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OT: looks like tough times ahead for Stock Market?

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Post Options Post Options   Thanks (0) Thanks(0)   Quote H2HPrep Quote  Post ReplyReply Direct Link To This Post Posted: June 29 2008 at 8:09pm
Oil's new high Friday was $142.99 for a while.
 
"Demand is looking pretty weak," says Rick Mueller, director of petroleum markets for Energy Security Analysis Inc. (ESAI) in Wakefield, Mass. "That's why it's so hard to predict prices. It wouldn't be surprising to see the price of crude drop $5 a barrel on Monday."
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Post Options Post Options   Thanks (0) Thanks(0)   Quote waterboy Quote  Post ReplyReply Direct Link To This Post Posted: June 29 2008 at 8:48pm
He must of missed the report on IRAN today?
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Post Options Post Options   Thanks (0) Thanks(0)   Quote coyote Quote  Post ReplyReply Direct Link To This Post Posted: June 30 2008 at 3:22am
Israel has 'year to destroy Iran's nuclear program'...

HERSH: Preparing the Battlefield...

Iran to ready thousands of graves for enemy soldiers...

Drudge Report

Oil rises for third day...

OPEC Leader: $170 in next 6 months...
Guru Declares: Avoid Dollar 'At All Costs'...

Stock, Bond Slumps Signal Worse Than '94 as Inflation Says '74...


Global stocks keep grinding lower...
RECORD: Barrel price passes $143...

Quote waterboy Post Posted: Yesterday at 6:02pm
Oil will hit $150.00 by friday spinning the stock market out of control. Not likes of these things seen since 1929.


Waterboy,You may be right...
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Post Options Post Options   Thanks (0) Thanks(0)   Quote waterboy Quote  Post ReplyReply Direct Link To This Post Posted: June 30 2008 at 6:51am
Stock, Bond Slumps Signal Worse Than '94 on Inflation (Update1)

By Michael Patterson

June 30 (Bloomberg) -- It's been 14 years since investors suffered as big a retreat in stocks and bonds and some of the largest money managers say the losses may have more in common with the 1974 bear market before the worst is over.

The Standard & Poor's 500 Index dropped 3.4 percent since March and investors in Treasuries lost 2.88 percent, the steepest combined plunge in 14 years, according to data compiled by Merrill Lynch & Co. and Bloomberg. Equity and debt markets fell in tandem for only the sixth time since the savings and loan crisis of the 1990s as oil closed at a record 19 times and concern grew that inflation will cut the value of bond payments.

Dreman Value Management LLC, BlackRock Inc. and Cambiar Investors LLC, which together oversee $1.38 trillion, are buying banks, phone companies and oil producers to weather more declines in benchmark indexes. David Dreman, whose DWS Dreman Small Cap Value Fund beat 90 percent of its peers over five years, bought Cleveland-based KeyCorp as financial firms fell to a 10-year low last week. BlackRock added AT&T Inc. for the best dividend yield since 2006. Cambiar says Marathon Oil Corp. is inexpensive.

``Between inflation and the liquidity crisis, this is one of the toughest markets I've seen,'' said Dreman, who oversees about $15 billion in Jersey City, New Jersey. ``But it's not a market you sell into. Any losses you take by being too early will be more than offset by buying cheaply.''

Coordinated Plunge

Dreman founded his firm in 1977, three years after the S&P 500 fell 30 percent for its worst annual loss in the last 60 years. Stocks plunged as the Arab oil embargo pushed up U.S. consumer prices as much as 12.3 percent, at the time the biggest annual advance since 1947.

Consumer prices climbed 4.2 percent in the 12 months to May. The Reuters/Jefferies CRB Index, a gauge of 19 commodities, added 49 percent in the past year, exceeding the record 48 percent annual gain in 1973.

Investors were whipsawed this month by the Dow Jones Industrial Average's worst June since 1930 and the biggest losses in Treasuries in four years. Bets that the Federal Reserve will increase interest rates helped spur a 1,292-point tumble in the Dow average this month on concern higher borrowing costs will prolong the worst profit slump in six years.

Futures on the Dow industrials expiring in September lost 0.2 percent as of 11:05 a.m. in London, while S&P 500 futures were little changed.

Bear Market

Just two of 10 industries in the S&P 500 rose this year. Energy producers gained 6.3 percent and a group of mining and chemical companies added 0.5 percent. Massey Energy Co., the fourth-biggest U.S. coal producer, advanced 155 percent for the index's biggest rally after the Richmond, Virginia-based company's first-quarter profit topped analysts' forecasts.

The drop in the Dow to its lowest level since September 2006 is part of a ``secular bear market'' that may last 10 to 15 years as home prices fall, consumers default and tighter credit slows economic growth, says Ryan Atkinson of Balestra Capital Ltd., which manages $550 million including last year's fourth-best performing U.S. hedge fund and is wagering equities will fall.

``The vast majority of investors are long-only investors and they would like nothing more than for stocks to always move to the upside,'' said Atkinson after the Dow came within 15 points of a 20 percent retreat from its October record. ``History shows we have bull markets and we have bear markets, and this is a bear market. That's what they're missing.''

China Tumbles

Global stocks are poised for their worst monthly decline since September 2002. The MSCI World Index retreated 8.4 percent in June through last week, while China's CSI 300 Index lost 22 percent for the steepest slide among the 20 biggest markets. An 11 percent retreat in Brazil's Bovespa index cut its year-to-date return to 0.7 percent, leaving Canada as the world's best performer in 2008. The S&P/Toronto Stock Exchange Composite Index climbed 3.8 percent this year.

The Balestra Capital Partners fund rose about 130 percent in nine months last year after betting mortgage bonds would default, according to a letter sent to investors. Almost $400 billion of bank credit losses and writedowns sent financial stocks in the S&P 500 down 44 percent since the beginning of 2007, the worst performance among 10 industries.

`Far Worse'

Citigroup Inc. fell 19 percent this quarter and is trading at a decade low. Goldman Sachs Group Inc. added the biggest U.S. lender by assets to its ``conviction sell'' list last week and cut its recommendation on U.S. brokerages, saying losses in the industry will be ``far worse'' than it originally anticipated.

KeyCorp shares decreased 49 percent this quarter, the fifth- steepest drop among 90 financial companies in the S&P 500, after it said it would sell new stock and reduce its dividend to cover a tax ruling. Only one of the 21 analysts following the shares rate it a ``buy,'' according to data compiled by Bloomberg.

Speculation that the Fed will lift its target rate for overnight loans between banks pushed the Merrill Lynch Treasury Master Index down 2.88 percent this quarter through last week, the biggest loss since 2004. The index has averaged a total return of about 1.75 percent in quarters when the S&P 500 fell over the last two decades, data compiled by Bloomberg show.

Dennis Stattman, who helps manage about $46 billion in asset allocation funds for BlackRock, owns fewer stocks and bonds than are represented in his benchmark in part because oil's rise is spurring inflation even as the outlook for economic growth deteriorates. He likes AT&T, the biggest U.S. phone company, because a 21 percent drop this year pushed its dividend to 4.88 percent of the share price, the highest yield since July 2006.

