Obama Rattles World Markets stating America may “face a full blown crisis”

Obama said the U.S. may be facing a “full blown crisis.”

Feb. 10 (Bloomberg) — Stocks in Europe and Asia dropped and U.S. index futures retreated as President Barack Obama said the world’s largest economy faces a “full-blown crisis.”

Vedanta Resources Plc sank 6.2 percent, leading commodity producers lower, as base metals slid and Obama warned “the problems are accelerating instead of getting better” in the U.S. Samsung Electronics Co., which gets 14 percent of its sales from the Americas, slipped 1.3 percent in Seoul. Nordea Bank AB tumbled 5.4 percent after the biggest Nordic lender by market value said it would raise capital after loan losses jumped.

The MSCI World Index fell for the first time in six days, losing 0.9 percent to 869.32 at 9:08 a.m. in London. The gauge of 23 developed nations has climbed 3.6 percent this month amid speculation the deteriorating U.S. economy would force Congress to reach a compromise on Obama’s stimulus package.

“Investors are looking for something substantial that can back up some of their positions they have been taking,” said Kevin Lilley, a London-based fund manager at Royal London Asset Management, which oversees about $63 billion. The U.S. financial rescue announcement is “critical and is what everyone is waiting for.”

Governments are stepping up efforts to ease a financial crisis that has spurred more than $1 trillion in credit-related losses as the International Monetary Fund predicts global growth will almost grind to a halt this year. The MSCI World Index tumbled 42 percent last year, the biggest annual drop since the gauge was created in 1970, and slid 8.9 percent last month, the worst ever start to a year.

Obama’s Plan

The economic-stimulus package of more than $800 billion sought by Obama cleared a key procedural hurdle in the U.S. Senate yesterday as lawmakers scrambled to complete work on the plan by the end of the week. Treasury Secretary Timothy Geithner is scheduled to unveil a financial-rescue plan today that may determine how effective the stimulus will be.

Most U.S. stocks fell yesterday on concern Obama’s stimulus plan won’t be enough to pull the nation out of a recession. Futures on the Standard & Poor’s 500 Index futures dropped 1.3 percent today.

Obama spoke at a news conference last night in Washington

Feb. 10 (Bloomberg) — President Barack Obama signaled he would be open to seeking an expansion of the $700 billion financial-rescue program should the plan fail to restore stability to the U.S. banking system.

“We don’t know yet whether we’re going to need additional money or how much additional money we’ll need until we’ve seen how successful we are at restoring a sense of confidence in the marketplace,” Obama said in a news conference last night in Washington.

Treasury Secretary Timothy Geithner today will announce an overhaul of the bank-bailout fund. The plan, which so far won’t seek additional government money, is designed to support about $1.5 trillion in new lending and handling of distressed assets. It has three main components: more capital for banks, financing for as much as $1 trillion of consumer and business loans, and public financing for investors willing to buy the distressed assets, people familiar with the matter said.

The president’s remarks indicate he acknowledges the assessment of many economists that the $350 billion remaining in the Treasury’s Troubled Asset Relief Program is insufficient to revive credit markets. The International Monetary Fund forecasts financial companies will need to write down over $1 trillion more of their U.S. mortgage debt.

A second article from the WSJ

The last editorial was too much for me. It did make me laugh and I had to counter with this editorial.

The dumb, willfully blind optimists who dominated the late boom have been evicted—and the ardent declinists, the bears and the prophetic historians have moved in. They’ve come armed with copies of Gibbon and Malthus, and with data. If this is the typical financial-crisis-induced recession, economists Carmen Reinhart and Ken Rogoff conclude, unemployment could spike to double digits through 2011, and the housing and stock markets won’t rebound until the end of 2010.

As the government steps up its involvement with the financial sector, there’s widespread concern that the U.S. may be losing some of its capitalistic essence. At Davos, Niall Ferguson, a brilliant young Oxford-educated, Ivy League–employed (Harvard) historian, said the U.S. isn’t in a Great Depression. Rather, it’s in the grips of a “Great Repression,” in deep denial of its problems. The go-go Age of Leverage is over, and a go-slow Age of Big Government has begun. High levels of debt, imperial overreach and heightened government influence in the economy means the U.S. is in for a Japan-style lost decade, in which it could struggle to chart growth of 1 percent, Ferguson argued.

