STOCK MARKET WATCH, Tuesday December 11, 2007

[UpInArms]

Source: du

STOCK MARKET WATCH, Tuesday December 11, 2007

DAYS REMAINING IN THE * REGIME 407 LONG DAYS
DAYS SINCE DEMOCRACY DIED (12/12/00) 2520 DAYS
WHERE'S OSAMA BIN-LADEN? 2242 DAYS
DAYS SINCE ENRON COLLAPSE = 2203
Number of Enron Execs in handcuffs = 19
ENRON EXECS CONVICTED = 10
Enron execs conveniently deceased = 3
Other Arrests of Execs = 54

U.S. FUTURES & MARKETS INDICATORS
NASDAQ FUTURES-----------------------------S&P FUTURES>



AT THE CLOSING BELL WHEN BUSH TOOK OFFICE on January 22, 2001
Dow - 10,578.24
Nasdaq - 2,757.91
S&P 500 - 1,342.90
Oil - $27.69/bbl
Gold - $266.70/oz.

AT THE CLOSING BELL ON December 10, 2007

Dow... 13,727.03 +101.45 (0.74%)
Nasdaq... 2,718.95 +12.79 (0.47%)
S&P 500... 1,515.96 +11.30 (0.75%)
Gold future... 806.60
10-Yr Bond... 4.149% 0.029






GOLD, EURO, YEN, Loonie and Silver



PIEHOLE ALERT

Heads Up!
Preliminary info on appearances by Bush & Co. throughout the country. Details & links are added as they become available so check back. And if you know more, are organizing something, or would like to, contact [email protected]

For information on protests and other actions Citizens For Legitimate Government



Read more: du

---

(UIA just filling in for Ozy!)

[UpInArms]

1. good morning everyone -

I don't think that I will be around long - and I apologize for the lateness of the SMW :blush:

I had to build it from scratch on my kid's laptop - the power is down here and we are in the middle of an ice storm - trees are breaking and falling all around the house.

I'll try to check in later, but I am going to conserve the battery on this computer - in case I need it to contact someone.

Have a great day at the markets and hopefully the rest of you will be able to get this thread some attention and find the reports

gotta run !

:hi:

[DemReadingDU]

3. Great toon!

Thanks for filling in for Ozy this week.

[TalkingDog]

5. Hey, as long as you are warm and safe, lateness is acceptable.

NC regularly has winter ice storms that take out the power for days. Last time it was 4 or 5.

I didn't mind the lack of computer or TV, interestingly what I missed most was music - which is usually the Spousal Unit's thing.

For all the inconvienence, it is a great time to clean the house from top to bottom.

Take care.



My Favorite Master Artist: Karen Parker GhostWoman Studios

[Hugin]

8. You did a great job UIA!

Please stay safe and warm. :)

[KoKo]

11. Stay Safe UIA's.....much appreciation for getting site up under such dire circumstances...

:hug: and :toast:

[AnneD]

27. Good on ya mate......

hope all remains well for you, UIA. Your adventures remind me of a duck swimming on the water. On the surface it looks so calm and serene....but if you look under the water, it's paddling it's feet like crazy.

[Nickster]

2. Fed May Cut Rates, Leave Door Open for Further Action

http://www.bloomberg.com/apps/news?pid=20601087&sid=a87ikmJx8wfQ&refer=home

Dec. 11 (Bloomberg) -- The Federal Reserve will probably cut interest rates today and lay the ground for more to prevent the economy from sliding into recession.

The Federal Open Market Committee will be loath to repeat language from its last meeting that risks between inflation and growth are ``roughly'' balanced, economists said. Keeping the phrase would open officials to criticism they're oblivious to the credit squeeze that's threatening growth.

``They pretty much tried to draw a line in the sand by going to a balanced-risks statement at the last meeting, and now the world's changed,'' said Keith Hembre, who used to work at the Fed and is now chief economist in Minneapolis at FAF Advisors Inc., which manages $105 billion. Officials will ``leave themselves the opening'' for further cuts, he said.

Chairman Ben S. Bernanke is trying to steer through the housing recession that entered its third year and alleviate a jump in borrowing costs for companies and consumers. The FOMC will lower the benchmark rate by a quarter point to 4.25 percent, according to 115 of 124 economists surveyed by Bloomberg News. Seven anticipate a half-point move and two see no change.

