Page 3 of 5 CREDIT BUBBLE BULLETIN Just the facts
Commentary and weekly watch by Doug Noland
Japan's small and midsized companies dropped to a decade low as a faltering
economy weighed on profits."
October 29 - Bloomberg (Jason Clenfield): "Japanese companies plan to cut
production this month and next as the global financial crisis increases the
likelihood of a worldwide recession. Industrial output will fall 2.3% in
October and 2.2% in November, the Trade Ministry said…"
Asia Bubble Watch
October 31 - Bloomberg (Patricia Kuo): "Asia-Pacific companies and governments
outside Japan cut sales of bonds in dollars, yen and euros by 98% and curbed
bank borrowing in October as the
global credit slump boosted costs and weakened lenders... 'It's going to be
quite a few months before we see a decent size of new lending in the region,''
said John Corrin ... chairman of the Asia Pacific Loan Market Association.
'There were about 30 banks capable of underwriting $1 billion of loans 18
months ago. There are probably around 10 banks today which can do $100 million
each.'"
Latin America Watch
October 31 - Bloomberg (Drew Benson and Lester Pimentel): "Argentina's debt
ratings were cut by S&P for the second time since August amid mounting
concern the global financial crisis and a tumble in commodity export prices
will lead to default. S&P lowered the South American country's foreign debt
rating to B-, six levels below investment grade and in line with countries
including Bolivia and Lebanon…"
Central Banker Watch
October 29 - Bloomberg (Craig Torres): "The Federal Reserve cut its benchmark
interest rate by half a percentage point to 1%, matching a half-century low, in
an effort to avert the worst US economic downturn in the postwar era."
October 30 - Bloomberg (Scott Lanman): "The Federal Reserve bought commercial
paper valued at $145.7 billion in the first days of the program aimed at
backstopping the market ... The central bank extended $144.8 billion of loans
as of yesterday to a unit that paid $143.9 billion for the debt ... Separately,
direct loans to commercial banks rose to a record $110.7 billion yesterday from
$107.5 billion a week earlier. Cash borrowing by securities firms totaled $79.5
billion, down from $102.4 billion."
October 31 - Bloomberg (Mayumi Otsuma): "The Bank of Japan cut its benchmark
interest rate to 0.3% to help stave off a prolonged recession. Governor Masaaki
Shirakawa cast the deciding vote to lower the key overnight lending rate from
0.5%..."
October 30 - Bloomberg (Chinmei Sung and Janet Ong): "Taiwan's central bank cut
interest rates for the third time in less than two months ... The Central Bank
of the Republic of China (Taiwan) reduced the discount rate on 10-day loans to
banks to 3% from 3.25%..."
October 30 - Bloomberg (Fiona MacDonald and Arif Sharif): "The Central Bank of
Kuwait cut its benchmark interest rate for the second time this month following
the US Federal Reserve's 0.5 percentage point reduction ... The Persian Gulf
country's central bank cut the repo rate to 2%, from 2.5%..."
Unbalanced Global Economy Watch
October 29 - Bloomberg (Brian Lysaght): "London's largest shopping mall, a
265-store, glass-roofed center owned by Westfield Group and Commerzbank AG,
opens today, just in time for Britain's first recession in 17 years. 'It's
clearly not the best time, but this is a long-term investment,' said Michael
Gutman, managing director of Westfield U.K…"
October 29 - Bloomberg (Svenja O'Donnell): "UK mortgage approvals stayed close
to a record low and consumer credit rose at the weakest pace since 1993 after
the worsening financial crisis prompted banks to tighten lending, pushing the
country towards a recession."
October 30 - Bloomberg (Jennifer Ryan): "UK house prices dropped by the most in
at least 17 years in October as banks tightened their grip on credit and the
prospect of a recession deterred potential buyers, Nationwide Building Society
said. The average cost of a home fell 14.6% from a year earlier to 158,872
pounds ($261,000)…"
October 31 - Bloomberg (Svenja O'Donnell): "UK consumer confidence dropped in
October close to the weakest level since at least 1974 as the financial crisis
spooked British shoppers, GfK NOP said."