Economic prognostication is hamstrung by a tendency to extrapolate from recent trends endlessly into the future. It happens at the top of a cycle—the Dow is going to 36,000! Housing prices never fall!!—which helps explain how we find ourselves in this particular pickle. And it happens when we fall into a ditch.

History may not repeat itself. But it sure does rhyme. Historians rhyme, too. Twenty-two years ago, another young, Oxford-educated, Ivy League–employed (Yale) historian argued that America’s best days were behind it, thanks to imperial overreach, excessive debt and an epic financial bust. Paul Kennedy’s “The Rise and Fall of the Great Powers” was a bestseller when it was published in 1987—and went into paperback just as the U.S. was beginning to emerge from the Cold War as the world’s only superpower and the hub of a global integrated trading system.

The cry of creeping socialism has likewise echoed (falsely) through the decades. In 1935, the day after Franklin Roosevelt delivered a fireside chat about the need for Social Security and other regulations, a U.S. Chamber of Commerce official accused Roosevelt of trying to “Sovietize America.” The medical profession—and Ronald Reagan—swore up and down that the passage of Medicare and Medicaid would transform the United States into an English-speaking version of the U.S.S.R.

Those who fret about an era of slow-growth socialism presume that our government is incapable of learning from mistakes and crafting intelligent policies. The prospect of an enhanced safety net wasn’t incompatible with growth in the 1930s and 1960s, and it isn’t now. And today, state ownership and control of private enterprise is a temporary last resort, not an enduring governing strategy. In Europe’s social democracies, CEOs frequently welcomed government involvement because it protected them from competition. By contrast, U.S. managers can’t wait to get out from under the government yoke. Goldman Sachs and Morgan Stanley have already started talking about how they plan to pay back the bailout money before the end of this year—so they can pay out humongous bonuses next January.

America has a way of turning socialists into capitalists, not the other way around. The last serious socialist in American electoral politics was Henry Wallace. Wallace, who was FDR’s third-term vice president, was dq’d as commerce secretary in 1946 because he was seen as too soft on communism. But Wallace was also an entrepreneur. In 1926 he had founded a seed company, Pioneer Hi-Bred. In 1999, the company was sold to DuPont, a company founded by some of America’s first capitalists, for $7.7 billion. Wallace’s heirs still own 15 percent of the company.

It’s difficult at this moment to see the light at the end of the tunnel. In the early 1990s, as a recession lengthened and executives took huge paychecks while firing thousands of workers, Americans began to lose faith in the capitalist system. No economist or historian stood up and said that globalization, intelligent fiscal and monetary policy and this thing called the Internet would launch the U.S. into an unprecedented era of growth, prosperity and rising asset prices.

Every mutual fund or investment product comes with the caveat that past performance is no guarantee of future performance. But when it comes to the economy at large, nearly 400 years of American history have shown that it can be a pretty good guide.

I found this editorial, and was amazed at what makes print these days.
By posting this I am not taking a side. I am wondering though what our nation is thinking.

Communist: Obama working to nationalize U.S. economy
Claims ‘people advocate president’ pushing through radical agenda
Posted: February 08, 2009
7:30 pm Eastern

By Aaron Klein
© 2009 WorldNetDaily

President Obama is “considering” a radical agenda to nationalize the U.S. financial system, the Federal Reserve Bank, and private industries such as energy and other sectors whose future is “problematic” in private hands, claims the leader of the Communist Party USA.

In a major speech focused on Obama titled “Off and running: Opportunity of a lifetime,” CPUSA leader Sam Webb also alleges Obama’s administration is considering turning education, childcare, and health care into “no profit zones;” rerouting investment capital from military infrastructure to “green economy” projects and public infrastructure; and waging a “full scale” assault on global warming.

“We now have not simply a friend, but a people’s advocate in the White House,” declared Webb at a recent speech in Ohio for People’s Weekly World Communist newspaper.

