Monday, December 28, 2009
Portfolio Rebalancing
Year-end is always a time of reflection, a rare opportunity where the usual psychological boundaries of time crumble. For a couple weeks, the tyranny of the present yields to a heightened consideration of the past and the future. This rift in our everyday thought patterns leads many investors to ponder the composition of their portfolios, making this time of year the primary season for portfolio rebalancing.
While the concept of portfolio rebalancing is simple, many investors struggle with the practical execution. The whole idea of investment is deploying the surplus fruits of our labors in productive assets that can earn returns for us. We all work and use the resulting earnings to finance our lifestyles. And if we prudently live within our means, we are blessed with leftover capital after all expenses. Rather than let it sit idle, we invest it.
But it is foolish to invest all this hard-earned surplus capital in one place. Diversification is absolutely critical for investment, it radically lowers the risk of catastrophic losses. This principle is nothing new, some thirty centuries ago the ancient Israeli King Solomon wrote, “Cast your bread upon the waters, for you will find it after many days. Give a portion to seven, or even to eight, for you know not what disaster may happen on earth.” (Ecclesiastes 11:1-2)
While the concept of portfolio rebalancing is simple, many investors struggle with the practical execution. The whole idea of investment is deploying the surplus fruits of our labors in productive assets that can earn returns for us. We all work and use the resulting earnings to finance our lifestyles. And if we prudently live within our means, we are blessed with leftover capital after all expenses. Rather than let it sit idle, we invest it.
But it is foolish to invest all this hard-earned surplus capital in one place. Diversification is absolutely critical for investment, it radically lowers the risk of catastrophic losses. This principle is nothing new, some thirty centuries ago the ancient Israeli King Solomon wrote, “Cast your bread upon the waters, for you will find it after many days. Give a portion to seven, or even to eight, for you know not what disaster may happen on earth.” (Ecclesiastes 11:1-2)
Thursday, December 3, 2009
Thursday, November 19, 2009
SPX and Gold Correlation
In the old days, with the Standard & Poor’s 500-stock index down 1.75% through midday, chances were pretty good that gold prices would find a “safe haven” buying bid. That was then. This is now. Instead, gold prices were also down, off about 0.6%.
The link these days is the dollar, and the correlations between the dollar and other assets is creating strange bedfellows such as stocks and gold prices moving in the same direction.
Those correlations have continued to tighten in recent weeks. In the first eight months of the year, gold prices, as measured by the SPDR Gold Shares exchange traded fund, had a negative 30% correlation to the dollar, according to Macro Risk Advisors. In October and November, that correlation was up to negative 56%. The correlation between the S&P 500 and the dollar jumped to an astonishing -87% from -41%.
Macro Risk Advisors’ Dean Curnutt says there have also been some subtle differences in the options market that bear watching.
Traditionally, options prices for gold have been biased toward a greater risk of a sharp rise in prices than would be the case on other investments, Curnutt says. The idea being that investors would use those positions as a hedge against a significant spike in inflation. Now, they’re not only factoring in much slower increases but also, there has been more demand for puts that provide downside protection.
Of course, that could reflect the fact that gold has had a big rally, and some many be now protecting themselves against a reversal. However, Curnutt thinks it could reflect a more fundamental change. Gold is being priced “more akin to something like a traditional risk asset like the S&P 500,” he says. “That doesn’t mean the market isn’t pricing for the risk that gold can move up quickly, but less so.”
To take that one step further, if stocks go into a big decline gold might decline as well. “These risk assets – gold, commodities and S&P could move down … in a very correlated fashion,” Curnutt says.
The link these days is the dollar, and the correlations between the dollar and other assets is creating strange bedfellows such as stocks and gold prices moving in the same direction.
Those correlations have continued to tighten in recent weeks. In the first eight months of the year, gold prices, as measured by the SPDR Gold Shares exchange traded fund, had a negative 30% correlation to the dollar, according to Macro Risk Advisors. In October and November, that correlation was up to negative 56%. The correlation between the S&P 500 and the dollar jumped to an astonishing -87% from -41%.
Macro Risk Advisors’ Dean Curnutt says there have also been some subtle differences in the options market that bear watching.
Traditionally, options prices for gold have been biased toward a greater risk of a sharp rise in prices than would be the case on other investments, Curnutt says. The idea being that investors would use those positions as a hedge against a significant spike in inflation. Now, they’re not only factoring in much slower increases but also, there has been more demand for puts that provide downside protection.
Of course, that could reflect the fact that gold has had a big rally, and some many be now protecting themselves against a reversal. However, Curnutt thinks it could reflect a more fundamental change. Gold is being priced “more akin to something like a traditional risk asset like the S&P 500,” he says. “That doesn’t mean the market isn’t pricing for the risk that gold can move up quickly, but less so.”
To take that one step further, if stocks go into a big decline gold might decline as well. “These risk assets – gold, commodities and S&P could move down … in a very correlated fashion,” Curnutt says.
Tuesday, November 10, 2009
Manulife nicely valued
Manulife Financial Corp. has been upgraded to Outperform from Sector Perform by RBC Capital Markets.
"While we believe that Manulife will not earn the same kind of ROEs as it has in the past and that the volatility of its earnings shoud be greater than in the past, we believe that the stock's valuation more than reflects that reality and that the worst is behind in terms of earnings surprises, based on current equity market levels and interest rates," Andre-Phillipe Hardy, RBC Capital Markets analyst said in a note to clients.
Mr. Hardy said Manulife was trading at 9.9x estimated 2010 earnings, compared to a range of 10.1x to 11.1x for its three lifeco peers. On a normalized earnings basis, Manulife is also nicely valued, trading at 9.8x versus 9.2x to 10.8x for its peers.
"Those are attractive valuation levels compared to history as the company used to trade at a premium P/E valuation," the analyst wrote.
Over the past eight months, Manulife shares have risen almost 130% from a low around $9 in March. Now trading at roughly $20, they still remain half their value at the peak in April 2008.
Mr. Hardy reduced his price target on Manulife shares from $27 to $26.
"While we believe that Manulife will not earn the same kind of ROEs as it has in the past and that the volatility of its earnings shoud be greater than in the past, we believe that the stock's valuation more than reflects that reality and that the worst is behind in terms of earnings surprises, based on current equity market levels and interest rates," Andre-Phillipe Hardy, RBC Capital Markets analyst said in a note to clients.
Mr. Hardy said Manulife was trading at 9.9x estimated 2010 earnings, compared to a range of 10.1x to 11.1x for its three lifeco peers. On a normalized earnings basis, Manulife is also nicely valued, trading at 9.8x versus 9.2x to 10.8x for its peers.
"Those are attractive valuation levels compared to history as the company used to trade at a premium P/E valuation," the analyst wrote.
Over the past eight months, Manulife shares have risen almost 130% from a low around $9 in March. Now trading at roughly $20, they still remain half their value at the peak in April 2008.
Mr. Hardy reduced his price target on Manulife shares from $27 to $26.
Tuesday, September 22, 2009
Following Hunter-Dickinson's holding
Since June 2007, I have been following the holdings of Hunter-Dickinson. Not impressive at all.
Tuesday, September 15, 2009
IAMGOLD ceo sees $1,200 by year end
The price of gold, which just hit the $1,000 per ounce barrier, could keep rising and reach $1,200 by the end of the year, the chief executive officer of Canadian producer IAMGOLD Corp (IMG.TO) (IAG.N) said on Tuesday in Denver.
"You could very easily see $1,200 by year end. It's a possibility," he said in an interview on the sidelines of the Denver Gold Forum industry gathering.
"I can't predict. But do I feel very strongly that the gold price is going to rise significantly over the short to medium term? I am very clear on that."
Asked if that could mean as much as a 50-percent increase, Conway said, "That's a possibility."
"You could very easily see $1,200 by year end. It's a possibility," he said in an interview on the sidelines of the Denver Gold Forum industry gathering.
"I can't predict. But do I feel very strongly that the gold price is going to rise significantly over the short to medium term? I am very clear on that."
Asked if that could mean as much as a 50-percent increase, Conway said, "That's a possibility."
Eldorado Gold: Cost below $300.
Eldorado Gold (ELD.TO) CEO Paul Wright, in a presentation via webcast from the Denver Gold Forum, expects costs during the third quarter to come in below estimates and plans to be selective in future asset acquisitions.
"In terms of what you see us buying or developing, the simple guideline will be: Does it allow us to remain in the lower quartile of production costs," he said. "If it doesn't, frankly, you won't see us acquiring it and you won't see us developing it."
The company has forecast production of 330,000 ounces this year at cash costs per ounce of $300, and Wright said the company is on pace to beat that in the third quarter.
"We would expect to see operating costs perhaps improved (on) $300 an ounce," he said.
"In terms of what you see us buying or developing, the simple guideline will be: Does it allow us to remain in the lower quartile of production costs," he said. "If it doesn't, frankly, you won't see us acquiring it and you won't see us developing it."
The company has forecast production of 330,000 ounces this year at cash costs per ounce of $300, and Wright said the company is on pace to beat that in the third quarter.
"We would expect to see operating costs perhaps improved (on) $300 an ounce," he said.
Wednesday, September 9, 2009
Thursday, August 13, 2009
Eldorado Gold Break Out?
After Eldorado Gold hit 52-week high in Amex, today it breaks out today in Toronto Stock Exchange and also hit all time high. It outperforms its peer gold mining companies.
This is the cheapest producer of gold at extraction costs of just $300 an ounce and going lower, maybe much lower. And also interesting was the possible sale or restart of its gigantic iron mine in South America. China needs lots of iron, who has the problem with Rio Tinto right now. It could sell this mine to China at a nifty profit and have a war chest and accelerate its properties that produce the cheapest gold in China.
According to its press release, Eldorado Gold identifies new gold zone in China and announces the discovery of a new zone of mineralization at our Tanjianshan Mine in China. The mineralization has been intersected approx 2 km south of the Qinglongtan open pit within an evolving broad zone of geochemically anomalous bedrock up to 500m wide and 2.5km long. The discovery represents the first new gold zone identified by Eldorado since acquiring the property, and the company said it believes there is the potential for additional discoveries. That may add to its price jump 8.44% today.
Congradulation to Eldorado's management team.
Disclosure: Long Eldorado Gold.
Envast Gold is not a registered investment adviser or a broker/dealer. Envast Gold makes no recommendation that the purchase of securities of companies profiled in this web site is suitable or advisable for any person, or that an investment in such securities will be profitable.
Tuesday, August 4, 2009
Analysts downgrade and upgrade Eldorado Gold
Today we saw analysts gave different rating on Eldorado gold:
Tgt Cut To C$12 From C$12.35 By Salman
Tgt Raised To C$14 From C$12 By BMO
Tgt Cut To Hold From Buy By GMP
Tgt Raised To $13 From $10.50 By CIBC
Tgt Raised To $11 From $10.25 By Canaccord
Confusing ? That explained the price of EGO up and down quite a lot. Eldorado gold is a mid-tier gold producer, and recently reported a great 2Q. Technically it is very bullish and hit a new high in AMEX today while the rest gold producer are struggling way from their high. I feel very comfortable with Eldorado management team who deliver what they promised.
Disclosure: Long EGO.
Tgt Cut To C$12 From C$12.35 By Salman
Tgt Raised To C$14 From C$12 By BMO
Tgt Cut To Hold From Buy By GMP
Tgt Raised To $13 From $10.50 By CIBC
Tgt Raised To $11 From $10.25 By Canaccord
Confusing ? That explained the price of EGO up and down quite a lot. Eldorado gold is a mid-tier gold producer, and recently reported a great 2Q. Technically it is very bullish and hit a new high in AMEX today while the rest gold producer are struggling way from their high. I feel very comfortable with Eldorado management team who deliver what they promised.
Disclosure: Long EGO.
Friday, July 31, 2009
Powerful Head & Shoulders Pattern
This powerful and inverted "head & shoulders" pattern has been forming since beginning of 2008. This pattern is telling us that last year decline after the Lehman collapse was a classic selling climax. Gold was dumped in the rush by hedge funds and others to de-leverage. That selling led to a bottom that was marked by emotion, not logic. Gold will climb above $1,000 this year and stay there to validate "head & shoulders" pattern. The moment is rapidly approaching.
Eldorado Gold Corp reported a second-quarter profit that beat market estimates, helped by higher production, and reiterated its production outlook for the full year. I think EGO is at good position to benefit from the imminent rising price of Gold.
Disclosure: Long EGO
Thursday, July 23, 2009
Northern Dynasty is pushed up after rebound from support
The world needs copper and gold especially from Chinese economy. The pebble project must be developed. Recently NDM is picking up again with this favorable environment. Technically it broke the downward trend recently and MACD is positive again. It also could be potential takeover target.
I am Long on NDM.
Wednesday, July 15, 2009
Endeavour Silver Looks interesting
Today, Endeavour Silver Reports Production for Second Quarter, 2009; Produces 578,641 oz Silver (Up 12%) and 2,750 oz Gold (Up 61%) or 762,891 oz Silver-Equivalents (Up 21%) Compared to Q2, 2008. It looks like that EXK has moved higher from support. MACD turns positive and 5 days moving average is about to cross over 10 days moving average. At least in short term it is moving higher. In the longer term, Gold and Silver can not have much better fundamental, which definately adds to the upside of EXK.
Disclosure: Long EXK.
Friday, July 3, 2009
Top 10 holdings for gold stock fund
This is the list of top 10 holdings in the precious metal funds by end of first quarter of 2009. We can see the popularity of the gold stocks among the funds:
Senior: K.TO, G.TO, AEM.TO, YRI.TO, Eld.TO, ABX.TO, IMG.TO
Junior: SGR.V, RBI.TO, OSK.TO
Thursday, July 2, 2009
JP Morgan Upgrades Evergreen Solar (ESLR) Two-Notches to Overweight
July 2, 2009 7:06 AM EDT
JP Morgan upgrades Evergreen Solar Inc. (Nasdaq: ESLR) from Underweight to Overweight and raises their price target to $5.
The firm's price target represents over 100% upside from yesterday's $2.15 close.
Evergreen Solar, Inc. engages in the development, manufacture, and marketing of solar power products primarily in the United States and Europe.
Thursday, June 25, 2009
A Bright Future for Evergreen Solar
According to the post in Business West Online BY EDWARD J. MARKEY, the Race for Clean-energy Innovation has begun.
Here is the post:
On a recent congressional delegation to Hong Kong, I toured a factory that is developing a thin solar cell that can be put on windows to generate electricity from the sun with zero carbon emissions. I thought of 1366 Technologies, a company in Lexington that is also racing to get advanced solar technologies to market.
It may seem like your typical competition between two companies, but this race is about much more than the solar market. It is about the race for trillions of dollars in clean-energy investments. As President Obama says, “the nation that leads in 21st-century clean energy is the nation that will lead the 21st-century global economy.”
And if we win the race, it could bring 150,000 new jobs and billions of dollars to Massachusetts.
American companies would get an edge with passage of the Waxman-Markey bill, the most sweeping energy legislation Congress has considered in a generation. The plan would end America’s dangerous dependence on foreign oil; increase the amount of clean energy we produce; make our buildings, homes, cars, and trucks more efficient; and cut the harmful carbon pollution causing global warming.
The bill requires that 20% of our electricity in 2020 come from clean-energy sources like solar or wind, or from energy efficiency. It establishes ‘clean-energy innovation hubs’ around the country to help researchers and inventors move their ideas from the lab to the market.
It also aims to reduce carbon emissions from major U.S. sources 83% by 2050 compared with 2005 levels, and saves consumers money at the pump by investing $20 billion to retool America’s auto manufacturers to produce electric cars that don’t use any gasoline.
The Waxman-Markey bill would invest more than $190 billion in clean-energy technologies that will go to the companies, research institutions, and entrepreneurs smart enough, agile enough, and innovative enough to devise the next great clean-energy technology.
Many of these cutting-edge companies will be in Massachusetts.
The state has always led the way in innovation, but, like the rest of America, our technological dominance is threatened. Germany has emerged as the global photovoltaic market, even though Massachusetts has 30% better solar resources. Korea and Japan are leapfrogging America in battery and electric-vehicle technology, even though we pioneered invention of these technologies.
Today, only one-fourth of the world’s top renewable-energy companies are American-owned, because we have failed to put in place a set of policies to promote alternative energy sources. China is spending $12.6 million per hour on clean-energy development and is preparing to invest $440 billion to $660 billion this year in clean-energy development.
As I traveled around China, I saw countless examples of how Chinese investments in clean energy are bearing fruit, from the solar company in Hong Kong to electric-car factories in Tianjin. And I came back thinking that these jobs belong in Massachusetts.
There are signs of a clean-energy economic recovery sprouting over our region. There is American Superconductor in Devens, a company pioneering wind-turbine designs and working on new power-cable systems to connect sources of renewable energy to the rest of the country. Marlborough’s Evergreen Solar is on track to be manufacturing 160 megawatts of solar panels annually, and recently opened a larger factory. These are only two local examples of the next generation of American entrepreneurs who stand poised to capitalize on the clean-energy revolution.
The American economy and the American dream have succeeded because we refuse to be shackled to old technologies and business as usual, but instead always look for the newest idea or opportunity.
In Massachusetts, we have the brain power. We have the potential. What we need are the right policies to unleash this revolution. And with the Waxman-Markey bill, the next great revolution will come to New England, as we shape a new-energy destiny for the nation.
U.S. Rep. Edward J. Markey (D-Malden) is chairman of twin climate and energy panels in the House.
Here is the post:
On a recent congressional delegation to Hong Kong, I toured a factory that is developing a thin solar cell that can be put on windows to generate electricity from the sun with zero carbon emissions. I thought of 1366 Technologies, a company in Lexington that is also racing to get advanced solar technologies to market.
It may seem like your typical competition between two companies, but this race is about much more than the solar market. It is about the race for trillions of dollars in clean-energy investments. As President Obama says, “the nation that leads in 21st-century clean energy is the nation that will lead the 21st-century global economy.”
And if we win the race, it could bring 150,000 new jobs and billions of dollars to Massachusetts.
American companies would get an edge with passage of the Waxman-Markey bill, the most sweeping energy legislation Congress has considered in a generation. The plan would end America’s dangerous dependence on foreign oil; increase the amount of clean energy we produce; make our buildings, homes, cars, and trucks more efficient; and cut the harmful carbon pollution causing global warming.
The bill requires that 20% of our electricity in 2020 come from clean-energy sources like solar or wind, or from energy efficiency. It establishes ‘clean-energy innovation hubs’ around the country to help researchers and inventors move their ideas from the lab to the market.
It also aims to reduce carbon emissions from major U.S. sources 83% by 2050 compared with 2005 levels, and saves consumers money at the pump by investing $20 billion to retool America’s auto manufacturers to produce electric cars that don’t use any gasoline.
The Waxman-Markey bill would invest more than $190 billion in clean-energy technologies that will go to the companies, research institutions, and entrepreneurs smart enough, agile enough, and innovative enough to devise the next great clean-energy technology.
Many of these cutting-edge companies will be in Massachusetts.
The state has always led the way in innovation, but, like the rest of America, our technological dominance is threatened. Germany has emerged as the global photovoltaic market, even though Massachusetts has 30% better solar resources. Korea and Japan are leapfrogging America in battery and electric-vehicle technology, even though we pioneered invention of these technologies.
Today, only one-fourth of the world’s top renewable-energy companies are American-owned, because we have failed to put in place a set of policies to promote alternative energy sources. China is spending $12.6 million per hour on clean-energy development and is preparing to invest $440 billion to $660 billion this year in clean-energy development.
As I traveled around China, I saw countless examples of how Chinese investments in clean energy are bearing fruit, from the solar company in Hong Kong to electric-car factories in Tianjin. And I came back thinking that these jobs belong in Massachusetts.
There are signs of a clean-energy economic recovery sprouting over our region. There is American Superconductor in Devens, a company pioneering wind-turbine designs and working on new power-cable systems to connect sources of renewable energy to the rest of the country. Marlborough’s Evergreen Solar is on track to be manufacturing 160 megawatts of solar panels annually, and recently opened a larger factory. These are only two local examples of the next generation of American entrepreneurs who stand poised to capitalize on the clean-energy revolution.
The American economy and the American dream have succeeded because we refuse to be shackled to old technologies and business as usual, but instead always look for the newest idea or opportunity.
In Massachusetts, we have the brain power. We have the potential. What we need are the right policies to unleash this revolution. And with the Waxman-Markey bill, the next great revolution will come to New England, as we shape a new-energy destiny for the nation.
U.S. Rep. Edward J. Markey (D-Malden) is chairman of twin climate and energy panels in the House.
Wednesday, June 24, 2009
Saturday, May 16, 2009
Thursday, March 5, 2009
Don't Tick Off Jon Stewart
Jon Stewart shows us that it might just be a really bad idea to stand him up for an appearance on his show.
Saturday, February 28, 2009
Warren E. Buffett 's Letter
Mr. Buffett released his annual letter on Feb 27,1009 to Berkshire Hathaway Inc and said the economic turmoil that contributed to a 62 per cent profit drop last year at the holding company he controls is certain to continue in 2009, but the revered investor remains optimistic.
"Though the path has not been smooth, our economic system has worked extraordinarily well over time," Mr. Buffett wrote. "It has unleashed human potential as no other system has, and it will continue to do so. America's best days lie ahead."
Mr. Buffett said he made at least one major investing mistake last year by buying a large amount of ConocoPhillips (COP) stock when oil and gas prices were near their peak. Berkshire increased its stake in ConocoPhillips from 17.5 million shares in 2007 to 84.9 million shares at the end of 2008. Mr. Buffett said he did not anticipate last year's dramatic fall in energy prices, so his decision cost Berkshire shareholders several billion dollars.
Mr. Buffett says he also spent $244-million on stock in two Irish banks that appeared cheap. But since then, he's had to write down the value of those purchases to $27-million.
Berkshire owns a diverse mix of more than 60 companies, including insurance, furniture, carpet, jewellery, restaurants and utility businesses. And it has major investments in such companies as Wells Fargo & Co. and Coca-Cola Co.
"Though the path has not been smooth, our economic system has worked extraordinarily well over time," Mr. Buffett wrote. "It has unleashed human potential as no other system has, and it will continue to do so. America's best days lie ahead."
Mr. Buffett said he made at least one major investing mistake last year by buying a large amount of ConocoPhillips (COP) stock when oil and gas prices were near their peak. Berkshire increased its stake in ConocoPhillips from 17.5 million shares in 2007 to 84.9 million shares at the end of 2008. Mr. Buffett said he did not anticipate last year's dramatic fall in energy prices, so his decision cost Berkshire shareholders several billion dollars.
Mr. Buffett says he also spent $244-million on stock in two Irish banks that appeared cheap. But since then, he's had to write down the value of those purchases to $27-million.
Berkshire owns a diverse mix of more than 60 companies, including insurance, furniture, carpet, jewellery, restaurants and utility businesses. And it has major investments in such companies as Wells Fargo & Co. and Coca-Cola Co.
Thursday, February 26, 2009
Friday, February 20, 2009
Thursday, February 19, 2009
Barclay bullish on Suncor
Paul Chen, an analyst at Barclays, said in a note to clients that Suncor has the clearest growth prospects of the Canadian oil sands producers. He raised his recommendation on the stock to “overweight” from “equal weight” - the first time since 1999 that the analyst has been bullish on the stock.
“We expect both capital and operating costs for oil sands projects to come down, which should help add further upside,” Mr. Cheng said in his report, according to Bloomberg News. “Management's new focus on improving reliability and getting the most from the assets in the ground should help restore its reputation as a good operator.”
He believes that the stock is worth $42 – representing a potential gain of 76 per cent from its current level of $23.87 – if the price of crude oil gets to a long-term average of $80 (U.S.) a barrel.
“We expect both capital and operating costs for oil sands projects to come down, which should help add further upside,” Mr. Cheng said in his report, according to Bloomberg News. “Management's new focus on improving reliability and getting the most from the assets in the ground should help restore its reputation as a good operator.”
He believes that the stock is worth $42 – representing a potential gain of 76 per cent from its current level of $23.87 – if the price of crude oil gets to a long-term average of $80 (U.S.) a barrel.
Wednesday, February 11, 2009
Goldcorp Founder McEwen Bets Gold to $5,000
Goldcorp Inc. founder Rob McEwen said he expects the metal to top $5,000 an ounce as governments increase the money supply to combat recession.
Bullion will more than double to $2,000 an ounce by the end of next year before rising to McEwen’s target by the end of the cycle, which could take an additional four years, the investor said.
McEwen said he has a “big, big” holding in bullion since August 2007, at the beginning of the subprime mortgage crisis. “I realized we had reached an inflection point regarding money,” McEwen said. “It was all about protecting money, and gold served that purpose.”
Bullion will more than double to $2,000 an ounce by the end of next year before rising to McEwen’s target by the end of the cycle, which could take an additional four years, the investor said.
McEwen said he has a “big, big” holding in bullion since August 2007, at the beginning of the subprime mortgage crisis. “I realized we had reached an inflection point regarding money,” McEwen said. “It was all about protecting money, and gold served that purpose.”
Saturday, February 7, 2009
Gold Price Higher than Dow Index?
Interview with Dr. Marc Faber (aka Dr. Doom) February 06, 2009 on Bloomberg.
Friday, February 6, 2009
Bullish chart for XGD
The fundamental of Gold can not be more bullish nowadays. The ETF XGD which traded in Toronto Exchange obviously tell the story. The 50 days average has crossed over 200 days average.
Q & A from Mr.Jim Sinclair today
Q. What is an Economic Stimulus Payment?
A. It is money that the federal government will send to taxpayers..
Q. Where will the government get this money?
A. From taxpayers.
Q. So the government is giving me back my own money?
A. No, they are borrowing it from China. Your children are expected to repay the Chinese.
Q. What is the purpose of this payment?
A. The plan is that you will use the money to purchase a high-definition TV set, thus stimulating the economy.
Q. But isn’t that stimulating the economy of China?
A. Shut up."
A. It is money that the federal government will send to taxpayers..
Q. Where will the government get this money?
A. From taxpayers.
Q. So the government is giving me back my own money?
A. No, they are borrowing it from China. Your children are expected to repay the Chinese.
Q. What is the purpose of this payment?
A. The plan is that you will use the money to purchase a high-definition TV set, thus stimulating the economy.
Q. But isn’t that stimulating the economy of China?
A. Shut up."
Are we going to rely on wife's payroll
With the recession on the brink of becoming the longest in the postwar era, a milestone may be at hand: Women are poised to surpass men on the nation’s payrolls, taking the majority for the first time in American history.
The reason has less to do with gender equality than with where the ax is falling.
The proportion of women who are working has changed very little since the recession started. But a full 82 percent of the job losses have befallen men, who are heavily represented in distressed industries like manufacturing and construction. Women tend to be employed in areas like education and health care, which are less sensitive to economic ups and downs, and in jobs that allow more time for child care and other domestic work.
“Given how stark and concentrated the job losses are among men, and that women represented a high proportion of the labor force in the beginning of this recession, women are now bearing the burden — or the opportunity, one could say — of being breadwinners,” says Heather Boushey, a senior economist at the Center for American Progress.
Economists have predicted before that women would one day dominate the labor force as more ventured outside the home. The number of women entering the work force slowed and even dipped during the boom years earlier this decade, though, prompting a debate about whether women truly wanted to be both breadwinners and caregivers.
Should the male-dominated layoffs of the current recession continue — and Friday’s jobs report for January may offer more insight — the debate will be moot. A deep and prolonged recession, therefore, may change not only household budgets and habits; it may also challenge longstanding gender roles.
In recessions, the percentage of families supported by women tends to rise slightly, and it is expected to do so when this year’s numbers are tallied. As of November, women held 49.1 percent of the nation’s jobs, according to nonfarm payroll data collected by the Bureau of Labor Statistics. By another measure, including farm workers and the self-employed, women constituted 47.1 percent of the work force.
Women may be safer in their jobs, but tend to find it harder to support a family. For one thing, they work fewer overall hours than men. Women are much more likely to be in part-time jobs without health insurance or unemployment insurance. Even in full-time jobs, women earn 80 cents for each dollar of their male counterparts’ income, according to the government data.
“A lot of jobs that men have lost in fields like manufacturing were good union jobs with great health care plans,” says Christine Owens, executive director of the National Employment Law Project. “The jobs women have — and are supporting their families with — are not necessarily as good.”
Nasreen Mohammed, for example, works five days a week, 51 weeks a year, without sick days or health benefits.
She runs a small day care business out of her home in Milpitas, Calif., and recently expanded her services to include after-school care. The business brings in about $30,000 annually, she says, far less than the $150,000 her husband earned in the marketing and sales job he lost over a year ago. “It’s peanuts,” she says.
She switched from being a full-time homemaker to a full-time businesswoman when her husband was laid off previously. She says she unexpectedly discovered that she loves her job, even if it is demanding.
Still, her husband, Javed, says he and their three children — who are in third grade, junior college and law school — worry about her health, and hope things can “return to the old days.”
“In terms of the financial benefit from her work, we all benefit,” he says. “But in terms of getting my wife’s attention, from the youngest daughter to our oldest, we can’t wait for the day that my job is secure and she doesn’t have to do day care anymore.”
Women like Ms. Mohammed find themselves at the head of once-separate spheres: work and household. While women appear to be sole breadwinners in greater numbers, they are likely to remain responsible for most domestic responsibilities at home.
On average, employed women devote much more time to child care and housework than employed men do, according to recent data from the government’s American Time Use Survey analyzed by two economists, Alan B. Krueger and Andreas Mueller.
When women are unemployed and looking for a job, the time they spend daily taking care of children nearly doubles. Unemployed men’s child care duties, by contrast, are virtually identical to those of their working counterparts, and they instead spend more time sleeping, watching TV and looking for a job, along with other domestic activities.
Many of the unemployed men interviewed say they have tried to help out with cooking, veterinarian appointments and other chores, but they have not had time to do more because job-hunting consumes their days.
“The main priority is finding a job and putting in the time to do that,” says John Baruch, in Arlington Heights, Ill., who estimates he spends 35 to 45 hours a week looking for work since being laid off in January 2008.
While he has helped care for his wife’s aging parents, the couple still sometimes butt heads over who does things like walking the dog, now that he is out of work. He puts it this way: “As one of the people who runs one of the career centers I’ve been to told me: ‘You’re out of a job, but it’s not your time to paint the house and fix the car. Your job is about finding the next job.’ ”
Many women say they expect their family roles to remain the same, even if economic circumstances have changed for now.
“I don’t know if I’d really call myself a ‘breadwinner,’ since I earn practically nothing,” says Linda Saxby, who assists the librarian at the Cypress, Tex., high school her two daughters attend. Her husband, whose executive-level position was eliminated last May, had been earning $225,000, and the family is now primarily living off savings.
Historically, the way couples divide household jobs has been fairly resistant to change, says Heidi Hartmann, president and chief economist at the Institute for Women’s Policy Research.
“Over a long, 20-year period, married men have stepped up to the plate a little bit, but not as much as married women have dropped off in the time they spend on household chores,” Ms. Hartmann says. This suggests some domestic duties have been outsourced, as when takeout substitutes for cooking, for example. And as declining incomes force families to cut back on these outlays, she says, “women will most likely pick up the slack.”
A severe recession could put pressure on these roles.
“It has definitely put a strain” on my marriage, says Debbie Harlan, an executive assistant at a hospital system in Sarasota, Fla. Four months ago, her husband closed his 10-year-old independent car sales business, and the couple have been asking their children to help with bills. “So far we’ve worked through it, but there have been times when I wasn’t sure we could.”
The Mohammeds say things are not as stressful as they were the last time Mr. Mohammed lost his job. He has been helping out with the cooking and with paperwork for his wife’s business, and she says she works to prop up family morale.
“Things are not happy in the house if I blame him all the time, so I don’t do any of that anymore,” Ms. Mohammed says. “I know he is doing his best.”
The reason has less to do with gender equality than with where the ax is falling.
The proportion of women who are working has changed very little since the recession started. But a full 82 percent of the job losses have befallen men, who are heavily represented in distressed industries like manufacturing and construction. Women tend to be employed in areas like education and health care, which are less sensitive to economic ups and downs, and in jobs that allow more time for child care and other domestic work.
“Given how stark and concentrated the job losses are among men, and that women represented a high proportion of the labor force in the beginning of this recession, women are now bearing the burden — or the opportunity, one could say — of being breadwinners,” says Heather Boushey, a senior economist at the Center for American Progress.
Economists have predicted before that women would one day dominate the labor force as more ventured outside the home. The number of women entering the work force slowed and even dipped during the boom years earlier this decade, though, prompting a debate about whether women truly wanted to be both breadwinners and caregivers.
Should the male-dominated layoffs of the current recession continue — and Friday’s jobs report for January may offer more insight — the debate will be moot. A deep and prolonged recession, therefore, may change not only household budgets and habits; it may also challenge longstanding gender roles.
In recessions, the percentage of families supported by women tends to rise slightly, and it is expected to do so when this year’s numbers are tallied. As of November, women held 49.1 percent of the nation’s jobs, according to nonfarm payroll data collected by the Bureau of Labor Statistics. By another measure, including farm workers and the self-employed, women constituted 47.1 percent of the work force.
Women may be safer in their jobs, but tend to find it harder to support a family. For one thing, they work fewer overall hours than men. Women are much more likely to be in part-time jobs without health insurance or unemployment insurance. Even in full-time jobs, women earn 80 cents for each dollar of their male counterparts’ income, according to the government data.
“A lot of jobs that men have lost in fields like manufacturing were good union jobs with great health care plans,” says Christine Owens, executive director of the National Employment Law Project. “The jobs women have — and are supporting their families with — are not necessarily as good.”
Nasreen Mohammed, for example, works five days a week, 51 weeks a year, without sick days or health benefits.
She runs a small day care business out of her home in Milpitas, Calif., and recently expanded her services to include after-school care. The business brings in about $30,000 annually, she says, far less than the $150,000 her husband earned in the marketing and sales job he lost over a year ago. “It’s peanuts,” she says.
She switched from being a full-time homemaker to a full-time businesswoman when her husband was laid off previously. She says she unexpectedly discovered that she loves her job, even if it is demanding.
Still, her husband, Javed, says he and their three children — who are in third grade, junior college and law school — worry about her health, and hope things can “return to the old days.”
“In terms of the financial benefit from her work, we all benefit,” he says. “But in terms of getting my wife’s attention, from the youngest daughter to our oldest, we can’t wait for the day that my job is secure and she doesn’t have to do day care anymore.”
Women like Ms. Mohammed find themselves at the head of once-separate spheres: work and household. While women appear to be sole breadwinners in greater numbers, they are likely to remain responsible for most domestic responsibilities at home.
On average, employed women devote much more time to child care and housework than employed men do, according to recent data from the government’s American Time Use Survey analyzed by two economists, Alan B. Krueger and Andreas Mueller.
When women are unemployed and looking for a job, the time they spend daily taking care of children nearly doubles. Unemployed men’s child care duties, by contrast, are virtually identical to those of their working counterparts, and they instead spend more time sleeping, watching TV and looking for a job, along with other domestic activities.
Many of the unemployed men interviewed say they have tried to help out with cooking, veterinarian appointments and other chores, but they have not had time to do more because job-hunting consumes their days.
“The main priority is finding a job and putting in the time to do that,” says John Baruch, in Arlington Heights, Ill., who estimates he spends 35 to 45 hours a week looking for work since being laid off in January 2008.
While he has helped care for his wife’s aging parents, the couple still sometimes butt heads over who does things like walking the dog, now that he is out of work. He puts it this way: “As one of the people who runs one of the career centers I’ve been to told me: ‘You’re out of a job, but it’s not your time to paint the house and fix the car. Your job is about finding the next job.’ ”
Many women say they expect their family roles to remain the same, even if economic circumstances have changed for now.
“I don’t know if I’d really call myself a ‘breadwinner,’ since I earn practically nothing,” says Linda Saxby, who assists the librarian at the Cypress, Tex., high school her two daughters attend. Her husband, whose executive-level position was eliminated last May, had been earning $225,000, and the family is now primarily living off savings.
Historically, the way couples divide household jobs has been fairly resistant to change, says Heidi Hartmann, president and chief economist at the Institute for Women’s Policy Research.
“Over a long, 20-year period, married men have stepped up to the plate a little bit, but not as much as married women have dropped off in the time they spend on household chores,” Ms. Hartmann says. This suggests some domestic duties have been outsourced, as when takeout substitutes for cooking, for example. And as declining incomes force families to cut back on these outlays, she says, “women will most likely pick up the slack.”
A severe recession could put pressure on these roles.
“It has definitely put a strain” on my marriage, says Debbie Harlan, an executive assistant at a hospital system in Sarasota, Fla. Four months ago, her husband closed his 10-year-old independent car sales business, and the couple have been asking their children to help with bills. “So far we’ve worked through it, but there have been times when I wasn’t sure we could.”
The Mohammeds say things are not as stressful as they were the last time Mr. Mohammed lost his job. He has been helping out with the cooking and with paperwork for his wife’s business, and she says she works to prop up family morale.
“Things are not happy in the house if I blame him all the time, so I don’t do any of that anymore,” Ms. Mohammed says. “I know he is doing his best.”
Thursday, February 5, 2009
Goldman Sachs forecast $1,000 gold in 3 months
According to Reuters today Goldman Sachs lifted its three-month gold forecast to $1,000 an ounce from $700 an ounce, citing safe-haven demand for gold.
"The gold price rally has been driven by surging demand for gold in all forms: physical gold, exchange traded funds and futures contracts and investors seek a 'safe store of value'," the bank said in a note.
"It is also important to emphasise that the recent strong demand for gold has not been irrational, but rather pretty much in line with the probabilities of financial and sovereign default."
"The gold price rally has been driven by surging demand for gold in all forms: physical gold, exchange traded funds and futures contracts and investors seek a 'safe store of value'," the bank said in a note.
"It is also important to emphasise that the recent strong demand for gold has not been irrational, but rather pretty much in line with the probabilities of financial and sovereign default."
Wednesday, February 4, 2009
Merrill Lynch CIO predicted gold prices could hit $1,500
Wednesday, February 04, 2009
Business 24|7
Gold prices may hit $1,500 an ounce in the next 12 to 15 months, Gary Dugan, the Chief Investment Officer (CIO) of Merrill Lynch, said yesterday.
Dugan termed his apprehensions of gold striking such a high as a "fear" that may come true. He reasoned that such a price would mean the other commodities and streams of investments have been shunned by investors.
With confidence in currencies shaken to the core, the yellow metal is increasingly assuming the role of "the most trusted currency", Dugan said. "We have never seen such a rush to buy gold. It's bringing in security and it's still affordable."
Merrill Lynch commodity price forecast authored by Dugan showed that gold prices can rise from the currently prevailing $913/oz to $1,100/oz in the first quarter of 2009 and to $1,150/oz in the second quarter. "While demand for gold has been rising production has been declining. South Africa, which accounts for the major share of global gold production, is facing political issues and has energy problems," Dugan said.
With reports of declining returns from other investment options, "cash" – keeping money safe in banks and investing in government bonds – is the option in front of investors, Dugan said.
"Fear" and eventual decline of the greenback are the two factors that will drive gold prices, he said. While commodity markets could also bounce back in the first half of the year, a rebound is likely to be short-lived in the absence of strong US consumer demand.
Precious metals, led by gold, could enjoy a more sustained rally with gold benefiting from a weakening of the dollar in the second half of the year, Dugan said.
Dugan said the greenback, which has been strengthening for the past few months, will decline in value by the middle of this year. "That's when people will begin to realise that President Obama's policies are not having the desired impact," he said.
Investors could also look to private equity, which produced strong returns during the downturns in 1991 and 2001, on an opportunistic basis. Some hedge fund strategies may be worth following but hedge funds should be treated with caution, Dugan said.
Returns from private equity should remain in single digits in 2009 and a return of beyond 10 per cent should be treated as "fair value", he said. "Investors should remain cautious. They need to be prepared to take profits. We think any such rally would run out of steam by the second half of the year."
Low risk assets could offer private investors the best prospects of attractive returns in 2009 as the world's leading industrialised nations face recession, Dugan said. With governments around the world striving to tackle the economic crisis, private investors could find value in a cautious approach towards asset allocation. Options include high-grade corporate bonds and high-quality, high-yielding equities in defensive industries.
"Investors will look to long-term US government bonds as an important barometer of the progress of global recovery," said Dugan. "Sharply rising bond yields will show that the governments have overspent."
While earnings downgrades are likely to dominate the first quarter of 2009, a rally in global equity markets could be on the cards for the first half of the year with consumer and cyclical stocks among the potential beneficiaries, Dugan said.
Broad equities indices could also offer trading opportunities to private investors. "Equities could outperform as an asset class in 2009 unless there is a serious deflation risk. Our view is that deflation will be avoided," he added.
Selective investment in high-grade corporate bonds could also provide attractive returns, Dugan said.
Business 24|7
Gold prices may hit $1,500 an ounce in the next 12 to 15 months, Gary Dugan, the Chief Investment Officer (CIO) of Merrill Lynch, said yesterday.
Dugan termed his apprehensions of gold striking such a high as a "fear" that may come true. He reasoned that such a price would mean the other commodities and streams of investments have been shunned by investors.
With confidence in currencies shaken to the core, the yellow metal is increasingly assuming the role of "the most trusted currency", Dugan said. "We have never seen such a rush to buy gold. It's bringing in security and it's still affordable."
Merrill Lynch commodity price forecast authored by Dugan showed that gold prices can rise from the currently prevailing $913/oz to $1,100/oz in the first quarter of 2009 and to $1,150/oz in the second quarter. "While demand for gold has been rising production has been declining. South Africa, which accounts for the major share of global gold production, is facing political issues and has energy problems," Dugan said.
With reports of declining returns from other investment options, "cash" – keeping money safe in banks and investing in government bonds – is the option in front of investors, Dugan said.
"Fear" and eventual decline of the greenback are the two factors that will drive gold prices, he said. While commodity markets could also bounce back in the first half of the year, a rebound is likely to be short-lived in the absence of strong US consumer demand.
Precious metals, led by gold, could enjoy a more sustained rally with gold benefiting from a weakening of the dollar in the second half of the year, Dugan said.
Dugan said the greenback, which has been strengthening for the past few months, will decline in value by the middle of this year. "That's when people will begin to realise that President Obama's policies are not having the desired impact," he said.
Investors could also look to private equity, which produced strong returns during the downturns in 1991 and 2001, on an opportunistic basis. Some hedge fund strategies may be worth following but hedge funds should be treated with caution, Dugan said.
Returns from private equity should remain in single digits in 2009 and a return of beyond 10 per cent should be treated as "fair value", he said. "Investors should remain cautious. They need to be prepared to take profits. We think any such rally would run out of steam by the second half of the year."
Low risk assets could offer private investors the best prospects of attractive returns in 2009 as the world's leading industrialised nations face recession, Dugan said. With governments around the world striving to tackle the economic crisis, private investors could find value in a cautious approach towards asset allocation. Options include high-grade corporate bonds and high-quality, high-yielding equities in defensive industries.
"Investors will look to long-term US government bonds as an important barometer of the progress of global recovery," said Dugan. "Sharply rising bond yields will show that the governments have overspent."
While earnings downgrades are likely to dominate the first quarter of 2009, a rally in global equity markets could be on the cards for the first half of the year with consumer and cyclical stocks among the potential beneficiaries, Dugan said.
Broad equities indices could also offer trading opportunities to private investors. "Equities could outperform as an asset class in 2009 unless there is a serious deflation risk. Our view is that deflation will be avoided," he added.
Selective investment in high-grade corporate bonds could also provide attractive returns, Dugan said.
John Paulson: Bearish for Now
Hedge fund head John Paulson — who continues to make huge profits for his investors while other managers continue to drown in red — ink remains bearish going into 2009.
“The sharp contraction in the global economy, the instability of the global financial system and the ongoing credit contraction are unlikely to be resolved in the first half of 2009,” Paulson wrote in his year-end letter to investors.
Paulson's two credit funds were up 19 percent and 16 percent respectively last year, avoiding buying distressed debt such as mortgages and leveraged loans even though both were trading at what appeared to be attractive prices.
Instead, the fund essentially bet against the debt of several financial institutions by purchasing credit-default swaps.
Now, Paulson remains short financial stocks and slightly short of the equity markets in general but sees a big opportunity in buying distressed debt.
“The biggest driver for 2009 and 2010 will be in long distressed opportunities,” he says.
“We estimate the potential size of the distressed market to approach $10 trillion.”
Two-thirds of the several hundred asset managers who responded to a recent survey said they plan to raise more money and increase their investments in distressed debt this year, The Wall Street Journal reports.
One-third believe the first quarter is the right time to buy, and more than half are expecting it to pay off smartly, projecting 20 percent returns or more for the year.
“The sharp contraction in the global economy, the instability of the global financial system and the ongoing credit contraction are unlikely to be resolved in the first half of 2009,” Paulson wrote in his year-end letter to investors.
Paulson's two credit funds were up 19 percent and 16 percent respectively last year, avoiding buying distressed debt such as mortgages and leveraged loans even though both were trading at what appeared to be attractive prices.
Instead, the fund essentially bet against the debt of several financial institutions by purchasing credit-default swaps.
Now, Paulson remains short financial stocks and slightly short of the equity markets in general but sees a big opportunity in buying distressed debt.
“The biggest driver for 2009 and 2010 will be in long distressed opportunities,” he says.
“We estimate the potential size of the distressed market to approach $10 trillion.”
Two-thirds of the several hundred asset managers who responded to a recent survey said they plan to raise more money and increase their investments in distressed debt this year, The Wall Street Journal reports.
One-third believe the first quarter is the right time to buy, and more than half are expecting it to pay off smartly, projecting 20 percent returns or more for the year.
UBS grows more bullish on gold and silver
One of the best performing assets of 2008 is expected to have another good year in 2009. Despite adverse moves in three of gold’s most powerful drivers – a stronger U.S. dollar particularly against European currencies, the sharp decline for crude oil and rapidly falling inflation – UBS has increased its forecasts for gold and silver as it sees both investor and speculative interest boosting prices, even as jewellery demand falls and the U.S. dollar strengthens.
Its gold price targets for 2009 and 2010 move from US$700 per ounce for both years to US$1000 and US$900, respectively. UBS’s silver forecasts climb from US$8.40 and US$8.95 per ounce to US$14.75 and US$12.80, respectively.
“Purchases of physical gold have jumped over the past six months as investors’ fears about the current financial crisis and the possible outcomes from government efforts to support banks and economies have intensified,” UBS strategist John Reade told clients.
The European bank estimates that investment demand will double in 2009 compared to 2007, which will drive gold to an average of US$1000. It expects this safe haven buying to decline in 2010.
Based on the implied returns from these changes, UBS upgraded Agnico-Eagle Mines Ltd., Barrick Gold Corp., Eldorado Gold Corp., Newmont Mining Corp. and Goldcorp Inc. from “neutral” to “buy,” while maintaining “buy” ratings on Centerra Gold Inc. and Franco-Nevada Corp.
The firm also noted that precious metals remain its preferred investments in a commodity context and it anticipates that gold and platinum equities could continue to outperform. It favours names like Impala Platinum Holdings Ltd., Barrick and Goldcorp.
Its gold price targets for 2009 and 2010 move from US$700 per ounce for both years to US$1000 and US$900, respectively. UBS’s silver forecasts climb from US$8.40 and US$8.95 per ounce to US$14.75 and US$12.80, respectively.
“Purchases of physical gold have jumped over the past six months as investors’ fears about the current financial crisis and the possible outcomes from government efforts to support banks and economies have intensified,” UBS strategist John Reade told clients.
The European bank estimates that investment demand will double in 2009 compared to 2007, which will drive gold to an average of US$1000. It expects this safe haven buying to decline in 2010.
Based on the implied returns from these changes, UBS upgraded Agnico-Eagle Mines Ltd., Barrick Gold Corp., Eldorado Gold Corp., Newmont Mining Corp. and Goldcorp Inc. from “neutral” to “buy,” while maintaining “buy” ratings on Centerra Gold Inc. and Franco-Nevada Corp.
The firm also noted that precious metals remain its preferred investments in a commodity context and it anticipates that gold and platinum equities could continue to outperform. It favours names like Impala Platinum Holdings Ltd., Barrick and Goldcorp.
Tuesday, February 3, 2009
Eric Sprott said bullion may top $2,000 an ounce in coming years
Feb. 3 (Bloomberg) -- Eric Sprott, the Canadian money manager who last year predicted banking stocks would collapse, said the U.S. is at the beginning of an economic depression that will help gold prices more than double.
Bullion may top $2,000 an ounce in coming years amid a series of financial catastrophes, the chairman and founder of Toronto-based Sprott Asset Management Inc. said yesterday in an interview. Banks will battle to replenish capital, Treasury auctions stand the risk of failing and the moribund economy will create a dire operating outlook for many companies, he said.
“The trend is down, and there’s not one signpost that says it’s changing yet,” Sprott said yesterday from Toronto. “We’ll stand by to wait to see those, and until it does, you have to assume it gets worse.”
Sprott, who manages $4.5 billion, said in March that the world was in a “systemic financial meltdown,” a call that presaged the collapse of financial institutions including Bear Stearns & Co. and Lehman Brothers Holdings Inc. Since then, the U.S. has entered the worst economic slowdown since the Great Depression, credit markets have tightened and asset prices have dropped as companies and funds sell portfolios to raise cash.
The 81-company Standard & Poor’s 500 Financials Index has dropped 62 percent since Sprott said on March 6 he was buying bullion and gold-producers’ shares, while shorting financial- sector stocks. Gold slipped 6.3 percent during the same period.
So-called short-selling allows speculators to profit from a stock’s decline by borrowing shares, selling them to raise cash and buying them later when the price drops to repay the debt.
Sprott Funds
Sprott Hedge Fund LP posted a one-year return of 9.9 percent, while Sprott Hedge Fund LP II rose 18 percent in the period, according to data posted on the company’s Web site. The Sprott Canadian Equity Fund dropped 37 percent.
Sprott now favors buying more gold stocks and bullion while selling the entire equity market short. Most at risk in the current climate are banks, discretionary consumer stocks and any companies needing to refinance debt, he said.
Sprott believes there is a chance that a U.S. Treasury auction will fail as countries use their resources to quell financial turmoil in their home markets, leaving less to help finance the world’s largest economy. That outcome will have a “catastrophic” impact, he said.
“When do people stop buying the credit of the country? That’s a tough question to answer, but it’s on a lot of people’s lips right now,” he said. “Each country has their own financial problem, so there’s no funding for anything external.”
Gold Investors
Such concerns have driven investors to the gold market, propelling the metal higher as other commodities have slumped and helping gold-producers’ stocks almost double in the past three months.
Greenlight Capital Inc., a $5.1 billion New York-based hedge fund, has invested in gold for the first time, while Federated Investors Inc.’s $1.3 billion Federated Market Opportunity Fund, which outperformed 99 percent of rivals last year, now counts Yamana Gold Inc. and Goldcorp Inc. among its largest investments.
Gold companies such as Newmont Mining Corp. and Kinross Gold Corp. have taken the opportunity to issue stock to bolster their own balance sheets.
Barrick Gold Corp. Chairman Peter Munk said last week he has been inundated with calls from wealthy investors seeking to buy gold to protect their capital.
“The window to raise money for gold stocks has blown open,” Sprott said. “The investing public has started to go to that one thing that they think it’s safe to invest in.”
Bullion may top $2,000 an ounce in coming years amid a series of financial catastrophes, the chairman and founder of Toronto-based Sprott Asset Management Inc. said yesterday in an interview. Banks will battle to replenish capital, Treasury auctions stand the risk of failing and the moribund economy will create a dire operating outlook for many companies, he said.
“The trend is down, and there’s not one signpost that says it’s changing yet,” Sprott said yesterday from Toronto. “We’ll stand by to wait to see those, and until it does, you have to assume it gets worse.”
Sprott, who manages $4.5 billion, said in March that the world was in a “systemic financial meltdown,” a call that presaged the collapse of financial institutions including Bear Stearns & Co. and Lehman Brothers Holdings Inc. Since then, the U.S. has entered the worst economic slowdown since the Great Depression, credit markets have tightened and asset prices have dropped as companies and funds sell portfolios to raise cash.
The 81-company Standard & Poor’s 500 Financials Index has dropped 62 percent since Sprott said on March 6 he was buying bullion and gold-producers’ shares, while shorting financial- sector stocks. Gold slipped 6.3 percent during the same period.
So-called short-selling allows speculators to profit from a stock’s decline by borrowing shares, selling them to raise cash and buying them later when the price drops to repay the debt.
Sprott Funds
Sprott Hedge Fund LP posted a one-year return of 9.9 percent, while Sprott Hedge Fund LP II rose 18 percent in the period, according to data posted on the company’s Web site. The Sprott Canadian Equity Fund dropped 37 percent.
Sprott now favors buying more gold stocks and bullion while selling the entire equity market short. Most at risk in the current climate are banks, discretionary consumer stocks and any companies needing to refinance debt, he said.
Sprott believes there is a chance that a U.S. Treasury auction will fail as countries use their resources to quell financial turmoil in their home markets, leaving less to help finance the world’s largest economy. That outcome will have a “catastrophic” impact, he said.
“When do people stop buying the credit of the country? That’s a tough question to answer, but it’s on a lot of people’s lips right now,” he said. “Each country has their own financial problem, so there’s no funding for anything external.”
Gold Investors
Such concerns have driven investors to the gold market, propelling the metal higher as other commodities have slumped and helping gold-producers’ stocks almost double in the past three months.
Greenlight Capital Inc., a $5.1 billion New York-based hedge fund, has invested in gold for the first time, while Federated Investors Inc.’s $1.3 billion Federated Market Opportunity Fund, which outperformed 99 percent of rivals last year, now counts Yamana Gold Inc. and Goldcorp Inc. among its largest investments.
Gold companies such as Newmont Mining Corp. and Kinross Gold Corp. have taken the opportunity to issue stock to bolster their own balance sheets.
Barrick Gold Corp. Chairman Peter Munk said last week he has been inundated with calls from wealthy investors seeking to buy gold to protect their capital.
“The window to raise money for gold stocks has blown open,” Sprott said. “The investing public has started to go to that one thing that they think it’s safe to invest in.”
Friday, January 30, 2009
Fair oil price would be twice as high, Opec says
By Sean O'Grady, Economics Editor, in Davos
Friday, 30 January 2009
A "fair price" for oil is between $60 and $80 a barrel, the secretary general of Opec, Abdullah al-Badri, told participants at the World Economic Forum yesterday, up to twice as high as the current price in the market.
Mr Badri warned he believed that the current price of oil, around the $40 mark, was insufficient to provide an acceptable income for Opec member states, or high enough to fund the investment needed to raise capacity in time for the next economic upswing.
The price of a barrel of oil has fallen from a peak of almost $150 last summer to below $40 in recent weeks as demand for oil has fallen sharply in line with the global economic downturn. The oil producers' group, said Mr Badri, was prepared to act to reduce supply further if necessary; having decided to cut output in September and October, Opec oil production will be 4.2 million barrels a day lower by the end of this month, and further cuts in supply would act as an inflationary pressure on the market price.
The cartel, which accounts for roughly 35 per cent of world oil production and two-thirds of proven reserves, is next due to meet formally in March in Vienna, Austria. Mr Badri said that if Opec was still suffering from what he described as a "destruction of demand" in March, then members of the group "will not hesitate to take oil out of the market".
He said he was "not very happy" with oil at $40 "or even $50" per barrel. "Even with $50 we cannot have a decent income for our members," Mr Badri added.
However, while Opec member states have been warning for some months that the current market conditions cannot continue indefinitely, higher oil prices would be a blow to much of the world. As the global economy enters what the International Monetary Fund said on Wednesday would be the worst recession since the Second World War, cheaper oil is one of the few bright spots. Any push by Opec for higher prices through restricting supply will suck even more spending power out of the advanced and emerging economies, and may hit developing nations especially hard.
Nevertheless, the Opec secretary general's declaration of a "reasonable price range" was endorsed yesterday by BP's chief executive, Tony Hayward, who estimated that a price of between $60 to $80 a barrel was needed to ensure adequate investment to meet growing oil demand by Opec countries. Mr Hayward also said that only this level of price would meet the cost of producing the marginal 3 million to 5 million barrels a day of world supply from sources such as ultra-deep water wells, Angola, Brazil and Canada's oil sands.
The BP boss said, however, that price levels higher than $100 tended to adversely affect consumer behaviour.
Pierre Gadonneix, chairman and chief executive of Electricité de France (EDF), also agreed that $60 to $80 would be compatible with a competitive nuclear power sector, which he favoured.
Indeed the "spirit of Davos" seemed to overwhelm all the energy session panel members in their rush to agree with the $60 to $80 proposal: other panel members, including Mukesh Ambani, chairman of the Indian giant Reliance Industries, which has interests in natural gas, and the President of oil-producing Azerbaijan, Ilham Aliyev, were also happy to back the Opec line.
Mr Badri repeated the Opec claim that the spike in the price of oil to an all-time high of $147 last year was artificially created by speculative traders rather than genuinely reflecting demand and supply. He also hinted at the idea that the world's major oil producers and consumers should agree the oil price and make oil a much less traded commodity.
Friday, 30 January 2009
A "fair price" for oil is between $60 and $80 a barrel, the secretary general of Opec, Abdullah al-Badri, told participants at the World Economic Forum yesterday, up to twice as high as the current price in the market.
Mr Badri warned he believed that the current price of oil, around the $40 mark, was insufficient to provide an acceptable income for Opec member states, or high enough to fund the investment needed to raise capacity in time for the next economic upswing.
The price of a barrel of oil has fallen from a peak of almost $150 last summer to below $40 in recent weeks as demand for oil has fallen sharply in line with the global economic downturn. The oil producers' group, said Mr Badri, was prepared to act to reduce supply further if necessary; having decided to cut output in September and October, Opec oil production will be 4.2 million barrels a day lower by the end of this month, and further cuts in supply would act as an inflationary pressure on the market price.
The cartel, which accounts for roughly 35 per cent of world oil production and two-thirds of proven reserves, is next due to meet formally in March in Vienna, Austria. Mr Badri said that if Opec was still suffering from what he described as a "destruction of demand" in March, then members of the group "will not hesitate to take oil out of the market".
He said he was "not very happy" with oil at $40 "or even $50" per barrel. "Even with $50 we cannot have a decent income for our members," Mr Badri added.
However, while Opec member states have been warning for some months that the current market conditions cannot continue indefinitely, higher oil prices would be a blow to much of the world. As the global economy enters what the International Monetary Fund said on Wednesday would be the worst recession since the Second World War, cheaper oil is one of the few bright spots. Any push by Opec for higher prices through restricting supply will suck even more spending power out of the advanced and emerging economies, and may hit developing nations especially hard.
Nevertheless, the Opec secretary general's declaration of a "reasonable price range" was endorsed yesterday by BP's chief executive, Tony Hayward, who estimated that a price of between $60 to $80 a barrel was needed to ensure adequate investment to meet growing oil demand by Opec countries. Mr Hayward also said that only this level of price would meet the cost of producing the marginal 3 million to 5 million barrels a day of world supply from sources such as ultra-deep water wells, Angola, Brazil and Canada's oil sands.
The BP boss said, however, that price levels higher than $100 tended to adversely affect consumer behaviour.
Pierre Gadonneix, chairman and chief executive of Electricité de France (EDF), also agreed that $60 to $80 would be compatible with a competitive nuclear power sector, which he favoured.
Indeed the "spirit of Davos" seemed to overwhelm all the energy session panel members in their rush to agree with the $60 to $80 proposal: other panel members, including Mukesh Ambani, chairman of the Indian giant Reliance Industries, which has interests in natural gas, and the President of oil-producing Azerbaijan, Ilham Aliyev, were also happy to back the Opec line.
Mr Badri repeated the Opec claim that the spike in the price of oil to an all-time high of $147 last year was artificially created by speculative traders rather than genuinely reflecting demand and supply. He also hinted at the idea that the world's major oil producers and consumers should agree the oil price and make oil a much less traded commodity.
Thursday, January 29, 2009
Dr. Doom: Roubini Predicts More Global Gloom
Jan. 30 (Bloomberg) -- At the World Economic Forum two years ago, Nouriel Roubini warned that record profits and bonuses were obscuring a “hard landing” to come. “I really disagree,” countered Jacob Frenkel, the American International Group Inc. vice chairman and former Israeli central banker.
No more. “Roubini was intellectually courageous, and he called the shots correctly,” says Frenkel, whose AIG survives only on the basis of more than $100 billion of government loans. “He gained credibility, and he deserves it.”
This week, New York University’s Roubini returned to the WEF and the Swiss ski resort of Davos as the prophet of the worst economic and financial crisis since the Great Depression - - joining the ranks of previous “Dr. Dooms” who made their names through contrarian calls that proved correct.
Even as he wins plaudits for his prescience, Roubini, 50, says worse lies ahead. Banks face bigger credit losses than they realize, more financial companies will require state takeovers and the world economy will keep shrinking throughout 2009, he says.
“The consensus is catching up with me, but it’s still behind,” Roubini said in an interview in Davos. “I don’t know what some people are smoking.”
‘Catastrophic’
As long ago as February 2007, Roubini was writing on his blog that “the party will soon be over,” and warning of “painful consequences for the U.S. and the global economy.” By last February, his tone had become apocalyptic, raising the specter of a “catastrophic” meltdown that central banks would fail to prevent, triggering the bankruptcy of large banks with mortgage holdings and a “sharp drop” in equities.
The next month, Bear Stearns Cos. failed, to be taken over by JPMorgan Chase & Co. in a government-backed deal. Then, in September, Lehman Brothers Holdings Inc. went bankrupt, prompting banks to hoard cash and depriving businesses and households of access to capital. The U.S. took over AIG, Fannie Mae and Freddie Mac, and the Standard & Poor’s 500 Index suffered its worst year since 1937.
“I was intellectually vindicated,” Roubini says. “But I was vindicated by having an economic disaster which has political and social consequences.”
Predecessors
Roubini’s predecessors in the role of economic nay-sayer include some well-known names: Joseph Granville, publisher of the Granville Market Letter, who forecast the stock-market declines of 1976 and 2000; Henry Kaufman, who as a managing director at Salomon Brothers projected rising interest rates that led to a U.S. recession in the early 1980s; Marc Faber, publisher of the Gloom, Boom & Doom Report, who predicted the 1987 stock crash; and Yale University’s Robert Shiller, a former colleague of Roubini’s, who forecast the end of the dot-com bubble in his 2000 book “Irrational Exuberance.”
Granville, 85, says the key to being an outlier is not to doubt your analysis.
“I don’t have anything to do with emotion,” says Granville, who’s based in Kansas City. “Keep your head, follow the numbers and ignore the rest.”
Roubini was born in Istanbul, the son of an importer- exporter of carpets, and spent his childhood in Israel, Iran and Italy. It was while living in Milan from 1962 to 1982, he says, that he became attracted to economics: “Economics had the tools to understand the world, and not just understand it but also change it for the better.”
International Economics
After a year at the Hebrew University of Jerusalem, he earned an economics degree at Milan’s Universita’ L. Bocconi and then his Ph.D. at Harvard University in 1988, where he specialized in international economics.
Jeffrey Sachs, he says, became his “role model” at Harvard by demonstrating that economists could shape public policy -- as Sachs did by lobbying for poor countries to have their debts relieved by richer governments. Sachs is now a professor at Columbia University.
“You sensed there was something beyond academia, that you have to figure out the big issues of the global economy,” says Roubini. “You have to be engaged, and can’t just be in an ivory tower.”
For much of the 1990s, Roubini combined academic research and policy-making by teaching at Yale and then in New York, while also spending time at the International Monetary Fund, the Federal Reserve, World Bank and Bank of Israel.
Joining Clinton
By 1998 he had attracted the attention of President Bill Clinton’s administration, joining it first as a senior economist in the White House Council of Economic Advisers and then moving to the Treasury department as a senior adviser to Timothy Geithner, then the undersecretary for international affairs and now Treasury secretary in the Obama administration.
Roubini returned to the IMF in 2001 as a visiting scholar while it battled a financial meltdown in Argentina. He co-wrote a book on saving bankrupt economies entitled “Bailouts or Bail- ins?” and opened his own global consulting firm, which now employs two dozen economists and publishes a popular Web site and blog.
“Nouriel has a rare combination of economics and the real world, and so has great insight because of that,” says Shiller. “He looks into the details and rolls up his sleeves.”
Roubini says working on emerging-market blowouts in Asia and Latin America allowed him to spot the looming disaster in the U.S. “I’ve been studying emerging markets for 20 years, and saw the same signs in the U.S. that I saw in them, which was that we were in a massive credit bubble,” he says.
Still a Pessimist
With that bubble now popped, Roubini remains more pessimistic than economists elsewhere. The IMF forecasts global growth of 0.5 percent this year and bank losses from toxic U.S.- originated assets of $2.2 trillion. By contrast, Roubini sees the global economy shrinking this year, and banks writing down at least $3.6 trillion -- compared to the $1.1 trillion disclosed so far.
While the U.S. government is resisting nationalizing its biggest banks, Roubini says it will have no choice because they are now “effectively insolvent.” And the outcome may be even worse than even he anticipates if governments fail to take aggressive steps to recapitalize banks and revive their economies, he says: “The risk of a near-depression shouldn’t be underestimated.”
Roubini, who’s now working on a book about the crisis, says he takes no particular pleasure in his role as Dr. Doom or the attention it brings him.
“I’m not a permanent bear,” he says. “I’ll be the first to call a recovery, but I just don’t see it yet, and it’s getting uglier.”
Barrick Chairman Mr. Munk said Gold likely to hit new highs
The gold price is likely to hit record highs in dollar terms as fears grow about the stability of the US currency, the chairman of Barrick Gold said today at the World Economic Forum (WEF) in Davos.
The founder of the world’s largest goldmining company said that there was even a possibility that central banks, including China’s, might start to switch from dollar holdings to gold, which could cause the price of the metal to treble.
“Gold is at record levels in every currency except dollars," Peter Munk told Reuters at the WEF meeting.
"Even within dollar terms it is within a few percentage points of an all-time high, at a time when all the other major commodities are falling.”
Mr Munk said: “Whether it’s the currency effect or a reaction to a feeling of uncertainty, gold, in my opinion, is more likely to go up than down.”
The gold price was up today, trading at about $890 at 1500GM. At present the record high is $1,030.80 an ounce, achieved in March last year.
Mr Munk emphasised that he was merely weighing the odds.
“It would be stupid to assume commodities prices can only go one way,” he said, adding that physical demand for gold jewellery was not high during the economic downturn.
Gold has been one of the best-performing assets of recent months, rising in value by nearly 17 per cent since late October even as the price of other commodities, such as oil and copper, has dropped sharply.
Investors have bought heavily into physical bullion in the form of coins and bars, and physically backed assets, such as exchange-traded funds, as a safe store of value at a time of increased volatility in other asset prices.
Mr Munk said that downward pressure on the dollar, partly due to massive US spending and printing money to stimulate the economy, would increase gold’s attractions as an investment even further.
Gold usually moves in the opposite direction to the dollar, as it is often bought as a hedge against weakness in the US currency.
“My personal feeling is that with the rescue packages calling for trillions, not billions ... the value of the [US] currency has to go down,” Mr Munk said.
He said that there was a possibility that central banks, including that of China, a major dollar asset holder, might start buying gold.
“If they decide to diversify, we assume into gold, then we start to talk about a trebling or quadrupling of the gold price," he said. "It could be followed by Russia or Kuwait.
“I don’t think it’s likely, but it’s more likely. I would not have said it two years ago — I’m not a gold bug — but it’s more likely than it was two years ago.”
He added that his company did not now hedge its output — meaning use derivatives to insure against a fall in price — and relied on the price climbing.
In the past its successful hedging allowed it to make key acquisitions.
“It would be dumb to hedge,” Mr Munk said
The founder of the world’s largest goldmining company said that there was even a possibility that central banks, including China’s, might start to switch from dollar holdings to gold, which could cause the price of the metal to treble.
“Gold is at record levels in every currency except dollars," Peter Munk told Reuters at the WEF meeting.
"Even within dollar terms it is within a few percentage points of an all-time high, at a time when all the other major commodities are falling.”
Mr Munk said: “Whether it’s the currency effect or a reaction to a feeling of uncertainty, gold, in my opinion, is more likely to go up than down.”
The gold price was up today, trading at about $890 at 1500GM. At present the record high is $1,030.80 an ounce, achieved in March last year.
Mr Munk emphasised that he was merely weighing the odds.
“It would be stupid to assume commodities prices can only go one way,” he said, adding that physical demand for gold jewellery was not high during the economic downturn.
Gold has been one of the best-performing assets of recent months, rising in value by nearly 17 per cent since late October even as the price of other commodities, such as oil and copper, has dropped sharply.
Investors have bought heavily into physical bullion in the form of coins and bars, and physically backed assets, such as exchange-traded funds, as a safe store of value at a time of increased volatility in other asset prices.
Mr Munk said that downward pressure on the dollar, partly due to massive US spending and printing money to stimulate the economy, would increase gold’s attractions as an investment even further.
Gold usually moves in the opposite direction to the dollar, as it is often bought as a hedge against weakness in the US currency.
“My personal feeling is that with the rescue packages calling for trillions, not billions ... the value of the [US] currency has to go down,” Mr Munk said.
He said that there was a possibility that central banks, including that of China, a major dollar asset holder, might start buying gold.
“If they decide to diversify, we assume into gold, then we start to talk about a trebling or quadrupling of the gold price," he said. "It could be followed by Russia or Kuwait.
“I don’t think it’s likely, but it’s more likely. I would not have said it two years ago — I’m not a gold bug — but it’s more likely than it was two years ago.”
He added that his company did not now hedge its output — meaning use derivatives to insure against a fall in price — and relied on the price climbing.
In the past its successful hedging allowed it to make key acquisitions.
“It would be dumb to hedge,” Mr Munk said
Robert Rubin Says Mark-to-Market has Done ‘Damage’
Jan. 28 (Bloomberg) -- Robert Rubin, who quit his post as senior counselor at Citigroup Inc. this month, said an accounting rule forcing companies to mark down assets every quarter to reflect market value has “done a great deal of damage.”
“I spent my whole life at Goldman Sachs believing in mark- to-market accounting, and having said that, if you look at the experience from the last two years, I think mark-to-market accounting has led to terrible vicious cycles in asset prices,” Rubin, the former U.S. Treasury secretary, said during a discussion at the 92nd Street Y late yesterday.
Companies including Citigroup and American International Group Inc. say mark-to-market, also known as fair-value accounting, doesn’t work when few buyers are willing to trade assets like subprime mortgages. Proponents such as the U.S. Financial Accounting Standards Board say the rule adds to transparency and gives investors information about companies.
Rubin joined Citigroup in 1999. Earlier this month, he announced he won’t stand for re-election to the board. Rubin, 70, proposed that a “reserve” accounting standard be adopted, which drew applause from the audience.
Citigroup received a $45 billion bailout from the U.S. government after reporting more than $85 billion of credit losses and writedowns from investments tainted by the subprime-mortgage crisis.
‘Controversial’
“Mark-to-market accounting has done a great deal of damage,” Rubin said. “For a lot of financial institutions we should move to something that is more similar to reserve accounting. That will be a very controversial matter.”
Under reserve accounting, assets like loans are carried at cost, offset by reserves for potential losses. Rubin was criticized by investors for collecting more than $150 million in pay in a decade while failing to steer Citigroup away from subprime mortgages.
Goldman Sachs Group Inc., where Rubin was co-chairman in the early 1990s and where he spent 26 years, is an advocate of fair- value accounting. Rubin left Goldman Sachs to become a top economic adviser to President Bill Clinton in 1993. In 1994, he succeeded Lloyd Bentsen as Treasury secretary, presiding over five years of economic growth.
“For us, fair value is the oxygen of the firm,” Matthew Schroeder, managing director for accounting policy at Goldman Sachs, said at a U.S. Securities and Exchange Commission public meeting in July. “It’s part of our fabric. We follow a daily discipline of marking to market at our firm. It can be done.”
The SEC said the rule should be improved rather than suspended in a study released Dec. 30.
“I spent my whole life at Goldman Sachs believing in mark- to-market accounting, and having said that, if you look at the experience from the last two years, I think mark-to-market accounting has led to terrible vicious cycles in asset prices,” Rubin, the former U.S. Treasury secretary, said during a discussion at the 92nd Street Y late yesterday.
Companies including Citigroup and American International Group Inc. say mark-to-market, also known as fair-value accounting, doesn’t work when few buyers are willing to trade assets like subprime mortgages. Proponents such as the U.S. Financial Accounting Standards Board say the rule adds to transparency and gives investors information about companies.
Rubin joined Citigroup in 1999. Earlier this month, he announced he won’t stand for re-election to the board. Rubin, 70, proposed that a “reserve” accounting standard be adopted, which drew applause from the audience.
Citigroup received a $45 billion bailout from the U.S. government after reporting more than $85 billion of credit losses and writedowns from investments tainted by the subprime-mortgage crisis.
‘Controversial’
“Mark-to-market accounting has done a great deal of damage,” Rubin said. “For a lot of financial institutions we should move to something that is more similar to reserve accounting. That will be a very controversial matter.”
Under reserve accounting, assets like loans are carried at cost, offset by reserves for potential losses. Rubin was criticized by investors for collecting more than $150 million in pay in a decade while failing to steer Citigroup away from subprime mortgages.
Goldman Sachs Group Inc., where Rubin was co-chairman in the early 1990s and where he spent 26 years, is an advocate of fair- value accounting. Rubin left Goldman Sachs to become a top economic adviser to President Bill Clinton in 1993. In 1994, he succeeded Lloyd Bentsen as Treasury secretary, presiding over five years of economic growth.
“For us, fair value is the oxygen of the firm,” Matthew Schroeder, managing director for accounting policy at Goldman Sachs, said at a U.S. Securities and Exchange Commission public meeting in July. “It’s part of our fabric. We follow a daily discipline of marking to market at our firm. It can be done.”
The SEC said the rule should be improved rather than suspended in a study released Dec. 30.
Monday, January 26, 2009
Chinese Ministry Denies Geithner's Currency Claims
The Wall Street Journal
JANUARY 25, 2009, 10:37 P.M. ET
BEIJING -- A Chinese ministry Saturday strongly denied Obama administration claims that China "manipulates" its currency, as the first contact between the new administration and China takes a markedly sour tone.
On Thursday, President Obama's nominee for Treasury secretary, Timothy Geithner, told U.S. lawmakers that President Barack Obama, "backed by the conclusions of a broad range of economists -- believes that China is manipulating its currency." No Chinese official of Mr. Geithner's standing has fired back -- a move analysts say shows that China doesn't want to overreact to the statement -- but Saturday morning an official from China's Ministry of Commerce said "we never have used currency manipulation or exchange-rate manipulation as a mains to gain an advantage in international trade." The statement, provided by an official from the ministry's news department, also said China would not "rely on devaluations" of its currency, the yuan, to promote exports.
Meanwhile, a top official in China's central bank said the charge that Beijing manipulates its currency was inaccurate and implied there were bigger issues to address in the global financial crisis.
"In recent days persons in a Western country have said 'China is manipulating the yuan exchange rate,' " said People's Bank of China Vice Governor Su Ning, according to a report Saturday by the state-controlled Xinhua news agency. "These remarks are not only inconsistent with the facts, but they are misleading about the reasons for the financial crisis."
Some Chinese commentators say the verbal sparring is a sign of greater trade friction to come with Washington. They noted that both sides' comments were written, not spoken -- and therefore should be taken as a serious view of intent.
"This is the first communication by the new president's team to China and it is provocative," said Shen Dingli, professor of international relations at Fudan University in Shanghai. China's official Xinhua news agency also weighed in Friday evening, saying that Mr. Geithner's claim "fans Sino-U.S. trade fears," alluding to concern in Beijing over protectionism in the new administration.
Chinese officials are deeply concerned that the global economic downturn could spur protectionist moves in the U.S. and elsewhere that could further damage China's trade-dependent economy. Mr. Geithner's comments marked a significant escalation in U.S. criticism of China's exchange-rate system.
U.S. officials have long argued that China should let its currency, the yuan, strengthen, which could make Chinese exports relatively more expensive and reduce China's massive trade surplus with the U.S. But the just-ended Bush administration stopped short of calling Beijing a currency manipulator.
In recent years, China did let the yuan strengthen, but stopped last year as its economy weakened. Some analysts have expressed concern that Beijing might let the yuan weaken, although Chinese officials have ruled that out. Almost no one in Beijing, however, believes the government would let the currency strengthen in the current environment, or abandon its controls over the currency -- especially given the disastrous results of liberal financial rules on other economies.
[Chart]
Ba Shusong, expert from Financial Research Institute of Development Research Center of the State Council, China's cabinet, said "it is U.S. dollar that is the main currency being manipulated," in part because the U.S. is printing money to pay for its soaring budget deficit. He noted that China and other developing countries hold U.S. dollars as their foreign reserve on the premise that the dollar is being managed responsibly. But in recent years, the U.S. "didn't assume its responsibilities."
Some traders and economists argue that, given Mr. Obama's reputation for pragmatism, the accusation over currency manipulation could have been made to give the U.S. an advantage in the early stage of fresh dialogue with Beijing on foreign exchange and trade.
"I expect Beijing will keep the yuan largely stable this year," said Isaac Meng, an economist at BNP Paribas. "Traders needn't worry about Geithner's remark unduly."
Chinese financial market participants were sanguine about the statement. The benchmark Shanghai Composite Index, which tracks both A and B shares, ended down 0.7% at 1990.66. The Shanghai Stock Exchange government bond index ended flat at 120.71.
"Geithner's comment wasn't that unexpected because people had anticipated the new Obama administration would take a relatively protectionist and populist stance toward China," said a Guangzhou-based trader at a foreign bank.
While there is concern about protectionist rhetoric coming from Washington, China wasn't a major factor in last year's presidential election and both parties agree that China is a key partner in U.S. foreign policy.
In fact, Washington and Beijing could become partners in solving other world-wide problems like global warming, says Scott Kennedy, a professor at Indiana University. In doing so, Washington is likely to call on China to take a more active role. "With a changing of the guard in Washington, China has the opportunity -- and challenge -- of doing much more."
JANUARY 25, 2009, 10:37 P.M. ET
BEIJING -- A Chinese ministry Saturday strongly denied Obama administration claims that China "manipulates" its currency, as the first contact between the new administration and China takes a markedly sour tone.
On Thursday, President Obama's nominee for Treasury secretary, Timothy Geithner, told U.S. lawmakers that President Barack Obama, "backed by the conclusions of a broad range of economists -- believes that China is manipulating its currency." No Chinese official of Mr. Geithner's standing has fired back -- a move analysts say shows that China doesn't want to overreact to the statement -- but Saturday morning an official from China's Ministry of Commerce said "we never have used currency manipulation or exchange-rate manipulation as a mains to gain an advantage in international trade." The statement, provided by an official from the ministry's news department, also said China would not "rely on devaluations" of its currency, the yuan, to promote exports.
Meanwhile, a top official in China's central bank said the charge that Beijing manipulates its currency was inaccurate and implied there were bigger issues to address in the global financial crisis.
"In recent days persons in a Western country have said 'China is manipulating the yuan exchange rate,' " said People's Bank of China Vice Governor Su Ning, according to a report Saturday by the state-controlled Xinhua news agency. "These remarks are not only inconsistent with the facts, but they are misleading about the reasons for the financial crisis."
Some Chinese commentators say the verbal sparring is a sign of greater trade friction to come with Washington. They noted that both sides' comments were written, not spoken -- and therefore should be taken as a serious view of intent.
"This is the first communication by the new president's team to China and it is provocative," said Shen Dingli, professor of international relations at Fudan University in Shanghai. China's official Xinhua news agency also weighed in Friday evening, saying that Mr. Geithner's claim "fans Sino-U.S. trade fears," alluding to concern in Beijing over protectionism in the new administration.
Chinese officials are deeply concerned that the global economic downturn could spur protectionist moves in the U.S. and elsewhere that could further damage China's trade-dependent economy. Mr. Geithner's comments marked a significant escalation in U.S. criticism of China's exchange-rate system.
U.S. officials have long argued that China should let its currency, the yuan, strengthen, which could make Chinese exports relatively more expensive and reduce China's massive trade surplus with the U.S. But the just-ended Bush administration stopped short of calling Beijing a currency manipulator.
In recent years, China did let the yuan strengthen, but stopped last year as its economy weakened. Some analysts have expressed concern that Beijing might let the yuan weaken, although Chinese officials have ruled that out. Almost no one in Beijing, however, believes the government would let the currency strengthen in the current environment, or abandon its controls over the currency -- especially given the disastrous results of liberal financial rules on other economies.
[Chart]
Ba Shusong, expert from Financial Research Institute of Development Research Center of the State Council, China's cabinet, said "it is U.S. dollar that is the main currency being manipulated," in part because the U.S. is printing money to pay for its soaring budget deficit. He noted that China and other developing countries hold U.S. dollars as their foreign reserve on the premise that the dollar is being managed responsibly. But in recent years, the U.S. "didn't assume its responsibilities."
Some traders and economists argue that, given Mr. Obama's reputation for pragmatism, the accusation over currency manipulation could have been made to give the U.S. an advantage in the early stage of fresh dialogue with Beijing on foreign exchange and trade.
"I expect Beijing will keep the yuan largely stable this year," said Isaac Meng, an economist at BNP Paribas. "Traders needn't worry about Geithner's remark unduly."
Chinese financial market participants were sanguine about the statement. The benchmark Shanghai Composite Index, which tracks both A and B shares, ended down 0.7% at 1990.66. The Shanghai Stock Exchange government bond index ended flat at 120.71.
"Geithner's comment wasn't that unexpected because people had anticipated the new Obama administration would take a relatively protectionist and populist stance toward China," said a Guangzhou-based trader at a foreign bank.
While there is concern about protectionist rhetoric coming from Washington, China wasn't a major factor in last year's presidential election and both parties agree that China is a key partner in U.S. foreign policy.
In fact, Washington and Beijing could become partners in solving other world-wide problems like global warming, says Scott Kennedy, a professor at Indiana University. In doing so, Washington is likely to call on China to take a more active role. "With a changing of the guard in Washington, China has the opportunity -- and challenge -- of doing much more."
Geithner's answer to a question about the valuation of China's yuan:
"President Obama - backed by the conclusions of a broad range of economists - believes that China is manipulating its currency. President Obama has pledged as President to use aggressively all the diplomatic avenues open to him to seek change in China's currency practices. More broadly, we look forward to a productive economic dialogue with the Chinese government on a number of short- and long-tem issues. The Yuan is certainly an important piece of that discussion, but given the crisis the immediate focus needs to be on the broader issue of stabilizing domestic demand in China and the US. The latest figures show that China's growth in 2008 was 9%, a full 4 percentage points lower than in the previous year. Because China accounts for such a large fraction of the world economy, a further slowdown in China would lead to a substantial fall in world growth (and demand for US exports) and delay recovery from the crisis. Therefore, the immediate goal should be for us to convince China to adopt a more aggressive stimulus package as we do our part to try to pass a stimulus package here at home."
Friday, January 23, 2009
Citigroup, Bank of America May Look ‘Nationalized’
Jan. 23 (Bloomberg) -- The U.S. government’s decision to pledge billions of additional dollars with strings attached to Citigroup Inc. and Bank of America Corp. may be nationalization by another name, according to former bankers and regulators.
Faced with pressure from lawmakers, banks have shaken up management, eliminated executive bonuses and staff and canceled conventions. They’ll be forced to do monthly reports on how they’ve boosted lending while slashing quarterly dividends to one cent a share for three years.
“When the Treasury tells a bank to pay a penny a share vs. its old dividend, you know who’s calling the shots,” said Jon Bruss, a 40-year industry veteran and founder of Hartland, Wisconsin-based Fortress Partners Capital Management Ltd., which invests in banks. “It may not be de jure nationalization but I think it’s de facto nationalization.”
While avoiding steps taken by the U.K., which this week acquired a 70 percent stake in Royal Bank of Scotland Plc, U.S. regulators are no longer passively injecting capital into the nation’s biggest banks. Investors have fled, sending Citigroup and Bank of America down by more than 50 percent this year, on concern that tougher U.S. oversight is coming after the government takeover last year of mortgage financers Fannie Mae and Freddie Mac, and insurer American International Group Inc.
Citigroup, based in New York, tumbled 56 cents, or 15 percent, to $3.11 yesterday on the New York Stock Exchange. Bank of America plunged 97 cents, or 15 percent, to $5.71. The 24- company KBW Bank Index has dropped 38 percent in 2009, following last year’s 50 percent decline.
Government Decides
“Some of these traditional management decisions are being made by the government,” said Donald Powell, 67, who was chairman of the Federal Deposit Insurance Corp. from 2001 to 2005, and now lives in Amarillo, Texas. “Shareholders don’t have a voice in some of these things that are occurring.”
After the Treasury’s initial investments in October failed to adequately shield Citigroup and Bank of America from mortgage- related losses, the companies returned for more capital along with protection from hundreds of billions of dollars in potential defaults.
Citigroup needed $20 billion in November on top of an earlier $25 billion injection, which still wasn’t enough to keep the company from splitting apart after posting a record deficit on Jan. 15. The same day, Bank of America received $20 billion to cover losses tied to Merrill Lynch & Co. after the two companies received a combined $25 billion in October.
Executives Depart
Citigroup replaced Win Bischoff as chairman yesterday, naming former Time Warner Inc. Chief Executive Officer Richard Parsons to the post. Two weeks ago, former Treasury Secretary Robert Rubin, who had been a top Citigroup executive and board member, announced plans to step down. Merrill Lynch head John Thain was ousted yesterday, less than a month after he negotiated the sale of his company to Bank of America.
William K. Black, former lawyer at the Federal Home Loan Bank of San Francisco and Office of Thrift Supervision, says the Treasury could do better by assuming control of the companies and removing existing management altogether. By trying to avoid nationalizing the institutions, the government is wasting money, he said.
“It’s insane to leave it in the control of the people who have every incentive to cover up the scale of the losses,” said Black, professor at the University of Missouri-Kansas City School of Law. “You’re deliberately negotiating a bad deal for the American people by not getting an appropriate return for the risk you’re taking.”
Dividends, Conferences
Investors are getting smaller returns because the banks have to cut their dividends as part of the bailout agreements. And the companies are being told how to spend their money --especially when it comes to conferences and other business trips.
SunTrust Banks Inc., an Atlanta-based lender that sold $4.9 billion in preferred shares to the U.S., eliminated a sales conference to hold down travel expenses and reduced compensation for 4,000 managers. AIG, which received a $150 billion bailout package and is now majority-owned by the government, drew fire from lawmakers last year for conferences, bonuses and perks.
Bank of America dropped 12 cents, or 2.1 percent, to $5.59 at 11:03 a.m. in New York Stock Exchange composite trading today. Citigroup added 19 cents, or 6.1 percent, to $3.30.
In the U.K., Barclays Plc is trading at a price that indicates investors give it a 70 percent chance of nationalization, according to a note today from Sanford C. Bernstein analyst Bruno Paulson in London. The stock, down as much as 20 percent today, has lost about two-thirds of its value since Jan. 12.
‘Partial Nationalization’
Citigroup and Bank of America aren’t necessarily headed toward nationalization, according to Powell, who said President Barack Obama’s administration is tasked with developing an “exit strategy” to avoid ending up with financial control. That may mean converting preferred shares into common equity and then selling them, he said.
As Obama’s economic advisers plan for how the government will dole out the remaining $350 billion in the Troubled Asset Relief Fund, they’ll make sure the money doesn’t go to “bonuses or remodeling” offices, White House press secretary Robert Gibbs said today. Merrill Lynch’s Thain spent $1.2 million redecorating his downtown Manhattan office last year as the company was firing employees, a person familiar with the project said yesterday.
‘Weird’ Policy
Another former bank regulator, Kevin Jacques, says a nationalization policy may be preferable to the current strategy of handling every case differently.
In 2008, Bear Stearns Cos. was bought by JPMorgan Chase & Co. in a deal arranged by the government, Lehman Brothers Holdings Inc. went bankrupt, Washington Mutual Inc. was seized and AIG was taken over. That hurts confidence in the financial system and keeps investors guessing, Jacques said.
“If you took a nationalization policy, you would at least create some degree of certainty because now you know the government is going to stand behind these institutions,” said Jacques, 49, who was an economist with the Treasury Department for 14 years before becoming a finance professor at Baldwin- Wallace College in Berea, Ohio.
Now, “it’s almost like some kind of weird partial nationalization,” he said.
Faced with pressure from lawmakers, banks have shaken up management, eliminated executive bonuses and staff and canceled conventions. They’ll be forced to do monthly reports on how they’ve boosted lending while slashing quarterly dividends to one cent a share for three years.
“When the Treasury tells a bank to pay a penny a share vs. its old dividend, you know who’s calling the shots,” said Jon Bruss, a 40-year industry veteran and founder of Hartland, Wisconsin-based Fortress Partners Capital Management Ltd., which invests in banks. “It may not be de jure nationalization but I think it’s de facto nationalization.”
While avoiding steps taken by the U.K., which this week acquired a 70 percent stake in Royal Bank of Scotland Plc, U.S. regulators are no longer passively injecting capital into the nation’s biggest banks. Investors have fled, sending Citigroup and Bank of America down by more than 50 percent this year, on concern that tougher U.S. oversight is coming after the government takeover last year of mortgage financers Fannie Mae and Freddie Mac, and insurer American International Group Inc.
Citigroup, based in New York, tumbled 56 cents, or 15 percent, to $3.11 yesterday on the New York Stock Exchange. Bank of America plunged 97 cents, or 15 percent, to $5.71. The 24- company KBW Bank Index has dropped 38 percent in 2009, following last year’s 50 percent decline.
Government Decides
“Some of these traditional management decisions are being made by the government,” said Donald Powell, 67, who was chairman of the Federal Deposit Insurance Corp. from 2001 to 2005, and now lives in Amarillo, Texas. “Shareholders don’t have a voice in some of these things that are occurring.”
After the Treasury’s initial investments in October failed to adequately shield Citigroup and Bank of America from mortgage- related losses, the companies returned for more capital along with protection from hundreds of billions of dollars in potential defaults.
Citigroup needed $20 billion in November on top of an earlier $25 billion injection, which still wasn’t enough to keep the company from splitting apart after posting a record deficit on Jan. 15. The same day, Bank of America received $20 billion to cover losses tied to Merrill Lynch & Co. after the two companies received a combined $25 billion in October.
Executives Depart
Citigroup replaced Win Bischoff as chairman yesterday, naming former Time Warner Inc. Chief Executive Officer Richard Parsons to the post. Two weeks ago, former Treasury Secretary Robert Rubin, who had been a top Citigroup executive and board member, announced plans to step down. Merrill Lynch head John Thain was ousted yesterday, less than a month after he negotiated the sale of his company to Bank of America.
William K. Black, former lawyer at the Federal Home Loan Bank of San Francisco and Office of Thrift Supervision, says the Treasury could do better by assuming control of the companies and removing existing management altogether. By trying to avoid nationalizing the institutions, the government is wasting money, he said.
“It’s insane to leave it in the control of the people who have every incentive to cover up the scale of the losses,” said Black, professor at the University of Missouri-Kansas City School of Law. “You’re deliberately negotiating a bad deal for the American people by not getting an appropriate return for the risk you’re taking.”
Dividends, Conferences
Investors are getting smaller returns because the banks have to cut their dividends as part of the bailout agreements. And the companies are being told how to spend their money --especially when it comes to conferences and other business trips.
SunTrust Banks Inc., an Atlanta-based lender that sold $4.9 billion in preferred shares to the U.S., eliminated a sales conference to hold down travel expenses and reduced compensation for 4,000 managers. AIG, which received a $150 billion bailout package and is now majority-owned by the government, drew fire from lawmakers last year for conferences, bonuses and perks.
Bank of America dropped 12 cents, or 2.1 percent, to $5.59 at 11:03 a.m. in New York Stock Exchange composite trading today. Citigroup added 19 cents, or 6.1 percent, to $3.30.
In the U.K., Barclays Plc is trading at a price that indicates investors give it a 70 percent chance of nationalization, according to a note today from Sanford C. Bernstein analyst Bruno Paulson in London. The stock, down as much as 20 percent today, has lost about two-thirds of its value since Jan. 12.
‘Partial Nationalization’
Citigroup and Bank of America aren’t necessarily headed toward nationalization, according to Powell, who said President Barack Obama’s administration is tasked with developing an “exit strategy” to avoid ending up with financial control. That may mean converting preferred shares into common equity and then selling them, he said.
As Obama’s economic advisers plan for how the government will dole out the remaining $350 billion in the Troubled Asset Relief Fund, they’ll make sure the money doesn’t go to “bonuses or remodeling” offices, White House press secretary Robert Gibbs said today. Merrill Lynch’s Thain spent $1.2 million redecorating his downtown Manhattan office last year as the company was firing employees, a person familiar with the project said yesterday.
‘Weird’ Policy
Another former bank regulator, Kevin Jacques, says a nationalization policy may be preferable to the current strategy of handling every case differently.
In 2008, Bear Stearns Cos. was bought by JPMorgan Chase & Co. in a deal arranged by the government, Lehman Brothers Holdings Inc. went bankrupt, Washington Mutual Inc. was seized and AIG was taken over. That hurts confidence in the financial system and keeps investors guessing, Jacques said.
“If you took a nationalization policy, you would at least create some degree of certainty because now you know the government is going to stand behind these institutions,” said Jacques, 49, who was an economist with the Treasury Department for 14 years before becoming a finance professor at Baldwin- Wallace College in Berea, Ohio.
Now, “it’s almost like some kind of weird partial nationalization,” he said.
Jim Rogers warns against Obama's economic team
BBC News
Thursday, January 22, 2009
A well-known investor has attacked the record of President Obama's nominee for Treasury Secretary, Timothy Geithner.
Jim Rogers, a former partner of George Soros, told the BBC that the new administration was "run by people who caused the latest financial problems".
He said Mr Geithner and Larry Summers, due to head the National Economic Council, have been wrong for 15 years.
"These people don't know what they're doing," he said. Mr Rogers is seen as influential in financial markets.
Investors haven't always made money from his forecasts. He advised them to back Zimbabwe in the mid-1990s. Since then the country's economy has virtually collapsed.
But his prediction that commodity prices would soar over the past ten years did prove to be correct.
He made comments on Monday advising investors to sell the pound and sterling has since weakened sharply.
Mr Rogers assured the BBC that he has no position in sterling, so did not benefit from talking the pound down.
Mr Rogers also attacked the British prime minister for selling a large portion of Britain's gold reserves when gold was at a very low price.
"Gordon Brown sold UK gold at $250 an ounce," he said. "And this is a man who knows what he's doing? " he mused.
He said Britain no longer has anything to sell without North Sea oil and with the City of London "a pale shadow of its former self."
Eastern promise
Mr Rogers believes that Asia represents the future for investors.
"China is going to have horrible setbacks, but the 21st century will be the century of Asia," he said.
He revealed that his children have bank accounts in Swiss Francs as he does not want their assets in dollars.
"There will probably be exchange controls in the US in their lifetime. I have given up on the US dollar and sterling," he said.
He added that the current actions of governments to restart economies are likely to lead eventually to inflation, and that the only way to protect wealth under those conditions is to hold real assets.
He recommended Chinese shares, the Japanese yen, gold and other real assets.
"The era of paper shufflers is over - farmers are going to inherit the earth again," he said.
"Bankers should learn how to drive tractors".
Thursday, January 22, 2009
A well-known investor has attacked the record of President Obama's nominee for Treasury Secretary, Timothy Geithner.
Jim Rogers, a former partner of George Soros, told the BBC that the new administration was "run by people who caused the latest financial problems".
He said Mr Geithner and Larry Summers, due to head the National Economic Council, have been wrong for 15 years.
"These people don't know what they're doing," he said. Mr Rogers is seen as influential in financial markets.
Investors haven't always made money from his forecasts. He advised them to back Zimbabwe in the mid-1990s. Since then the country's economy has virtually collapsed.
But his prediction that commodity prices would soar over the past ten years did prove to be correct.
He made comments on Monday advising investors to sell the pound and sterling has since weakened sharply.
Mr Rogers assured the BBC that he has no position in sterling, so did not benefit from talking the pound down.
Mr Rogers also attacked the British prime minister for selling a large portion of Britain's gold reserves when gold was at a very low price.
"Gordon Brown sold UK gold at $250 an ounce," he said. "And this is a man who knows what he's doing? " he mused.
He said Britain no longer has anything to sell without North Sea oil and with the City of London "a pale shadow of its former self."
Eastern promise
Mr Rogers believes that Asia represents the future for investors.
"China is going to have horrible setbacks, but the 21st century will be the century of Asia," he said.
He revealed that his children have bank accounts in Swiss Francs as he does not want their assets in dollars.
"There will probably be exchange controls in the US in their lifetime. I have given up on the US dollar and sterling," he said.
He added that the current actions of governments to restart economies are likely to lead eventually to inflation, and that the only way to protect wealth under those conditions is to hold real assets.
He recommended Chinese shares, the Japanese yen, gold and other real assets.
"The era of paper shufflers is over - farmers are going to inherit the earth again," he said.
"Bankers should learn how to drive tractors".
Thursday, January 22, 2009
Microsoft CEO Ballmer's e-mail
From: Steve Ballmer
Sent: Thursday, January 22, 2009 6:07 AM
To: Microsoft - All Employees (QBDG)
Subject: Realigning Resources and Reducing Costs
In response to the realities of a deteriorating economy, we're taking important steps to realign Microsoft's business. I want to tell you about what we're doing and why.
Today we announced second quarter revenue of $16.6 billion. This number is an increase of just 2 percent compared with the second quarter of last year and it is approximately $900 million below our earlier expectations.
The fact that we are growing at all during the worst recession in two generations reflects our strong business fundamentals and is a testament to your hard work. Our products provide great value to our customers. Our financial position is solid. We have made long-term investments that continue to pay off.
But it is also clear that we are not immune to the effects of the economy. Consumers and businesses have reined in spending, which is affecting PC shipments and IT expenditures.
Our response to this environment must combine a commitment to long-term investments in innovation with prompt action to reduce our costs.
During the second quarter we started down the right path. As the economy deteriorated, we acted quickly. As a result, we reduced operating expenses during the quarter by $600 million. I appreciate the agility you have shown in enabling us to achieve this result.
Now we need to do more. We must make adjustments to ensure that our investments are tightly aligned with current and future revenue opportunities. The current environment requires that we continue to increase our efficiency.
As part of the process of adjustments, we will eliminate up to 5,000 positions in R&D, marketing, sales, finance, LCA, HR, and IT over the next 18 months, of which 1,400 will occur today. We'll also open new positions to support key investment areas during this same period of time. Our net headcount in these functions will decline by 2,000 to 3,000 over the next 18 months. In addition, our workforce in support, consulting, operations, billing, manufacturing, and data center operations will continue to change in direct response to customer needs.
Our leaders all have specific goals to manage costs prudently and thoughtfully. They have the flexibility to adjust the size of their teams so they are appropriately matched to revenue potential, to add headcount where they need to increase investments in order to ensure future success, and to drive efficiency.
To increase efficiency, we're taking a series of aggressive steps. We'll cut travel expenditures 20 percent and make significant reductions in spending on vendors and contingent staff. We've scaled back Puget Sound campus expansion and reduced marketing budgets. We'll also reduce costs by eliminating merit increases for FY10 that would have taken effect in September of this calendar year.
Each of these steps will be difficult. Our priority remains doing right by our customers and our employees. For employees who are directly affected, I know this will be a difficult time for you and I want to assure you that we will provide help and support during this transition. We have established an outplacement center in the Puget Sound region and we'll provide outplacement services in many other locations to help you find new jobs. Some of you may find jobs internally. For those who don't, we will also offer severance pay and other benefits.
The decision to eliminate jobs is a very difficult one. Our people are the foundation of everything we have achieved and we place the highest value on the commitment and hard work that you have dedicated to building this company. But we believe these job eliminations are crucial to our ability to adjust the company's cost structure so that we have the resources to drive future profitable growth. I encourage you to attend tomorrow's Town Hall at 9am PST in Café 34 or watch the webcast.
While this is the most challenging economic climate we have ever faced, I want to reiterate my confidence in the strength of our competitive position and soundness of our approach.
With these changes in place, I feel confident that we will have the resources we need to continue to invest in long-term computing trends that offer the greatest opportunity to deliver value to our customers and shareholders, benefit to society, and growth for Microsoft.
With our approach to investing for the long term and managing our expenses, I know Microsoft will emerge an even stronger industry leader than it is today.
Thank you for your continued commitment and hard work.
Steve
Sent: Thursday, January 22, 2009 6:07 AM
To: Microsoft - All Employees (QBDG)
Subject: Realigning Resources and Reducing Costs
In response to the realities of a deteriorating economy, we're taking important steps to realign Microsoft's business. I want to tell you about what we're doing and why.
Today we announced second quarter revenue of $16.6 billion. This number is an increase of just 2 percent compared with the second quarter of last year and it is approximately $900 million below our earlier expectations.
The fact that we are growing at all during the worst recession in two generations reflects our strong business fundamentals and is a testament to your hard work. Our products provide great value to our customers. Our financial position is solid. We have made long-term investments that continue to pay off.
But it is also clear that we are not immune to the effects of the economy. Consumers and businesses have reined in spending, which is affecting PC shipments and IT expenditures.
Our response to this environment must combine a commitment to long-term investments in innovation with prompt action to reduce our costs.
During the second quarter we started down the right path. As the economy deteriorated, we acted quickly. As a result, we reduced operating expenses during the quarter by $600 million. I appreciate the agility you have shown in enabling us to achieve this result.
Now we need to do more. We must make adjustments to ensure that our investments are tightly aligned with current and future revenue opportunities. The current environment requires that we continue to increase our efficiency.
As part of the process of adjustments, we will eliminate up to 5,000 positions in R&D, marketing, sales, finance, LCA, HR, and IT over the next 18 months, of which 1,400 will occur today. We'll also open new positions to support key investment areas during this same period of time. Our net headcount in these functions will decline by 2,000 to 3,000 over the next 18 months. In addition, our workforce in support, consulting, operations, billing, manufacturing, and data center operations will continue to change in direct response to customer needs.
Our leaders all have specific goals to manage costs prudently and thoughtfully. They have the flexibility to adjust the size of their teams so they are appropriately matched to revenue potential, to add headcount where they need to increase investments in order to ensure future success, and to drive efficiency.
To increase efficiency, we're taking a series of aggressive steps. We'll cut travel expenditures 20 percent and make significant reductions in spending on vendors and contingent staff. We've scaled back Puget Sound campus expansion and reduced marketing budgets. We'll also reduce costs by eliminating merit increases for FY10 that would have taken effect in September of this calendar year.
Each of these steps will be difficult. Our priority remains doing right by our customers and our employees. For employees who are directly affected, I know this will be a difficult time for you and I want to assure you that we will provide help and support during this transition. We have established an outplacement center in the Puget Sound region and we'll provide outplacement services in many other locations to help you find new jobs. Some of you may find jobs internally. For those who don't, we will also offer severance pay and other benefits.
The decision to eliminate jobs is a very difficult one. Our people are the foundation of everything we have achieved and we place the highest value on the commitment and hard work that you have dedicated to building this company. But we believe these job eliminations are crucial to our ability to adjust the company's cost structure so that we have the resources to drive future profitable growth. I encourage you to attend tomorrow's Town Hall at 9am PST in Café 34 or watch the webcast.
While this is the most challenging economic climate we have ever faced, I want to reiterate my confidence in the strength of our competitive position and soundness of our approach.
With these changes in place, I feel confident that we will have the resources we need to continue to invest in long-term computing trends that offer the greatest opportunity to deliver value to our customers and shareholders, benefit to society, and growth for Microsoft.
With our approach to investing for the long term and managing our expenses, I know Microsoft will emerge an even stronger industry leader than it is today.
Thank you for your continued commitment and hard work.
Steve
Bank of Canada sees return to economic growth later in 2009
The Bank of Canada is projecting a sharp recession that will see three quarters of economic contraction before growth returns in the second half of 2009.
In its update to its Monetary Policy Report, the central bank said it anticipates quarter-over-quarter contractions of 2.3 per cent in the fourth quarter of 2008, followed by a deeper drop of 4.8 per cent for the first three months of 2009 and a drop of one per cent in second quarter of this year.
However, the bank sees a rebound to positive activity by the third quarter of the year, when it forecasts two per cent growth and 3.5 per cent expansion in the last three months of the year.
The bank said the return of normal financial conditions, coupled with the stimulus coming from monetary and fiscal policies, should boost the growth of consumer spending in 2010, leading to growth for the year of 3.8 per cent. The recent depreciation in the Canadian dollar will also lend support to a recovery, it added.
"Excess supply will be gradually reduced, with the economy projected to return to balance by mid-2011," the bank said. "The projected return to balance of the Canadian economy is faster than either of the recoveries following the 1981-82 and 1990-92 recessions."
Bank of Canada governor Mark Carney said the recovery projected by the bank is milder than from an average recession due to "muted" recoveries expected in other economies around the world.
"We are comfortable with our forecast," he told reporters at a news conference in Ottawa.
The latest outlook offered by the central bank marked a significant downgrade from the forecast it presented in October, when the bank projected growth of 0.6 per cent in 2009, and 3.4 per cent in 2010.
Two days earlier, the bank cut a key lending rate by half a percentage point to one per cent as it sought to boost the economy. Since it began its latest round of monetary policy easing in December 2007, the Bank of Canada has cut 3.5 percentage points from the key lending rate.
In its update to its Monetary Policy Report, the central bank said it anticipates quarter-over-quarter contractions of 2.3 per cent in the fourth quarter of 2008, followed by a deeper drop of 4.8 per cent for the first three months of 2009 and a drop of one per cent in second quarter of this year.
However, the bank sees a rebound to positive activity by the third quarter of the year, when it forecasts two per cent growth and 3.5 per cent expansion in the last three months of the year.
The bank said the return of normal financial conditions, coupled with the stimulus coming from monetary and fiscal policies, should boost the growth of consumer spending in 2010, leading to growth for the year of 3.8 per cent. The recent depreciation in the Canadian dollar will also lend support to a recovery, it added.
"Excess supply will be gradually reduced, with the economy projected to return to balance by mid-2011," the bank said. "The projected return to balance of the Canadian economy is faster than either of the recoveries following the 1981-82 and 1990-92 recessions."
Bank of Canada governor Mark Carney said the recovery projected by the bank is milder than from an average recession due to "muted" recoveries expected in other economies around the world.
"We are comfortable with our forecast," he told reporters at a news conference in Ottawa.
The latest outlook offered by the central bank marked a significant downgrade from the forecast it presented in October, when the bank projected growth of 0.6 per cent in 2009, and 3.4 per cent in 2010.
Two days earlier, the bank cut a key lending rate by half a percentage point to one per cent as it sought to boost the economy. Since it began its latest round of monetary policy easing in December 2007, the Bank of Canada has cut 3.5 percentage points from the key lending rate.
Fertilizer stocks in for rough 2009??
Consensus is building on the Street in Canada and the U.S., calling for a rough 2009 in the fertilizer sector, followed by a 2010 turnaround.
Citigroup Global Markets analyst P.J Juvekar assumed coverage on Potash Corp. of Saskatchewan Inc., Agrium Inc, and Mosaic Co. with short term caution, based on a forecast of a 10 to 20% year-over-year decline in phosphate and potash volumes in 2009.
"We expect many farmers in North America to go on a 'fertilizer holiday' as they 'mine' their soil for fertilizer," he said. "But the nutrient depletion may set the stage for a robust recovery in 2010 that could cause us to revisit our stance."
The analyst has "hold" ratings for Potash Corp. and Mosaic with price targets of US$81 and US$39, respectively. As for Agrium, he rates the stock a "sell" with a US$27 price target.
"We have a sell on Agrium given its potential for retail margin compression and write-downs, amid falling fertilizer prices, and large Nitrogen exposure.
At CIBC World Markets, analyst Jacob Bout also told clients that fertilizer demand and pricing will remain weak at least through the first half of this year, with recovery expected next year. However, he remains more bullish on both Agrium and PotashCorp's long term prospects than his Citigroup peer.
"While [nitrogen] and [phosphate] prices have collapsed, [potash] prices are still buoyed by producer discipline," he said. "We expect reduced plantings in South America and Russia to have an impact on pricing, supporting stronger plantings (and fertilizer demand) in '10."
On a relative basis, he likes Agrium Inc. because of its exposure to the retail fertilizer market, saying retail demand should "hold in well on a year-over-year basis." That should offset weak wholesale results in H1 for phosphate and potash, the analyst said, continuiing to rate these shares "sector outperformer" with a US$60 price target.
Mr. Bout also rates Potash Corp. of Saskatchewan Inc. "sector outperformer" with a US$125 price target. He said potash demand will be on hold until there is a 2009 Chinese potash contract, but once a contract is settled, Mr. Bout believes potash demand will reach 2 to 3% per annum, creating tight market conditions.
From National Post
Citigroup Global Markets analyst P.J Juvekar assumed coverage on Potash Corp. of Saskatchewan Inc., Agrium Inc, and Mosaic Co. with short term caution, based on a forecast of a 10 to 20% year-over-year decline in phosphate and potash volumes in 2009.
"We expect many farmers in North America to go on a 'fertilizer holiday' as they 'mine' their soil for fertilizer," he said. "But the nutrient depletion may set the stage for a robust recovery in 2010 that could cause us to revisit our stance."
The analyst has "hold" ratings for Potash Corp. and Mosaic with price targets of US$81 and US$39, respectively. As for Agrium, he rates the stock a "sell" with a US$27 price target.
"We have a sell on Agrium given its potential for retail margin compression and write-downs, amid falling fertilizer prices, and large Nitrogen exposure.
At CIBC World Markets, analyst Jacob Bout also told clients that fertilizer demand and pricing will remain weak at least through the first half of this year, with recovery expected next year. However, he remains more bullish on both Agrium and PotashCorp's long term prospects than his Citigroup peer.
"While [nitrogen] and [phosphate] prices have collapsed, [potash] prices are still buoyed by producer discipline," he said. "We expect reduced plantings in South America and Russia to have an impact on pricing, supporting stronger plantings (and fertilizer demand) in '10."
On a relative basis, he likes Agrium Inc. because of its exposure to the retail fertilizer market, saying retail demand should "hold in well on a year-over-year basis." That should offset weak wholesale results in H1 for phosphate and potash, the analyst said, continuiing to rate these shares "sector outperformer" with a US$60 price target.
Mr. Bout also rates Potash Corp. of Saskatchewan Inc. "sector outperformer" with a US$125 price target. He said potash demand will be on hold until there is a 2009 Chinese potash contract, but once a contract is settled, Mr. Bout believes potash demand will reach 2 to 3% per annum, creating tight market conditions.
From National Post
Wednesday, January 21, 2009
Jim Rogers sees Renminbi replacing US Dollar as world reserve currency
BusinessIntelligence
Tuesday, January 20, 2009
Legendary global investor Jim Rogers said the Renminbi may possibly replace the US dollar as the international reserve currency 15 years from now.
Addressing the Asian Financial Forum in Hong Kong, an event that brought together about a thousand participants from around the globe, Rogers said he found Asia to be the place where "the world is changing" as he toured the world in 1990 through 1992.
"This is going to be the new centre of the world, not just the financial but the political world," he said.
The only currency that could replace the US dollar "this year" would be the euro, while the only conceivable currency that can replace the dollar as the reserve currency "15 years from now" is renminbi.
Rogers said he believed China will rise despite possible setbacks.
The United States also experienced setbacks and had various problems back in the 19th century, which, nevertheless, did not stop it from becoming the greatest success of the 20th century, he said.
The US dollar, on the other hand, is falling, he said, citing the fact that China is now the largest creditor nation while the United States is largest debtor nation.
"The Renminbi is big enough. It's liquid enough," he said, adding that the question was only academic in the sense that the renminbi is still a blocked currency.
He accused US authorities of consciously trying to devalue the US dollar by flooding the market with liquidity -- or in his words, "turning on the printing presses" -- and said anyone chasing the rally in government bonds is making a "terrible mistake."
"The idea that you can fix a period of excess borrowing and excess consumption by more borrowing and more consumption to me is just ludicrous," he said.
The projected plan to bail out the US economy by printing more money and boosting consumption could lead to even bigger problem. "The idea that you can solve a period of excessive borrowing and consumption with more borrowing and more consumption and destroying more balance sheets, to me, is ludicrous on its face," Rogers said.
Rogers said protectionism, one of the key pillars of U.S. President-elect Barrack Obama's presidential campaign platform, could push the U.S. economy into big trouble, citing the historical anecdote that the US congress passed a protectionist bill after the 1929 stock market crash to send the US economy into a long depression.
Underscoring his convictions, Rogers began his speech by showing pictures of his two young children, both of whom he said have Swiss bank accounts and speak Mandarin.
Rogers said his elder daughter, who is five years old, is in school in Asia and speaks fluent mandarin thanks to a governess who can speak fluent Chinese.
The other younger daughter was also learning mandarin.
"The single most important advice I can give you is teaching your child mandarin," he said, urging investors to sell US dollars when it peaks in the near term.
Rogers has spent a career being one step ahead of mainstream investment thinking. Amongst his many accomplishments, Rogers was co-founder with George Soros of Quantum Fund. During his ten years with the fund, the portfolio gained more than 4,000%, while the S&P rose less than 50%. The Quantum Fund shot to fame after making more than US$1 billion betting against the British pound in early 1990s.
The Asian Financial Forum was hosted by the Hong Kong Special Administrative Region government and Hong Kong Trade Development Council. Prominent speakers discussed the challenges and opportunities facing Asian economies.
Tuesday, January 20, 2009
Legendary global investor Jim Rogers said the Renminbi may possibly replace the US dollar as the international reserve currency 15 years from now.
Addressing the Asian Financial Forum in Hong Kong, an event that brought together about a thousand participants from around the globe, Rogers said he found Asia to be the place where "the world is changing" as he toured the world in 1990 through 1992.
"This is going to be the new centre of the world, not just the financial but the political world," he said.
The only currency that could replace the US dollar "this year" would be the euro, while the only conceivable currency that can replace the dollar as the reserve currency "15 years from now" is renminbi.
Rogers said he believed China will rise despite possible setbacks.
The United States also experienced setbacks and had various problems back in the 19th century, which, nevertheless, did not stop it from becoming the greatest success of the 20th century, he said.
The US dollar, on the other hand, is falling, he said, citing the fact that China is now the largest creditor nation while the United States is largest debtor nation.
"The Renminbi is big enough. It's liquid enough," he said, adding that the question was only academic in the sense that the renminbi is still a blocked currency.
He accused US authorities of consciously trying to devalue the US dollar by flooding the market with liquidity -- or in his words, "turning on the printing presses" -- and said anyone chasing the rally in government bonds is making a "terrible mistake."
"The idea that you can fix a period of excess borrowing and excess consumption by more borrowing and more consumption to me is just ludicrous," he said.
The projected plan to bail out the US economy by printing more money and boosting consumption could lead to even bigger problem. "The idea that you can solve a period of excessive borrowing and consumption with more borrowing and more consumption and destroying more balance sheets, to me, is ludicrous on its face," Rogers said.
Rogers said protectionism, one of the key pillars of U.S. President-elect Barrack Obama's presidential campaign platform, could push the U.S. economy into big trouble, citing the historical anecdote that the US congress passed a protectionist bill after the 1929 stock market crash to send the US economy into a long depression.
Underscoring his convictions, Rogers began his speech by showing pictures of his two young children, both of whom he said have Swiss bank accounts and speak Mandarin.
Rogers said his elder daughter, who is five years old, is in school in Asia and speaks fluent mandarin thanks to a governess who can speak fluent Chinese.
The other younger daughter was also learning mandarin.
"The single most important advice I can give you is teaching your child mandarin," he said, urging investors to sell US dollars when it peaks in the near term.
Rogers has spent a career being one step ahead of mainstream investment thinking. Amongst his many accomplishments, Rogers was co-founder with George Soros of Quantum Fund. During his ten years with the fund, the portfolio gained more than 4,000%, while the S&P rose less than 50%. The Quantum Fund shot to fame after making more than US$1 billion betting against the British pound in early 1990s.
The Asian Financial Forum was hosted by the Hong Kong Special Administrative Region government and Hong Kong Trade Development Council. Prominent speakers discussed the challenges and opportunities facing Asian economies.
Tuesday, January 20, 2009
Rick Warren's Inaugural Invocation
Let us pray.
Almighty God, our Father, everything we see and everything we can’t see exists because of you alone. It all comes from you. It all belongs to you. It all exists for your glory.
History is your story. The Scripture tells us, “Hear O Israel, the Lord is our God. The Lord is One.” And you are the compassionate and merciful one. And you are loving to everyone you have made.
Now, today, we rejoice not only in America’s peaceful transfer of power for the 44th time. We celebrate a hingepoint of history with the inauguration of our first African American president of the United States. We are so grateful to live in this land, a land of unequaled possibility, where the son of an African immigrant can rise to the highest level of our leadership. And we know today that Dr. King and a great cloud of witnesses are shouting in heaven.
Give to our new President, Barack Obama, the wisdom to lead us with humility, the courage to lead us with integrity, the compassion to lead us with generosity. Bless and protect him, his family, Vice President Biden, the cabinet, and every one of our freely elected leaders.
Help us, O God, to remember that we are Americans, united not by race, or religion, or blood, but to our commitment to freedom and justice for all. When we focus on ourselves, when we fight each other, when we forget you, forgive us. When we presume that our greatness and our prosperity is ours alone, forgive us. When we fail to treat our fellow human beings and all the earth with the respect that they deserve, forgive us. And as we face these difficult days ahead, may we have a new birth of clarity in our aims, responsibility in our actions, humility in our approaches, and civility in our attitudes, even when we differ.
Help us to share, to serve and to seek the common good of all. May all people of goodwill today join together to work for a more just, a more healthy and a more prosperous nation and a peaceful planet. And may we never forget that one day all nations and all people will stand accountable before you. We now commit our new president and his wife, Michelle and his daughters, Malia and Sasha, into your loving care.
I humbly ask this in the name of the one who changed my life, Yeshua, Isa, Jesus [Spanish pronunciation], Jesus, who taught us to pray:
“Our Father, who art in heaven, hallowed be thy name. Thy kingdom come. Thy will be done on earth as it is in heaven. Give us this day our daily bread and forgive us our trespasses as we forgive those who trespass against us. And lead us not into temptation, but deliver us from evil. For thine is the kingdom and the power and the glory forever. Amen."
President Barack Obama 2009 Inauguration and Address
SPEAKER: PRESIDENT BARACK OBAMA
[*] OBAMA: Thank you. Thank you.
CROWD: Obama! Obama! Obama! Obama!
My fellow citizens: I stand here today humbled by the task before us, grateful for the trust you have bestowed, mindful of the sacrifices borne by our ancestors.
I thank President Bush for his service to our nation...
(APPLAUSE)
... as well as the generosity and cooperation he has shown throughout this transition.
Forty-four Americans have now taken the presidential oath.
OBAMA: The words have been spoken during rising tides of prosperity and the still waters of peace. Yet, every so often the oath is taken amidst gathering clouds and raging storms. At these moments, America has carried on not simply because of the skill or vision of those in high office, but because We the People have remained faithful to the ideals of our forbearers, and true to our founding documents.
OBAMA: So it has been. So it must be with this generation of Americans.
That we are in the midst of crisis is now well understood. Our nation is at war against a far-reaching network of violence and hatred. Our economy is badly weakened, a consequence of greed and irresponsibility on the part of some but also our collective failure to make hard choices and prepare the nation for a new age.
Homes have been lost, jobs shed, businesses shuttered. Our health care is too costly, our schools fail too many, and each day brings further evidence that the ways we use energy strengthen our adversaries and threaten our planet.
OBAMA: These are the indicators of crisis, subject to data and statistics. Less measurable, but no less profound, is a sapping of confidence across our land; a nagging fear that America's decline is inevitable, that the next generation must lower its sights.
Today I say to you that the challenges we face are real, they are serious and they are many. They will not be met easily or in a short span of time. But know this America: They will be met.
(APPLAUSE)
On this day, we gather because we have chosen hope over fear, unity of purpose over conflict and discord.
OBAMA: On this day, we come to proclaim an end to the petty grievances and false promises, the recriminations and worn-out dogmas that for far too long have strangled our politics.
We remain a young nation, but in the words of Scripture, the time has come to set aside childish things. The time has come to reaffirm our enduring spirit; to choose our better history; to carry forward that precious gift, that noble idea, passed on from generation to generation: the God-given promise that all are equal, all are free, and all deserve a chance to pursue their full measure of happiness.
(APPLAUSE)
In reaffirming the greatness of our nation, we understand that greatness is never a given. It must be earned. Our journey has never been one of shortcuts or settling for less.
OBAMA: It has not been the path for the faint-hearted, for those who prefer leisure over work, or seek only the pleasures of riches and fame.
Rather, it has been the risk-takers, the doers, the makers of things -- some celebrated, but more often men and women obscure in their labor -- who have carried us up the long, rugged path towards prosperity and freedom.
For us, they packed up their few worldly possessions and traveled across oceans in search of a new life. For us, they toiled in sweatshops and settled the West, endured the lash of the whip and plowed the hard earth.
OBAMA: For us, they fought and died in places Concord and Gettysburg; Normandy and Khe Sahn.
Time and again these men and women struggled and sacrificed and worked till their hands were raw so that we might live a better life. They saw America as bigger than the sum of our individual ambitions; greater than all the differences of birth or wealth or faction.
This is the journey we continue today. We remain the most prosperous, powerful nation on Earth. Our workers are no less productive than when this crisis began. Our minds are no less inventive, our goods and services no less needed than they were last week or last month or last year. Our capacity remains undiminished. But our time of standing pat, of protecting narrow interests and putting off unpleasant decisions -- that time has surely passed.
OBAMA: Starting today, we must pick ourselves up, dust ourselves off, and begin again the work of remaking America.
(APPLAUSE)
For everywhere we look, there is work to be done.
The state of our economy calls for action: bold and swift. And we will act not only to create new jobs but to lay a new foundation for growth.
We will build the roads and bridges, the electric grids and digital lines that feed our commerce and bind us together.
We will restore science to its rightful place and wield technology's wonders to raise health care's quality...
(APPLAUSE)
... and lower its costs.
OBAMA: We will harness the sun and the winds and the soil to fuel our cars and run our factories. And we will transform our schools and colleges and universities to meet the demands of a new age.
All this we can do. All this we will do.
Now, there are some who question the scale of our ambitions, who suggest that our system cannot tolerate too many big plans. Their memories are short, for they have forgotten what this country has already done, what free men and women can achieve when imagination is joined to common purpose and necessity to courage.
What the cynics fail to understand is that the ground has shifted beneath them, that the stale political arguments that have consumed us for so long, no longer apply.
OBAMA: The question we ask today is not whether our government is too big or too small, but whether it works, whether it helps families find jobs at a decent wage, care they can afford, a retirement that is dignified.
Where the answer is yes, we intend to move forward. Where the answer is no, programs will end.
And those of us who manage the public's knowledge will be held to account, to spend wisely, reform bad habits, and do our business in the light of day, because only then can we restore the vital trust between a people and their government.
Nor is the question before us whether the market is a force for good or ill. Its power to generate wealth and expand freedom is unmatched.
OBAMA: But this crisis has reminded us that without a watchful eye, the market can spin out of control. The nation cannot prosper long when it favors only the prosperous.
The success of our economy has always depended not just on the size of our gross domestic product, but on the reach of our prosperity; on the ability to extend opportunity to every willing heart -- not out of charity, but because it is the surest route to our common good.
(APPLAUSE)
As for our common defense, we reject as false the choice between our safety and our ideals.
Our founding fathers faced with perils that we can scarcely imagine, drafted a charter to assure the rule of law and the rights of man, a charter expanded by the blood of generations.
OBAMA: Those ideals still light the world, and we will not give them up for expedience's sake.
And so, to all other peoples and governments who are watching today, from the grandest capitals to the small village where my father was born: know that America is a friend of each nation and every man, woman and child who seeks a future of peace and dignity, and we are ready to lead once more.
(APPLAUSE)
Recall that earlier generations faced down fascism and communism not just with missiles and tanks, but with the sturdy alliances and enduring convictions.
OBAMA: They understood that our power alone cannot protect us, nor does it entitle us to do as we please. Instead, they knew that our power grows through its prudent use. Our security emanates from the justness of our cause; the force of our example; the tempering qualities of humility and restraint.
We are the keepers of this legacy, guided by these principles once more, we can meet those new threats that demand even greater effort, even greater cooperation and understanding between nations. We'll begin to responsibly leave Iraq to its people and forge a hard- earned peace in Afghanistan.
OBAMA: With old friends and former foes, we'll work tirelessly to lessen the nuclear threat and roll back the specter of a warming planet.
We will not apologize for our way of life nor will we waver in its defense.
And for those who seek to advance their aims by inducing terror and slaughtering innocents, we say to you now that, "Our spirit is stronger and cannot be broken. You cannot outlast us, and we will defeat you."
(APPLAUSE)
For we know that our patchwork heritage is a strength, not a weakness.
We are a nation of Christians and Muslims, Jews and Hindus, and nonbelievers. We are shaped by every language and culture, drawn from every end of this Earth.
And because we have tasted the bitter swill of civil war and segregation and emerged from that dark chapter stronger and more united, we cannot help but believe that the old hatreds shall someday pass; that the lines of tribe shall soon dissolve; that as the world grows smaller, our common humanity shall reveal itself; and that America must play its role in ushering in a new era of peace.
OBAMA: To the Muslim world, we seek a new way forward, based on mutual interest and mutual respect.
To those leaders around the globe who seek to sow conflict or blame their society's ills on the West, know that your people will judge you on what you can build, not what you destroy.
To those...
(APPLAUSE)
To those who cling to power through corruption and deceit and the silencing of dissent, know that you are on the wrong side of history, but that we will extend a hand if you are willing to unclench your fist.
(APPLAUSE)
OBAMA: To the people of poor nations, we pledge to work alongside you to make your farms flourish and let clean waters flow; to nourish starved bodies and feed hungry minds.
And to those nations like ours that enjoy relative plenty, we say we can no longer afford indifference to the suffering outside our borders, nor can we consume the world's resources without regard to effect. For the world has changed, and we must change with it.
As we consider the road that unfolds before us, we remember with humble gratitude those brave Americans who, at this very hour, patrol far-off deserts and distant mountains. They have something to tell us, just as the fallen heroes who lie in Arlington whisper through the ages.
We honor them not only because they are guardians of our liberty, but because they embody the spirit of service: a willingness to find meaning in something greater than themselves.
OBAMA: And yet, at this moment, a moment that will define a generation, it is precisely this spirit that must inhabit us all.
For as much as government can do and must do, it is ultimately the faith and determination of the American people upon which this nation relies.
It is the kindness to take in a stranger when the levees break; the selflessness of workers who would rather cut their hours than see a friend lose their job which sees us through our darkest hours.
It is the firefighter's courage to storm a stairway filled with smoke, but also a parent's willingness to nurture a child, that finally decides our fate.
Our challenges may be new, the instruments with which we meet them may be new, but those values upon which our success depends, honesty and hard work, courage and fair play, tolerance and curiosity, loyalty and patriotism -- these things are old.
OBAMA: These things are true. They have been the quiet force of progress throughout our history.
What is demanded then is a return to these truths. What is required of us now is a new era of responsibility -- a recognition, on the part of every American, that we have duties to ourselves, our nation and the world, duties that we do not grudgingly accept but rather seize gladly, firm in the knowledge that there is nothing so satisfying to the spirit, so defining of our character than giving our all to a difficult task.
This is the price and the promise of citizenship.
OBAMA: This is the source of our confidence: the knowledge that God calls on us to shape an uncertain destiny.
This is the meaning of our liberty and our creed, why men and women and children of every race and every faith can join in celebration across this magnificent mall. And why a man whose father less than 60 years ago might not have been served at a local restaurant can now stand before you to take a most sacred oath.
(APPLAUSE)
So let us mark this day in remembrance of who we are and how far we have traveled.
In the year of America's birth, in the coldest of months, a small band of patriots huddled by nine campfires on the shores of an icy river.
OBAMA: The capital was abandoned. The enemy was advancing. The snow was stained with blood.
At a moment when the outcome of our revolution was most in doubt, the father of our nation ordered these words be read to the people:
"Let it be told to the future world that in the depth of winter, when nothing but hope and virtue could survive, that the city and the country, alarmed at one common danger, came forth to meet it."
America, in the face of our common dangers, in this winter of our hardship, let us remember these timeless words; with hope and virtue, let us brave once more the icy currents, and endure what storms may come; let it be said by our children's children that when we were tested we refused to let this journey end, that we did not turn back nor did we falter; and with eyes fixed on the horizon and God's grace upon us, we carried forth that great gift of freedom and delivered it safely to future generations.
Thank you. God bless you.
(APPLAUSE)
And God bless the United States of America.
(APPLAUSE)
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