Daily Highlights: 9.30.09

• Asian stocks rose for a second day, led by automakers and technology companies.
• Bank of Japan said to consider ending corporate debt purchases on recovery.
• Cash for farmers, surplus purchases in $350 million congressional dairy aid package.
• China's shares rebound from 3-day slump ahead of holiday; steel, banks, oil gain.
• Consumer confidence in US unexpectedly declines amid rising unemployment.
• EU nations to hammer out financial oversight, exit strategies in wake of G-20 summit.
• FDIC: Banks must prepay fees through 2012 to boost depleted reserves.
• Home prices in 20 US cities climb the most in four years as slump abates.
• IMF says losses from financial crisis have fallen by $600 bln to $3.4 trillion as shares rise.
• Oil rises to above $67 in Asia despite increase in US crude inventories.
• Yen falls for 2nd day on speculation government will intervene.
• Bank of America, 3 other banks' FDIC fees may total more than $10B.
• Big 5 Sporting Goods Q3 same-store sales up 1.6%.
• Boston Scientific to pay $716M to J&J for partial settlement of litigation over heart stents.
• CIT Group in midst of last-ditch bid to restructure by handing control to its bondholders.
• Daimler's Mercedes-Benz to take on 800 new employees at Brazil bus, truck plant.
• Darden posts unexpected drop in Q1 sales by 2.3% to $1.73B; profits up 15% at $94.3M.
• Deere & Co. plans to take a $300M goodwill write-down on its John Deere Landscapes unit.
• EU tells Lloyds Banking Group to relinquish 3.7M checking accounts to secure govt rescue.
• Exelon Chief shelves hunt for acquisitions as takeover prospects diminish.
• Gannett Co. sees Q3 EPS at $0.39-0.42 (cons est. $0.31), helped by lower costs.
• HP's CEO is finalizing plans to combine printer and personal-computer divisions.
• Micron Tech sharply narrowed its Q4 loss amid prior year write-downs, to $88M.
• Morgan Stanley’s mack proposes single global bank regulator.
• Nike's Q1 net rises slightly to $513M, on cost cutting measures. Revs fell 12%.
• Oracle buys HyperRoll, provider of financial reporting solutions. Terms undisclosed.
• Royal Bank of Canada to buy JP Morgan's Third Party Registered Investment Advisor.
• Sealy Corp.'s Q3 net rises 11% to $12.1M; revs down 13.7% at $349.6M.
• Thor Industries beats by $0.22, posts Q4 EPS of $0.45. Revs fell 22.6% to $440.9M.
• Wynn said to raise $1.63 billion in Hong Kong IPO.

Economic Calendar: Data on ADP Employment, GDP, Chicago PMI, Crude Inventories.

Recent Egan-Jones Rating Actions
RELIANCE STEEL & ALUMINUM CO (RS)
CALPINE CORP (CPN)
PHILLIPS-VAN HEUSEN CORP (PVH)
OXFORD INDUSTRIES INC (OXM)
POLO RALPH LAUREN CORP (RL)
MBIA INC (MBI)
CIT GROUP INC (CIT)
NEW YORK TIMES CO/THE (NYT)
GOODRICH CORP (GR)
MOOG INC (MOG)
CLEAN HARBORS INC (CLH)
ST JUDE MEDICAL INC (STJ)
COCA-COLA BOTTLING CO (COKE)

Comments

[Sqworl]

Thank you Jon Stewart...Ron Paul...

http://www.youtube.com/watch?v=jrsWXlSzyF0

[Cognitive Dissonance]

Sqworl, I see you changed your icon picture. Who's the girl?

[EagleProjets]

World finance: Is the dollar on the way out? September 29th 2009  

FROM THE ECONOMIST INTELLIGENCE UNIT

This year has seen a sharp rise in the number of voices questioning the US dollar's role as an international reserve currency. They have included the Chinese, the Russians, the French and, most recently, the president of the World Bank, Robert Zoellick. Yet while the view that the dollar faces a secular decline has some justification, radical change is a long way off. The three most widely proposed alternatives to the dollar—the euro, the Chinese renminbi and the IMF's Special Drawing Rights (SDR)—all have severe limitations as reserve currencies.