`Pretty Carefully'

``We're buying pretty carefully and we're able to get some attractive stocks,'' Stattman, whose BlackRock Global Allocation Fund outperformed 86 percent of peers last year, said in a phone interview from Chicago. Still, ``there's some risk now that inflation is damaging the value of all financial assets, stocks and bonds included,'' he said.

Laszlo Birinyi, president of Westport, Connecticut-based research and money-management firm Birinyi Associates Inc., says it's ``very treacherous'' to make long-term bets on stock markets now because equities are swinging too much and there's ``very few historical parallels'' to gauge when they will stop.

The S&P 500 alternated between gains and losses for six days before ending last week with the steepest two-day plunge in four months. The Chicago Board Options Exchange Volatility Index, a gauge of expected swings in the S&P 500, almost doubled in 2007 and surged 13 percent on June 26.

No `Buy' Ratings

Birinyi is purchasing companies such as Paris-based handbag maker Hermes International, which has no ``buy'' ratings and 17 ``sells'' from Wall Street analysts, according to Bloomberg data. He also owns stocks that outperformed peers such as U.S. Steel Corp., the country's largest steelmaker by revenue.

Hermes rose 16 percent in 2008, helped by takeover speculation and first-quarter revenue that topped analysts' estimates. U.S. Steel rallied 55 percent since December after hot-rolled steel-sheet prices jumped about 86 percent in the year through May.

``We want to look for individual stocks,'' said Birinyi, who oversees more than $300 million. ``That's probably the toughest part of the process but it's the most rewarding. It's where the opportunities are.''

Cambiar's Brian Barish beat his peers this year by purchasing energy and raw-materials producers. He's betting Houston-based Marathon Oil, the fourth-largest U.S. oil company, and Newmont Mining Corp., the world's third-largest gold producer, will advance because they haven't caught up with a 102 percent surge in oil and 45 percent gain in gold over the past year.

`Handful of Winners'

Marathon's stock fetches 7.4 times analysts' average 2008 profit estimate, 30 percent less than the average for energy companies in the S&P 500, according to Bloomberg data. Newmont's 7.9 percent gain this year is the eighth-best in the Philadelphia Stock Exchange Gold & Silver Index, which rose 12 percent.

Barish is shunning any company that relies on low energy costs and a surging economy to boost earnings.

``You're winding up with a handful of winners and a whole lot of losers,'' said Barish, who outperformed 98 percent of his peers this year running the Cambiar Aggressive Value Fund and the Cambiar Opportunity Fund. ``It's painful, but we're trying to concentrate our positions around the areas of the market where you don't have these ferocious headwinds.''

To contact the reporter on this story: Michael Patterson in New York at mpatterson10@bloomberg.net.

Last Updated: June 30, 2008 06:09 EDT
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Post Options Post Options   Thanks (0) Thanks(0)   Quote waterboy Quote  Post ReplyReply Direct Link To This Post Posted: July 01 2008 at 6:46am
Dow at 10,500 by next wednesday.7-6-08
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Post Options Post Options   Thanks (0) Thanks(0)   Quote H2HPrep Quote  Post ReplyReply Direct Link To This Post Posted: July 01 2008 at 7:17am

Did you get that from a magic 8 ball?

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Post Options Post Options   Thanks (0) Thanks(0)   Quote MelodyAtHome Quote  Post ReplyReply Direct Link To This Post Posted: July 01 2008 at 9:25pm
You might be right about this. I hope not though. I just have a bad "gut" feeling about things just getting worse...I'm an optimistic person by nature but things don't look good...again...what do I know:O)
Melody
 
Originally posted by waterboy waterboy wrote:

Dow at 10,500 by next wednesday.7-6-08
Melody
Emergency Preparedness 911
http://emergencypreparedness911.blogspot.com/
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Post Options Post Options   Thanks (0) Thanks(0)   Quote waterboy Quote  Post ReplyReply Direct Link To This Post Posted: July 02 2008 at 12:48pm
You will see????? If oil reaches $150.00 watch out below??? 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote H2HPrep Quote  Post ReplyReply Direct Link To This Post Posted: July 02 2008 at 12:59pm
July 6th is Sunday. If the dow is 10,500 on either Sunday or Wednesday
I will tender my apology.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Albert Quote  Post ReplyReply Direct Link To This Post Posted: July 02 2008 at 8:52pm

A lot of people are predicting "the crash" will take place in early July.  Tom orrow could get interesting as we go into the holiday weekend.  

 
 
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Post Options Post Options   Thanks (0) Thanks(0)   Quote coyote Quote  Post ReplyReply Direct Link To This Post Posted: July 03 2008 at 3:41am
Oil soars past 145 dollars for first time       
Jul 3 12:24 AM US/Eastern
     
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          Oil surged past 145 dollars per barrel for the first time Thursday as the weak US dollar and Middle East tension stoked black gold's record-breaking run, analysts said.

Brent North Sea crude for August delivery hit 145.11 dollars in early Asian trade, before easing back to 144.90 dollars. It had settled at a record 144.26 in London on Wednesday after breaking 144 dollars for the first time.

New York's benchmark contract, light sweet crude for August delivery, hit an intra-day record price of 144.44 dollars. By late morning the contract was 70 cents higher at 144.27 against a record close of 143.57 in the US on Wednesday.

The latest surge followed a warning from Iranian Oil Minister Gholam Hossein Nozari that his country, a key crude producer, would react fiercely to any attack against it.

"Iran, if there were any kind of activity of any sort, is not going to be quiet and would react fiercely," he told reporters on the sidelines of the World Petroleum Congress in Madrid.

He said oil prices, which have been driven to record levels partly because of fears about the loss of Iran's oil output, would rise radically if Israel or the United States launched a military strike.

"That's the kind of talk that kind of juices the market," said Jason Feer, vice president and general manager, Asia Pacific, for energy market analysts Argus Media Ltd. in Singapore.

Western powers and Iran have been engaged in long-running efforts to resolve a stalemate over Iran's nuclear enrichment programme, which the West fears could be used to make an atomic bomb.

Iran, the world's fourth largest oil producer, says its nuclear programme is for peaceful purposes.

The Iranian tensions, along with unrest which has cut output in key African producer Nigeria, and the weaker US currency were among factors combining to push prices higher, Feer said.

"It's the ongoing perfect storm, basically," he said.

The dollar slumped to a two-month low against the euro on Wednesday and held steady in Asian trade on Thursday. A weaker dollar makes commodities like oil denominated in the greenback more affordable for buyers with stronger currencies.

Phil Flynn at Alaron Trading said oil continued to gain momentum amid worries about the global economy, the dollar and other ills.

"Oil is a proxy for everything and an accurate reflection of our deep-seated fears and all of our insecurities," Flynn said during US trading hours.

Feer said the latest report released Wednesday by the US Energy Information Administration pointed to fairly weak demand in the United States, even though the traditional North American holiday motoring season is at its peak.

The report said stockpiles of crude had fallen by 2.0 million barrels in the week to June 27, while petrol stocks grew, Feer said.

OPEC secretary general Abdallah el-Badri said in an interview published Wednesday that US authorities should stop "harassing" members of the Organisation of the Petroleum Exporting Countries (OPEC) cartel.

