On the left, evil invading the world. The creation of Eve is followed by the temptation of Adam and both are driven out of Paradise; high above in the sky the fall of the rebellious angels, hurled from heaven as a swarm of repulsive insects. On the right a vision of hell: horror piled upon horror, fires, torments and fearful demons, half animal, half human or half machine, who plague and punish the poor sinful souls for all eternity. For the first and perhaps for the only time, an artist had succeeded in giving concrete and tangible shape to the fears that had haunted the minds of man in the Middle Ages.
Ilargi: It’s starting to put a smile on my face: The countries worst hit by the housing bubble and the credit crunch, the usual suspects we know by now: the US, Britain, Ireland, Spain and soon Canada, continue to fall over each other in denying there is such a thing as a recession in their economies.
Meanwhile, relatively tiny Denmark comes out and admits it IS in a recession. Does that mean that Denmark is doing worse than all the rest of the rich world? Honestly, would anyone believe that? Sure, Denmark had quite a bubble, and it’s not immune to what happens in the world economy, or the Eurozone (to which it doesn’t belong).
What I think is happening is that the Danish simply have less use, and patience, for spin and lies and other illusions. I think the media in Copenhagen is less prone to play along with politicians who are interested much more in holding on to their own power and pensions, and have eye only for the poll numbers for the next elections. A similar view seems to exist in Germany, where -some of- the press is highly critical of rosy reports and numbers. While at the same time, the US government releases the next in an endless litany of reports based on bogus employment statistics.
Yes, continental Europe, and the Eurozone, is running into trouble. But from what I can see, from a purely financial and economic point of view, the hurt will be worse, deeper and faster in the Anglo-Saxon zone. The difference in perception seems to come from one source only: deception.
PS: Today, Québec City, North America's oldest city, celebrates its 400th anniversary, which also marks 400 years of French culture on the continent. Tomorrow, the US marks its independence. Here's to both celebrations remembering, with full respect and dignity, the beautiful and highly developed native cultures that were destroyed to make way for the new ones.
Pain in Spain as cracks show in Europe's economy
Spain's private sector tumbled towards recession in June with Ireland and Britain not far behind in surveys that showed Europe's housing-driven economies slowing hard on the heels of the United States. The surveys of thousands of companies across Europe showed activity in the manufacturing and services sectors of the euro zone as a whole shrank in June for the first time in five years, though Germany and France were spared.
"The Spanish and the Irish surveys were both truly awful," said Howard Archer, analyst at Global Insight, an economics consultancy. The Purchasing Managers' Index surveys offered the European Central Bank a reminder of the risks to economic growth, as well highlighting the inflation risks that are expected to prompt it to raise euro zone interest rates later on Thursday by a quarter percentage point to 4.25 percent.
Many analysts think the risks to growth from higher borrowing costs will deter the ECB from hiking further, and that the next move will be a cut, in 2009. With the exception of Italy, which has been battling economic stagnation for years, growth in Europe looks most at risk in economies that prospered during a decade-long housing boom fuelled, as in the United States, by cheap credit. That ended when defaults on U.S. mortgages started a global credit crunch last year.
Earlier this week, Denmark, another country where a housing boom has turned to bust, became the first European country to confirm two straight quarters of shrinkage in gross domestic product, the general definition of recession. Thursday's news ramped up the evidence that Spain, the euro zone's fourth largest economy, is falling hard following a decade or so of bumper economic growth fuelled by rising house prices and frenzied construction.
Spain's services economy shrank at the fastest pace ever recorded in a euro zone PMI survey, according to Markit who compile the monthly surveys of corporate purchasing managers. Economists consider the PMIs a good "as it happens" measure of what is happening to the economy on the business side. The PMI index for Spain's services sector hit a record low of 36.7, and its manufacturing sector reading is also below the 50 mark which is the dividing line between growth and contraction.
June performance was not much stronger in Ireland and Italy, two other euro zone troublespots, nor in Britain, which along with Denmark is outside the ECB's monetary policy area but suffering the same worries about high prices and low growth. Ireland's services economy shrank in June for the fifth consecutive month, and at the fastest pace in at least eight years, the PMI survey there showed.
One of the country's most respected forecasters, the Economic and Social Research Institute, believes the small island economy is heading for its first recession since 1983 this year, although the government is clinging to less gloomy forecasts. In Italy, the third-largest euro zone economy after Germany and France, the PMI showed service sector activity contracted for the seventh month running in June, though the rate of contraction was a bit less than the previous month.
In Britain, the services sector shrank at its fastest pace since the aftermath of the 2001 attacks on the United States and researchers who compile the index think the economy is flirting with a recession. The index of UK service activity dropped to 47.1 in June from 49.8 in May, for a second month in contraction territory. For the euro zone as a whole, the PMI service sector index fell to 49.1 in June from 50.6 in May, dipping into the red for the first time since June 2003.
Yet the surveys offered little evidence that slowing demand was curbing the inflation pressures that have the ECB so worried. While some surveys showed companies were finding it somewhat harder to pass on their higher costs to consumers, there was little sign that upward pressures on corporate costs were easing in any convincing way.
Denmark in recession after first quarter contraction
Denmark has fallen into recession, the first European Union country to do so in the aftermath of the U.S. sub-prime crisis, after its economy contracted in the first quarter, official figures issued on Tuesday showed. The official statistics office said the Danish economy contracted 0.6 percent compared with the three months to December, when it saw negative growth of 0.2 percent.
A recession is defined technically as two consecutive quarters of negative growth. "The numbers are very disappointing and even more so because they stem from many different factors. It adds up to quite a poor picture," said HSH Nordbank Senior analyst Erik Bennike. "Denmark is in what is called a technical recession.
The Danish economy has been hit harder than we have estimated," said Danske Bank chief economist Steen Bocian. Compared with a year earlier, the economy contracted 0.7 percent in the first quarter, the statistics office said. Analysts had expected year-on-year growth of 1.3 percent in the first quarter and quarter-on-quarter growth of 0.2 percent.
The statistics office said household consumption fell 1.1 percent in the first quarter, led by a 4.4 percent drop in new car sales. The government said in May that it expected growth of 1.2 percent in 2008 and 0.7 percent in 2009 after the economy expanded 1.8 percent last year.
Denmark is a member of the European Union but has not adopted the single european currency, the euro. It is one of the 30 countries in the Organisation of Economic Cooperation and Development, which groups the world's richest economies.
Global growth has been steadily slowing since the collapse of the US subprime or higher-risk home loan market last year sparked a credit crunch that has seen business starved of funding as banks refuse to lend. At the same time, record high oil and other commodity prices have stoked costs and inflation, undercutting corporate profits and investment.
Ilargi: Back to the US, where we have another non-sensical spin report straight out of Washington. Apparently the markets will have a negative reaction regardless of the emptiness. Still, why they would even read these reports anymore, your guess is as good as mine.
However, what the part of the population with actual functioning neurons has known for ages, numbers like 62.000 are but a fraction of real losses. I don’t want to waste to much space on it, we’ve been there and done that. But I’ll pick out one example, that I think underlines the "bogusiness".
It doesn’t get much crazier than pretending there’s been job growth among carmakers: "Auto manufacturing and parts industries gained 5,600 jobs".
Yes, sure, as car sales plummet 15-25%, and share values scrape the gutter, as GM shares are lower than at any point since 1954, and talk of bankruptcy is now no longer taboo among analysts, the industry creates jobs.
Come to think of it, it must be quite liberating for the Labor Department and the B(L)S to not have to worry about their credibility any longer. It’s gone.
U.S. Loses 62,000 Jobs, Jobless Rate Holds at 5.5%
U.S. employers cut jobs in June for a sixth consecutive month as soaring fuel prices and a slowing economy forced companies to reduce costs. Payrolls fell by 62,000 after a 62,000 drop in May that was greater than initially reported, the Labor Department said today in Washington. The jobless rate remained at 5.5 percent after jumping in May by the most in two decades.
Job losses, along with record gasoline prices and tumbling home values, makes it more likely consumer spending will falter once the lift from federal tax rebates fades. A weakening labor market may also prompt Federal Reserve policy makers to put off their first interest-rate increase since 2006.
"As long as the consumer is facing these headwinds, it's going to be very tough for a major turnaround in employment growth," Kathleen Stephansen, head of global economics at Credit Suisse Holdings USA Inc. in New York, said before the report. "There is very little room for the Fed to do anything."
The June figures brought total job losses for the first half of 2008 to 438,000. In 2007, the economy generated 91,000 jobs a month on average. Revisions subtracted 52,000 from payroll figures previously reported for April and May. Economists had projected payrolls would drop by 60,000 after a previously reported 49,000 decline the prior month, according to the median of 81 forecasts in a Bloomberg News survey. Estimates of job losses ranged from 20,000 to 130,000.
Trends in jobs, sales, production and incomes, in addition to changes in gross domestic product, are the criteria used by the National Bureau of Economic Research to determine when contractions begin and end. The Cambridge, Massachusetts, group is the arbiter of U.S. recessions.
"Tight credit conditions, the ongoing housing contraction, and the rise in energy prices are likely to weigh on economic growth over the next few quarters," Fed policy makers said last week in announcing they were keeping the benchmark rate unchanged for the first time since August. Central bankers signaled inflation was an increased risk.
Another report from the Labor Department today showed initial claims for jobless benefits rose by 16,000 to 404,000 last week. The total, higher than economists forecast, brought the four-week average to the highest since October 2005, just after Hurricane Katrina. The total number of people collecting benefits dropped to 3.116 million from 3.135 million.