[Roland99]

7. Let's see...maybe third time is a charm?

Last two times the markets have shown a huge jump up followed by a big dump the next day.

[Nickster]

4. Consumer Slowdown to Hurt U.S. Economy Into 2008

http://www.bloomberg.com/apps/news?pid=20601087&sid=axc2icqL_dM4&refer=home

Dec. 11 (Bloomberg) -- U.S. economic growth will slow to 1 percent in the fourth quarter as consumer spending cools and the housing slump enters its third year, a survey showed.

Economists cut their estimates for the expansion this quarter from November's 1.5 percent forecast, according to the median of 63 estimates in a Bloomberg News survey taken Dec. 3 to Dec. 10. Gross domestic product in the first three months of next year will also be less than previously projected.

Spending, which accounts for more than two-thirds of the economy, will grow in 2008 at the slowest pace in 17 years as higher fuel costs and falling home values limit consumers' buying power. The Federal Reserve will probably lower interest rates today and again early next year to fend off recession, the survey said.

``Everything is going against the consumer,'' said Chris Rupkey, chief financial economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, who lowered his growth forecast to 0.5 percent for this quarter. ``Confidence is off quite a bit, and gasoline is going to take a toll. We're very, very close to a recession.''

[TalkingDog]

6. "very close to a recession"

That's kinda like saying- "We're close to the exit." just as you pass it on the freeway. By the time the words are out of your mouth.....

But then again, given his income and influence, maybe he meant "We" (his peer group) are close to a recession. Because down here in the trenches, the water is freezing cold and ankle deep.



My Favorite Master Artist: Karen Parker GhostWoman Studios

[Hugin]

10. Good point.

It's been recession as far as the eye can see for quite some time from my vantage point.

[DemReadingDU]

15. Morgan Stanley issues full US recession alert

12/11/07

Morgan Stanley has issued a full recession alert for the US economy, warning of a sharp slowdown in business investment and a "perfect storm" for consumers as the housing slump spreads.

In a report "Recession Coming" released today, the bank's US team said the credit crunch had started to inflict serious damage on US companies.

"Slipping sales and tightening credit are pushing companies into liquidation mode, especially in motor vehicles," it said.

"Three-month dollar Libor spreads have jumped by 60 to 80 basis points over the last month. High yield spreads have widened even more significantly. The absolute cost of borrowing is higher than in June."

more...
http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2007/12/10/bcnusa110.xml&CMP=ILC-mostviewedbox

[AnneD]

26. Morning Marketeers.....

:donut: and lurkers. "We're close to a recession" is like saying we are a little pregnant:eye:These economist are like the elevator boy with the hot stock tip....Now that they know about it, it's too late. I think these small rises in consumer spending have been inflation related-not purchasing more.

What you WILL see is the credit card folks tightening up credit in 2008 and THAT is when you'll see the interesting fire works going on. These poor desperate folks that pay part of their mortgage with their cards will be the first to go belly up. I'd look for and increase of foreclosures. Consumer spending will start to decline too. We have been at the beginning of a recession at the start of this year and it has been accelerating to this point and will continue in 2008. Beyond 2008, one can only guess. Much will depend on the leadership we vote for in 2008. Voting for WS pals will not cut it. this next few years will be painful and we will need some seriously strong leadership.

Happy hunting and watch out for the bears...

[Hugin]

28. Like the 'slight increase in Real Estate sales'...

:hangover:

Was an effect of rounding 5.69% up to 5.7%... I find the contempt they hold for the 'average joe/joan' to do
such a thing appalling. Some times I wish I'd been dumbed down to the point I didn't notice such things anymore.

But, lies will only work so long and it'll snowball.

[AnneD]

29. I found myself .....

laughing about that when I was watching the Nightly Business Report last night. They are desperate to spin straw into gold.

[Hugin]

31. "spin straw into gold"

Exactly the phrase my feeble mind was looking for... Thanks. :D

[AnneD]

33. Like minds....

roll down the same gutter...you're welcome:rofl:

[Ghost Dog]

18. Shockwaves from the credit crisis — who are the victims, really?

As the credit crisis deepens, at least one big question has been answered, says the FT’s Tony Jackson in his Monday column. “We now have abundant evidence that the crisis is affecting the real economy. So we need to switch our attention from the travails of the banks and look instead at their customers.” Which of them are getting hit?, he asks.