He argued that sky-high oil prices were not due to "the myth" of the lack of supplies -- as Western nations contend -- but to speculation sparked by a crisis in the US subprime mortgage sector.

Global oil prices have doubled in the past year and have risen by 45 percent since the start of 2008, when they breached 100 dollars for the first time, triggering fears over inflation and slower economic growth.

Protests against the soaring prices have also broken out around the world.

"I think it's becoming fairly clear that the only thing that's going to bring prices down is significant decline in demand growth in the Asia Pacific," Feer said.


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Post Options Post Options   Thanks (0) Thanks(0)   Quote coyote Quote  Post ReplyReply Direct Link To This Post Posted: July 03 2008 at 3:42am
My Opinion, things are going to get ugly soon..Stock market crash, war staring with Iran, and avain flu pandemic..Jeesh I pray I'm wrong!


Stocks Slide, Sending Dow Jones Average Into Bear Market...Drudge
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Post Options Post Options   Thanks (0) Thanks(0)   Quote LaRo Quote  Post ReplyReply Direct Link To This Post Posted: July 03 2008 at 5:35am
Well if i recall the prediction was 150 by the 4th of July.  If they don't make it today, they will be very close.   All these price hikes are caused by the fed flooding the banking system with new money.  When you inject a trillion dollars of new money into the economy, it effects the whole world.  By pretending the inflation rate in the US is at 2% is another lie.  Most countries will tell their people the inflation is low but in reality it's running at double digits.  Look at your grocery bill and energy gill each month, then figure out your inflation rate.

If you use credit cards for your gas (at the pump) compare the January bill to the June, same thing at the grocery store.  Compare how much more it costs, that's your inflation rate.
r we there yet?
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Albert Quote  Post ReplyReply Direct Link To This Post Posted: July 04 2008 at 12:52pm
The reason for the predicted crash is because of the Swiss Bank UBS now being in trouble.  Swiss banks control A LOT of world money, including for the U.S.  The U.S. mortgage melt down is now taking its' toll on the swiss bank, which is why they're going t o bump Paine Webber as well.   UBS announced on Friday (today) its new moertgage losses.  There is a reason why they announce news like this during non-trading days.   With GM now hanging by a  thread, this could get bad at anytime.    Here are a couple lengthy stories that re an interesting read.
itedowns

UBS faces more US credit writedowns

By Haig Simonian in Zurich

Published: July 4 2008 07:18 | Last updated: July 4 2008 12:12

UBS confirmed on Friday that it faced more heavy writedowns on its US credits, meaning that it would break even or make a loss in the second quarter.

Europe's biggest casualty of the US subprime crisis did not quantify the writedowns, which analysts have estimated at up to $7.5bn.

The bank said it had continued to make money in wealth and asset management but suffered renewed losses in investment banking. UBS has written off about $38bn since the start of the subprime crisis.

The bank stressed that it had no need to raise funds, saying its latest losses would leave the bank’s Tier 1 capital ratio at about 11.5 per cent as of June 30.

UBS has raised more than SFr30bn ($29.2bn) this year, mainly through a rights issue and sale of shares to strategic investors.

Bank shares, which have fallen heavily in recent weeks, initially recovered on the news, jumping more than 8 per cent. But by the close of trading, the stock was down 2.57 per cent at SFr20.48, well below the SFr21 a price of its recent SFr16bn rights issue.

Citigroup said, in a note to investors: "While [Friday's] statement rules out an immediate capital increase, we believe that the Swiss regulator's increased focus on the leverage ratio suggests harsher capital requirements ahead."

UBS gave an indirect indication of its latest markdowns by noting that its second-quarter results would benefit from a tax credit of about SFr3bn in connection with its losses to date. Working backwards, and assuming roughly normal profitability of up to SFr2bn in wealth and asset management combined, that implies a loss of at least SFr5bn in investment banking to produce break-even.

UBS said its latest writedowns stemmed from the effect of "further market deterioration" on previously disclosed positions, particularly adjustments to the value of its exposures to monoline insurers.

At the time of its first-quarter results, UBS disclosed that it had exposures of $6.3bn to monolines – a position viewed as ominous by many analysts given the concerns and subsequent ratings downgrades of many bond insurers.

The bank also confirmed fears that its problems with subprime, and broader reputational damage, had eroded its blue chip-private banking franchise, which until recently had escaped fallout. UBS said group net new money had been negative in the second quarter, though it did not distinguish between wealth and asset management.

The bank added that outflows were most severe in April but said matters improved in May and June, especially in wealth management. Full results for the second quarter will be revealed on August 12.

UBS on Friday failed in an attempt to move a lawsuit with HSH Nordbank over UBS’s alleged mismanagement of a $500m portfolio of collateralised debt obligations to London. The case, which is set to be heard in New York, was among the first to be filed over subprime mortgage losses in the wake of the credit crunch. UBS said it would seek to take the case to the Court of Appeal, given its possible impact on similar disputes.

http://www.ft.com/cms/s/0/0f8682de-4990-11dd-891a-000077b07658.html

 

UBS considers Paine Webber sale in review: sources

LONDON (Reuters) - Beleaguered Swiss bank UBS (UBSN.VX) is considering the sale of Paine Webber, the heart of its U.S. wealth management business, according to sources with direct knowledge of the matter.

UBS is under pressure from the Swiss financial watchdog and from one of its top shareholders, Olivant, to overhaul its business after more than $37 billion in writedowns during the credit turmoil.

The bank's management, led by Chief Executive Marcel Rohner, is also grappling with the U.S. trial of a former employee for helping a billionaire client hide $200 million.

Considering a sale of Paine Webber, the broker it bought nearly eight years ago for about $10 billion as a bridgehead into North America, is part of a review which is due to be concluded by October

If you are going to be a global wealth manager, then the U.S. is a market where you have to be present. But it is also the case that you have to make it more profitable. (A sale) is always an option," one of the sources told Reuters.

Another source said Paine Webber was "one of the assets that would be of serious interest to other people. If you were to merge Paine Webber with another brokerage, for example, there would be huge cost synergies," he said.

When Wachovia (WB.N) bought broker A.G. Edwards for $6.4 billion last year, it paid roughly $1 million per broker. A similar valuation for Paine Webber would value it at more than $8 billion.

A UBS spokesman declined to comment on whether Paine Webber -- the name has been ditched since the acquisition -- was under review, but said:

"UBS is the largest wealth manager in the world and a significant portion of global wealth resides in the U.S. The wealth management U.S. business is instrumental in offering investment solutions to America's wealthiest individuals."

In the June edition of a staff magazine, UBS Chairman Peter Kurer pledged to take a "hard look" at the group's strategy while underlining the need for every business to generate "sufficient profits."

UBS's U.S. wealth management business, which employs more than 8,200 brokers, made just 183 million Swiss francs pretax profit in the first three months of this year. It suffers from higher costs and thinner margins than the lucrative Swiss business.

Talking about the group review, chairman Kurer said: "It is imperative that we take another long, hard look at our strategy."

UBS is being helped in this review by investment bank Lazard (LAZ.N), whose chief Bruce Wasserstein also advised it on its acquisition of Paine Webber in 2000.

ROCKY ROAD

"We still have a rocky road ahead of us," said Kurer in the staff magazine. "It is going to take more hard work in the months ahead until we -- hopefully by the end of the year -- are back on track for success."

