Sailors prefer pirates to no job

Nov 20 - Seafaring Filipinos worry more about landing work in a shrinking global economy than being hijacked by pirates off Somalia.



The mounting threat posed by Somali pirates is causing waves in many seafaring nations but not in the Philippines. Around 40 percent of the sailors who work on the world's supertankers and cargo ships hail from the Philippines. And sailors there are making light of the risk of being held hostage. They're far more worried about the economic downturn drying up demand for their services.

- Reuters

Financials need at least $1 trillion: analyst

(Reuters) - The U.S. financial system still needs at least $1 trillion to $1.2 trillion of tangible common equity to restore confidence and improve liquidity in the credit markets, Friedman Billings Ramsey analyst Paul Miller said.

Eight financial companies -- Citigroup Inc, Morgan Stanley, Goldman Sachs Group Inc, Wells Fargo & Co, JPMorgan Chase & Co, American International Group Inc, Bank of America Corp and GE Financial -- are in greatest need of capital, he said.

"Debt or TARP capital is not true capital. Long-term debt financing is not the solution. Only injections of true tangible common equity will solve the current crisis," he said in a note dated November 19.

Currently, the U.S. financial system has $37 trillion of debt outstanding, he noted.

Combined, these eight companies have roughly $12.2 trillion of assets and only $406 billion of tangible common capital, or just 3.4 percent, the analyst said in his note to clients.

Miller said these institutions need somewhere between $1 trillion and $1.2trillion of capital to put their balance sheets back on solid ground and begin to extend credit again, given their dependence on short-term funding and the illiquid nature of their asset bases.

Since the summer of 2007, Wall Street has been hammered by a sharp pullback in debt markets, which began with mortgage woes and escalated into a credit crisis, slowing economic activity around the world.

RECAPITALIZATION NEEDS

The bulk of the capital will have to come from the U.S. government, Miller said. The government needs to take the initial steps to begin the process, and private capital and earnings can finish the job.

"The quicker the government acts, the sooner the financial system can work through its current problems and begin to supply credit again to the economy," he said.

The U.S. government must declare a bank-dividend holiday and convert the TARP funding into pure tangible common equity to get the credit markets functioning.

Also, the government should support a centralized CDS clearinghouse that backstops all transactions and eliminates the cross-default problem, the analyst said.

Top U.S. financial regulators said on Friday they were working on developing a centralized clearinghouse for credit default swaps, the exotic instruments that have exacerbated the financial crisis of recent months.

The weakened economy and global credit crisis had pushed the U.S. government into bailing out companies including insurer AIG, investment bank Bear Stearns, and mortgage companies Fannie Mae and Freddie Mac.

Regulators have also shown a willingness this year to intervene when banks appeared to struggle. They pushed Wachovia Corp into finding a buyer and arranged for JPMorgan to buy Washington Mutual Inc's banking assets after worried customers began to yank deposits.

Miller, however, said it could take three to five years for the financial system to fix itself completely, with adequate capital and appropriately priced interest rate and credit risk.

Prospect for auto bailout dims

WASHINGTON (Reuters) - Chances dimmed that a last-minute plan being crafted by Republican senators, with White House support, to provide $25 billion to bail out U.S. automakers would receive enough backing from Democrats to pass before the end of this week.

As the hours ticked down on this year's legislative session, Democratic leadership expressed deep skepticism the talks would lead to a compromise acceptable to all parties.

Congress has at most two days remaining in its post-election session. Without a deal in that time, any bailout is likely to have to wait until the new Obama administration takes over in January.

"I won't say it's completely over. I'm still having conversations with people. But it doesn't look good," Sen. Robert Bennett, a Utah Republican, said of chances lawmakers would strike a deal that could pass.

Failure to craft a deal carries the risk that one or more of the U.S. automakers -- General Motors Corp, Ford Motor Co or Chrysler LLC -- could be forced into bankruptcy.

Senate Minority Leader Mitch McConnell said in remarks on the Senate floor that the compromise "is the only proposal being considered" that has any chance of becoming law now.

The approach, spearheaded by Republicans Christopher Bond of Missouri and George Voinovich of Ohio, would amend a plan that extended $25 billion approved in September for helping Detroit retool factories and make more fuel-efficient cars.

A number of strings attached to the retooling money would have to be cut or reworked to make it available immediately for operational and other pressing needs.

"We've made great progress. We're down to wording challenges," Bond said in remarks on the Senate floor Wednesday night.

CEO HOT SEAT

The rush to reach a deal comes after U.S. auto executives spent their second straight day on Capitol Hill pleading for $25 billion in government aid.

The day's hearings, before the House Financial Services Committee, got off to a rousing start when panel Chairman Barney Frank asked how the government could justify a bailout for banks and insurers, but not the automakers.

"Frankly, there seems to me to be an inherent cultural bias," Frank said. "Aid to blue-collar employees is being judged by a standard different than white-collar employees."

The weakened economy and global credit crisis pushed the U.S. government into bailing out companies including insurer American International Group Inc, investment bank Bear Stearns, and mortgage companies Fannie Mae and Freddie Mac.

Congressional Democrats have proposed using money from the $700 billion bailout package for banks to aid the automakers, but the Bush administration -- with only weeks left before it cedes power to President-elect Barack Obama -- has expressed opposition.

In addition, other opponents of the bailout have argued that reorganization under bankruptcy would be the best solution to the carmakers' problems.

Senate Democratic Majority Leader Harry Reid said he wished "we could move forward" on a bill, but said that legislators were still trying to find a bill that could be sure to pass.

However, the U.S. House is scheduled to leave Washington on Thursday for the year and "we have to face reality," the Senate leader said. "We'll work to see what we can get done in the next 12 hours."

Other legislators have said some kind of deal is coming.

McConnell said a compromise is the only way for legislation to become law. He proposed to tap $25 billion of auto retooling loans already approved by Congress but not yet disbursed by the Energy Department -- an approach supported by the White House.

White House spokeswoman Dana Perino said the administration remains opposed to giving automakers money from the $700 billion financial rescue package, as some Democrats have urged. "There's no appetite for that," she said.

But changing the existing legislation could have one key opponent -- Barney Frank.

Frank, champion of a bailout plan similar to the one stalled in the Senate, said amending the retooling legislation, as he understood it, would meet resistance in the House.

"It would be sending the wrong signal to rescind the environmental restrictions," the Massachusetts Democrat said of core provisions in the retooling bill.

WHEELIN' AND DEALIN'

Earlier on Wednesday, Levin urged the House committee not to let differing views about the source of U.S. automaker loans hold up the aid.

"Are we going to permit a difference over the source of these loans to destroy an opportunity to help an industry so essential to this country?" Levin asked.

Voinovich, whose state could be devastated by a collapse of the U.S. auto industry, also voiced optimism that a deal could be struck.

"We are having a lot of discussions with the Democrats," the Ohio Republican said, noting a growing consensus "of getting something done so we don't lose General Motors."

Investors showed their concerns about the legislative wrangling, as GM and Ford shares fell on the uncertainty of the bill's passage. GM closed down nearly 10 percent at $2.79 after hitting a 66-year low of $2.52, and Ford was off 25 percent at $1.26, after hitting a 26-year low of $1.21.

If the bailout deal is reached, Chrysler said it hopes to revive merger talks with GM, according to a story in the Financial Times.

Connecticut Democrat Christopher Dodd, chairman of the Senate Banking Committee, said it looked unlikely that Congress will come to agreement this week on an assistance package for the auto industry.

"I'm anxious to see something happen," he told reporters after a committee hearing on a separate issue. "But frankly, the idea that there's going to be a bill, I think, is remote."

Markets hit new lows on global job losses

LONDON/WASHINGTON (Reuters) - Fears of a deep, long global recession intensified on Thursday as markets hit new lows in alarm at reports of record U.S. job losses, oil prices plunging below $50 a barrel and worry that U.S. automakers would not get a bailout from Washington.

World economic woes prompted Switzerland's central bank to make a surprise one percentage-point interest rate cut and analysts said the poor U.S. jobs picture almost guaranteed a Federal Reserve Board rate cut at its next meeting on December 16.

CNBC reported Saudi Prince Alwaleed bin Talal planned to boost his stake in Citigroup back to 5 percent. The U.S. financial giant is subject to serious concern over heavy losses and even its very survival. Its shares plunged 20 percent on Thursday after falling 23 percent on Wednesday.

Global equity markets sold off again, with Wall Street stocks tanking for a second consecutive day, although the Swiss and Citi news pared back fears of even deeper falls.

The International Monetary Fund stepped in to bail out troubled Iceland, leading a $10.2 billion help package, and was set to make as much as $40 billion available to Turkey.

The deepening recession also ate into companies' outlooks. Prospects for a bailout of U.S. automakers faded and General Motors underlined its troubles by announcing a two-month production shutdown in Thailand. Its shares lost another 30 percent in early trading on the New York Stock Exchange.

On the jobs front, the U.S. government reported the number of workers making new claims for jobless benefits last week surged to the highest in 16 years, adding to fears of a deep recession. U.S. Senate Democratic Leader Harry Reid said lawmakers may consider on Thursday extending jobless benefits.

French carmaker PSA Peugeot Citroen said it would cut 2,700 jobs, Anglo-Swedish drugmaker AstraZeneca saw 1,400 losses over coming years, and engine maker Roll-Royce expects up to 2,000 job cuts next year.

Planned layoffs since September at non-financial companies worldwide total at least 172,000. To that can be added 89,500 in financial sector losses.

All three major U.S. stock indices fell at the opening, with the Dow Jones industrial average at its lowest since March 2003 and the Standard & Poor's 500 down more than 2.5 percent, it lowest since October 2002.

World stocks tumbled 8.7 percent to 5-1/2-year lows with volatile emerging market equities down 5.4 percent. European shares lost 4.9 percent and Japanese stocks plunged nearly 7 percent.

In what would normally be a good sign for consumers and markets but now signals weaker global growth, U.S. crude futures fell over 5 percent to just below $50 a barrel for the first time since January 18, 2007.

LONG DOWNTURN

Leading economies will likely be in recession for around a year, a Reuters poll of around 250 economists showed. The survey across the Group of Seven nations showed economies faced recession for as much as five quarters.

"All developed economies will contract in 2009. It's the worst we have had in a century. But to say it's going to look like 1929 again for all these economies is a bit excessive, it's too pessimistic," said Marco Annunziata, chief economist at UniCredit in London.

The Federal Reserve said on Wednesday the U.S. economy would contract through the first half of 2009.

"No end in sight," ING economists said in a note on Thursday, a sentiment widely shared by investors.

Japan's exports to Asia fell in October for the first time since 2002, suggesting the fallout from the credit crisis has spread to neighbors such as China. Shipments to Asia had previously cushioned the impact on Japanese exports of weakening demand from the United States and Europe. But data Thursday showed they fell 4 percent from a year earlier.

"The fall in exports to Asia reflects that their economies are also taking a blow from weakness in developed economies," said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo.

IMF TO THE RESCUE?

With investors looking increasingly to governments and other authorities to stop the rot, the IMF moved to prop up both Iceland and Turkey. The Fund approved a $2.1 billion loan for Iceland, battered by a severe banking crisis, as part of a $10.2 billion package.

"The whole IMF package, which includes British and Dutch loans to the Icelandic deposit guarantee agency, is about $10.2 billion, out of which the Nordic countries' share is about a quarter," Finland Finance Ministry Under-Secretary Martti Hetemaki told Reuters.

The IMF said Iceland's economy would likely shrink 9.6 percent next year and unemployment quadruple to 5.7 percent.

Sources in Turkey told Reuters the IMF was ready to agree a precautionary standby agreement of $20 billion to $40 billion.

CAR TROUBLES

Prime Minister Vladimir Putin said Russia would not allow the global financial crisis to capsize its economy and announced a $20 billion stimulus package and help for people who lose out in the downturn.

European Central Bank Executive Board member Lorenzo Bini Smaghi told a Portuguese newspaper more interest rate cuts by the European Central Bank were possible.

Other official help looked less certain. Chances for a $25 billion bailout of the U.S. auto industry faded further, with little expectation that Democratic leaders in Congress will support a compromise that hinges on negotiations supported by Republicans and the "lame-duck" White House.

"I won't say it's completely over," Sen. Robert Bennett, a Utah Republican, said in reference to the chances of lawmakers striking a deal on aid for General Motors Corp, Ford Motor Co and Chrysler LLC that could pass.

"I'm still having conversations with people. But it doesn't look good.

Citigroup shares plummet 25 percent despite Alwaleed move

NEW YORK (Reuters) - Citigroup Inc's largest individual investor gave the troubled bank new support, saying he would boost his stake modestly, but failed to revive investor confidence as the bank's shares tumbled another 25 percent.

Saudi Prince Alwaleed bin Talal, who plans to increase his stake to 5 percent from less than 4 percent, said the bank's shares were "dramatically undervalued" following a nearly 90 percent plunge since late 2006.

He also expressed "full and complete support to Citi management," including embattled Chief Executive Vikram Pandit, who earlier this week announced a plan to cut 52,000 jobs.

But investors were unimpressed, and many questioned the bank's ability to withstand what are expected to be billions in additional loan losses in 2009.

Citigroup, which has lost more than half of its value this month alone, was the top decliner among large U.S. banks, but the carnage was widespread. JPMorgan Chase & Co was down 13 percent and Bank of America Corp was off 7 percent.

And in a year that has seen the rescue of giant insurer American International Group Inc and mortgage giants Freddie Mac and Fannie Mae, some speculated about the possibility of government intervention.

"As a company, (Citigroup) can't go bankrupt because they're too big," said Saj Karim, investment adviser at Cannacord Capital in Waterloo, Ontario. "They will get bailed out, and that's another unfortunate strain on the U.S. government."

Citigroup shares fell as low as $4.77, a nearly 14-year low, in morning trade on the New York Stock Exchange.

CDS RISE

The cost of insuring Citigroup's debt jumped. Five-year credit default swaps rose to 395 basis points, meaning it would cost $395,000 a year to protect $10 million of debt, according to data from Phoenix Partners Group. The swaps closed at 357 basis points on Wednesday, or $357,000 a year to protect $10 million of debt, according to Markit.

"Spreads are widening on pretty much everything," said Keith Davis, a bank analyst at Farr, Miller & Washington. "Given that backdrop, how much capital is Citi going to need to shore up their balance sheet? I don't think anyone knows, and so the knee-jerk reaction is to sell first and ask questions later."

Citigroup's market value was $34.9 billion on Wednesday, meaning that Alwaleed plans to invest at least $349 million, based on Wednesday's closing price.

Peter Kenny, managing director at Knight Equity Markets, said that if Alwaleed "is upping his stake to 5 percent at the current valuation of the company, what does that mean? That he's spending less than $100 million? That's not very much."

He added, "The fact he's bumping up to 5 percent actually underscores how pathetic the stock performance has been."

Alwaleed said the New York-based bank is "taking all the necessary steps to position the company to withstand the challenges facing the banking industry and the global economy."

Alwaleed, a nephew of Saudi King Abdullah, added that he is "fully confident that Citigroup's universal banking model and global franchise will make it a long-term winner in the financial services industry."

The prince's percentage stake in the bank was reduced in late 2007 and early 2008 as Citigroup raised some $50 billion of capital from sovereign wealth funds and other investors, including Alwaleed, to shore up its balance sheet. It recently received another $25 billion under the U.S. government's bank bailout package.

The Saudi billionaire last came to the bank's aid in 1991, when he invested $590 million in Citigroup predecessor Citicorp, which needed cash as it struggled with Latin American loan losses and a collapse in U.S. real estate prices.

Shares of Citigroup have fallen 82 percent this year. They lost one-third of their value in the first three days of this week as investors worried that Pandit's plan to cut expenses by 20 percent and eliminate 52,000 jobs won't restore the bank to health.

Citigroup has lost $20.3 billion in the last year and taken tens of billions of dollars of writedowns on mortgage and other toxic debt. Analysts expect it to lose money in the fourth quarter, and some don't expect it to be profitable in 2009.

Pandit suffered a major setback last month when Wells Fargo & Co agreed to buy Wachovia Corp, trumping Citigroup's bid to buy much of the Charlotte, North Carolina-based bank and add its $418.8 billion of deposits.

Jaipur jewellers hit by recession

Nov.20 - Jewellery manufacturers and exporters in the pink city of Jaipur are facing the effects of global recession.



An ANI Report

Cars sold 2 for 1 as sales crash

Nov. 20 (Reuters) - As car sales plummet, one UK website is offering 2 for 1 car deals on new autos.

Simon Empson of Broadspeed.com launched his novel idea earlier in November a 2 for 1 deal on Dodge Avenger SXT 2.4i models for 20,000 pounds (30,000 USD). He said the phone rang off the hook, his website crashed and he was sold out within four hours.

He is repeating the offer in another campaign, with the Kia Magentis, hoping to achieve the same sort of success.

Hayley Platt Reuters.

SOUNDBITES:

Simon Empson, Managing Director, Broadspeed.com.
Chas Hallett, editor, Autocar.