confront this crisis and ways to further enhance our collective efforts. In addition, in consultation with Brazil, the G-20 President, I am calling for a special meeting of the G20 that will include senior finance officials, central bankers, and regulators from key emerging economies to discuss how we might coordinate to lessen the effects of global market turmoil and the economic slowdown on all of our countries.
Although the tasks are not easy, I am regularly heartened as I work with my international colleagues who are also committed to securing stability and growth in their domestic economies, and to promoting the orderly functioning of the international financial system.
The Road Ahead
While most Americans understand that economic cycles occur, we are experiencing some extraordinary and difficult challenges at home and abroad - challenges that make it clear Congress was correct to take swift and bold action, and that we have no time to waste implementing the new law. We also know that getting it right is as important as getting it done quickly.
Cont........
In reply to:
Paulson`s Poison & Antidote
Posted by : sambala
It is the policy of our federal government to use all resources at its disposal to make our financial system stronger. In light of current conditions, the FDIC, with the full support of the Fed and the Treasury, will use its authority and resources, as appropriate to mitigate systemic risk, by, as appropriate, protecting depositors, protecting unsecured claims, guaranteeing liabilities and adopting other measures to support the banking system
Increasing Liquidity to Financial Markets
As we address issues of capital and financial strength in our banks, we must also address the liquidity of our markets. The Federal Reserve has introduced innovative facilities and policies to enhance the liquidity that is vital to market stability, and has frequently done so in coordination with the European Central Bank. Today`s announcement of a coordinated rate cut, including Europe, China and other large economies, is a welcome sign that central banks around the world are prepared to take the necessary steps to support the global economy during this difficult time. The EESA granted the Fed permanent authority to pay interest on depository institutions` required and excess reserve balances held at the Federal Reserve. This will allow the Fed to expand its balance sheet to support financial stability while maintaining its monetary policy priorities.
In recent weeks, the commercial paper market has suffered severe stress and illiquidity. Businesses ranging from financial institutions to industrial companies rely on the commercial paper market every day to fund their business activities. In particular, financial institutions sell commercial paper, and use the funds to lend to millions of consumers and businesses across the nation. In the wake of the uncertainty surrounding financial institution balance sheets, many investors are reluctant to buy commercial paper from financial institutions - in essence, unwilling to hold this unsecured debt for any significant length of time, even when the particular institution is healthy, because of the fear of not having access to liquid markets.
Yesterday, the Federal Reserve announced a new facility to provide a liquidity backstop to U.S. issuers of commercial paper. Through a special purpose vehicle the Fed will purchase three-month unsecured and asset-backed commercial paper directly from eligible issuers. I expect this initiative to significantly improve the availability of funding for financial institutions and corporations that depend on the commercial paper market. Until those that depend on commercial paper can issue it again in significant maturities, funding pressures will continue to ripple through our economy, dramatically shrinking the availability of credit to support families and businesses.
Mortgage Credit Availability and Affordability
As I have long said, the housing correction is the root cause of the current financial market turmoil. We must continue to keep mortgage credit available and support the housing market, so that we can more quickly turn the corner on the housing correction.
To provide critical additional funding to our mortgage markets, FHFA has directed Fannie Mae and Freddie Mac to increase their purchases of agency mortgage-backed securities (MBS). Supporting the availability of mortgage finance is the mission of the GSEs. There is headroom of over $150 billion between the current GSE portfolios and their regulatory limit. FHFA will supervise the growth in these portfolios, under its expanded authorities to monitor GSE risk-management. We also expect Fannie and Freddie to increase direct support to the mortgage market through their ongoing securitization activities.
Cont.....