Many analysts see the U.S. wealth management business -- mostly Paine Webber -- as a natural candidate for sale, and senior bankers say it could make an attractive buy for Bank of America (BAC.N) or Morgan Stanley (MS.N).

The U.S. market has proven tough to crack. While UBS's Swiss business has predominantly very wealthy customers, the U.S. operation largely serves a more "downmarket" rich.

Paine Webber -- which sells investment advice and stock tips on commission -- has proven unsuccessful in tapping America's super-rich, say industry experts.

And its employees are more far expensive than those in Switzerland.

UBS is also embroiled in a legal battle that threatens to puncture strict Swiss banking secrecy rules.

One of its U.S. managers has been questioned by the U.S. authorities in an ongoing probe into whether UBS helped clients hide money from the tax authorities and is now required to stay at a hotel in the U.S. as the investigation continues.

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Post Options Post Options   Thanks (0) Thanks(0)   Quote waterboy Quote  Post ReplyReply Direct Link To This Post Posted: July 04 2008 at 1:34pm
Good post Albert. Watch what happens to the market by Wednesday. Im glad Im almost completely out?
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Albert Quote  Post ReplyReply Direct Link To This Post Posted: July 04 2008 at 1:48pm
Maybe we're headed for a "Super Recession".   This news came out at the end of trading on Tuesday. 
 
Merrill says GM bankruptcy possible

DETROIT (Reuters) - General Motors Corp (GM.N: Quote, Profile, Research, Stock Buzz) will need to raise as much as $15 billion in cash to shore up liquidity and bankruptcy is "not impossible" if the U.S. auto market continues to slump, Merrill Lynch said.

Other analysts have suggested GM, whose shares fell to a new 54-year low on Wednesday, needs to raise funds to ride out the downturn in the U.S. auto market through 2009.

But Merrill's estimate of GM's financing needs is the highest yet. It also carried the most stark warning of the bankruptcy risk for the largest U.S. automaker.

GM declined to comment directly on the Merrill Lynch report but it believes it has sufficient liquidity for 2008 despite lower volumes and could take more steps to cut costs if sales conditions worsen.

"If conditions continue to deteriorate, we would consider other operating measures," GM spokeswoman Renee Rashid-Merem told Reuters.

Merrill Lynch analyst John Murphy cut GM to "underperform" from "buy" and lowered his price target for the largest U.S. automaker to $7 from $28. Shares fell as much as 11 percent to $10.50 in Wednesday's trading in the New York Stock Exchange. The cost to insure GM's debt rose.

Murphy also lowered his forecast for 2008 U.S. industry-wide light vehicle sales for the third time this year and said the recent drastic decline in sales would likely to continue through 2009.

Murphy forecasts light vehicle sales of 14.3 million units this year and 14 million units for next year. That compares with 16.15 million units in 2007 and is sharply lower than the current forecast of most major automakers, including GM

"The recent extreme deterioration in volume and mix is driving much higher cash burn and eroding GM's cash position," Murphy said. "We believe $15 billion is necessary because there is downside risk to our current estimates and a greater cushion is essential."

Any capital GM raises has the potential to dilute equity if it's done through convertible offering or the issuance of additional equity, both possibilities analysts have raised.

DEEPER DOWNTURN AHEAD?

The deepening concerns about the sales outlook for GM come after a June sales report that showed industry-wide auto sales dropping to a 15-year low.

GM's own sales fell by a narrower-than-expected 8 percent on an adjusted basis after the automaker offered zero-percent financing for six years.

But Deutsche Bank analyst Rod Lache said GM could see a "payback" from its June sale in coming months, with its U.S. market share dropping back below 20 percent from 22 percent in June as sales fall back.

Several other Wall Street banks including Citigroup also downgraded automakers and parts suppliers on Wednesday and lowered their outlook for U.S. auto sales this year and next.

Citigroup analyst Itay Michaeli lowered his forecast for 2008 U.S. vehicle sales to 14.5 million units from 15 million, saying plummeting resale values of trucks and SUVs was crimping demand already hurt by weak housing and tighter credit.

Itay said a full recovery in the U.S. auto market would begin only in 2010 or 2011.

Michaeli said GM has to weather the current downturn with considerably less backup liquidity than smaller rival Ford Motor Co (F.N: Quote, Profile, Research, Stock Buzz), which tapped the leveraged loan market at its peak in late 2006 to raise $23 billion.

"While we do not believe GM is facing an immediate cash crunch, the urgency to shore up liquidity to navigate through a difficult 2008-2009 has risen significantly in recent months," Michaeli said. He cut GM's target price to $14 from $21.

Industry tracking firm Global Insight cut its forecast for the annualized sales rate in July to 14.4 million units and cut its 2009 forecast to 14.2 million units in sales, citing the risk of higher average oil prices in the months ahead.

Credit option contracts on the Chicago Board Options Exchange that would pay out if GM or Ford default before September 2012 ticked higher. The contracts, which remain lightly traded, point to a roughly 73-percent default risk for GM and a 69-percent risk for Ford over that period.

 

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so should someone cash in all their investments like 401ks (except PM)?
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Nope, I wouldn't cash in your 401k, in fact never cash them in. Just shift your 401k investment scheme to favor commodities. Most of the money in your 401k is theoretical money. If the stock market tanks, the money in your 401k isn't going to be worth anything anyway, and the risk that the market isn't going to crash is far too great for you to pull your money out because it "Might" take a crap.
 
I use Military retirement investment, it's called Thrift Savings Plan (TSP) and it's probably one of the best deals I've ever seen. It's basically the program George W. wanted to give to all Americans through Social Security reform.The Dems saw that W had too good of an idea so they tanked it. Too bad too.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote Guests Quote  Post ReplyReply Direct Link To This Post Posted: July 05 2008 at 9:28am
Good advise Turgoguy, "...use Military retirement investment, it's called Thrift Savings Plan (TSP)..."
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The S&P is predicted to lose 300 points by September, which is a 25% loss.   It's like watching a train wreck in slow motion.   A 25% loss on the DOW is  -3000 points. 
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What is your opinion of why GM is on the verge of bankrupcy?
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Originally posted by H2HPrep H2HPrep wrote:

What is your opinion of why GM is on the verge of bankrupcy?

"Other analysts have suggested GM, whose shares fell to a new 54-year low on Wednesday, needs to raise funds to ride out the downturn in the U.S. auto market through 2009."
 
H2H, I really do not know what will happen if GM goes bankrupt, so many workers will loose their jobs. I remember in the late 70's when the local Ford plant closed their doors in Downey, California that was tough on the area.
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Rising gas prices is the primary problem for GM.  SUV sales have plummeted, and GM was caught off guard.   They will need until 2010 before mass producing compact cars.  They have a short term target share price of $7.00, which will probably be closer to $2.00 before it's done.  Imagine if your 401k was tied up in GM.   This could be a look of what lays ahead, but of course on a much broader scale. 
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Annie, I hope if the do file, it will be a reorganization type. I recall Continental airlines
went bankrupt about every 10 years.
 