Oil prices that topped $145 a barrel today are hammering manufacturers and service companies alike. Factory payrolls dropped by 33,000 workers after declining by 22,000 in May. Economists had forecast a drop of 30,000.
Auto manufacturing and parts industries gained 5,600 jobs, reflecting the end of a walkout at an auto parts manufacturer, the report said. About 20 General Motors Corp. plants that were shut or partially idled returned to work after a 12-week strike at American Axle & Manufacturing Inc. was resolved in late May.
The worst housing slump in a quarter century and the resulting collapse in subprime lending were also reflected in today's report. Payrolls at builders declined by 43,000 after dropping by 37,000 the prior month, bringing the total loss of construction jobs since September 2006 to 528,000. Financial firms decreased payrolls by 10,000, after a 3,000 decline the prior month.
ECB Raises Rate to Seven-Year High to Fight Inflation
The European Central Bank raised interest rates to a seven-year high to fight inflation even as the economy cools. The ECB's Governing Council, meeting in Frankfurt, increased the benchmark lending rate by a quarter point to 4.25 percent today, as predicted by all but one of 58 economists in a Bloomberg survey.
Policy makers say they're worried that the fastest inflation in 16 years will develop into a wage-price spiral as workers demand more pay to compensate for rising costs. The risk is that higher interest rates deepen Europe's economic downturn. France and Spain have already said the ECB may not be paying enough attention to the growth outlook.
"The inflation outlook has deteriorated significantly in the past month," said Klaus Baader, chief European economist at Merrill Lynch and Co. in London. ECB President Jean-Claude Trichet will "leave the door open" for further action.
Investors have fully priced in another quarter-point rate increase to 4.5 percent by the end of the year and most expect a third step by March, Eonia swap contracts show. Trichet, who said last month a July rate increase was "possible," holds a press conference at 2:30 p.m. to explain today's decision.
Central banks from Russia to Brazil are raising rates as inflation replaces the global credit crunch as their biggest concern. Indonesia moved today for the third time in as many months and Sweden lifted its benchmark rate to a 12-year high. "If we're not decisive, there's a risk of inflation exploding," Trichet told German newspaper Die Zeit in an article released yesterday.
Record food and energy prices pushed inflation in Europe to 4 percent this month, twice the ECB's 2 percent limit. Producer prices jumped a record 7.1 percent in May from a year earlier. Oil prices have doubled over the past year and breached $145 a barrel for the first time today, fanning inflation concerns.
Still, with faster inflation sapping purchasing power and further damping the growth outlook, Trichet said last month that some of the ECB's 21 policy makers were against raising rates. "I expect a rather balanced statement from Trichet," said Gertrud Traud, chief economist at Helaba Trust GmbH in Frankfurt. "The ECB, even though it sees the risk of inflation, is also under pressure to take responsibility for economic growth."
ECB Executive Board member Lorenzo Bini Smaghi said June 17 that one quarter-point rate increase "should be enough" to rein in inflation. Spain's Miguel Angel Fernandez Ordonez has expressed concern about "contractionary trends" in his economy, which grew at the slowest pace in 13 years in the first quarter.
"I am not convinced it is prudent to significantly raise interest rates at this stage," French Finance Minister Christine Lagarde said in an interview with BFM Television last week. "The division in the Governing Council has never been bigger," said Uwe Angenendt, chief economist at BHF-Bank AG in Frankfurt. "I see a small risk of the ECB raising interest rates again in September. But I generally expect a marked economic slowdown followed by rate cuts."
Europe: One (Tight) Size Fits All
From underemployed Germany to the fast-growing island of Cyprus to the nouveau riche of Slovenia, the euro zone is becoming a motley array of inflation and growth rates. This is one of the reasons why the European Central Bank, which is expected to raise interest rates Thursday by 25 basis points to 4.25%, is in such a bind.
Its mission, to set a suitable borrowing rate for 15 different countries, is a bit like creating a single-size uniform for an army of soldiers who range from the obese to the stick thin. This is a difficult job for a central bank that has been presiding over countries that have used the euro for only 16 years. The differences in inflation rates among member countries is probably the widest since the euro zone came into being in 1992, says Global Insight economist Howard Archer.
Though the ECB will make its decision based on the overall figure for euro zone inflation, which came in at a higher than expected 4.0% in June, according to preliminary data, that figure is calculated on the relative size of countries' economies, meaning that the inflation rates for Germany, France, Spain, Italy and the Netherlands hold the most weight.
Yet even these countries have very different inflation pictures, with the Dutch boasting the lowest rate of inflation in the euro area, at 2.32%, and Spain at the upper end, with 4.60%. "It's going to take a very long time to see a country like Slovenia become like Germany or even a country like Portugal or Greece," says Archer. "But divergence is particularly a problem if we're talking about one of the larger economies."
Some of the smaller nations can at least stomach a rate rise well enough. Slovenia has the highest rate of inflation in the euro zone at 6.4%, but the highest growth rate, too, at 4.3%. It also has the highest per capita income of any of the former Soviet satellites. Inflation in rapidly expanding Cyprus is also above the euro zone average of 4.0%.
With inflation running in every direction, the European Union will be looking a lot more harshly on countries whose present finances aren't completely up to Maastricht Treaty standards
Dow's bear market run spells trouble for Wall Street
With the Dow sliding into a bear market on Wednesday, the dark days on Wall Street are far from over, amid record oil prices, struggling consumers and the never-ending credit crisis. The Dow became the second major U.S. index to enter a bear market, crossing the critical threshold of a 20 percent decline from its peak, following the Nasdaq in February. The broader S&P 500 is a little more than half a percent from the same fate.
News on the struggling economy could get much worse, with Thursday's government report on June payrolls seen as make-or-break. Any further worsening in the employment picture could stir more gloom about the health of consumers. "I think we're seeing a capitulation of sorts and a sign that the market is really on its knees. The market needs a positive catalyst. It could be the jobs number," said Marc Pado, U.S. market strategist and technical analyst at Cantor Fitzgerald & Co in San Francisco.
"Crude has a knife in our back and it keeps twisting," he added. Oil jumped to a record close of $143.57 a barrel on Wednesday. Add worries about slumping home values and a worsening corporate profit picture, and the outlook for Wall Street gets bleaker. Based on historical patterns of bear markets, Wall Street's current slide has some ways to go before it plays out.
Since 1900, whenever the Dow has fallen into a bear market, it has on average shed 30 percent of its value for the duration of the slump. Bear markets have tended to last just over a year. The Dow's worst bear market occurred in the early years of the Great Depression, stretching from April 17, 1930, to July 8, 1932. The industrial average lost 86 percent of its value in that period, falling from 294.07 to a bottom of 41.22.
The 30 current components of the Dow have shed a collective $1.1 trillion since the index's record close on October 9, 2007.
"When you look at the bear markets that have taken place since 1960, the average decline in the Dow has been 31 percent and average duration 14 months. Using that standard there's a long way to go," said William Sullivan, chief economist at JVB Financial Group, in Boca Raton, Florida.
At Wednesday's close the Dow was down 20.8 percent from its record close set on October 9, 2007, while the S&P 500 was down 19.4 percent from its record also set last October. The bulk of the damage in the Dow stems from slides in the shares of General Motors, grappling with slumping auto sales as soaring gasoline prices hurt demand for highly profitable trucks and SUVs, and American International Group Inc, the world's largest insurer, which has been buffeted by fallout from the mortgage crisis.
GM and AIG are the Dow's worst performers year-to-date, down 59.9 percent and 54.1 percent, respectively. On Friday, Merrill Lynch said GM will need to raise as much as $15 billion to shore up its finances and said its bankruptcy is "not impossible" if the U.S. auto market continues to slump. Meanwhile, the Nasdaq ended down 21.2 percent from its 52-week closing high set October 31, 2007, a drop that also technically signifies a bear market run for the index.
The 20 percent drop in the Dow industrials from its record close "is just kind of an artificial line in the sand. It's more a validation that all hell has already broken," said Keith Hembre, chief economist at First American Funds, Minneapolis.
GM shares fall below $10 for first time since 1954, talk of bankruptcy
Shares of General Motors Corp. plunged Wednesday to close below $10 for the first time in more than half a century, on worries about the company's cash needs and speculation about a possible bankruptcy protection filing down the road. GM shares fell $1.77, or 15.1 percent, to close at $9.98.
Their session low of $9.96 marked their lowest point since Sept. 13, 1954, when they hit $9.92, according to the Center for Research in Security Prices at the University of Chicago. The price is adjusted for splits and other changes. The drop came after a Merrill Lynch analyst cut his rating for GM to "Underperform" from "Buy" and slashed his price target for the company to $7 from $28, saying that the decline in automotive sales has been more severe than anyone expected and will likely continue through next year.
"We believe there is potential downside in the stock below $7 and that bankruptcy is not impossible if the market continues to deteriorate and significant incremental capital is not raised," John Murphy wrote in a note to investors. David Healy, an auto analyst with Burnham Securities, said the $10 mark is a purely psychological one but highlights the automaker's dramatic share price plunge since the beginning of the year, along with worries that the company may have to file for bankruptcy protection. GM shares are down about 60 percent this year.
Automakers' shares have taken a beating in recent months, hurt by rising oil prices and a weak U.S. economy, along with a shift in consumer demand away from gas guzzling sport utility vehicles and pickup trucks and toward smaller, more fuel-efficient cars and crossovers. Since July 2, 2007, GM shares have tumbled about 74 percent and the company's market capitalization has dropped to $5.65 billion from $21.5 billion.
Investors on Wednesday shrugged off better-than-expected June sales that sent GM shares surging as much as 12 percent the previous day. The automaker reported an 18.2 percent drop in U.S. vehicle sales from a year ago but retained its traditional U.S. sales lead over Toyota Motor Corp., which posted a 21.4 percent decline. Analysts, who had expected a much steeper drop, said GM's sales were able to outpace those of most other automakers because of late-month incentives and double-digit jumps in demand for certain small and midsize cars.
Deutsche Bank's Rod Lache said that while previous incentive programs have resulted in temporary boosts to GM's market share, they have generally been followed by drops in later months. "If history is any guide, we would expect GM's sales to experience 'payback' for the pulled forward sales in the months ahead," Lache wrote in a note to investors.
Meanwhile, Citi Investment Research analyst Itay Michaeli slashed his price target on GM shares to $14 from $21, citing liquidity fears. "While we do not believe GM is facing an immediate cash crunch, the urgency to shore up liquidity to navigate through a difficult 2008-09 has risen significantly in recent months," Michaeli said in a note to clients. He kept a "Hold" rating.
Ford Motor Co. didn't fare as well as its crosstown rival. The Dearborn, Mich.-based automaker said its June sales plunged 27.9 percent, blaming surging gas prices for knocking its light truck sales down 35.4 percent.
Ford shares fell 35 cents, or 7.4 percent, Wednesday to close at $4.36, passing a multidecade low of $4.41 set the day before.
Despite the sales drop, Lache said Ford remains the best positioned among the U.S.-based automakers and has the required cash to ride out a drawn out industrywide slump. "In addition, we continue to believe that Ford is the most 'fixable' of the three U.S. automakers -- it has effectively consolidated itself to two brands, and we still see considerable cost savings opportunities within the enterprise," Lache said. June was a dismal month for the industry overall, which posted a 18.3 percent sales drop, according to Autodata Corp.
Merrill, Citigroup Estimates Cut by Meredith Whitney
Merrill Lynch & Co. and Citigroup Inc. had their second-quarter earnings estimates cut by Oppenheimer & Co.'s Meredith Whitney on expectations of writedowns related to the subprime market and bond-insurer downgrades.
Merrill, the third-biggest U.S. securities firm, will probably lose $4.21 a share and write down $5.8 billion of assets, Whitney said in a report today, compared with her earlier estimate for a profit of 20 cents. Citigroup will probably lose $1.25, compared with her prior estimate for a gain of 21 cents. She forecast Citigroup's writedown at $12.2 billion.
Deutsche Bank AG analyst Mike Mayo and UBS AG analyst Glenn Schorr today also reduced their estimates for Merrill's second- quarter. Analysts and investors are reversing their predictions that the worst of the credit-market contraction is over after more than $400 billion of writedowns and losses by the world's largest financial institutions. Lehman Brothers Holdings Inc. last month increased its loss estimate for Merrill and more than doubled its prediction for the firm's subprime writedown, to $5.4 billion.
"Given Merrill's headwinds of de-leveraging and the next disruptive step of restructuring, we believe Merrill's shares are expensive," said Whitney, who has an "underperform" rating on the shares of Merrill and Citigroup. Merrill, which reports second-quarter earnings in two weeks, fell $1.10, or 3.4 percent, to $31.15 at 4:11 p.m. in composite trading on the New York Stock Exchange. The stock is down 42 percent this year. Citigroup, the biggest U.S. bank, fell 29 cents to $16.84.
Deutsche Bank's Mayo late today cut his estimate of Merrill's second-quarter earnings to a loss of $1.91 from an earlier prediction of 87 cents profit, and he forecast writedowns of about $5 billion. He cut his price target to $38 from $43 a share. UBS's Schorr reduced his estimates for Merrill's second- quarter to a loss of $2.20 from a profit of 55 cents, and he predicted $4.5 billion in writedowns. He also cut his price target to $35 from $47 a share.
"While the stock looks fairly cheap on our numbers, given the challenging earnings backdrop, Merrill's remaining exposure to troubled asset classes and the potential dilution from capital raises we remain neutral," Schorr wrote. Sanford Bernstein & Co.'s Brad Hintz last month reduced his estimate for Merrill to a loss of 93 cents a share from a profit of 82 cents and predicted a writedown of $3.5 billion.
Goldman Sachs Group Inc. analyst William Tanona reduced his Merrill estimate to a loss of $2 per share from earnings of 25 cents and predicted a writedown of $4.2 billion. He cut his Citigroup estimate to a loss of 75 cents from profit of 25 cents. Whitney said the downgrade of the so-called monoline insurers last month will force Merrill and Citigroup to book more losses. She sees a $2.5 billion writedown for Merrill related its monoline assets and a writedown of $3.6 billion for Citigroup.
"We continue to be negative in our outlook on Citigroup due simply to the fact that the company has seriously constrained earnings power, in addition to the writedowns seen in the quarter," Whitney wrote. Whitney estimated a wider 2008 per-share loss for Merrill of $5.37 compared with her earlier prediction for a loss of 45 cents. For 2009, she sees profit of $2.85, down from $4.05 previously.
She also said she expects Merrill to announce an asset sale, probably involving its stakes in BlackRock Inc. and Bloomberg LP, the parent of Bloomberg News. Whitney estimated a 2008 loss of $2.15 for Citigroup, compared with an earlier prediction of a loss of 58 cents. She lowered her 2009 estimate to profit of 45 cents from 80 cents.
Toronto stocks plunge for second day
The Toronto Stock Exchange's main index shed more than 200 points early on Thursday, extending the previous session's steep fall, as global markets stumbled and worries about the outlook for the economy remained in view.
The S&P/TSX composite index was down 206.9 points at 13827.2 in morning trading, after giving up more than 400 points on Wednesday.
432-point drop TSX’s worst in six months
Investors emerged from the Canada Day public holiday only to pummel the Toronto Stock Exchange's benchmark index Wednesday, resulting in the TSX/S&P's worst performance in more than five months despite oil hitting a record US$144 a barrel.
Peter Buchanan, strategist and senior economist at CIBC World Markets said the market started the second half by locking in profit, with much of the selling likely coming from fund managers. The TSX rose 4.6% in the first half of the year.
"Certainly we've seen some further evidence of pressure in bonds and various financial instruments, so it could also be people unloading their more profitable investments to cover some of that," he said.
The S&P/TSX dropped a sharp 432.92 points, or 3%, to close at 14,034.11. It was the S&P/TSX's worst performance since it dropped 600 points on Jan, 21 amid U.S. economic growth fears. The loss also surpassed the 427-point nosedive on March 19 in the wake of Bear Stearns' near collapse.
Ilargi: An excellent example of how the securities industry has operated until recently; it reminds me of the bright folks who periodically claim they have invented cars that run on air, or water. Investors who’ve bought into these schemes, that were based solely on lies based on more lies, should start screaming at the top of their voices.
I see Karl Denninger has already taken issue with this FT article, so I’ll leave it here for now; I’ll post his comment right after. We will see a milllion more of these stories.
UBS in spat with hedge fund over CDOs
A dispute between UBS and a hedge fund that sold it protection on a complicated mortgage security highlights why banks are still having a hard time figuring out the total amount they will have to write down such debt. UBS asked Paramax Capital International to sell it protection on $1.3bn of the most highly rated slices of a CDO made up of subprime residential mortgages that the UBS investment bank underwrote.
In general, by hedging the risk fully through the credit derivatives market, banks can remove such exposures from their balance sheets and do not have to set aside capital. The dispute is one of a growing number of such legal spats as the meltdown in the value of such securities is triggering an avalanche of litigation between parties in the $63,000 billion gross market for credit default swaps.
The litigation is feeding fears that the huge but still opaque market can cause shocks as any one dispute can set off numerous ripple effects. "There was a lot that was done and done at a fast pace," says Andrea Pincus, a lawyer with Reed Smith in New York who specialises in such disputes, speaking generally. "The sellers never expected the CDO market to drop through the floor. They underestimated their liability and exposure. Now they are trying to get out of their obligations and the buyers are trying to enforce their rights."
Paramax claims that, from the beginning, the UBS hedge was cosmetic. In May 2007, when the original agreement was signed, the terms were a fraction of the market rate. Also, Paramax had only $200m under management and its agreements with its own investors limited it to commit no more than $40m to any single deal. Thus, it could never compensate UBS fully for any meaningful loss in value of the $1.3bn UBS was trying to insure, it claims.
Paramax also claims that UBS told it that the bank would employ "subjective valuation methodologies" that meant it would not record any loss in value that could trigger calls for additional margin from Paramax. (Because credit derivatives contracts are individually tailored agreements rather than standardised documents, in fact there is some discretion in how firms value such deals.) Paramax also claims that UBS assured it that if it needed a "real" hedge, it would tear up the agreement.
However, all the banks with major exposure to subprime mortgages, including UBS, were forced to mark down the value of CDOs tied to subprime and began asking counterparties who had provided credit protection to post more collateral. Now UBS is taking Paramax to court, seeking to compel it to pay up as the securities drop in value, alleging breach of contract. Paramax in turn is charging UBS with negligent misrepresentation.
UBS says the bank is confident in the merits of its case. A lawyer for Paramax says its allegations are supported by both written and oral statements. The combination of subjective valuation and hedges that may not be real because counterparties cannot or will not pay goes way beyond UBS and Paramax.
For example, in one case the seller of credit protection recently discovered that the final agreement on insuring a portfolio of collateralised debt obligations had never been signed, either by it or a French bank which in this case was buying protection. Now, with the meltdown in that market, the seller has returned all the premium payments to the buyer and torn up the agreement, saying that because it was never signed, it has no legal obligation to pay up
Firecracker Fourth - Dead Bodies Do Stink
Ah, the truth comes out:"UBS asked Paramax Capital International to sell it protection on $1.3bn of the most highly rated slices of a CDO made up of subprime residential mortgages that the UBS investment bank underwrote. In general, by hedging the risk fully through the credit derivatives market, banks can remove such exposures from their balance sheets and do not have to set aside capital.
....
Paramax claims that, from the beginning, the UBS hedge was cosmetic. In May 2007, when the original agreement was signed, the terms were a fraction of the market rate. Also, Paramax had only $200m under management and its agreements with its own investors limited it to commit no more than $40m to any single deal. Thus, it could never compensate UBS fully for any meaningful loss in value of the $1.3bn UBS was trying to insure, it claims."
So, if this article is correct, the "hedges" weren't really hedges at all. They were a transparent fraud, devised for the singular purpose of allowing these banks to remove the risk from their balance sheet, thereby avoiding reserve and capital requirements, and Paramax is claiming that they both knew it and willingly participated in it.
Its funny how when you start to drain the swamp (either as a regulator or just due to the events of the marketplace) the dead bodies start to become bloated and stink. This "little spat", frankly, pretty much defines the entire "credit crunch" problem. These allegations must be investigated and proven up one way or the other, and if proven, every one of these institutions needs to have a fork put in them.
OCC and OTS should swoop in like vulchers, revoking the charters of every one of these banks for the offense of intentionally deceiving them as to their capital ratios and general financial health. The Fed should cut these institutions off from the window and other credit facilities for their fraudulent misstatements as well. Indeed, are not all of these "alphabet soup" games there specifically to provide a means of liquidity for these institutions?
Does it not now appear to have been shown that they manipulated their way into needing this "liquidity" in the first place? Why is the The Fed assisting institutions that, it would appear, are in their pickle precisely because of their own actions? Shareholders should go after these institutions with both barrels blazing. "The Landshark Full Employment Act of 2008" must ring in the halls of every courthouse of the nation.
If you own or owned stock in any of these firms - virtually any financial company in the United States - you need to be talking to a securities attorney. Today. The OTC swap market needs to be closed. Sorry folks, if this isn't hard evidence of intentional deception and abuse, I don't know what is. We don't allow a crackhouse to operate openly in the middle of the city, so why would we allow a market to operate that has been established and used for the express purpose of intentionally deceiving both investors and regulators?
We must force each and every one of these contracts onto an exchange with an OCC-like institution in the middle that is the counterparty to all deals, thereby guaranteeing that margin supervision and capital adequacy will be watched - because it is their butt if they don't! No more OTC contracts, as I've said time and time again. This can and must happen right here and now so we can figure out who's telling the truth.
It would appear that there is simply no way the financial institutions can escape on this one, as one of the following, if the article cited is accurate, must be true:
- Paramax intentionally deceived UBS (and is lying now) about their capital adequacy and financial strength to pay on those swaps, OR
- UBS really did engage in a sham transaction for the purpose of shifting their risk off their balance sheet and capital computations, and was well-aware that Paramax could not possibly pay under stress, OR
- BOTH firms were aware of and intentionally participated in a scheme to intentionally "cook" UBS' balance sheet and capital requirement computations.
Good luck trying to come up with a different explanation that fits the claims in that article. If you can, I'm all ears.
If you can't, then someone (or maybe everyone involved) needs to be facing an indictment.
Say it ain't so, Warren: Berkshire shares down 20%
It must be a bear market because even billionaire Warren Buffett's Berkshire Hathaway Inc. has slumped almost 20% since December. The decline exceeds the 15% drop of the Standard & Poor's 500 Index from Dec. 10 through Tuesday.
It's the worst first half for the Omaha, Neb.-based investment and holding company since 1990, as price competition drove down revenue at Berkshire's insurance units, which account for about half of its income. Berkshire is "close to getting more fairly priced," said Charles Hamilton, a Nashville, Tenn.-based analyst at FTN Midwest Securities Corp., who has a "neutral" rating on Berkshire. "I wouldn't say it presents a buying opportunity right now."
After reporting record 2007 earnings of US$13.2-billion, the 77-year-old Mr. Buffett told shareholders in February that profit margins from insurance will drop. "That party is over," Mr. Buffett wrote in his annual letter to shareholders in February. "It is a certainty that insurance industry profit margins, including ours, will fall significantly in 2008."
Berkshire also has been hurt by the declines of Wells Fargo & Co., American Express Co. and U.S. Bancorp, three of the company's 10 biggest equity holdings at the end of March. Wells Fargo, Berkshire's second-largest holding, dropped 18% in the second quarter, while American Express and U.S. Bancorp slipped 14%.
Berkshire closed at US$120,100 Tuesday in New York Stock Exchange composite trading, down from their all-time high of US$151,650 in December. That's the sharpest drop in more than five years. Berkshire spokeswoman Jackie Wilson didn't respond to a request for comment.
The slide hasn't deterred Mr. Buffett devotees, who think Berkshire's decline represents a buying opportunity. "I'd put a new client in Berkshire right now," said Frank Betz, a partner at Warren, N.J.-based Carret Zane Capital Management, which oversees US$800-million, including Berkshire shares. "It's probably the highest-quality collection of individual companies that's ever been assembled. Long slides are not in the Berkshire Hathaway lexicon."
Paulson: downturn "has further to go"
Henry Paulson denied the regulatory system had "failed" but acknowledged that it could have "performed better". He told the BBC his main focus was limiting the "spillover" from the banking crisis to the US economy. In the same interview, Chancellor Alistair Darling said that rising oil prices were a "real problem".
With oil prices now above $145 a barrel, Mr Darling said G8 leaders meeting next week urgently needed to address the requirement for increased crude supplies. Mr Paulson held talks with Prime Minister Gordon Brown on Wednesday, and staged a joint news conference with Mr Darling after meeting top UK bankers.
In his remarks, Mr Paulson warned that there was no easy, short-term solution to high oil prices, and said that the cost of oil was likely to prolong the US slowdown, possibly into 2009. He said the current level of oil prices was "unacceptable to the American people" and that all his efforts were focused on dealing with the matter.
But he admitted that the basic problem was that there was not enough oil to meet the growing demand - and it was not clear whether producers such as Saudi Arabia actually had the capacity to increase output further. In the longer term, he argued that a wide range of measures, including energy conservation, the development of more oil fields, and switching to cleaner technology, could bring about a reduction in the oil price.
And he announced that the UK and the US would be bringing forward plans for a large clean energy loan facility at the G8 meeting next week. Mr Paulson praised his counterpart's handling of the Northern Rock crisis and the current economic turbulence, saying he was "on his toes". "There is a lot of co-operation going on right now between the UK and US in developing the right policy responses," Mr Paulson said.
Both admitted there should have been earlier warning of the turmoil that hit global credit markets last year and that policymakers needed to raise their game. "There is no doubt that that there were mistakes made by banks, regulators and investors," Mr Paulson said, adding that he was "encouraged" by banks' efforts to acknowledge the size of their losses and repair their balance sheets.
Mr Darling said the US and UK had "led the way" in addressing shortcomings in how the global banking system was policed. "Whether it is the government, the Bank of England or the Financial Services Authority, we need to tighten up what we are doing," he said. Mr Paulson has said the US must devise a tougher regulatory system that can allow financial institutions to fail without causing wider economic turbulence.
The Federal Reserve stepped in to support investment bank Bear Stearns in March after confidence in the firm's financial position evaporated. Minutes of meetings held by the Fed at the time of the crisis showed that officials were worried about the prospect of "contagion" from the possible collapse of Bear Stearns with broader disruption to financial markets.
However, he said it was not the government's job to dictate how much bank bosses who have lost their jobs as a result of the credit crunch should be paid in compensation. "No-one wants to see high compensation for failure," he said. But he added: "I believe in market discipline. I think we are going to see markets react."
In an interview with BBC Newsnight to be broadcast later on Thursday, Mr Paulson will say the current economic downturn "has further to go". He admits the US economy is going through a "tough period" because of the combination of the spike in oil prices, the credit crunch and housing slump. But he is more upbeat about prospects for the rest of the year, saying he believes growth will improve at the end of 2008.
Regulators to Schumer: We’ve got a Whole Bag of Shhh With Your Name on It
As we head into the July 4th holiday, it’s clear that federal banking regualtors have one thing in common with beleaguered Indymac Bancorp Inc. — both wish that Sen. Charles Schumer (D-NY) would keep his trap shut. The leaked letter he sent to regulators last week questioning the financial footing of the Pasadena-based thrift caused a mini-bank run this week, and presented the ideal timing for a consumer group to pile on with claims of predatory lending.
The LA Times got its hands on a letter from John M. Reich, director of the Office of Thrift Supervision, back to Schumer on the matter, which pretty much told the good Senator to keep his thoughts to himself — or at the very least out of the public limelight. From Reich’s letter: “Dissemination of incomplete or erroneous information can erode public confidence, mislead depositors and investors, and cause unintended consequences, including depositor runs and panic stock trades.
Rumors and innuendo cause damage to financial institutions that might not occur otherwise and these concerns drive our strict policy of privacy.” The LA Times also pulls the thoughts of John D. Hawke, the U.S. comptroller of the currency, from an American Banker story published recently, who called the leak “reckless and grossly irresponsible.”
Our industry sources have gone so far as to suggest that Schumer was paid off to leak the letter to the press, although it’s unclear if the suggestion is anything more than idle speculation. The conspiracy theory goes like this: IndyMac has been privately negotiating for new capital for at least the last few months, and a Large Investor offered a deal that CEO Michael Perry balked at; Large Investor decided to pay a few bucks to a Senator in New York to force the issue.
We’re no conspiracy theorists at HW, but nothing on Capitol Hill would surprise us right about now. For its part, Schumer’s office has held its ground, with a Schumer aide telling the press last week that waging war publicly with regulators was a better alternative to being ignored privately.
“The home loan bank system has an obligation to lend responsibly and police its members. But it has not been doing its job,” the LAT quoted Brian Fallon, a Schumer aide, as saying. “We have found the only way to get the home loan bank system to act appropriately and positively is to make public the concerns we’ve already expressed privately.”
Ilargi: Please allow me an off-topic remark on this article:"Our government protects us from unsafe foods and drugs...". Recent survey showed that a higher percentage of Americans use marihuana and cocaine than in any other country in the world. That protection seems to work fine....
Angry Consumers Flood Federal Reserve Board with Complaints
The message is out to struggling consumers and the Federal Reserve may be sorry they offered a helping hand to the millions of consumers who are drowning in credit card debt and in their homes. Apparently the Federal Reserve has been inundated with over 8,200 consumer complaints against various banking and lending institutions for credit card abuse and predatory lending.
The Fed’s inbox has been full since it invited personal comments regarding a proposed new rule to end “Unfair or Deceptive Acts or Practices.” Sarah Byrnes said, Campaign Manager of Americans for Fairness in Lending (AFFIL) Here are some of the complaints from Federal Reserves Freedom of Imformation Office:
- “I get a form letter from Bank of America that says my interest rate is going to be raised from 7.9% to 21.99%. Why? Because I have a large balance that I haven’t paid off and I carry balances on a few other cards. Never mind that I’m not late, overlimit or anything else that would be a problem.” — Angela, Louisville, Kentucky
“The worst is Bank of America….The worst experience with this card was when I received my statement the other day. There was a $39 late fee on it. I knew that I paid on time and when I called the rep stated that I ‘paid too early’ so that it was applied to my previous billing cycle. Therefore, it was if I hadn’t made any payment in [the] current billing cycle. I have never heard of such a thing, being penalized for paying too soon.” — Eileen, Farmingdale, New York
“My husband and I recently experienced Bank of America raising our interest rate on our credit card from 13% to over 24%. The reason they sited [sic] was because they ‘re-evaluated’ our credit history…. Thankfully we continue to pay all our bills on time but these actions are predatory as I feel like they are in a dark corner just waiting to pounce.” — Jennifer, Fort Meyers, Florida
“Back when the President signed the new bankruptcy law, all my credit cards doubled the minimum payment and at least doubled my interest rates. What was a $100 minimum payment with a 9.99% interest rate went to $200 a month at 28%. I had to open more cards to transfer balances to help pay the other cards. Now I have to file for bankruptcy.” — Tim, Troy, Ohio
From the AAFIL: “Americans are telling the Federal Reserve Board in no uncertain terms that they have had enough of these tricks and traps. Consumers are demanding strong federal regulations to ban the most egregious credit card practices—doubling and tripling interest rates, applying these higher interest rates retroactively to outstanding balances, imposing exorbitant penalty fees, and requiring binding mandatory arbitration clauses.
But many wonder whether the Fed will listen to banks more than consumers and come down on the side of ‘business as usual.’ There’s no doubt that the banks are pressuring the Fed to tone down the proposed changes.
“Our government protects us from unsafe foods and drugs. Shouldn’t we demand reasonable protection against dangerous lending practices that deplete and destroy assets? We believe that consumer voices are what’s missing in the dialogue between banks and the Federal Reserve Board. That’s why AFFIL is helping consumers to contact the Fed during this period through its website http://www.affil.org. The Fed’s invitation for comments remains open through August 4, 2008.”
Ilargi: Well, interesting suggestion: will oil prices follow the example now set by coal?
Coal prices plunge as traders take profits
Coal prices have tumbled from record highs earlier this week as buyers sit on their hands, setting off a scramble by hedge funds to liquidate speculative positions. Newcastle and South African cargoes have plunged by over $20 a tonne in the last day, apparently triggered by fears of a European economic slowdown and concerns that the coal shortage in China might not be quite as extreme as supposed.
The sudden change in market psychology could be a warning sign for the oil and gas markets, where frenzied buying has pushed prices to levels once unthinkable. While coal moves to its own distinctive rhythm, it tends to chime with the rest of the energy market.
Oil again hit record levels yesterday on news that Russian output had fallen 1pc so far this year to June to 9.77m barrels per day, the first half-year decline in a decade. Brent North Sea crude jumped $3.98 to trade as high as $144.65 dollars a barrel, before closing up $3.59 at $144.26.
Richards Bay coal prices in South Africa peaked at just over $180 a tonne earlier this week but bids fell back to nearer $150 yesterday. Delivery prices on the Rotterdam and Antwerp markets fell by over $22 a tonne.
Shares in Cons Energy were off 15pc at one stage, Peabody Energy was down 11pc, and UK Coal closed down 4.4pc. Fording Canadian Coal Trust was down 17pc.
Coal has enjoyed a spectacular run in recent months following moves by China to restrict exports but analysts at Wood Mackenzie said the market had become "anomalous" and could fall back sharply in the second half of this year. The Baltic Dry Index measuring shipping rates for dry bulk has fallen by 23pc over the past month.
It is too early tell whether this amounts to a breather in a long-term upwards trend, or if it signals the start of a serious correction in coal, iron ore, and grain demand. China relies on coal to fuel two thirds of its power plants. Exports have been restricted to ensure supplies and help cap rising electricity prices. However, there are signs that the economy is starting to cool rapidly as the central bank tightens reserve ratios to curb inflation.
Why the Gulf Is Switching to Coal
The Persian Gulf may be sitting atop massive oil reserves. But with prices for crude skyrocketing, it makes more sense to sell it than to burn it. Instead, the Gulf is turning to coal for its energy needs -- to the detriment of the climate.
For Alfred Tacke, CEO of the Essen energy giant Evonik Steag, it's the yellowish-brown pall below that tells him the plane he's on is approaching the Persian Gulf. Beneath the haze, he knows, is Kuwait, which has five large-scale gas- and oil-fired power plants in operation. The power they generate provide around-the-clock electricity for Kuwait's gigantic seawater desalination plants and the country's enormous air-conditioning needs.
"Here, you only need to stick your finger in the sand and you're likely to strike oil or gas," says Tacke, whose energy group ranks fifth among Germany's electricity producers. But Tacke has his own ideas about how to make money in the region. And they center on a different kind of black gold: coal-fired power plants. "We're currently in the process of discussing the conditions for projects of this kind," he says.
As odd as the idea may seem, coal power in the gulf is just one more outcome of skyrocketing oil prices. In a world with dramatically disparate ideas on how or even whether to address the risks of global warming, demand for coal plants across the globe is growing rapidly to the detriment of efforts to increase the production of renewable energies such as solar, hydro and wind.
Nowhere is that demand more paradoxical than in the oil-rich Middle East. At the end of April, for example, the state-owned Oman Oil Company signed a memorandum of understanding with two Korean companies on the construction and operation of several coal-fired power plants. Dubai, for its part, is initially planning to build at least four large facilities with a cumulative output of 4,000 megawatts. Abu Dhabi also wants to get into the act. Even Egypt is thinking of constructing its first coal-fired plant on the shores of the Red Sea.
Other regions in the world are fuelling the trend as well. Oil-rich Russia is planning the construction of more than thirty new coal-fired power plants by 2011. In China a new facility is connected to the grid about once every 10 days. Greenpeace estimates that around five thousand coal-fired power plants will be in operation worldwide by 2030. The economics behind the coal fad are clear. To produce a megawatt hour of electricity using Australian coal, it costs just €11. Using natural gas, on the other hand, ups that price to €26 while oil-fired power plants swallow up €50.50 per megawatt hour of electricity.
Plus, coal is likely to be available for quite some time to come. Global coal reserves will last an estimated 100 more years and possibly even twice that long. As a result, coal is relatively cheap and in some cases can even be gleaned from open pit mines as in Australia, but also in the US, South Africa, China and Russia. The difference between the prices of natural gas and oil on the one hand, and coal on the other is growing increasingly large.
For the Gulf, the development is turning into a highly lucrative business model. They are currently able to sell their oil at record prices on the global market (currently over $140 a barrel). At the same time, they are able to satisfy their own energy needs at a much lower cost with coal shipped in from overseas.
From an environmental standpoint, of course, this trend is devastating. The Gulf states, first and foremost the United Arab Emirates, are among the world's boom regions. It is predicted that by 2015 the population of Dubai will double to a total of 2.6 million. Per capita energy consumption in the Emirates is six times higher than the global average and a third more than even the US average.
Ilargi: Those of you who have been following the situation in the UK economy with us in the past half year, will have no doubt anymore that it’s looking grimmer by the day.
That’s why I can’t wrap my head around the ongoing impression that the government, the lending industry and the media there are trying to paint: namely, that the main issue is that first-time buyers don’t have sufficient access to mortgages. But that is not the problem at all.
Meanwhile, the entire economy is crumbling under their feet at blazing speed. The British need to provide themselves with a thorough reality check, and very soon, or reality will provide one for them. What is currently provided by politics, media and industry amounts to nothing more than the same state of denial you find at an AA meeting.
Lenders say UK mortgage squeeze will continue
Lenders say they will put a further squeeze on the availability of home loans in July to September, the Bank's Credit Conditions Survey says. They also expect the number of people who default on mortgages to rise. The amount of unsecured lending, such as overdrafts and credit cards, is also expected to fall.
The Chancellor, Alistair Darling, has been meeting the heads of the major UK banks along with US Treasury Secretary Hank Paulson. At a press conference on Thursday, Mr Darling made it clear that there was little the government could do to review the mortgage market while the wholesale credit markets remained frozen.
Mr Darling said that with one-third of all mortgage lending having previously been funded by wholesale borrowing, the number of mortgage loans was bound to fall. He said he remained hopeful that in the longer term, the extra lending that the Bank of England was providing to the financial sector would bear fruit - but it very much depended on the restoration of international confidence.
In the meantime, the government would try to help homebuilders by allowing social landlords such as housing associations to buy unsold new private sector homes. But he pointed out that the UK had far fewer of these than the US.
The Bank of England survey asks lenders to gauge what they have experienced in the previous three months and what they predict for the following quarter. A significant factor in the tightening of the mortgage market over the past three months was the fact that lenders expected house prices to fall, the Bank said. The Nationwide Building Society, one of the UK's biggest mortgage lenders, reported its eighth consecutive monthly fall in house prices this week.
But the Bank of England predicted that the demand for home loans was also expected to fall in the coming three months. It fell by more than lenders anticipated from April to July, the survey revealed. The number of people defaulting on their mortgages also rose by more than lenders had expected in the past three months, the Bank said.
There was more bad news for first-time buyers without significant savings, with mortgage suppliers expecting to ask for bigger deposits in the coming months, instead of putting up the cost of a mortgage. Banks and building societies have regularly pointed to the cost of borrowing from each other during the credit crunch as the main factor behind the falling availability of mortgages.
Fewer than 4,000 different types of mortgage are now on offer, compared with more than 11,000 a year ago and the cost of these deals has been fluctuating for months. In its survey, the Bank found that a balance of plus 55% of those lenders asked believed that expectations for house prices had affected overall mortgage availability during the past three months. A balance of plus 69% considered that it will be a factor in the next three months.
This compares with plus 38% who believed tighter wholesale funding conditions affected availability in the past three months, and plus 39% who identified wholesale funding as an issue for the next quarter. The outlook is also looking tough for small businesses, with a reduction in corporate credit availability predicted for the next three months, and default rates on loans expected to rise.
Earlier in the week, the Bank reported that the number of new mortgages approved for house purchases had fallen to its lowest level since figures began in 1993. Some 42,000 home loans were approved in May, a 28% fall compared with the previous month and 64% down on a year ago.
The following day, the Nationwide said the annual house price fall in June was 6.3%. This means the average home costs £172,415 and is £13,629 cheaper than at the top of the market in October last year.
Worst equity market conditions in 20 years could force UK firms to slash jobs
Stricken companies' attempts to avert disaster by raising emergency funds are being jeopardised by what experts have described as the worst equity market conditions in 20 years. As housebuilder Taylor Wimpey was yesterday forced to abandon a planned £500m fundraising to recapitalise its shattered balance sheet, market specialists claimed "right now the window for raising equity is all but shut".
One senior banker said: "We've walked into a tornado this week. We are in the most extraordinary market environment I've seen for 20 years." Economists now fear that companies will have to cut jobs as investors retreat. Simon Ward, chief economist at New Star, said: "If companies can't raise cash from the banks or via the equity markets then they will need to cut staff and investment. We are already seeing signs of that."
One major institutional investor, who asked not to be named, confirmed that "investors' attitudes are hardening" to capital raisings due to "concerns about credit quality". "We're reaching a place where shareholder reaction is having a real economy impact. It doesn't do our clients any good if whole parts of the economy get screwed because of the hiatus in terms of equity raising," he said.
The most recent Bank of England data shows that companies are running out of cash and are already having to dip into their reserves. Corporate liquidity, the amount of money companies hold in reserve, fell 0.5pc in May. Mr Ward said: "It is very unusual to see a contraction." Paul Myners, former head of fund manager Gartmore and ex-chairman of Marks & Spencer, said: "It is in the interest of the institutions to back the good companies. It's foolish to endanger a company where there is a good case for support."
Investors are retreating from capital raisings because they fear losing money even at the distressed prices being offered. Concerns were stoked by Bradford & Bingley, the mortgage lender that had to cut its rights issue price by a third last month after issuing a shock profits warning.
The problems are not UK specific. Lehman Brothers raised $6bn (£3bn) at $28 a share in the US last month, since when the stock has collapsed 22pc. Last week, shares in Belgian bank Fortis tumbled 18pc after revealing it needed to tap investors for an extra €1.5bn (£1.2bn). Fears of more bad news have pushed Halifax-owner HBOS's £4bn rights issue heavily underwater. HBOS shares closed down 8 at 261p yesterday - 14p below the 275p rights issue price.
Equity market specialists are worried that HBOS' underwriters, Dresdner Kleinwort and Morgan Stanley, will end up with the £4bn of stock - 28pc of HBOS's enlarged share capital. Several senior bankers have warned that should that happen, it could close the City down for rights issues. The underwriters, not natural holders of the shares, would be likely to sell the rump at a large discount.
UK housing woes shake economy's foundations
Taylor Wimpey's failure to raise the £500m it needs to prop up its balance sheet has put not just the future of the company at risk, it has also destabilised the housebuilding sector and cast a gloom over the wider economy.
In simple terms, the decision by the investors not to give the UK's largest housebuilder the equity it desperately requires was based on the philosophy of not throwing good money after bad. The investors, like a growing band of analysts, seem to be questioning whether their investment, and the company, has any future in the current market.
Dresdner Kleinwort analyst Alastair Stewart said: "We believe there is a very real danger that Britain's biggest housebuilder by volume faces collapse when covenants are tested in February." In an unremittingly gloomy trading update yesterday, Taylor Wimpey revealed not only that had it failed to raise the £500m of equity, but that if it did not get a cash injection it would breach its banking covenants in February.
By cutting 900 jobs, closing 13 of its regional offices and suspending its dividend payments, Taylor Wimpey has taken some of the load off its buckling balance sheet. But the weight of the company's £1.7bn of net debt, supported by a drastically devalued asset base, is still more than the company can manage. The company announced it was to write down the value of its landbank by £550m when it releases interim results in August, wiping 11pc off the gross asset value of its UK land.
The trading update said: "Without an amendment to the terms of our banking facilities, in certain negative market scenarios we might breach one or more banking covenants at the first testing date in 2009." The problem for the company, the market and the Government is that if investors are not prepared to stand behind Taylor Wimpey, what chance is there that they will back rivals Barratt and Persimmon? The two are faced with very similar issues, huge amounts of debt and falling order books.
Taylor Wimpey revealed yesterday that reservation levels for new homes are now 45pc down on last year, while housing completions had dropped by a third. The implication of yesterday's trading statement was not lost on the Government. Housing minister Caroline Flint immediately announced a series of measures designed to support the housing market.
Although the initiatives failed to impress industry experts, they were seen as proof that the Government is finally waking up to the severity of the situation facing the housing market and the economy. The Government's proposals included £270m to build 1,500 shared ownership homes and a new "clearing house" to allow housebuilders to sell stock to housing associations. But critics said there was no new money or new thinking in the statement.
Stewart Baseley, executive chairman of the Home Builders Federation, said: "It is pretty small beer. If the Government doesn't act on this, a housing downturn could bring the UK economy into a recessionary cycle with all the effects that would have on Treasury income." What the HBF is calling for is a package of measures including a stamp duty holiday, a tax-free saving scheme to help first-time buyers save for a deposit and the reintroduction of mortgage tax relief.
The problem for Taylor Wimpey and its peers is that none of the measures being implemented by the Government or proposed by the HBF will lift the short-term pressure they are under. What Taylor Wimpey needs is immediate support from investors and long-term backing by its bankers. Having bailed out the banks with billions of pounds of public money, it is likely the Government will now put pressure on them to stand behind the housebuilders.
Taylor Wimpey's syndicate of lending banks - Barclays, RBS, Lloyds and HSBC - has reason to support the limping housebuilder even without government pressure. All four have significant exposure to the UK property sector, as does HBOS. If the banks play hard-ball with the housebuilders by refusing to relax lending covenants, they could be forced to take big writedowns against the loans when they next report.
Whether the help they offer will be in the form of a debt-for-equity swap or a waiver on banking covenants will emerge in the coming months. More immediately, Taylor Wimpey and its advisers will be scouring the globe for new sources of equity. Sovereign wealth funds, US hedge funds and international private equity groups will all be approached for new funding.
But with the company's market capitalisation hovering around the £370m mark, raising £500m will not be easy. Finance director Peter Johnson has already lost his job and if the company does survive there will no doubt be a question mark over the future of chief executive Peter Redfern. But for the moment the only question is one of survival.
Canada’s economic contraction to be short-lived, RBC says
The national economic growth rate is projected to slow to 1.4 per cent this year, according to the latest Royal Bank of Canada forecast. That's half the 2.8 per cent growth that the Bank of Canada was forecasting at the start of the year, though private-sector economists were less optimistic as 2008 began, with forecasts ranging around 2 per cent growth.
However, “the surprise economic contraction will be short-lived as growth prospects for the remainder of the year should brighten,” RBC chief economist Craig Wright predicted in the survey released Thursday. “Canada's economy will continue to be hampered by flagging U.S. demand for exports, but domestic demand will more than offset the drag this year,” Mr. Wright said.
But later in the year the picture is set to improve, “with financial market pressures starting to ease, the U.S. economy getting a boost from the issuance of tax rebate cheques, and commodity prices remaining historically high.” The report notes that Canadian commodities continue to experience solid demand from emerging markets such as China, but rising commodity prices — especially for oil — have also stoked worries about inflation.
“However, the modest pace of growth and ease in labour markets are expected to be sufficient enough to offset these pressures,” the bank says. The housing market is “poised to cool in the face of deteriorating affordability,” it adds. “However, the extent of any weakening is expected to be much less pronounced than what is occurring currently in the U.S., as the Canadian market did not experience many of the excesses evident south of the border.”
The report adds that the risks to its forecast “are largely on the downside as greater-than-expected restraint could emerge from still high energy prices, tight credit conditions and weakening labour markets.”
Spain manufacturing dives, government says no recession
The performance of Spain's manufacturing sector hit a record low in June, a purchasing managers survey showed on Tuesday, but the government insisted the country was not headed for recession. The Markit Research Manufacturing PMI index contracted for the seventh consecutive month to 40.6, down from 43.8 in May. This was its lowest level since the survey began in February 1998 and compared to a consensus forecast of 43.5 .
The result was accompanied by other grim data indicating Spaniards, who had become accustomed to boom times and easy credit, are suffering under the impact of the credit crunch, the unravelling of a construction boom and relatively high inflation.
Car sales tumbled 30.8 percent in June compared to a year earlier, industry body ANFAC said, and leading property website Facilisimo.com reported that house prices had fallen by 6.4 percent from their peak last July.
Volumes traded on Spain's stock market fell 42 percent in June compared to the same month in 2007, figures from stock market operator BME showed. The blue chip Ibex-35 index had fallen 2.6 percent by 1140 GMT on Tuesday to take this year's drop to 23 percent. Economy Minister Pedro Solbes, who until months ago was predicting economic growth of about 3 percent this year, said that growth was set to slow further in the second quarter from the 0.3 percent quarterly rate in the first three months of the year.
"As of that point, it is hard to say what will happen," Solbes told a press breakfast. He added that the economy, which is heavily burdened by private sector debt and a current account deficit running at 10 percent of output, would probably touch bottom at the end of this year and the beginning of next. "We are not assuming there will be a recession," said Solbes.
Apart from global shocks, the Spanish economy was also hit by a truck strike in June, as drivers demanded government help for hauliers in the face of soaring oil prices. "The manufacturing PMI figures for June pointed to a further contraction of the sector. The latest data was undoubtedly affected by the transport strikes, and the underlying trend remains negative," said Nathan Carroll, economist at Markit.
Any PMI figure below 50.0 shows contraction while figures over 50.0 show growth. The government says it expects the economy to grow by less than 2 percent this year and some private economists see expansion of barely more than 1.5 percent, in stark contrast to 3.8 percent growth in 2007. But private economists are increasingly pessimistic.
"I think a recession is more likely than not because the correction that we are seeing is very abrupt, it's brutal," said Nicolas Lopez of Madrid's M&G Valores. "Not all countries have had the sort of construction boom Spain has had, so it makes sense that the hangover is worse here," he said. The PMI survey indicated that production is unlikely to improve in the near future.
"The forward-looking indicators from the survey suggest that production is likely to fall further in the coming months. There was no respite from cost inflation in June, as input prices rose at the sharpest pace since November 2004," Carroll said. Spanish inflation hit an 11-1/2 year high of 5.1 percent in June, preliminary data showed, and the Markit survey noted that the rate of input cost inflation faced by Spanish manufacturers was the sharpest since November 2004, driven by rising raw material prices.
Joy over Falling German Unemployment May Soon Fade
Germany this week announced its lowest number of unemployed in 15 years. The boom in the labor market led to a drop in the number of jobless in June by 528,000 compared to the same time last year, with the total number of unemployed at 3.16 million and a jobless rate of 7.5 percent (down from 8.8 percent one year ago).
The country's Federal Labor Agency says those figures may improve even further in autumn, and German Labor Minister Olaf Scholz of the Social Democrats said Berlin is moving toward its goal of steering Germans toward full employment. Modern economists today describe full employment as a situation in which fewer than between three and five percent of a country's working-age residents are jobless.
According to the German financial daily Handelsblatt, only a dozen labor offices (out of 180 nationwide) are reporting full employment, in the relatively prosperous southern German states of Bavaria and Baden-Württemberg. Since 2005, over 1.7 million jobs have been created in Germany, with companies adding an average of about 1,000 new positions a day, according to the mass-circulation daily BILD.
It's a job motor that has been created by the country's so-called "secret world champions," small and medium-sized companies that have helped defend Germany's title as the world's leading exporter from fast-rising China. Still, there are clouds on the horizon. As the respected Süddeutsche Zeitung newspaper points out in an editorial: "If politicians now want to reinforce the target of full employment, then they also need to tell the people that Germany is still far from that goal and that the path to it is not without its dangers."
"There's no reason for euphoria," the paper writes. "Expensive oil and the finance crisis could soon impact the labor market. Right now it is primarily banks and insurance companies that are conducting layoffs because of the crisis, but it could soon place downward pressure on other sectors. Expensive oil prices are hitting all parts of the economy, and the easiest way for businesses to cut costs is by cutting staff. … Experience has shown that there is a months-long delay before economic developments have an impact on the labor market."
The paper added that more than 1 million Germans do not even appear in the official statistics because they are hidden in government-subsidized job-creation programs. They clean parks as participants as part of so-called "one-euro jobs" or they wash dishes in cafeterias. They are often people, the paper writes, who do not qualify for the labor market. "If there were no social safety net, these people would be officially unemployed. A little more government honesty about the labor market would be appropriate."
The conservative daily Die Welt notes that while the government may be able to sit back comfortably and dream about full employment, the "upsurge in the labor market will in no way happen on its own. The need for reforms is tremendous," with so many unemployed people parked in government programs that have taken them off the unemployment rolls. And looking to eastern Germany, where the unemployment rate is twice as high as in the western states, the paper notes that with 1 million jobs unfilled in other parts of the country, jobless residents of the formerly communist east might ought to think about moving to where the jobs are.
The financial daily Handelsblatt is less pessimistic than other papers, writing that is is not yet certain "what kind of impact and how sustained the cost pressures from the recent price explosion will have on firms. There's still a chance that unions, with their wage hike policies, will act with a sense of proportion to the recent inflation rate" when pay raise bargaining starts again later this year. Meanwhile, the Office for Economic Cooperation and Development (OECD) on Wedneday pointed out weaknesses in Germany's labor market in a report.
At 69 percent, the country's employment rate is slightly higher than the OECD average of 67 percent, but still well below its best performers -- countries like Iceland, Switzerland, Denmark and Norway, all of which have employment rates of 75 percent or greater. The OECD points out that a significant chunk of the job creation that has taken place in Germany has been in the part-time job sector. At 22 percent, Germany now has the highest percentage of people working part-time throughout the 20 OECD member states.
Irish are EU's eternal optimists despite fears of a recession
A recession may be looming but Irish people are among the most optimistic in the EU that their lives will be better in 20 years' time, a survey revealed yesterday. The Eurobarometer survey found that people in Ireland (67pc) were second only to Estonia (78pc) when it came to believing they would be better off in 2028. But the survey was conducted in April, before economic gloom descended.
Irish and British people were also the most likely to strongly agree that everyone should pay higher taxes (19pc) to fund public services. Ireland, the UK, Cyprus and the Netherlands were the only member states where an overall majority believed higher taxes should be paid to support health and essential services.
Irish people's cheery forecast about the future contrasted with the more gloomy outlook from European citizens in general, 49pc of whom thought they would be worse off in 2028. Overall, fewer than four in ten Europeans think their futures will improve. Optimism about people's lives decreased with age, but increased with educational attainment and urbanisation.
The survey, released by the European Commission yesterday, also found that newer member states were more optimistic than older EU states, making Ireland's position all the more noteworthy. For instance, in the UK, just 36pc thought their lives would be better in 20 years and that figure was as low as 27pc in France.
When asked if they felt they would earn less because of competition from rising economies like China's, 16pc of Irish agreed compared to an EU average of 27pc. Italy was the country most fearful of this happening (35pc). Asked whether they expected improvements in working conditions, respondents in Ireland again had great expectations.
The survey showed 76pc here believed their work life would improve, outdone only by those surveyed in Estonia (85pc) and Lithuania (77pc). Asked whether the gap between rich and poor would be wider, 25pc of Irish believed this would happen, compared to an EU average of 27pc. The people of Denmark were the most pessimistic, and 43pc thought the wealth divide would get wider.
The Federal Reserve and Central Bank Gold Sales
Central Bank Gold Agreement
Joint Statement on Gold
8 March 2004
European Central Bank
Banca d'Italia
Banco de España
Banco de Portugal
Bank of Greece
Banque Centrale du Luxembourg
Banque de France
Banque Nationale de Belgique
Central Bank & Financial Services Authority of Ireland
De Nederlandsche Bank
Deutsche Bundesbank
Oesterreichische Nationalbank
Suomen Pankki
Schweizerische Nationalbank
Sveriges Riksbank
In the interest of clarifying their intentions with respect to their gold holdings, the undersigned institutions make the following statement: Gold will remain an important element of global monetary reserves. The gold sales already decided and to be decided by the undersigned institutions will be achieved through a concerted programme of sales over a period of five years, starting on 27 September 2004, just after the end of the previous agreement. Annual sales will not exceed 500 tons and total sales over this period will not exceed 2,500 tons.
Over this period, the signatories to this agreement have agreed that the total amount of their gold leasings and the total amount of their use of gold futures and options will not exceed the amounts prevailing at the date of the signature of the previous agreement. This agreement will be reviewed after five years.
The above press release states the working platform that the signatories have agreed to "confine" themselves to; restraint knowing no bounds it appears; but appearances can be deceiving - just ask Alice when she's ten feet tall. It is comforting to note that the first line states that the purpose of the communiqué is to clarify the intentions of the signatories in respect to their gold holdings. Well, that sounds pretty straight forward, but is it?
First, I suggest that if something needs to be clarified, then it is presently not clear. So, from the get go, we know that we don't know the true story, as it needs to be clarified - brings to mind: oh ye of little faith. Next, I point out that this statement is issued to clarify intentions in regard to gold holdings. Once, again it sounds pretty straight forward, but is it? I guess a lot would depend on just what exactly is meant by gold holdings.
Is anything to do with gold considered a gold holding, or just certain things? Are futures holdings, are over the counter derivatives holdings, is leased gold a holding, are swaps a holding; not to mention - just who is doing the holding, and does that matter? You bet it does, just ask Alice, even when she not ten feet tall.
Yes, I know - I have little faith, but then again I've studied history for a long, long time - almost as long as history has been around. I mean the Constitution of the United States clearly states that only gold and silver coin is money; and that no bills of credit (paper money) is to be accepted by states as legal tender.
Well, if one looks around we can see that just the opposite is the rule de jour: we have bills of credit, aka Federal Reserve Notes as money, and no gold and silver coin circulating as money; and hell, we've even got all the Central Banks and the IMF behind closed doors making secret agreements as to how and when they are going to sell gold, or do whatever it is they do behind closed doors. So yes, I remain skeptical at best, and with more than good reason - there are a plethora of reasons, just look up into the night sky - that one over there - that's draconis and he thinks he rules.
Now, let's take a look at the sentence that reads:"The gold sales already decided and to be decided by the undersigned institutions will be achieved through a concerted programme of sales over a period of five years, starting on 27 September 2004, just after the end of the previous agreement."
The gold sales ALREADY decided. Hmm, now what does that mean? Heck, it sounds like they've already decided on the gold sales PRIOR to the agreement; and you wonder why it needs clarification. P.T. Barnum would be proud. And, not to be forgotten: they consider gold in the vault and gold on loan to be worthy of the same line on their balance sheet.
And the best is kept for last, as the sentence that winds up the press release states: "Over this period, the signatories to this agreement have agreed that the total amount of their gold leasings and the total amount of their use of gold futures and options will not exceed the amounts prevailing at the date of the signature of the previous agreement."
What a bunch of nice guys, they have agreed that the total amount of their gold leasings (is this a gold holding?) and the total amount of their use (is the use of something the same as a holding?) of gold futures and options will not exceed the amounts prevailing at the date of the signature of the PREVIOUS agreement. Hmm, something doesn't quite smell right does it?
16 comments:
"Pain in Spain as cracks show in Europe's economy"
The Pain in Spain falls Mainly on the Plain.
Sorry, couldn’t help it.
“I mean the Constitution of the United States clearly states that only gold and silver coin is money; and that no bills of credit (paper money) is to be accepted by states as legal tender.”
Hey, not a news flash but “President of the United States called the Constitution "a goddamned piece of paper.""
More to the point: “In the summer of 2002, after I had written an article in Esquire that the White House didn't like about Bush's former communications director, Karen Hughes, I had a meeting with a senior adviser to Bush. He expressed the White House's displeasure, and then he told me something that at the time I didn't fully comprehend -- but which I now believe gets to the very heart of the Bush presidency.
The aide said that guys like me were "in what we call the reality-based community," which he defined as people who "believe that solutions emerge from your judicious study of discernible reality." I nodded and murmured something about enlightenment principles and empiricism. He cut me off. "That's not the way the world really works anymore," he continued. "We're an empire now, and when we act, we create our own reality. And while you're studying that reality -- judiciously, as you will -- we'll act again, creating other new realities, which you can study too, and that's how things will sort out. We're history's actors . . . and you, all of you, will be left to just study what we do."” Without a Doubt, New York Times Magazine
"Auto manufacturing and parts industries gained 5,600 jobs".
Think of the bankruptcy lawyers, forensic accountants, and MBAs they had to hire.
Mr. President didn't notice yet that his empire is dying...
el pollo,
Actually it's
The Pain in Spain stays mainly in the Plain.
Sorry, couldn't help it :)
@bigelow: I just finished reading Ayn Rand's 'Atlas Shrugged'. As I read it, I kept drawing parallels between the present administration and the antagonists in the book. The words of the Bush aide in your article are nearly lifted from the final chapters when industrial society begins its inexorable decline.
Thanks for the correction, Anon. I guess my error comes from too much Grateful Dead and not enough Lerner & Loewe.
Since there's a literary theme going here I'll contribute a little something. I just finished "Trinity" by Leon Uris - a heartwrenching and achingly beautiful book about the Irish struggle for freedom. I couldn't help but draw parallels between the actors in the book and today's reality in Iraq. I wonder what a book in a similar vein written by a Sunni would sound like. I also put on my conspiracy hat and thought, wow, I could get very cynical about the US operations in Iraq.
I already believe that the primary reason the US army is in Iraq is oil and future access to lots of it. Believing this, it seems clear that there would be much to gain from inflamming sectarian tensions and creating a reason for many troops to remain. The English did it in Ulster year after year after year... Ulster was a major industrial profit center, "vital to the interests of the crown". By keeping the Protestants and Catholics at each other's throats they didn't turn on the true enemy of both - the imperial power holding them down.
The US needs some degree of unrest in Iraq to justify having many troops and permenant bases there. It's extremely convienent that just when the political will to pull out of the Iraq debacle was coming to a head here in the States a 20,000 troop surge has pacified much of the unrest... And the Shia unilaterally declared a cease-fire at the same time. Perhaps the Shia are more closely aligned with Power in Washington than is commonly portrayed.
And it all is for the love of money and power (both sordid situations).
My thoughts of the day.
Hello,
Concerning UBS and Paramax, now we learn that the hedge was "cosmetic" and subject to "subjective valuation methodologies".
Having read S&I for almost a year now, I know I should not be surprised, but I still am. Suspecting something is not the same as actually seeing the dirty linen. And you must admit, that is pretty dirty.
*****************
Concerning the article yesterday by Feteke on the gold standard, I had trouble with the same sentence as Ric.
"The result was continually falling interest rates, causing widespread capital destruction as well as falling prices."
As far as I am aware, in recent years, low interest rates caused major capital creation.
Is the apparent contradiction here due to the fact that Feteke is talking about productive enterprise and in recent years, our system has been more about financial smoke and mirrors?
Ciao,
François
FB and Ric,
I haven't forgotten and I'll get to that question as soon as I can. I have to make dinner first though :)
François,
I think maybe you confuse capital creation with credit creation. Real estate prices that double (US), triple (UK) or even quintuple (Ireland) have nothing to do with capital creation.
You may argue that this sort of credit creation increases the money supply, but that is already contentious. Is it money, or is it just velocity of money, or liquidity? In any case the houses don't double in real value. If they were not maintained, paint would start peeling off while "values" went up, which is about as contradictory as it gets.
If they were maintained, painted, enlarged or embellished, than the added value came from those actions, not from the house itself. And that only to the extent of what is paid for the materials and work involved.
Capital can only be created by real work, which involves the use of any number of real natural resources, not by sitting behind a desk and punching a keyboard. Doesn't that make it ironic that most of what is perceived as added value, or capital, comes from cubicles?
There were a lot of new homes built, and that is arguably capital creation, but only as far as the value of the materials used, plus the hours of man-work, are concerned. If that adds up to $100.000, and the home is subsequently sold for $500.000, then the remaining $400.000 is not capital created.
You know what it is? Inflation, pure as it comes, that's what.
I would disagree that the creation of capital can not be accomplished in a cubicle. Much of the internet's "house" was built in a such a fashion - the server for TAE is just a lump without the software (presumably Linux) that is on it. This "intellectual capital" area is ripe for hucksterism, but it does exist and we all use it ...
Iowa boy, to nitpick along,
that most of what is perceived as added value, or capital, comes from cubicles?
It doesn't follow that there can be nothing done in a cubicle that isn't productive, for example, the raw resource electricity is used both on the internet and TAU to produce, by manipulation of that electric commodity, a product. Whatever unproductive work these workers get up to in those cubicles I will not comment on.
Bebeegee.
My understanding is that " capital" is something that can be put in a wheelbarrow, something tangible, measurable.
Added value is fleeting,based on sentiment,perception. Granite countertops are both.
Scandia are your thoughts and feelings so immaterial that they do not add value to these conversations and when printed can they not be put in that wheelbarrow? On the other hand I have a problem making materially real(to others) the value I would assignee to my grandmothers paisley shawl.
Bebeegee
Bebeegee, I have read that all form originates with a thought/idea. It is the spark, the catalyst,the charge, so to speak. However it is not form and I think capital is of the realm of form. This does not in any way lessen the very significant influence of emotion/ideas on the nature of the form/capital.
I'm struggling here with the esoteric! Help!
Post a Comment