Germany wants greater Indian role to tackle recession

In his first-ever visit to India, German foreign minister Frank-Walter Steinmeier has a full agenda. In his conversations with counterpart Pranab Mukherjee on Thursday, Steinmeier will focus on the raging financial crisis , particularly as Germany slides into recession.

But closer home, it will be the instability in Afghanistan that will consume a lot of conversation with the Indian leadership . In an exclusive interview with TOI, Steinmeier said, “We would like to discuss the available options for increasing our support for the stabilization of South Asia and its trouble spots. There is also much we would like to accomplish bilaterally . Germany is deliberately building up its presence in India , for example in the areas of business and science.”

There has been a lot of talk that European nations want to get out of Afghanistan, using the “reconciliation” talks with the Taliban. It has, say sources, led to a kind of dissonance with the Americans whose presidentelect Barack Obama is determined to make Afghanistan a top foreign policy priority.

Steinmeier said there was some focus on getting Afghans in the frontlines, so the foreign troops could get out of direct combat. “It is crucial that our Afghan partners gradually take on more responsibility. As the Afghan government becomes more capable of providing security and stability, the presence of international troops can gradually be reduced and eventually ended,” he said. But he tried to dispel the notion that reconciliation talks were on with the Taliban. “Reconciliation will only be possible on the basis of the existing constitution and that the Taliban must renounce all use of violence as a precondition for serious negotiations . That’s why I caution not to misunderstand the willingness to engage in talks as a sign of weakness,” he said.

Germany has been hit by the financial crisis harder than most, and reports say it has officially slid into recession. During the recent ASEM and G-20 summits, one of the ideas that was discussed was the ceding of voting rights in the IMF to important emerging economies like India and China as well as opening up the Financial Stability Forum for these countries.

“The crisis underlines the need to improve the conditions for stable and transparent financial markets... the IMF along with the Financial Stability Forum should be given considerable influence when it comes to risk analysis, monitoring the stability of the system and the development of an early warning system,” the German minister said. While endorsing the results of last week’s G-20 summit , Steinmeier said the future lay in a permanent expansion of the G-8 . “It will be important to go beyond crisis management to discuss new conditions for the world economy as a whole with all the relevant global actors ... the format of the future will have to be a permanent expansion of the G-8 ,” he said.

But Germany will join the global cacophony to ask India to help break the deadlock in the Doha round of WTO talks. For everybody, it was India’s stonewalling that kept the world short of getting a deal on Doha.

“Bringing the WTO Doha Round to an end would be a significant impetus for the global economy. We should press ahead to reach agreement on the core arrangements in agriculture and industry. I am confident that India, with its growing influence , will also take on more responsibility ,” Steinmeier said.

Source: EconomicTimes

The year 2025: China and India continue to rise

A new US intelligence report predicts few countries will influence the world over the next two decades more than China.

The report by the National Intelligence Council said China is set by 2025 to have the world's second largest economy and be a leading military power; "it could also be the largest importer of natural resources and an even greater polluter than it is now."

The US analysts predict that China's economic growth "almost certainly will slow, or even recede, even with additional reforms to address mounting social pressures."

Analysts said that China's international standing is based partly on the world's treatment of Beijing as "the country of the future."

"If foreigners treat the country less deferentially, nationalistic Chinese could respond angrily," the report said.

In India, the report said, leaders will try to position their country as "a political and cultural bridge between a rising China and the United States."

Analysts said they expect India's "rapidly expanding middle class, youthful population, reduced reliance on agriculture and high domestic savings and investment rates to propel continued economic growth."

Source: EconomicTimes

Al Qaeda warns Obama

Nov 19 - Al Qaeda warns President-elect Barack Obama not to follow President W. Bush's policies.

An Obama spokeswoman in Washington said the president-elect's office was not planning to comment.

- Reuters

Is Warren Buffett losing his touch?

NEW YORK (Reuters) - Investors are wondering if Warren Buffett has lost his touch.

They are bailing out of Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research, Stock Buzz) (BRKb.N: Quote, Profile, Research, Stock Buzz) stock and have lost some confidence that the insurance and investment company, run by one of the world's most admired investors since 1965, can pay its debts.