Tracked by: 0 Boarder
It is the policy of our federal government to use all resources at its disposal to make our financial system stronger. In light of current conditions, the FDIC, with the full support of the Fed and the Treasury, will use its authority and resources, as appropriate to mitigate systemic risk, by, as appropriate, protecting depositors, protecting unsecured claims, guaranteeing liabilities and adopting other measures to support the banking system
Increasing Liquidity to Financial Markets
As we address issues of capital and financial strength in our banks, we must also address the liquidity of our markets. The Federal Reserve has introduced innovative facilities and policies to enhance the liquidity that is vital to market stability, and has frequently done so in coordination with the European Central Bank. Today`s announcement of a coordinated rate cut, including Europe, China and other large economies, is a welcome sign that central banks around the world are prepared to take the necessary steps to support the global economy during this difficult time. The EESA granted the Fed permanent authority to pay interest on depository institutions` required and excess reserve balances held at the Federal Reserve. This will allow the Fed to expand its balance sheet to support financial stability while maintaining its monetary policy priorities.
In recent weeks, the commercial paper market has suffered severe stress and illiquidity. Businesses ranging from financial institutions to industrial companies rely on the commercial paper market every day to fund their business activities. In particular, financial institutions sell commercial paper, and use the funds to lend to millions of consumers and businesses across the nation. In the wake of the uncertainty surrounding financial institution balance sheets, many investors are reluctant to buy commercial paper from financial institutions - in essence, unwilling to hold this unsecured debt for any significant length of time, even when the particular institution is healthy, because of the fear of not having access to liquid markets.
Yesterday, the Federal Reserve announced a new facility to provide a liquidity backstop to U.S. issuers of commercial paper. Through a special purpose vehicle the Fed will purchase three-month unsecured and asset-backed commercial paper directly from eligible issuers. I expect this initiative to significantly improve the availability of funding for financial institutions and corporations that depend on the commercial paper market. Until those that depend on commercial paper can issue it again in significant maturities, funding pressures will continue to ripple through our economy, dramatically shrinking the availability of credit to support families and businesses.
Mortgage Credit Availability and Affordability
As I have long said, the housing correction is the root cause of the current financial market turmoil. We must continue to keep mortgage credit available and support the housing market, so that we can more quickly turn the corner on the housing correction.
To provide critical additional funding to our mortgage markets, FHFA has directed Fannie Mae and Freddie Mac to increase their purchases of agency mortgage-backed securities (MBS). Supporting the availability of mortgage finance is the mission of the GSEs. There is headroom of over $150 billion between the current GSE portfolios and their regulatory limit. FHFA will supervise the growth in these portfolios, under its expanded authorities to monitor GSE risk-management. We also expect Fannie and Freddie to increase direct support to the mortgage market through their ongoing securitization activities.
Cont........
In reply to:
Paulson`s Poison & Antidote
Posted by : sambala
Two days ago the members of the President`s Working Group on Financial Markets, the PWG, made clear that we will coordinate the use of our existing and new authorities to restore market confidence by strengthening financial institutions, preventing systemic impact from bank failures, increasing liquidity to financial markets and keeping mortgage credit available and affordable.
Strengthening Financial Institutions
The Treasury Department is moving rapidly to implement the EESA to help strengthen financial institutions while also protecting taxpayer interests. As I have said before, the ultimate taxpayer protection will be a stable financial system that supports normal economic activity.
Towards that goal, the EESA adds broad, flexible authorities for Treasury to buy or insure troubled assets, provide guarantees, and inject capital. We will use all of the tools we`ve been given to maximum effectiveness, including strengthening the capitalization of financial institutions of every size. We will design programs that encourage healthy institutions to participate. Much attention has focused on the use of auctions to purchase troubled assets from financial institutions. We are moving as quickly as possible to organize and implement the most effective process possible.
We expect it will be several weeks before our first purchase.
Consistent with EESA, I have appointed an interim Assistant Secretary to manage the program and begin its rapid implementation. I am currently working with the President to identify a leader to submit for confirmation, as called for in the legislation, to manage the program and help ensure its long-term success. I will also consult with congressional leaders and Senator McCain and Senator Obama during this process. It is our intent to have an appointee confirmed by the Senate as soon as possible, and I look forward to working with the Senate when they return in November, to ensure we maintain strong leadership and continuity for this unprecedented effort.