October 28 - Bloomberg (Colm Heatley): "Irish companies' biggest difficulty is
an inability to access credit from the country's banks, according to a survey
by the Institute of Certified Public Accountants. Some 50% of accountants
surveyed by the ... institute said a lack of credit was the main pressure
facing their clients, while 33 percent cited rising wage demands and 32% cited
energy costs."
Oct. 30 - Bloomberg (Fergal O'Brien): "European confidence in the economic
outlook fell by a record after the worsening credit crisis sent stocks
plunging, shut off companies' access to funding and heightened concerns that a
recession looms."
October 29 - Bloomberg (Emma Ross-Thomas): "Mortgage lending in Spain fell for
the 13th month in August as the global credit crunch coupled with the collapse
of a domestic housing boom threatened to tip the economy into recession.
Mortgage lending fell 38% from a year earlier…"
October 29 - Bloomberg (Tasneem Brogger): "Norway's jobless rate unexpectedly
held at a 20-year low in the three months ended September, indicating companies
in the world's No. 5 oil exporter are continuing to demand labor. The ... rate
held at 2.4%..."
October 31 - Bloomberg (Torrey Clark and Alex Nicholson): "Russia's inflation
rate will be about 13% by the end of the year, higher than the government's
11.8% forecast, central bank Chairman Sergey Ignatiev told lawmakers."
Bursting Bubble Economy Watch
October 31 - Bloomberg (Dan Levy): "Almost 20% of US mortgage borrowers owed
more on their loans in the third quarter than their house was worth as
foreclosures depressed prices and the economy weakened, according to First
American CoreLogic. More than 7.5 million properties already have negative
equity and another 2.1 million will follow should home prices decline another
5%.. First American ... said ... Six states account for almost 60% of homes
with negative equity, led by Nevada and Michigan."
October 28 - Bloomberg (Shobhana Chandra): "Consumers in the US were the most
pessimistic ever in October as stocks plunged and banks shut off credit,
raising the risk spending will tumble."
October 31 - Wall Street Journal (Kelly K. Spors and Simona Covel): "Small
businesses are getting hit with another aftershock of the credit crisis:
Customers who are delaying payment of their bills for weeks or months. The
growing wave of late payers is hurting many companies that were already reeling
from the economic crisis themselves. It's also damaging healthy companies.
Small businesses are hugely dependent on their cash flow, so they must either
cut costs or scramble to find alternative funding if they aren't being paid on
time. With money tight and bank loans hard to get, a cash-strapped company can
easily be pushed to the brink. Making matters worse, big companies typically
delay payments to their smaller suppliers first -- in part because small
businesses are unlikely to have teams of people devoted to chasing down their
accounts receivables."
October 31 - Bloomberg (Julie Ziegler and Alex Nussbaum): "The worst financial
crisis since the Great Depression is beginning to shake up the budgets and
planning on US college campuses, even in the elite Ivy League. Cornell
University ... became the latest school to react to the declining economy. The
school will suspend hiring of non-faculty staff from outside the university ...
Publicly supported schools, which educate about 80% of US undergraduates, can
expect shortfalls for at least the next two academic years, given state
projections of continuing deficits, said Donald Heller, director of the Center
for the Study of Higher Education, at Penn State University."
October 28 - Wall Street Journal (Kate Linebaugh): "With credit drying up and
new-vehicle sales slumping to a 25-year low, car dealerships from New Jersey to
California are going out of business at an accelerating pace, threatening
greater economic pain for communities around the country. The National
Automobile Dealers Association estimates 700 new-car dealerships will close
this year, up from 430 last year, and taking with them an estimated 37,100 jobs
around the country. That is a heavy blow to a key piece of the US economy. The
country's 20,700 dealerships accounted for $693 billion in sales last year, or
18% of all retail sales…"
Oct. 30 - Bloomberg (Hugh Son): "American Express ... will slash 7,000 jobs, or
about 10% of its staff, and may take a charge of as much as $290 million in the
fourth quarter tied to the cuts. American Express plans to save as much as $1.8
billion next year with a freeze on hiring and management raises, and less
spending for technology and marketing ... The job cuts are concentrated on
managers and other people who don't deal directly with customers…"
Head
Office: Unit B, 16/F, Li Dong Building, No. 9 Li Yuen Street East,
Central, Hong Kong Thailand Bureau:
11/13 Petchkasem Road, Hua Hin, Prachuab Kirikhan, Thailand 77110