Berkshire stock has lost close to half its value since hitting a record high last December, as the company struggles with lower returns at its insurance businesses, the declining value of its stock holdings, and paper losses on derivative contracts.

Meanwhile, the cost of protecting Berkshire's "triple-A" rated debt has soared to a level more befitting a "triple-B" or even a junk-rated company.

Omaha, Nebraska-based Berkshire has nearly 80 businesses -- from car insurance to carpeting, clothing, food, kitchen utensils, and manufactured housing -- and owns tens of billions of dollars of stock.

Buffett's empire is diversified enough so that at any given moment many parts are unlikely to run on all cylinders.

"Everything you're seeing that affects other companies is eventually going to catch up with Berkshire," said Vahan Janjigian, author of the 2008 book "Even Buffett Isn't Perfect." "I'm not saying Berkshire is not well-run, but that even well-run companies will be hit in a severe recession."

Buffett, 78, was not available for comment.

Berkshire Class A shares fell as low as $74,100 a share on Thursday, their lowest level since August 2003.

That's down 51 percent from their record $151,650 set last December 11. It's also down 34 percent since Berkshire said on November 7 that lower insurance returns as well as investment losses led to a 77 percent drop in third-quarter profit, the fourth straight quarterly decline. Operating earnings were down 18 percent. Berkshire ended September with $33.37 billion in cash.

"We're buying Berkshire like crazy. It was our largest position, and we have made it much larger in the last two weeks," said Whitney Tilson, managing partner at T2 Partners LLC, a hedge fund firm.

"Investors are looking at the derivative exposure, seeing Berkshire marking losses, and it reminds them of AIG and other companies whose derivative exposures got them into trouble," he added. "They are coming to the insane conclusion that Berkshire faces similar risks."

He referred to American International Group Inc (AIG.N: Quote, Profile, Research, Stock Buzz), which got a $152 billion government bailout.

'UNUSUAL' MARKET

In Thursday afternoon trading, the shares were down $2,760, or 3.3 percent, to $81,240 a share on the New York Stock Exchange. The cost of protecting $10 million of Berkshire debt against default for five years rose to $490,000 annually on Thursday from $294,000 a week ago and $31,000 at the start of 2008, according to Markit.

"We're in an unusual time," said Peter Schiff, editor of Schiff's Insurance Observer. "It's like comparing a person having trouble making mortgage payments with a billionaire. The financial crisis affects them, but not in the same way."

Berkshire could have to pay as much as $37.04 billion between 2019 and 2027 under some derivative contracts if the Standard & Poor's 500 index .SPX and three other stock indexes are lower than when Berkshire entered the contracts. It obtained about $4.85 billion of premiums upfront.

At September 30, Berkshire had written down $6.73 billion on the contracts. Losses have almost certainly mounted since then. In October alone, Berkshire shareholder equity fell $9 billion, or 7.5 percent.

Buffett has said he expects the contracts to be profitable, distinguishing them from the "financial weapons of mass destruction" that he labeled other derivatives.

Berkshire also ended September with $10.78 billion in potential liabilities tied to various credit events, such as junk bond defaults, up from $4.66 billion at year-end 2007.

Moody's Investors Service said the global junk bond default rate could rise to 10.4 percent by the end of 2009 from 2.8 percent in October. With a typical junk bond yielding more than 20 percent, new financing is essentially nonexistent.

"Based on his 50-year track record selling insurance, I have a great deal of confidence he is selling these at the right price," Tilson said. "The critical thing is he does not have to post cash collateral until there are actual defaults."

A credit rating downgrade would likely not be material. Berkshire would have to post "nominal" additional collateral on derivatives of "far below 1 percent of assets" if Berkshire lost its "triple-A" ratings, Buffett's assistant, Jackie Wilson, said. It was posting no such collateral as of Sept 30, when Berkshire assets totaled $281.7 billion.

EQUITY HOLDINGS DECLINE

Berkshire has other exposures to falling markets.