I hope the retiree's won't take a hit.
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Stocks keep oil in crosshairs

Dow, Nasdaq already reach bear territory as crude marches higher

SAN FRANCISCO (MarketWatch) -- Stocks are expected to come under further pressure next week, as surging crude oil prices threaten to tip the broad market more convincingly into bear-market territory.

Markets are now "ridiculously correlated" with crude, said Jim Paulsen, chief investment officer at Wells Capital Management. "If we see oil going up to $150, the markets will no doubt have more pressure."

Crude surged more than 3% this past week to a new high above $145 a barrel. The price of oil has now doubled in less than a year. See Futures Movers. As the market prepares for the onset of second-quarter earnings season next week, investors will watch for signs of weak demand from cash-strapped consumers as well as the impact of surging energy costs to gauge the impact on bottom lines.

 

But in terms of the holiday-shortened week, the Dow still dropped 0.5% and it's down 20% from its Oct. 9 high of 14,165, putting the blue-chip index in bear-market conditions.

The Nasdaq, which fell 3% on the week, is in the same rut, now down 21.5% from its Oct. 31 high of 1,562.

Offering a slightly rosier assessment, the S&P 500 Index, which most Wall Strategists consider a more accurate gauge of the broader equities scene, remains a hair shy of the general definition of a bear market. It fell 1.2% in the week and is now down 19.2% from its Oct. 10 high of 1,562.

"If the price of oil continues to be at or above the current levels, the market is going to continue to go down," said Hugh Johnson, chairman of Johnson Illington Advisors.

Rallies in stock markets will be sustainable only when "investors collectively become more optimistic about the outlook for the economy and earnings," Johnson said. "I don't see anything that will happen next week that will change the outlook for the economy, which remains very gloomy."

On Friday, stocks got some help from the government's June employment report, which was more or less in line with market expectations, and it somewhat offset worries that the economy is getting worse. The Labor Department reported nonfarm payrolls dropped by 62,000 workers last month, while the jobless rate remained steady at 5.5%. Read Economic Report.

But investors also contended with news from the Institute for Supply Management, which said the services sector of the U.S. economy contracted unexpectedly in June, falling to its lowest level since the start of the year. See Economic Report

The Labor Department next Thursday will report this week's jobless claim, which is also on investors' radar.

http://www.marketwatch.com/news/story/stock-market-braces-oils-ever-higher/story.aspx?guid=%7B15926E66%2DCFD2%2D4004%2DAE60%2D5688AECB3710%7D&siteid=nwhfriend
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quoted Albert

Markets are now "ridiculously correlated" with crude, said Jim Paulsen, chief investment officer at Wells Capital Management. "If we see oil going up to $150, the markets will no doubt have more pressure."

Many things are happening at a rapid rate.
 
BRUSSELS (Reuters) - The United States must take another step towards a global climate change pact when major industrialized countries meet in Japan next week, the head of the European Union's executive said on Friday.

"In this G8 summit we will expect the United States to show more ambition than they have shown so far," European Commission President Jose Manuel Barroso told reporters.

"The world expects more from a major economy like the United States," Barroso said. "I am saying that not just as a hope -- I expect the U.S. will accept a more ambitious conclusion at the G8 than the one last year."

 
Reuters Posted on Saturday, July 05 @ 18:19:48 PDT by coyote
 
 
Ethanol in Center of Price Storm

For many months, an intense debate has been waged among interest groups and politicians in Washington over the role of corn-based ethanol in higher food prices.

The issue is coming to a head now, with the Environmental Protection Agency poised to decide soon whether to roll back the Renewable Fuel Standard. That's the federal mandate calling for the production of 9 billion gallons of biofuels in 2008 and even greater amounts in the future.

It's one of a handful of federal government policies spurring on the boom in corn-fed ethanol plants. Those facilities are gobbling up the country's corn, which raises the price for corn and other crops.

Under federal law, the EPA has the power to waive or reduce the fuel standard if necessary to protect the environment or the economy of a particular state, region or the country as a whole.

redOrbit Posted on Saturday, July 05 @ 18:13:09 PDT by coyote

 
High oil prices spur demand for low energy electronics

SEOUL (Reuters) - These days when customers walk into electronics stores, the first question they ask is how much electricity the fridge, washing machine or laptop computer they are contemplating buying consumes.

"Energy savings were not exactly a hot topic among customers last year," said Kim Dong-han at South Korean electronics retailer Hi-Mart. "But this year, nine out of ten people ask point blank whether a product will help them save money."

"Going green is not only eco-friendly but crucial for business," said Kim Jik-soo, a spokesman at LG Electronics Inc. "This goes beyond just products, extending throughout the development and manufacturing process."

From washing machines that use steam instead of hot water, to fridges that use low energy compressors, to low power computer screens, electronics firms are furiously developing energy efficient products and heavily promoting lines already on the market that use less electricity than competitors' brands.

Reuters Posted on Saturday, July 05 @ 18:01:34 PDT by coyote

 
  
 
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Originally posted by Annie Annie wrote:

Good advise Turgoguy, "...use Military retirement investment, it's called Thrift Savings Plan (TSP)..."
 
Unfortunately it's only available to government and uniformed personnel. 
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It didn't have to be, it could have been available to *ALL* of us, but your friendly neighborhood Democrap decided to tank that one.
 
Gotta keep people in the poorhouse when they're old, otherwise they might wise up and vote Republican!
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Got that one right Turboguy!
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I'm sure it probably came with a huge tax cut for the wealthy somewhere in it.   Wink
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Post Options Post Options   Thanks (0) Thanks(0)   Quote sjf53 Quote  Post ReplyReply Direct Link To This Post Posted: July 06 2008 at 8:04pm
I am pretty sure I saw that there were more wealthy Democrats than Republicans. Wink
 
 
 
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Because the possibility of letting people keep the money they've rightfully earned is an affront to the modern Democrap.
 
 
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As long as the Fed keeps pumping out $$$$, it won't really matter how much you have, Inflation will eat it up.  I read tonight that the real inflation rate in the US is 20%.  That's a bundle.  Like if you had $10,000 in the bank Jan 1, 2008, it' now worth $9,000 and they might have awarded you $50 in interest, your net loss will have been $950.00 on your savings and at the end of the year your $10,000 will now be $8,100.00  and we call that savings. 

I visited a small town in California over the weekend and it has a population of around 36,000 people.  Lots of new houses were built over the past 16 years.  I checked several houses out for value and I'll tell you about one or so.

It was a rather good looking 3 bedroom 2 bath, with 2 car garage, a great site, backed up to a small mountain.  on a cul d sac.  priced at $115,000, I checked zillo to find out previous values and it's high value was over $300,000.00 and it's at about 33% of what it was previously worth.  On the same zillo page ther was several sales to look at and i looked at the first one, it was a bigger house and had sold 6/6/08, a comment under that said the price of that home had deccreased $37,000.00 in the last 30 days.  That ment that  the earlier house had also decreased around the same amount and would now be worth around $85,000.00.