“An era of progressive change is within reach, no longer an idle dream. Just look at the new lay of the land: a friend of labor and its allies sits in the White House,” Webb proclaimed.

He stated Obama and the “broad coalition that supports him will almost inevitably have to consider – and they already are – the following measures:

* Public ownership of the financial system and the elimination of the shadow banking system and exotic derivatives.

* Public control of the Federal Reserve Bank.

* Counter-crisis spending of a bigger size and scope to invigorate and sustain a full recovery and meet human needs – something that the New Deal never accomplished.

* Strengthening of union rights in order to rebalance the power between labor and capital in the economic and political arenas.

* Trade agreements that have at their core the protection and advancement of international working class interests.

* Equality in conditions of life for racially minorities and women.

* Democratic public takeover of the energy complex as well as a readiness to consider the takeover of other basic industries whose future is problematic in private hands.

* Turning education, child care, and health care into “no profit” zones.

* Rerouting investment capital from unproductive investment (military, finance and so forth) to productive investment in a green economy and public infrastructure.

* Changing direction of our nation’s foreign policy toward cooperation, disarmament, and diplomacy. We can’t have threats, guns and military occupations on the one hand and butter, democracy, goodwill, and peace on the other.

* Full scale assault on global warming.

* Serious and sustained commitment to assisting the developing countries that are locked in poverty and misery.”

Webb lauded Obama’s $800-plus billion so-called stimulus package as “a good bill that will ease the pain of this crisis, create jobs, and begin to reflate the economy.”

He explained labor unions, which he said were instrumental in Obama’s election, must work to keep the White House in check by “exercis[ing] an enormous influence on the political process. Never before has a coalition with such breadth walked on the political stage of our country,” he said.

Indeed, in an article just after last November’s election titled, “Special Interest or Class Consciousness? How Labor Put Obama in the White House,” Political Affairs reported on polling data released that revealed the extent of union support for Obama.

The American Federation of Labor and Congress of Industrial Organizations, or AFL-CIO, sponsored a poll showing union members supported Obama by a 68-30 margin and strongly influenced their family members.

According to the survey, Obama won among white men who are union members by 18 points. Union gun-owners backed Obama by 12 points, while union veterans voted for Obama by a 25-point margin. In the general population, Obama lost these groups by significant margins.

The following is a visual comparison of today vs. past recessions.
Also a historical look at credit, M3, and its relation to CPI.

Source for above charts

Source for above charts

Q: What do you think about the economy ?

These charts are for educational and or entertainment purposes. They are not to be used as a solicitation or evidence to buy or sell the market.
Please contact your financial adviser for investment advice.

PPT Strong Buy Category
ABT, EGY, NCTY, TSYS

Unusual Volume
SOHU, EXBD, ENER, UEPS, EZCH

NYSE percentage gainers
MTL, BBX, GJS, MF, HIG, KNO, MLR, GNW

NASDAQ percentage gainers
PSBC, TONE, PRGX, OPHC, BANR, CTBK, CVLL, MRLN, BPAX, WAYN

Leveraged buyouts killing financiers

Feb. 9 (Bloomberg) — The five banks that helped finance the takeover of Lyondell Chemical Co. have lost at least $3.7 billion, and that figure may climb to more than $8 billion, which would make the leveraged buyout the costliest in history for lenders.

Goldman Sachs Group Inc., Citigroup Inc., UBS AG, Merrill Lynch & Co. and ABN Amro Holding NV agreed to underwrite the $20.9 billion takeover of Houston-based Lyondell by Basell AF, a Rotterdam company controlled by Ukraine-born billionaire Len Blavatnik, in the second half of 2007. LyondellBasell Industries, the world’s biggest maker of polyolefins used in products ranging from bottle caps to auto parts, filed for bankruptcy last month as demand evaporated in the global recession.

Stimulus Bill under the micro scope

A comparison of the $827 billion economic recovery plan drafted by Senate Democrats and moderate Republicans with a $820 billion version passed by the House. Additional debt costs would add about $350 billion or more over 10 years. Many provisions expire in two years.

15 Companies that may not survive this year