It ended September with $76 billion in stock investments, including multibillion dollar stakes in American Express Co (AXP.N: Quote, Profile, Research, Stock Buzz), Coca-Cola Co (KO.N: Quote, Profile, Research, Stock Buzz), ConocoPhillips (COP.N: Quote, Profile, Research, Stock Buzz), Procter & Gamble Co (PG.N: Quote, Profile, Research, Stock Buzz) and Wells Fargo & Co (WFC.N: Quote, Profile, Research, Stock Buzz). Shares in all have fallen this quarter.

And investors have shrugged off Berkshire's investment of $8 billion in General Electric Co (GE.N: Quote, Profile, Research, Stock Buzz) and Goldman Sachs Group Inc (GS.N: Quote, Profile, Research, Stock Buzz) preferred shares, with their 10 percent dividend yields. Shares of both have fallen, rendering Buffett's warrants to buy common shares worthless for the time being.

Buffett has been out of step with the markets before. After missing the late 1990s tech bubble, he gave himself a "D" for capital allocation in 1999, when Berkshire's book value barely budged, and the S&P 500, including dividends, rose 21 percent. Berkshire fared better in six of the subsequent eight years.

"Earnings of Berkshire's operating businesses will undoubtedly decline given the worldwide economic downturn," T2 Partners' Tilson said. "However, these businesses remain enormously profitable, and will almost certainly continue to be."

Schiff, of the Insurance Observer, expects Buffett will actually find new opportunities to win business or make acquisitions, in part because many insurance rivals are scrambling for capital. Several are applying to become bank holding companies to be eligible for the government's $700 billion financial rescue.

"When insurers lose capital, you're going to be more conservative with how much business you write," Schiff said. "Berkshire doesn't have this problem because its balance sheet is so strong. What they own may be worth less, but they get more opportunities to buy things at cheap prices."

S&P dives to lowest level since 1997

NEW YORK (Reuters) - Stocks plunged yet again on Thursday, as a frantic flight from risk prompted by investors' deepening economic fears drove the benchmark Standard & Poor's 500 index to its lowest level since 1997 -- completing the erasure of more than a decade of stock market gains.

The latest leg down in what has been a 13-month whipping of equities worldwide was led by the year's weakest links: banks, commodity producers and car makers.

The S&P 500 is now more than 52 percent below its October 2007 record high, making the current bear market the second biggest on record. The current decline is exceeded only by the 83 percent drop between 1930 and 1932, according to the Stock Trader's Almanac.

"People are looking for light at the end of the tunnel and people don't see anything," said Giri Cherukuri, head trader at OakBrook Investments LLC in Lisle, Illinois.

On Thursday, the price of oil hurtled below $50 a barrel, taking energy shares with it as dismal U.S. economic data intensified concerns of a long and deep global recession, crushing fuel demand expectations. Chevron tumbled more than 8 percent and dragged the most on the Dow.

The Dow Jones industrial average plunged 444.99 points, or 5.56 percent, to 7,552.29. The Standard & Poor's 500 Index lost 54.14 points, or 6.71 percent, to 752.44. The Nasdaq Composite Index slid 70.30 points, or 5.07 percent, to 1,316.12.

DELL CLIMBS AFTER SOLID EARNINGS

But after the closing bell, a bright spot emerged when shares of Dell Inc rose 6.3 percent to $10.43 after the world's No. 2 PC maker reported better-than-expected profit as cost cuts tempered lower revenue.

And in another positive development after hours, Fannie Mae and Freddie Mac, the two biggest home loan finance companies, said they would suspend foreclosures of occupied homes until early 2009 -- one of the biggest moves to date by the government to staunch the wave of evictions and home losses. [ID:nN20621384].

Earlier on Thursday, the number of American workers on the unemployment rolls surged to the highest in a quarter century, government data showed, while a regional manufacturing gauge slumped as the economic misery intensified.

Financial stocks helped lead the way lower. Citigroup dove 26.4 percent to $4.71 on growing worries about whether the second-largest U.S. bank has enough capital to withstand billions of dollars of additional loan losses, overshadowing fresh support from Saudi Prince Alwaleed, its largest individual investor.

An S&P index of financial shares tumbled 10.5 percent. JPMorgan Chase & Co was the second-heaviest weight on the Dow, falling 17.9 percent to $23.38.

DETROIT'S BAILOUT HITS SPEED BUMP

Further uncertainty over the prospects for a bailout for struggling automakers added to the gloom. Democratic leaders warned the bill would not pass unless it included a plan for the industry to return to profitability.

Shares of General Motors and Ford were tied to the bailout news, ending higher after falling sharply earlier in the day. GM rose 3.2 percent to $2.88, while Ford advanced 10.3 percent to $1.39.

Democratic leaders said automakers can submit another plan by December 2, adding that the proposal could be considered the week of December 8.

In the energy sector, Chevron dropped 8.8 percent to $64.40, while an S&P index of energy companies tumbled 11.2 percent.

U.S. front-month crude oil fell $4.00 to settle at $49.62 a barrel, the lowest settlement since May 23, 2005.

Volume was heavy on the New York Stock Exchange, where about 2.23 billion shares changed hands, above last year's estimated daily average of 1.90 billion, while on the Nasdaq, about 3.15 billion shares traded, well above last year's daily average of 2.17 billion.

Decliners outnumbered advancers on the NYSE by a ratio of 13 to 1, while on the Nasdaq, nearly seven stocks fell for every one that rose.

IBM, Wipro in fray for Polaris stake

With the market abuzz with the possibility of Citigroup's plans to sell the 43 per cent stake in the Polaris Software, it seems like othe IT majors are getting ready for buying stake in the Chennai-based financial software firm.

NDTV has learnt from sources that IBM could be a clear frontrunner along with Wipro. The negotiations could be at Rs 60 per share which is double the current market price. Both of these companies are keen to acquire stake in Polaris as the firm offers unique retail banking solutions.

But a deal will only go through if Polaris chairman and managing director Arun Jain relinquishes control and his board seat. Jain has an agreement clause on his side that gives him full control of the company irrespective of his holdings.

On Thursday Jain dismissed any moves by Citi to sell their stake in the company. While reacting to stake dilution reports, he said Citi cannot move to dilute its investment without the prior approval of Polaris' management.

But with global losses mounting this is one Citi which clearly has lost its sleep. The firm needs cash so just one month after it sold off its captive BPO, cashing out of Polaris makes sense.

Citigroup along with its wholly-owned subsidiary Orbitech owns a little over 43 per cent stake in Polaris is on the block. And such a move would automatically trigger an open offer for another 20 per cent stake.

If successful it would mean the others apart from the promoters will hold 63 per cent stake translating to a buyout! The promoters currently hold 29 per cent in the company.

Sources have also told NDTV that it is a matter of time and both Citi and Arun Jain are working out a framework where he can cede control and take a non-executive chairman role.

"The first option these companies like Polaris will want is to bring in a private equity pklayer and retain management control but if they cant they will eventually need to cede management control," said Dipen Shah, VP, Kotak PCG.

If the Polaris deal goes through then its a clear message for other mid cap IT companies. And analysts say it will trigger the much needed consolidation in the space.

As for Citi, well the word is out that they are selling out their entire IT portfolio and earn a quick buck.

Source: ndtvprofit

Day Trading Guide 2 - November 21, 2008

ICICI Bank

A short-term support is at Rs 305 level for the stock. Buy the stock in dips with tight stop-loss at Rs 305 level.

Infosys

Utilise rallies to sell the stock with tight stop-loss at Rs 1,180.

L&T

Initiate fresh short-position if the stock declines below the October low of Rs 680 with tight stop-loss.

ONGC

The near-term outlook for the stock is bearish. We recommend a sell in this counter for the session.

Reliance Capital

In line with our expectation, the stock declined by 7 per cent, accompanied with high volume on Thursday. We reiterate our sell recommendation.

Reliance Communications

We re-affirm our sell recommendation.

Reliance Industries

The near-term stance is bearish for the stock. We recommend a sell.

Satyam Computer

The stock is currently testing the key support level of Rs 220. Buy the stock in dips with tight stop-loss at Rs 220.

SBI

The stock is witnessing selling pressure at higher levels. Sell the stock in rallies while maintaining stiff stop-loss at Rs 1,170.

TCS

We recommend a sell.

Source: TheHinduBusinessLine