We have also identified and retained other very experienced interim leaders for the office, including an interim Chief Financial Officer. We have published guidelines on our procurement and conflict management processes. We have already sent out several essential Requests for Proposals that require 48 hour turnaround so we can contract with private sector experts --- some even as early as later this week --- who will bring complementary skills and expertise to the Treasury team.
We have several policy teams designing detailed programs to purchase mortgage-backed securities, whole loans, and equity-related instruments. In addition, we have begun work on compliance, executive compensation guidelines, foreclosure mitigation, and oversight. Our teams have already been working with Treasury`s Inspector General and are scheduled to meet with the General Accounting Office. Yesterday, we held our first meeting of the program`s Oversight Board and we are committed to transparency in all aspects of the program.
We will implement our new authorities with one simple goal - to restore capital flows to the consumers and businesses that form the core of our economy.
Prevent Systemic Impact from Bank Failures
One thing we must recognize - even with the new Treasury authorities, some financial institutions will fail. The EESA doesn`t exist to save every financial institution for its own sake.
Therefore, a second prong in our strategy is designed to mitigate financial market disruption when a bank fails. In addition to insuring deposits up to the new, temporary level of $250,000, the FDIC has the ability to use its insurance fund and its substantial lines of credit with the Treasury to address systemic financial risk that may be posed by a bank failure.
Cont.....
Tracked by: 0 Boarder
Two days ago the members of the President`s Working Group on Financial Markets, the PWG, made clear that we will coordinate the use of our existing and new authorities to restore market confidence by strengthening financial institutions, preventing systemic impact from bank failures, increasing liquidity to financial markets and keeping mortgage credit available and affordable.
Strengthening Financial Institutions
The Treasury Department is moving rapidly to implement the EESA to help strengthen financial institutions while also protecting taxpayer interests. As I have said before, the ultimate taxpayer protection will be a stable financial system that supports normal economic activity.
Towards that goal, the EESA adds broad, flexible authorities for Treasury to buy or insure troubled assets, provide guarantees, and inject capital. We will use all of the tools we`ve been given to maximum effectiveness, including strengthening the capitalization of financial institutions of every size. We will design programs that encourage healthy institutions to participate. Much attention has focused on the use of auctions to purchase troubled assets from financial institutions. We are moving as quickly as possible to organize and implement the most effective process possible.
We expect it will be several weeks before our first purchase.
Consistent with EESA, I have appointed an interim Assistant Secretary to manage the program and begin its rapid implementation. I am currently working with the President to identify a leader to submit for confirmation, as called for in the legislation, to manage the program and help ensure its long-term success. I will also consult with congressional leaders and Senator McCain and Senator Obama during this process. It is our intent to have an appointee confirmed by the Senate as soon as possible, and I look forward to working with the Senate when they return in November, to ensure we maintain strong leadership and continuity for this unprecedented effort.
We have also identified and retained other very experienced interim leaders for the office, including an interim Chief Financial Officer. We have published guidelines on our procurement and conflict management processes. We have already sent out several essential Requests for Proposals that require 48 hour turnaround so we can contract with private sector experts --- some even as early as later this week --- who will bring complementary skills and expertise to the Treasury team.
We have several policy teams designing detailed programs to purchase mortgage-backed securities, whole loans, and equity-related instruments. In addition, we have begun work on compliance, executive compensation guidelines, foreclosure mitigation, and oversight. Our teams have already been working with Treasury`s Inspector General and are scheduled to meet with the General Accounting Office. Yesterday, we held our first meeting of the program`s Oversight Board and we are committed to transparency in all aspects of the program.
We will implement our new authorities with one simple goal - to restore capital flows to the consumers and businesses that form the core of our economy.