The benign response comes from the global economics team at Merrill Lynch. Granted, they say, US mortgage borrowers are suffering and their UK counterparts will be shortly. But in the eurozone, consumers are less heavily indebted. And credit creation in the eurozone, on the latest October figures, is still showing strong double-digit growth.

Hence the fact that the European Central Bank did not cut interest rates last week. It saw no need.

Asia, meanwhile, is awash with savings, and so is unaffected. And across the world, corporate balance sheets are strong and governments are under no particular pressure to borrow. So by a process of elimination, the victims of the crisis are Anglo-Saxon consumers.

One way of testing that is to look at the stock prices of companies that supply those consumers. But first, to examine the Merrill thesis further:

It rests heavily on the premise of so-called “decoupling” – the ability of China, in particular, to shrug off a US slowdown. That is the next big unanswered question, and not everyone agrees with Merrill.

The Merrill case is that the rise in Chinese imports to the US in recent years has been vastly greater than the US growth rate and has been apparently unaffected by variations in that growth. So a point or two off US growth next year is neither here nor there. Opponents of that view argue that the more China is integrated in the world economy, the less immune it becomes to external shocks.

In the absence of hard data, Jackson suggests turning to the markets. “Investors may be wrong – indeed, they often are – but in situations like this their views represent information of sorts.”

/... continues at http://ftalphaville.ft.com/blog/2007/12/10/9483/tony-jackson-shockwave-from-the-credit-crisis-who-are-the-victims-really/

[DemReadingDU]

9. Roubini: How hard will be the landing?

12/11/07 The consensus is moving from the soft vs. hard landing debate towards how severe the hard landing will be Nouriel Roubini

While a few months ago analysts were still heatedly debating whether the US would experience a soft landing or a hard landing (a recession) the center of the macro debate has now clearly shifted away from soft landing versus hard landing discussion to a recognition that a hard landing is the most likely scenario; thus, increasingly now the debate is on how deep and severe the forthcoming hard landing will be.

David Rosenberg of Merrill Lynch is now clearly predicting a recession for the US economy in 2008; Jan Hatzius at Goldman Sachs is not formally speaking of a certain recession in 2008 but most of his analysis is consistent with a high likelihood of a recession in 2008; Mark Zandi of Moody’s Economy.com is also very close to a hard landing view.

More interesting now even the thoughtful Richard Berner – who used to be strongly in the soft landing camp while his counterpart Steve Roach was in the hard landing camp – is now predicting a recession in the US in 2008, even if he expects such a recession to be mild. And even the soft-landing optimists at JPMorgan are now recognizing that the likelihood of a US recession is now at its highest level in years. When mainstream analysts such as Berner start to talk about a recession beng likely you know that the debate has clearly shifted towards a discussion of not whether a recession but rather how deep of a recession.

And in the academic camp some of the most senior economists in the profession – Bob Shiller, Marty Feldstein, Larry Summers, Paul Krugman – are all in various degrees in the hard landing camp or very concerned about a hard landing.

more...
http://www.rgemonitor.com/blog/roubini/231693

[abelenkpe]

30. around late 2009 to mid 2010

that paragraph will prolly look like this:

While a few months ago analysts were still heatedly debating whether the US was experiencing a recession or a depression the center of the macro debate has now clearly shifted away from the recession versus depression discussion to a recognition that a depression is the most likely scenario; thus, increasingly now the debate is on how deep and severe the forthcoming depression will be.

[Ghost Dog]

12. ECB lends 3-month funds at highest rate since 2000

FRANKFURT, Dec 11 (Reuters) - The European Central Bank lent 60 billion euros ($88 billion) in three-month funds to banks on Tuesday at an average rate of 4.88 percent, the highest since November 2000, in the face of continued credit market tension.

Banks showed strong demand in the auction for funds, with 122 bidding for a total of 105.126 billion euros worth of refinancing. The lowest successful bid, or marginal rate, was 4.81 percent and the highest rate bid was 5.05 percent.

The results were above those foreseen in a Reuters poll on Monday, when traders predicted an average rate of 4.79 percent and a marginal rate of 4.75 percent. At the ECB's last tender of three-month funds on Nov. 28, the average rate was 4.70 percent and the marginal rate 4.65 percent.