The above is just for your information of what other communities are going thru during this period of deflation/infaltion.  I would hate to have been the person who just bought a house a month ago and is now almost upside down by $40,000.00.  Worse yet is the bank that will probably get to repossess the house again.  But you know I don't feel sorry for banks, they made this mess.
r we there yet?
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Originally posted by sjf53 sjf53 wrote:

I am pretty sure I saw that there were more wealthy Democrats than Republicans. Wink
For me its not a question of Democrats or Republicans being wealthy...when was the last time you saw a politician of ANY party that was not wealthy? Working class people of either party have no voice. The wealthy donors and lobbyists are well represented by the politicians they bought and paid for.
"Learning is not compulsory... neither is survival." - W. Edwards Deming
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Regarless of party affiliation, if you aren't completely satisfied with your elected representative, VOTE 'EM OUT.
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I just got my 600$ rebate, too bad the 10% inflation has reduced all my dollar based assets by that percent, then they added to my share of the national debt by tens of thousands. And they give tax breaks to the rich to boot.

Funny the middle men and speculators make out, the people who grow,make, transport or mine the products get very little. I thought that is who should get the tax breaks. The 600.00$ doen't even cover the 10% inflation and price increases this year and all they did was add it to the National debt to boot. Wait till the recession really hits, you'll be very depressed. If you can figure out a good plan to save, plan on working your "golden years" away at minimum wage.

   
cgh
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Originally posted by LaRo LaRo wrote:

...I would hate to have been the person who just bought a house a month ago and is now almost upside down by $40,000.00.  Worse yet is the bank that will probably get to repossess the house again.  But you know I don't feel sorry for banks, they made this mess.
I do not agree with you LaRo. The banks allowed folks consumed with WANTS and careless with their finances to dig their own graves, but make no mistake, folks signed for a loan they could NOT pay. Instead of renting out a room, selling off excess, going without, they went into default.
 
LaRo, that is a very tough loan scenario, one that I lived through in 1980. I bought a house for $75,000 in June by Aug that house value had dropped to $55,000 and continued to drop. Sure the smart thing would have been to let it go, but that is NOT what the agreement was at the time of purchase. I agreed to make payments for the full amount.
 
I had a VA loan and just kept making the payments that I agreed to make. It was tough, I had to rent out a room, I saw much nicer houses go for a fraction of what I spent. I rent that home out today. We are planning to sell it next year as we are going to retire. That home is worth nearly $600,000 today. Pay your commitments. Keep your credit clean. Things will turn around. Annie.
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Post Options Post Options   Thanks (0) Thanks(0)   Quote LaRo Quote  Post ReplyReply Direct Link To This Post Posted: July 07 2008 at 9:22pm
 Annie    Not everyone is as thrifty as you and I have been over the years. 

Today most people have found themselves in so deep they would never be able to dig their way out.  Foreclosure and bankruptcy is not as big a sin as it was when we were young.  I'll bet money you never refinanced your home and took out the equity to buy a new SUV either.

But times have changed and if the banks encouraged you to make loans that they knew were of very high risk, then it is their fault.  How many times did you recieve offers in the mail saying you could refinance for 125% of the appraised value of your home.  This is a big temptation for a young family starting out who want to live the high life.  So who do you blame the bank or the consumer? 

Who do you blame, the snake or Adam & Eve, they all knew they weren't to eat the apple?

r we there yet?
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LaRo,
 
To answer your question; "So who do you blame the bank or the consumer?", I blame both the banks and the consumers.  I also blame the Federal Reserve Board.
 
Banks were greedy & lowered their lending standards to make as much money as they possibly could.  I also blame consumers.  I hear all too often how my co-worker's bought something they clearly couldn't afford such as a flat screen TV or a new SUV, all the while complaining about how they can't pay their $800.00 dental bill.  GIVE ME A BREAK!  People just want, want, and want some more without being responsible.
 
This is exactly why I'm more afraid of my neighbor's who have to have what they want now whether they can afford it or not.  I'm in fear because I don't know what they're capable of after going hungry for a few days.
 
SUBTRACTION IS SECOND GRADE MATH!  YOU DON'T SPEND MORE THAN WHAT YOU MAKE. 
PERIOD!  Angry
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LONDON (Reuters) - Fresh credit fears swept global financial markets on Tuesday, pushing world stocks to their lowest levels since October 2006 as concerns intensified that the financial sector would have to raise more capital.

Banks tumbled across the board after a Lehman Brothers report said a pending accounting change could force Fannie Mae and Freddie Mac to raise $46 billion and $29 billion respectively at a difficult time, knocking their shares to near 16-year lows on Monday.

In Britain, shares in troubled mortgage bank Bradford & Bingley fell 20 percent to record lows, below the price of its planned rights issue, due to concerns over its future.

Fresh worries over the financial sector dealt a blow to risky assets, which have been already reeling from fears about rising inflation due to high energy costs and slowing growth.

"The crisis in the financial system, given banks are the lubricant for the economy, points to continued tight credit," said Jonathan Lawlor, head of European research at Fox-Pitt, Kelton.

"So we have a loop where tight credit leads to slower economic growth, which leads to higher losses for the financial system, which leads to capital constraints for the banks."

MSCI main world equity index fell as low as 341.35, down 1 percent, hitting its lowest since October 2006.

The index is down 20 percent from its all-time peak set in November last year, plunging into bear market territory.

The FTSEurofirst 300 index fell 2.5 percent.

SPREADING CRISIS

On Wall Street, the S&P regional bank index fell 5 percent to record low on Monday, which Bank of Scotland said highlighted a key evolution in the unravelling of the 2001-2007 global credit boom.

"Initial focus was on structured products held and marketed by investment banks and the viability of structured investment vehicles. Focus going forward is likely to be on the scale of credit impairments delivered by a deteriorating economic cycle," the bank said in a note to clients.

"High levels of leverage extended to both consumers and investors against a now depreciating asset (housing) alongside lax lending standards make a rise in default rates... The epicenter of the crisis therefore shifts from investment to commercial bank balance sheets."

The yen -- which tends to rise in times of risk aversion given its low interest rates -- rose 0.4 percent to 106.73 yen per dollar.

Emerging stocks fell 1.7 percent to its lowest since January. Emerging sovereign spreads were steady.

European government bonds drew in safe-haven demand, with the September Bund future up 28 ticks.

U.S. light crude rose 0.3 percent to $141.63 a barrel having dropped 2.7 percent on Monday. Gold rose to $928.00 an ounce.

 http://news.yahoo.com/s/nm/20080708/ts_nm/markets_global_dc_3

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Caveat Emptor
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Originally posted by H2HPrep H2HPrep wrote:

Caveat Emptor
Caveat emptor is Latin for "Let the buyer beware". Generally caveat emptor is the property law doctrine that controls the sale of real property after the date of closing. Under the doctrine of caveat emptor, the buyer could not recover from the seller for defects on the property that rendered the property unfit for ordinary purposes. The only exception was if the seller actively concealed latent defects. Ah yes, H2HPrep, you are so right!
 
Also, Caveat venditor is Latin for "let the seller beware". It is a counter to caveat emptor, and suggests that sellers too can be deceived in a market transaction. This forces the seller to take responsibility for the product, and discourages sellers from selling products of unreasonable quality.
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[QUOTE=gnfin]Is the market going to tank?                                                                           
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Things are going down from here?Ouch
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Originally posted by waterboy (GNFIN) waterboy (GNFIN) wrote:

Is the market going to tank?

House of Cards, LaRo you were so right!

You thought the housing crisis was bad?