Prevent Systemic Impact from Bank Failures
One thing we must recognize - even with the new Treasury authorities, some financial institutions will fail. The EESA doesn`t exist to save every financial institution for its own sake.
Therefore, a second prong in our strategy is designed to mitigate financial market disruption when a bank fails. In addition to insuring deposits up to the new, temporary level of $250,000, the FDIC has the ability to use its insurance fund and its substantial lines of credit with the Treasury to address systemic financial risk that may be posed by a bank failure.
Cont.....
...
In reply to:
Paulson`s Poison & Antidote
Posted by : sambala
Statement by Treasury Secretary Paulson
WASHINGTON (MarketWatch) -- Here is the prepared statement of U.S. Treasury Secretary Henry Paulson on Wednesday, as released by the Treasury.
Good afternoon. Last Friday Congress finalized and President Bush signed into law the bipartisan Emergency Economic Stabilization Act. The EESA provides the Treasury, the Federal Reserve and the FDIC with important new authorities to complement existing ones. We will continue to coordinate with other federal regulators to use these tools to implement our strategy to address the four key challenges in our financial markets today - confidence, capital, systemic risk and liquidity. Although we are facing particularly difficult circumstances, I remain confident that we will work through this challenge, as we have always successfully worked through every economic challenge in the history of the United States. We are a strong and wealthy nation, with the resources to address the needs we face. I am confident that, with the right public policy response, time and effort, we will conquer these challenges as well.
U.S. and global financial markets continue to be severely strained. A chain of events caused by the ongoing housing correction has reverberated through U.S. banks and financial institutions, and has seriously impacted the underlying economy, reaching American households and businesses. A root cause of this situation is the housing correction and a lack of confidence in mortgage assets, as well as a lack of confidence in many of the financial institutions that hold these assets. Because of this widespread uncertainty, investors are hesitant to commit capital to financial institutions. Investor confidence is critical to restore liquidity and enhance the stability of our financial system.
This financial market turmoil is now directly affecting more families and businesses. When banks can not finance at reasonable levels, and can not or are not willing to lend, everyone in our economy who depends on credit suffers. The capital markets are the pipes through which money flows to finance student loans, car loans, home loans and small businesses` payroll and inventory. And uncertainty and a lack of confidence have clogged our basic financial plumbing. While our actions have been aimed at restoring financial markets and institutions, our purpose is to prevent financial market difficulties from further impacting businesses and families across the country.
New Authorities Needed to Address Challenges
Over the last six months, the U.S. Government has addressed a number of significant problems on a case by case basis. In my judgment, these actions, a number of which were quite significant, were necessary but not sufficient. By September, uncertainty had led to a credit market freeze and it became clear that we needed to take a systemic approach on a significant scale, to get at the underlying cause of much of this turmoil.
We went to Congress and asked for broad new authorities to address the current troubles affecting our financial markets, including the root cause of the financial system freeze --- the illiquid mortgage assets weighing on bank balance sheets. And Congress met the very difficult challenge of providing these authorities by passing the EESA.
Specifically, the EESA empowers Treasury to use up to $700 billion to inject capital into financial institutions, to purchase or insure mortgage assets, and to purchase any other troubled assets that the Treasury and the Federal Reserve deem necessary to promote financial market stability. The new law also gives the Federal Reserve the authority to pay interest on reserves, and temporarily increases FDIC and NCUA deposit insurance from $100,000 up to $250,000.
Cont....
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Statement by Treasury Secretary Paulson
WASHINGTON (MarketWatch) -- Here is the prepared statement of U.S. Treasury Secretary Henry Paulson on Wednesday, as released by the Treasury.