The high rates at the tender reflect fears of a shortage of liquidity at the end of the year combined with pre-existing concerns about banks' hidden losses from the U.S. subprime mortgage crisis.

Three-month Euribor rates <EURIBOR3MD=> -- an average of the rates offered by major banks and base for many commercial loans -- fixed at 4.927 percent just before the ECB tender result, their highest level since December 2000.

/... http://www.reuters.com/article/marketsNews/idUKL1167889820071211?rpc=44

[Ghost Dog]

14. German investor confidence slides

BERLIN - German investor confidence dropped to its lowest level in nearly 15 years, weighed down by worries over the global economic outlook and the impact of the strong euro, a closely watched survey showed Tuesday.

The ZEW institute's index, which measures investors' expectations for Europe's biggest economy over the next six months, dropped to minus 37.2 points for December from minus 32.5 last month.

That was the worst showing since January 1993, when the index stood at minus 49.7, and also came in below the minus 34 forecast of economists surveyed by Dow Jones Newswires.

"The financial market experts see clear risks for economic growth in important industrial countries, particularly in the United States," ZEW said in a statement. "This impairs the export prospects of the German economy. The strong euro has furthermore increased uncertainty for German exporters."

/... http://news.yahoo.com/s/ap/20071211/ap_on_bi_ge/germany_economy;_ylt=Ai82G3f2xpK0kt8BoanCOg2yBhIF

[DemReadingDU]

13. Washington Mutual shares slide as firm slashes 3,150 jobs

12/11/07

Shares of Washington Mutual, the nation's largest thrift, fell in preopen trading Tuesday, a day after it said it's slashing 3,150 jobs and cutting its dividend.

The firm also said it is selling preferred stock to raise capital.

Shares of WaMu fell 7% to $18.49 in pre-open trade.

"We believe the fundamental news at WaMu is significantly worse than the company and we had previously expected," Bear Stearns analysts said on Monday evening.

The moves by one of the nation's biggest mortgage lenders indicate that shockwaves triggered by the subprime mortgage crisis have yet to subside, despite recent government efforts to ease the burden on the most-stretched homeowners.

"Washington Mutual (now) recognizes reality and is taking steps to shrink the company. It will be some time before investors make money in this stock although a takeover is possible," Punk Ziegel analyst Dick Bove said Tuesday.

more...
http://www.marketwatch.com/news/story/wamu-shares-slide-firm-slashes/story.aspx?guid=%7B28C28A91%2DF2F1%2D45B8%2D8CF7%2D81D6DD27E0E0%7D

[Emillereid]

34. What is preferred stock and would it be a good investment?

[Mojorabbit]

16. Chinese inflation hits 11-year high

Chinese inflation hits 11-year high
By Richard McGregor in Beijing

Published: December 11 2007 04:48 | Last updated: December 11 2007 05:07

Chinese inflation reached a new 11-year high in November of 6.9 per cent, a figure which will harden Beijing’s resolve to tighten monetary policy and also probably further delay energy price reform.

Although inflation continues to be driven primarily by food prices, because of a shortage of pigs and high global feed prices, broader underlying inflation was also up, to 1.4 per cent, because of higher oil and coal prices.


China loan curbs hit businesses - Dec-09Paulson presses China on growth - Dec-05China shifts to tighter policy - Dec-05China in fresh curb on bank lending - Dec-04Weak renminbi ‘not to blame’ for trade gap - Dec-02US claims victory in China subsidies battle - Nov-29“The inflation issue has evolved into more of a macroeconomic problem,” said Yiping Huang of Citigroup in Hong Kong.

Mr Huang, along with other analysts, also expects Beijing to let the renminbi, China’s currency, appreciate faster over the next 12 months in an effort to correct imbalances in the economy.
http://www.ft.com/cms/s/0/80552a2c-a7a3-11dc-a25a-0000779fd2ac.html

[Mojorabbit]

17. German investor morale worst in 15 years

German investor morale worst in 15 years
By Reuters, December 11

German investor sentiment deteriorated to its gloomiest level in almost 15 years in December, depressed by fears about the health of the US economy and turmoil on financial markets.

The Mannheim-based ZEW research institute said on Tuesday its economic sentiment indicator, based on a survey of 284 analysts and institutional investors, fell to minus 37.2 this month – the lowest since January 1993 – from minus 32.5 in November.


Trichet in attack on German wage deal - Dec-05Minimum wage comes at a price - Dec-05Conflict delays Germany’s acquisitions bill - Dec-05German service sector set for growth in 2008 - Dec-04Minimum wage deal for German post workers - Nov-30‘Snooty’ bankers blamed for crisis - Nov-30The euro ticked lower against the dollar after the ZEW indicator’s second consecutive monthly fall, as did Germany’s Dax index of leading shares.

”The financial market experts see clear risks for economic growth in important industrial countries, particularly in the United States. This impairs the export prospects of the German economy,” the institute said in a statement.
http://www.ft.com/cms/s/0/3bc75e80-a7d4-11dc-9485-0000779fd2ac.html

[DemReadingDU]

19. Washington Mutual and Countrywide: Wiped out?

12/10/07 by Bernard Ducalion

In order to get a better idea of the likelihood that these two leading mortgage lenders will “go under”, I thought it would be a good idea to dig into their last 10-K annual report filing to obtain information on what is their total exposure in higher risk loan categories.

As you read through this post, keep this quote in mind:

The option ARM is “like the neutron bomb,” says George McCarthy, a housing economist at New York’s Ford Foundation. “It’s going to kill all the people but leave the houses standing.”

For the analysis of both Washington Mutual and Countrywide...
http://wallstreetexaminer.com/blogs/ducalion/?p=130

[Emillereid]

35. Is the Countrywide bank going under or just the brokerage?

[Mojorabbit]

20. How to solve the problem of the dollar

How to solve the problem of the dollar
By Fred Bergsten

Published: December 10 2007 19:24 | Last updated: December 10 2007 19:24

The world economy faces an acute policy dilemma that, if mishandled, could bring on the mother of all monetary crises. Many dollar holders, including central banks and sovereign wealth funds as well as private investors, clearly want to diversify into other currencies. Since foreign dollar holdings total at least $20,000bn, even a modest realisation of these desires could produce a free fall of the US currency and huge disruptions to markets and the world economy. Fears of such an outcome have risen sharply in both official circles and the markets.

However, none of the countries into whose currencies the diversification would take place want to receive these inflows. The eurozone, the UK, Canada and Australia among others believe that their exchange rates are already substantially overvalued. But China and most of the other Asian countries continue to intervene heavily to keep their currencies from rising significantly. Hence, further large shifts out of the dollar could indeed push the floating currencies far above their equilibrium levels, generating new imbalances and a possibly severe slowdown in global growth.

There is only one solution to this dilemma that would satisfy all parties: creation of a substitution account at the International Monetary Fund through which unwanted dollars could be converted into special drawing rights, the international money created initially by the fund in 1969 and of which $34bn-worth now exists. Such an account was worked out in great detail in 1978-1980 during an earlier bout of currency diversification and free fall of the dollar that closely resembled today’s circumstances.

There was widespread agreement, including from influential private sector groups and congressional leaders as well as the IMF’s governing body, that the initiative would enhance global monetary stability. It failed only because the sharp rise in the dollar that followed the Federal Reserve’s monetary tightening of 1979-1980 obviated much of its rationale, and over disagreement between Europe and the US on how to make up for any nominal losses that the account might suffer as a result of further depreciation of dollars that had been consolidated.

The idea of a substitution account is simple. Instead of converting dollars into other currencies through the market, depressing the former and strengthening the latter, official holders could deposit their unwanted holdings in a special account at the IMF. They would be credited with a like amount of SDR (or SDR-denominated certificates), which they could use to finance future balance-of-payment deficits and other legitimate needs, redeem at the account itself or transfer to other participants. Hence the asset would be fully liquid.


http://www.ft.com/cms/s/0/75cb5f2e-a729-11dc-a25a-0000779fd2ac.html

[KoKo]

21. UBS posts Fresh $10bn Write Down...and Chart of Subprime losses so far by major banks..

UBS posts fresh $10bn write-down

The huge Swiss investment bank UBS has written off $10bn (11.2bn Swiss francs; £4.9bn) in debts linked to the sub-prime US mortgage sector.

UBS had already said in October that the crisis would cost it about $3.5bn.

The firm said these losses were more than its profits last year, and it might now make an overall loss in 2007.

The company also revealed that it had received a $9.7bn injection of funds from the Government of Singapore Investment Corporation.

The sub-prime write-down represents more than a monetary loss for UBS - it's a serious blow to a valuable brand
Robert Peston
BBC business editor


FACTS ON UBS
Swiss financial institution
Operates in more than 50 countries
Employs more than 80,000 people
Net Profit of $9.9bn in 2006
Has about $2.6 trillion of assets invested
Source: UBS


SUB-PRIME LOSSES SO FAR

UBS: $13.5bn
Citigroup: $11bn
Merrill Lynch: $8bn
Morgan Stanley $3.7bn
HSBC: $3.4bn
Bear Stearns: $3.2bn
Deutsche Bank: $3.2bn
Bank of America: $3bn
Barclays: $2.6bn
Royal Bank of Scotland: $2.6bn
Freddie Mac: $2bn
Credit Suisse: $1bn
Wachovia: $1.1bn
IKB: $1bn

Source: Company reports
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/2/hi/business/7135872.stm

Published: 2007/12/10 16:28:09 GMT

[Hugin]

22. Banks working on separate 'rescue' plans -- UPI

Published: Dec. 10, 2007 at 11:33 AM

NEW YORK, Dec. 10 (UPI) -- Big banks are scaling back their pledge to a U.S. plan to shore up troubled investment tools and calm investors, a published report said Monday.

New York's Citigroup Inc., the financial giant that first proposed the initiative, is devising a separate rescue plan and HSBC Holdings PLC and several other European banks are moving to solve their problems on their own, The New York Times reported.

The new super fund, created by the banks to keep the crisis in housing-related debt from deepening, began raising money from financial institutions Monday.

But it now looks increasingly irrelevant, the Times said.

The banks, with the support of U.S. Treasury Secretary Henry Paulson, originally thought the Master Liquidity Enhancement Conduit, or M-LEC, might raise $80 billion to prevent a sharp sell-off in securities owned by structured investment vehicles, or SIVs, the newspaper said.

But now, the M-LEC, known as the Super SIV on Wall Street, may raise just $60 billion, in part because many of the troubled SIVs are winding down themselves, the newspaper said.

http://www.upi.com/NewsTrack/Business/2007/12/10/banks_working_on_separate_rescue_plans/3376/

________________________________________________________

The banks are desperate to keep the total value of their exposure and their internal machinations secret.
(My take on it.)

[KoKo]

32. Secrecy at all costs.... Makes sense if you are involved in corrupt practices...n/t

[JNelson6563]

23. Thanks UIA!

Just checking in to give a shout out to all you Marketeers and a special thanks to UIA for keeping the home fires burning (as it were) while Ozy is off elsewhere.

I'm off to a get root canal, believe me I'd rather sit through many hours of supply-sider spew on CNBC.

Julie

[Hugin]

24. ...

Well, I'd rather have you here discussing the financial state of the economy.

Sorry to hear about your impending dental work.

Best wishes and I'll expect you back soon. :)

[Ghost Dog]

25. How to solve the problem of the dollar

The world economy faces an acute policy dilemma that, if mishandled, could bring on the mother of all monetary crises. Many dollar holders, including central banks and sovereign wealth funds as well as private investors, clearly want to diversify into other currencies. Since foreign dollar holdings total at least $20,000bn, even a modest realisation of these desires could produce a free fall of the US currency and huge disruptions to markets and the world economy. Fears of such an outcome have risen sharply in both official circles and the markets.

However, none of the countries into whose currencies the diversification would take place want to receive these inflows. The eurozone, the UK, Canada and Australia among others believe that their exchange rates are already substantially overvalued. But China and most of the other Asian countries continue to intervene heavily to keep their currencies from rising significantly. Hence, further large shifts out of the dollar could indeed push the floating currencies far above their equilibrium levels, generating new imbalances and a possibly severe slowdown in global growth.

There is only one solution to this dilemma that would satisfy all parties: creation of a substitution account at the International Monetary Fund through which unwanted dollars could be converted into special drawing rights, the international money created initially by the fund in 1969 and of which $34bn-worth now exists. Such an account was worked out in great detail in 1978-1980 during an earlier bout of currency diversification and free fall of the dollar that closely resembled today's circumstances.

There was widespread agreement, including from influential private sector groups and congressional leaders as well as the IMF's governing body, that the initiative would enhance global monetary stability. It failed only because the sharp rise in the dollar that followed the Federal Reserve's monetary tightening of 1979-1980 obviated much of its rationale, and over disagreement between Europe and the US on how to make up for any nominal losses that the account might suffer as a result of further depreciation of dollars that had been consolidated.

The idea of a substitution account is simple. Instead of converting dollars into other currencies through the market, depressing the former and strengthening the latter, official holders could deposit their unwanted holdings in a special account at the IMF. They would be credited with a like amount of SDR (or SDR-denominated certificates), which they could use to finance future balance-of-payment deficits and other legitimate needs, redeem at the account itself or transfer to other participants. Hence the asset would be fully liquid.

The fund's members would authorise it to meet the demand by issuing as many new SDR as needed, which would have no net impact on the global money supply (and hence on world growth or inflation) because the operation would substitute one asset for another. The account would invest the dollar deposits in US securities. If additional backing were deemed necessary, the fund's gold holdings of $80bn would more than suffice.

All countries would benefit. Those with dollars that they deem excessive would receive an asset denominated in a basket of currencies (44 per cent dollars, 34 per cent euros, 11 per cent each yen and sterling), achieving in a single stroke the diversification they seek along with market-based yields. They would avoid depressing the dollar excessively, minimising the loss on their remaining dollar holdings as well as avoiding systemic disruption.

The US would be spared the risk of higher inflation and potentially much higher interest rates that would stem from an even sharper decline of the dollar. Such consequences would be especially unwelcome today with the prospect of subdued US growth or even recession over the next year or so.

The international financial architecture would be greatly strengthened by a substitution account. In the wake of the dollar crises of the early postwar period, the IMF membership adopted SDR as the centrepiece of a strategy to build an international monetary system that would no longer rely on a single currency.

/... continues at http://news.yahoo.com/s/ft/20071210/bs_ft/fto121020071443077654

[Nickster]

36. Commodity Futures as of 1:26pm CST

COMMODITY FUTURES
VALUE CHANGE % CHANGE
Oil 90.13 2.27 2.58
Gold 817.40 3.90 0.48
Natural Gas 7.06 0.03 0.40

[Roland99]

37. Fed cuts by ¼-point... Dow down nearly 200

http://www.marketwatch.com/news/story/cautious-fed-cuts-quarter-point-no/story.aspx?guid=%7BCF5647A0%2D42B8%2D4B8E%2D857D%2D6851C74F43B0%7D

[JNelson6563]

39. Victim of hype

Everyone I saw on CNBC lately was sportin' hard-ons declaring the fed would cut by 50 basis points for sure. Now look. A quarter pt. cut and it's the end of the world.

Oy.

Julie

[Hugin]

40. The children! Who'll save the children!

:eyes: :sarcasm: :eyes:

[trogdor]

41. I just bought $10K more Am. Cent. Ultra

Gotta take advantage of sales when they happen. You watch. Everybody will be back in Santa Claus Rally mode tomorrow.

[JNelson6563]

42. I don't know about tomorrow

the disappointment Chopper Ben dealt the street today really stung. It may last through tomorrow.

Of course we will know for sure in less than 24 hours, won't we? ;)

Julie

[Eugene]

38. Freddie Mac sees $12bn credit hit

Source: BBC News

Last Updated: Tuesday, 11 December 2007, 16:20 GMT

Freddie Mac sees $12bn credit hit

Freddie Mac, the company that provides financing to US
mortgage lenders, has become the latest firm to admit
to higher losses in the sub-prime crisis.

It now expects $10bn (£4.89bn) to $12bn in credit losses
on its mortgage book, its chief executive told investors.

-snip-

Freddie Mac is the second largest buyer and guarantor of
home loans in the US.

"We would expect that our total future credit losses on
our current book of business would total approximately
between $10bn and $12bn, " Richard Syron, chief executive
told investors.

-snip-

Read more: http://news.bbc.co.uk/2/hi/business/7138992.stm

[Hugin]

43. ~16:00 ET: Taking the ball and going home...

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