Concern over the dollar's future viability as the dominant reserve currency has partly been triggered by the rise in US public deficits as a result of the financial crisis. Resentment of the economic advantages that the dollar's special status confers on the US has also fuelled criticism. At the same time, the increasing multipolarity of the global economic order, and the emergence of economies capable of reaching a size similar to that of the US, has prompted more thinking about possible alternatives.

In fact, the dollar's pre-eminence is already declining, although it is still by far the most widely held currency in central banks' foreign reserves. Not all central banks reveal the breakdown of their reserves (the People's Bank of China is notably coy on the subject), but in available data the US dollar's share of global central-bank reserves has fallen from 71% a decade ago to just 65% in the first quarter of 2009. The euro has been the main beneficiary of this change, its share of reserves having risen from 18% to 26% in the same period. Other common reserve currencies, such as the British pound, the Japanese yen and the Swiss franc, continue to play only a marginal role.

But the gradual downtrend has become a much greater cause for concern now that the US's fiscal position and financial-sector problems are undermining confidence in the US economy as a whole. In the current environment, a substantial shift of central banks' reserves and other funds out of the dollar could trigger a full-scale collapse of the US currency. However, this is not the Economist Intelligence Unit's core forecast. While the move towards a more multipolar currency order will continue, accompanied by further diversification of foreign reserves, we believe the process will be very gradual.

The fact remains that the alternatives to the dollar are extremely limited. In order for a currency to be desirable for central-bank reserves, there must be sufficient assets denominated in the currency that are an extremely reliable store of value. This requires that in times of economic stress these assets be highly liquid on international markets. The Chinese renminbi, which is increasingly being discussed as a possible competitor to the dollar, does not meet these criteria. The domestic government bond market (with bonds worth US$1.4trn outstanding, one-fifth the amount of US federal government debt) is in a very early stage of development; most bonds are held to maturity and there is very little trading on secondary markets.

More importantly, at present government bonds can virtually only be purchased and traded by mainland Chinese residents. Although the government has just launched its first renminbi-denominated bond in Hong Kong, the authorities are unlikely to ease restrictions completely in the near term, as doing so would severely strain China's under-developed financial system. Even once the government achieves its stated aim of fully liberalising the renminbi, it will take a long time for renminbi-denominated assets to become sufficiently liquid and stable for foreign central banks to have confidence in them.

SDRs, which are issued by the IMF, have the advantage over the renminbi of at least being internationally tradeable, but only among governments and central banks. Without private trading, there is no prospect of SDRs achieving sufficient liquidity to be viable as a major reserve currency. In addition, virtually no bonds are issued in SDRs. This situation is unlikely to change, as national governments prefer to issue bonds in their own currencies to avoid exchange-rate risk. Even if the IMF and the World Bank were to issue more SDR-denominated bonds, the amounts in circulation would be too small to make a big difference to the composition of global reserves. In this context it is also worth observing that the market for inflation-indexed bonds, which can indirectly protect against currency movements, remains small—underlining governments' preference for borrowing in their domestic currencies.

The most viable candidate to compete with the dollar is the euro. It is the only one of the three alternatives that already is a significant reserve currency. The euro area has a track record of relative economic stability, and the amount of euro-denominated central government bonds in circulation is roughly the same as the US$7.3trn worth of US federal debt outstanding. Despite this, euro area liquidity is not as strong as it appears, as the debt market is highly fragmented between different governments. Broader concerns about the impact of the global crisis on macroeconomic and financial stability are just as much an issue for Europe as for the US—perhaps more so, given the possibility of the euro zone breaking up. As a consequence, euro-denominated assets have limited global appeal; they are held as reserves primarily by other central banks in Europe, and have so far made only modest inroads into the reserve accounts of central banks in other regions.

The Economist Intelligence Unit Source: ViewsWire

[Careless Whisper]

Doesn't the FDIC story summarize everything ?

"Insolvent insurance company gets bailed out by insolvent banks who just got bailed out by insolvent government."

[chindit13]

...who got bailed out by a combination of insolvent consumers and Communists.

Louis Armstrong is singing in the background..."What a wonderful world"

[glenlloyd]

Cash for farmers, surplus purchases in $350 million congressional dairy aid package.

Am I wrong or does this smell a lot like the beginnings of price fixing ala 1930's?