You ain't seen nothing yet.

By Danny Schechter

 

The Mess

Nationwide, two million homes sit vacant. Home sales are at a nine-year low. Former Treasury Secretary Larry Summers says that housing finance has not been this bad since the Depression. We still don’t know the full extent of the colossal subprime rip-off, but a recent Bank of America study did some guesstimating on the scale of the consequences of the “credit crisis.” The meltdown in the U.S. subprime real estate market, the bank said, had led to a global loss of $7.7 trillion dollars in stock market value since October.

While many eyes are focusing on the housing meltdown and its hugely negative effect on an economy clearly moving into recession, few are paying attention to the next bubble expected to burst: credit cards. Combined with the subprime losses, such a credit card nightmare has the potential, experts say, of bringing down the entire financial system and global economy. You and your credit card have become key players in the highly unstable financial crunch. Mortgage lender cupidity and bank credit card greed wedded to financial institution deregulation supported by both political parties, have been made manifestly worse by Bush administration support-the-rich policies. It has brought us to a brink not seen since just before the Great Depression.

While campaigning in Edinburg, Texas, in February, Barack Obama met with students at the University of Texas-Pan American. “Just be careful about those credit cards, all right? Don’t eat out as much,” he said. After the foreclosure crisis, he warned, “the credit cards are next in line.”

The coupling of home equity debt and credit card debt has gone hand in glove for years. The homeowners at risk can no longer use their homes as ATM machines, thanks to their prior re-financings and equity loans, often used in the past to pay off their credit cards. Indeed, homeowners cashed out $1.2 trillion from their home equity from 2002 to 2007 to pay down credit card debts and to cover other costs of living, according to the public policy research organization Demos.

To compound the problem, fewer people are paying their credit card bills on time. And, to flip the old paradigm, more are using high-interest credit card cash to pay at least part of their mortgages instead of the other way around.

How bad is it?

• Financial analysts say that in the U.S. alone more than $850 billion in unpaid credit card balances is at stake and fast approaching $1 trillion, roughly the same amount as in the subprime market.

• CNN reports that worldwide, consumers have racked up more than $2.2 trillion in purchases and cash advances on major credit cards in just the last year.

• The unpaid debt portion of this is continuing to pile up, with U.S. consumers last year adding $68 billion against their credit lines, boosting credit card debt by 7.8 percent, the largest increase in seven years, just when the last recession was beginning.

• Even as they spent, consumers have been going into default at a stunning rate. The percentage of people delinquent on their credit cards is soaring, and credit card companies are now writing off somewhere near 5 percent of payments.

• By last fall, the major banks were setting aside billions for loan-loss reserves while anticipating an increase of 20 percent in non-payments over the next two to four quarters.

• Capital One, one of the biggest credit card banks, was forced to write off $1.9 billion in bad debt just in the last quarter of 2007.

•By October, according to a survey of only the leading credit card banks by the Associated Press, the value of credit card accounts at least 30 days late was up 26% from the previous year, to $17.3 billion. Serious delinquencies among some of the biggest lenders rose by 50 percent or more in the value of accounts that were at least 90 days delinquent.

• Making matters worse, or more widespread throughout the economy, just as with mortgage debt, credit card debt is put into pools that are then resold to investment houses, other banks and institutional investors. About 45 percent of the nation’s $900-plus billion in credit card debt has been packaged into these pools, and so many companies, not just a few, are at risk of being forced out of business by credit card debt write-offs.

What this adds up to, and what Obama didn’t say, is that we are actually face to face with the results of the most massive failure of our political and economic system since the Depression. Since Ronald Reagan, we have been living in an era in which neither the meltdown of the savings and loan banks in the 1980s nor the Enron-like scandals of the Bush years has stopped the relentless advancement and protection by both parties of the ability of financial institutions to make a buck at any cost to the social good and economic fabric. Which is what you get, of course, when both parties are so dependent on massive financial contributions to get their candidates into office and when the corporate media, heavy with advertising from the FIRE sector – Finance, Insurance and Real Estate – doesn’t warn the public or investigate the egregious fudging, misrepresentation and outright fraud that underpins the subprime and looming credit card crisis.

Priceless!

The credit card industry (Visa, MasterCard, American Express, etc.) and the 10 banks that dominate the industry as the primary card issuers spend an estimated $2 billion a year in endless marketing worldwide. We are all bombarded with their solicitations and sales tie-ins and gimmicks. They know that they might only have a 2-3 percent return rate, but that more than pays the enormous costs. They have thus succeeded in supplying 1.5 billion cards to 158 million U.S. card holders. That averages to 10 cards per person. In the last few years, retailers, banks, a wide range of companies, sports teams, unions and even universities have launched specialized card programs. Like the car companies that discovered that they made more money on car loans than automobiles, the benefits of what’s been called “financialization” is obvious to more business sectors.

Credit card advertising for new card holders is especially effective now as inflation drives costs up and consumers have less to spend. “Charging it” on yet another new credit card is for many the only option to meet their budgets or maintain their lifestyles, especially as gas prices rise. It’s become habit for many to spend more than they have. As a result, overall U.S. credit card debt grew by 435% from 2002 to year-end 2007, from $211 billion to approximately $915 billion.

The relentless, continuing push by the credit card banks doesn’t target potential customers alone. Constant focus group studies and other research techniques are still being used to persuade retailers to encourage more credit card transactions. Increasingly, businesses simplify their use by “swiping” and other gimmicks, no signed receipt needed.

“More and more sectors of the American economy recognize that their financial success is based on the success of the credit card industry,” explains Robert Manning, the author of the definitive Credit Card Nation and a leading expert who has been sounding the alarm about the consequences of credit card debt.

“Everything is very clearly thought out and premeditated. Whether it’s having conferences and think tank sessions about how to encourage people to accept more debt [or] to work with merchants – for example, to persuade merchants with empirical information that ... if they use a credit card that they’ll buy 20-25 percent more.”

Manning notes that saving and thrift was historically a positive value in the U.S. As recently as the l980s, the national savings rate was 10 to 11 percent. Since 2005, Americans have saved less than 1 percent of their disposable incomes. In fact, the most recent figures from March show that the savings rate is negative, below zero. And also in March the government reported that for the first time since the Depression, Americans owe more on their ≠homes than they have in equity. Essentially, on average, America is broke and its credit cards played a dominant role in getting there.

Manning, who teaches at Rochester Institute of Technology, has taken on the issue with original research and financial literacy courses for students. He found that many of his students already had credit cards before they arrived on campus, some for years.

As we all know, the companies don’t tell about the downside when they are seducing customers. They offer low introductory or teaser rates, in the same way that mortgage brokers enticed sub-prime customers. They offer rewards, frequent flyer miles and other prizes. Students are especially targeted because they have little real-world financial experience. The U.S. Public Interest Research Group, which is campaigning against student debt, says the average is $4,000 per student, but it easily climbs after four years to $15,000 to $20,000.

All of this, in our globalized world, is not unique. Clear across the world and down under, the New Zealand Union of Students’ Associations (NZUSA) and bank workers’ union Finsec are joining forces to try and keep students out of high-interest debt. The amount students owe on credit cards has increased by 32 percent since 2004, according to the NZUSA Income and Expenditure Survey. Credit card debt has increased at a higher rate than low to no interest overdrafts.

Here in the U.S., one mother, Joan E. Lisante, has set up a website targeted at other parents, www.consumeraffairs.com, so they can tell their stories. She wrote recently about what she calls the “plastic prison.”

“My 22-year-old son Jon, a college senior, got 52 credit card offers in the last year. I know this because, like a CIA operative, I intercepted the offers pouring into our mailbox.

“He got 19 from Capitol One, 13 from Providian, six from Washington Mutual, four from Chase, four from eBay and one each from an assortment of lenders ranging from PayPal to First Premier Bank in Sioux Falls, South Dakota (co-capital with “Small Wonder” Delaware of the credit card kingdom).

“Most begged Jon to rip open the envelope and wallow in instant gratification. Capital One, the most persistent suitor, shouted, ‘Offer Status: Confirmed. No Annual Fee!’

“‘16 Card Designs’ (but none that tally the total whenever you use it). You could get a response in as little as 60 SECONDS when you apply online.

“Now this kid has never held a job (yet) for more than one summer. He spent one summer working in the FEMA flood insurance call center, which shows how much expertise you need to work there. Although he is familiar with the inner workings of Blockbusters and Starbucks, Jon’s not yet a member of any corporate elite, prestigious profession or skilled craftsman’s guild. Does this matter? Apparently not.”

“The key for the banks,” Manning says, “is to get them dependent upon consumer credit, shape their attitudes towards savings, consumption and debt and to then multiply the number of financial products that they’re buying from that particular bank so the credit card will lead to the student loan, to the car loan, eventually to a home mortgage and then maybe some insurance products and investment opportunity.

The banks, he says, want students in a condition of dependency. “Young people today that see credit as a social entitlement have no understanding of what it is going to entail to repay those loans back. Once they’re used to living on borrowed money, then the banks realize that they’ll be following that pattern possibly for the rest of their lives. By the time they graduate they’re so indebted, and they’re so dependent upon the use of credit and debt, that it’s already presaged their future. They can’t possibly pursue the kinds of careers that they anticipated.”

Defaults on student loans are climbing. Many students used those loans to pay off credit cards. Military recruiters are now promising to pay off debts to entice enlistments. Other government agencies are also offering funds as part of their head-hunting.

 
Rise Up

“Many of you have probably forgotten that the American Revolution was largely driven by the great American planners, that were heavily in debt to European banks and they had very onerous terms,” Manning said in a lecture I attended when I was making my film In Debt We Trust. “And they recognized that they could not financially prosper under such outrageous financial demands.”

On the day I visted Manning’s lecture in an alcove literally right next door to the lecture room in the student center, local branches of banks like Chase and HSBC were signing up students for checking accounts and credit cards. Freshmen lined up at the tables to set up accounts. The banks had permission from the same school administration that hires Manning to counsel students to avoid getting into debt.

I listened in at the pitches.

BANK REP: “You don’t need anything for deposit, and we’re giving out free backpacks.”

BANK REP: “You get zero percent on the purchases for the first six months and then it goes to the standard intrest rate.”

QUESTION: “What’s the interest rate?”

BANK OF AMERICA REP: “The interest rate is variable ... to be honest with you, off-hand, I don’t know the interest rate off-hand. Sorry.”

A student is counting out twenties as his first deposit.

BANK REP: “I just need your signature. Right here, please.”

ANOTHER BANK REP: “And it’s free while they’re a student.”

What will happen when they do have to pay it back includes nonstop calls to them and their parents. Credit card collection agencies know how to harass, threaten and then sweet-talk cardholders who are late. They even have a term for people squeezed by debt: “sweatbox.” They also know that the longer the debt goes unpaid, the larger the potential profit for companies, as interest builds up at rates of up to 30 percent. Credit card promoters call people who only pay minimums “revolvers.”

Those of us who pay our bills in full? “Deadbeats.”

Recently the companies unilaterally hiked late fees and penalties that compound the debt. A few missing payments can earn you an interest rate hike to 29 to 30 percent. If you are late with a payment on some other debt not related to your credit card, you can readily find your interest fee doubled on your credit card. Some companies make more on fees and penalties than on interest payments. The companies racked up more than $17 billion in 2006, the last year for which records are available.

Like many of the homeowners who accepted subprime mortgages, and like you with your credit cards, youths and adults alike signed dense agreements that are largely unreadable. The credit card banks constantly update these with those small print notices with which you get assaulted in the mail, these drafted by risk-minimizing lawyers. Of course, it’s unlikely you bother to read these. In part of the unread text, the companies give themselves the right to unilaterally change the deal even after it is signed. Other small print insures that consumers cannot sue them over differences. All grievances have to be arbitrated in a process the companies created and control.

Even the Federal Reserve Bank condemns some of these practices, noting: “Although profitability for the large credit card banks has risen and fallen over the years, credit card earnings have been consistently higher than returns on all commercial bank activities.”

 

The Failure Trifecta

Track the subprime and credit card mess back, and you will find its origins in free market policies since Reagan that deregulated banking and much of the oversight that managed for years to keep the greed-meisters on Wall Street in check. The failure of media-lionized Alan Greenspan’s Federal Reserve Bank to pay attention to predatory lenders and sub-prime schemers allowed them to prosper.

Add to these failures a complicit Congress, with Democrats and Republicans alike dependent on donations from the three leaders of the FIRE economy. To assure their freedom to run their businesses their own damn way, the banks in the 1990s persuaded Congress to deregulate the practices of financial service companies. Pro-business Court decisions have allowed them to base their operations in low-tax states like South Dakota and Delaware and to end consumer protections against usury.

This decade, Bush’s tax cuts and his bankruptcy “reform” bill strengthening the power of credit card companies were passed with bipartisan support, including that of Senator Dianne Feinstein. Add major media amnesia to this list and you get a trifecta of failure. The New York Times admitted that advocates warned them that a rise in predatory lending was destroying poor communities in 2001, but they sat on the story for nearly six years.

Neither the politicians nor the media told us that every major brand name banking firm and investment house had its fingers in the juicy pie of pedaling mortgage-backed securities worldwide without disclosing that many of these mortgages were deliberately offloaded on people whom they knew could not afford to pay them. As with the credit card industry, these mortgage borrowers were cleverly given “teaser rates” that would soon reset upwards. The banks then resold the mortgages as “asset-backed paper” even though the assets’ value was so questionable.

Meanwhile, media outlets took in hundreds of millions in ad revenues from deceptive lenders and credit card banks encouraging Americans to shop and charge till we drop. The Super Bowl broadcast ran all those cool but misleading ads by credit card companies and mortgage hustlers. It was, um, “priceless.”

Notes scholar Lionel Tiger: “Those who have been operating the managerial levers of the financial system have failed embarrassingly and massively to comprehend the processes for which they are responsible. They have loaned money avidly and recklessly to people who couldn’t pay it back.

They fudged data to get loans approved and recalculated. Then they sausaged fragile figments of money reality into new ‘products’ which could be sold around the world to investors eager to enjoy the surprising returns which often accompany theft, managerial incompetence and fraud. When it comes to responsibility for all this, there appears to be no one here but us spring chickens.”

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