Good afternoon. Last Friday Congress finalized and President Bush signed into law the bipartisan Emergency Economic Stabilization Act. The EESA provides the Treasury, the Federal Reserve and the FDIC with important new authorities to complement existing ones. We will continue to coordinate with other federal regulators to use these tools to implement our strategy to address the four key challenges in our financial markets today - confidence, capital, systemic risk and liquidity. Although we are facing particularly difficult circumstances, I remain confident that we will work through this challenge, as we have always successfully worked through every economic challenge in the history of the United States. We are a strong and wealthy nation, with the resources to address the needs we face. I am confident that, with the right public policy response, time and effort, we will conquer these challenges as well.
U.S. and global financial markets continue to be severely strained. A chain of events caused by the ongoing housing correction has reverberated through U.S. banks and financial institutions, and has seriously impacted the underlying economy, reaching American households and businesses. A root cause of this situation is the housing correction and a lack of confidence in mortgage assets, as well as a lack of confidence in many of the financial institutions that hold these assets. Because of this widespread uncertainty, investors are hesitant to commit capital to financial institutions. Investor confidence is critical to restore liquidity and enhance the stability of our financial system.
This financial market turmoil is now directly affecting more families and businesses. When banks can not finance at reasonable levels, and can not or are not willing to lend, everyone in our economy who depends on credit suffers. The capital markets are the pipes through which money flows to finance student loans, car loans, home loans and small businesses` payroll and inventory. And uncertainty and a lack of confidence have clogged our basic financial plumbing. While our actions have been aimed at restoring financial markets and institutions, our purpose is to prevent financial market difficulties from further impacting businesses and families across the country.
New Authorities Needed to Address Challenges
Over the last six months, the U.S. Government has addressed a number of significant problems on a case by case basis. In my judgment, these actions, a number of which were quite significant, were necessary but not sufficient. By September, uncertainty had led to a credit market freeze and it became clear that we needed to take a systemic approach on a significant scale, to get at the underlying cause of much of this turmoil.
We went to Congress and asked for broad new authorities to address the current troubles affecting our financial markets, including the root cause of the financial system freeze --- the illiquid mortgage assets weighing on bank balance sheets. And Congress met the very difficult challenge of providing these authorities by passing the EESA.
Specifically, the EESA empowers Treasury to use up to $700 billion to inject capital into financial institutions, to purchase or insure mortgage assets, and to purchase any other troubled assets that the Treasury and the Federal Reserve deem necessary to promote financial market stability. The new law also gives the Federal Reserve the authority to pay interest on reserves, and temporarily increases FDIC and NCUA deposit insurance from $100,000 up to $250,000.
Cont.......
In reply to:
Paulson`s Poison & Antidote
Posted by : sambala
Securities regulators around the world have taken measures to enhance market stability by addressing market abuse. Here in the United States, we have taken steps to protect the savings of the American people by increasing deposit insurance limits, and the European Union member states have raised individual deposit limits to an EU-wide minimum.
The G-7 and others are working together through the Financial Stability Forum (FSF) to ensure a comprehensive, international regulatory response to the financial market turmoil. FSF Chairman Mario Draghi reported to us on the good progress that has been made in improving prudential supervision and regulation, increasing disclosure and transparency, and enhancing accounting frameworks. I am committed to making sure this work continues. We are also committed to tackling the next steps laid out by Chairman Draghi to be done by the end of this year and our ambitious agenda for 2009.
By Rex Nutting, MarketWatch
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Securities regulators around the world have taken measures to enhance market stability by addressing market abuse. Here in the United States, we have taken steps to protect the savings of the American people by increasing deposit insurance limits, and the European Union member states have raised individual deposit limits to an EU-wide minimum.
The G-7 and others are working together through the Financial Stability Forum (FSF) to ensure a comprehensive, international regulatory response to the financial market turmoil. FSF Chairman Mario Draghi reported to us on the good progress that has been made in improving prudential supervision and regulation, increasing disclosure and transparency, and enhancing accounting frameworks. I am committed to making sure this work continues. We are also committed to tackling the next steps laid out by Chairman Draghi to be done by the end of this year and our ambitious agenda for 2009.
By Rex Nutting, MarketWatch
...
In reply to: