Beijing Squeeze
Bejing Squeezing... In the five months to August, Chinese investors have reduced their holdings of U.S. Treasuries by 5% to $400 billion.
Today, the Vice Chairman of China's National People's Congress signaled plans to diversify the nation's $1.43 trillion of foreign exchange reserves.
The New York Board of Trade's dollar index dropped to 75.077, the lowest since the gauge started in March 1973. The dollar fell:
to a record low vs the Euro; the weakest since 1981 vs the pound; a 23 year low against the Australian dollar; and the lowest since 1950 vs the Canadian dollar.
Gold at a 27 year high, Crude Oil on target for $100 per barrel, hitting an all time high over $98 intraday.
Pump prices are rising fast, additional energy based commodities stagflation will squeeze John Q's spending habits and erode profits even further.
Leaking like a SIV...
Credit default swaps on bonds of Citigroup, Wachovia and Morgan Stanley are trading at the highest in at least five years on speculation the nation's biggest banks may be forced to write down more subprime assets.
WSJ reports Morgan Stanley may take a $3 billion to $6 billion write down in Q4.
Citigroup, which manages SIVs with $80 billion of assets, had provided the vehicles with $7.6 billion of credit by Oct. 31st.
Banks may have to give their SIVs more help (money) in the coming weeks if forced liquidation sales are to be averted. Citi stock down 37% YTD.
GM write down... General Motors, the world's largest automaker, reported a record $39 billion quarterly loss vs $147 million a year ago.
GM cited mortgage related losses at its partly owned GMAC LLC finance unit and "more challenging" auto market conditions in the U.S. and Germany.
GM took a $39 billion non cash charge for a valuation allowance against its deferred tax assets.
After 3 years of losses, GM is writing down the tax allowances because it may not be able to generate enough earnings to use the benefits.
Excluding the impact of the write down, GM reported an operating loss 10 times larger than expected.
America Off Line...Time Warner, the world's largest media company, said Q3 profit declined 53%. Net income fell to $1.09 billion vs $2.32 billion a year earlier.
On a net income basis, cable profit dropped 79% from a year earlier, when the unit recorded a tax gain.
AOL's internet profit fell 24% to $295 million in the quarter, hurt by a 38% drop in sales.
AIG After the bell...
American International Group Inc.'s Q3 earnings report, should provide the extent of its exposure to subprime loans since August.
AIG has potential exposure on multiple fronts, including business segments that offer mortgage originations and mortgage insurance.
AIG also has investments in (MBS) mortgage backed securities and credit default protection it provides on (CDO) collateralized debt obligations.
At the end of Q2, AIG had $64 billion in exposure to CDOs backed at least partly by subprime loans.
AIG said in August, that it does not expect to realize any losses from its CDO exposure.
The company stopped offering the protection to CDOs backed by subprime collateral in December 2005, at the very beginning of the market decline.
Its exposure to 2006 and 2007 vintage loans in its CDO coverage is only $31 million. Also reporting after the bell, Cisco. Hat tip to Bloomberg for the snipets.
Today, the Vice Chairman of China's National People's Congress signaled plans to diversify the nation's $1.43 trillion of foreign exchange reserves.
The New York Board of Trade's dollar index dropped to 75.077, the lowest since the gauge started in March 1973. The dollar fell:
to a record low vs the Euro; the weakest since 1981 vs the pound; a 23 year low against the Australian dollar; and the lowest since 1950 vs the Canadian dollar.
Gold at a 27 year high, Crude Oil on target for $100 per barrel, hitting an all time high over $98 intraday.
Pump prices are rising fast, additional energy based commodities stagflation will squeeze John Q's spending habits and erode profits even further.
Leaking like a SIV...
Credit default swaps on bonds of Citigroup, Wachovia and Morgan Stanley are trading at the highest in at least five years on speculation the nation's biggest banks may be forced to write down more subprime assets.
WSJ reports Morgan Stanley may take a $3 billion to $6 billion write down in Q4.
Citigroup, which manages SIVs with $80 billion of assets, had provided the vehicles with $7.6 billion of credit by Oct. 31st.
Banks may have to give their SIVs more help (money) in the coming weeks if forced liquidation sales are to be averted. Citi stock down 37% YTD.
GM write down... General Motors, the world's largest automaker, reported a record $39 billion quarterly loss vs $147 million a year ago.
GM cited mortgage related losses at its partly owned GMAC LLC finance unit and "more challenging" auto market conditions in the U.S. and Germany.
GM took a $39 billion non cash charge for a valuation allowance against its deferred tax assets.
After 3 years of losses, GM is writing down the tax allowances because it may not be able to generate enough earnings to use the benefits.
Excluding the impact of the write down, GM reported an operating loss 10 times larger than expected.
America Off Line...Time Warner, the world's largest media company, said Q3 profit declined 53%. Net income fell to $1.09 billion vs $2.32 billion a year earlier.
On a net income basis, cable profit dropped 79% from a year earlier, when the unit recorded a tax gain.
AOL's internet profit fell 24% to $295 million in the quarter, hurt by a 38% drop in sales.
AIG After the bell...
American International Group Inc.'s Q3 earnings report, should provide the extent of its exposure to subprime loans since August.
AIG has potential exposure on multiple fronts, including business segments that offer mortgage originations and mortgage insurance.
AIG also has investments in (MBS) mortgage backed securities and credit default protection it provides on (CDO) collateralized debt obligations.
At the end of Q2, AIG had $64 billion in exposure to CDOs backed at least partly by subprime loans.
AIG said in August, that it does not expect to realize any losses from its CDO exposure.
The company stopped offering the protection to CDOs backed by subprime collateral in December 2005, at the very beginning of the market decline.
Its exposure to 2006 and 2007 vintage loans in its CDO coverage is only $31 million. Also reporting after the bell, Cisco. Hat tip to Bloomberg for the snipets.
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