Saturday, January 2, 2010

World Financial Report, Dec 31, 2009

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The Worst May Not Be Over for Europe

Never before has Europe’s monetary union seemed so fragile.

Day by day, fears are growing that Greece or another weak country may default on its sovereign debt obligations, forcing the richer countries in Europe to ride to the rescue or risk having one or more of its most vulnerable members leave the 16-nation euro zone.

Many European economists discount such a fracture as a remote possibility. But that doesn’t mean Europe has safely emerged from crisis.

Instead, it faces a longer-term challenge to restore the fiscal credibility of at least half the countries that use the euro. The true test for the world’s largest common currency zone, analysts say, will be whether it can withstand the economic, political and social strains once the European Central Bank begins to raise interest rates in response to economic improvements in Germany, France and other Northern European countries.

At that point, the laggards on the union’s fringe — Portugal, Ireland, Italy, Greece and Spain (the so-called Piigs) — will face even tougher choices to cope with what looks like several more years of stagnant economies, high unemployment and gaping budget deficits. (more)

China Property Bubble May Lead to U.S.-Style Real Estate Slump

Li Nan has real estate fever. A 27- year-old steel trader at China Minmetals, a state-owned commodities company, Li lives with his parents in a cramped 700- square-foot apartment in west Beijing.

Li originally planned to buy his own place when he got married, but after watching Beijing real estate prices soar, he has been spending all his free time searching for an apartment. If he finds the right place -- preferably a two-bedroom in the historic Dongcheng quarter, near the city center -- he hopes to buy immediately. Act now, he figures, or live with Mom and Dad forever. In the last 12 months such apartments have doubled or tripled in price, to about $400 per square foot.

“This year they’ll be even higher,” says Li in the Jan. 11 issue of Bloomberg BusinessWeek. (more)

How Goldman Sachs Made Tens Of Billions Of Dollars From The Economic Collapse Of America In Four Easy Steps

Investment banking giant Goldman Sachs has become perhaps the most prominent symbol for everything that is wrong with the U.S. financial system, but most Americans cannot even begin to explain what they do or how they have made tens of billions of dollars from the economic collapse of America. The truth is that what Goldman Sachs did was fairly simple, and there may not have even been anything "illegal" about it (although they are now being investigated by the SEC among others).

The following is how Goldman Sachs made tens of billions of dollars from the economic collapse of America in four easy steps.... (more)

Deighan: Get Out of Bonds Before Meltdown Hits

he surge in bond prices this year represents a bubble that will soon burst, says Dan Deighan, founder of Deighan Financial Advisors.

"My biggest fear is the bond market,” he told CNBC.

“There is going to be a meltdown. It's time to get out of bonds."

The Barclays Capital corporate bond index has gained 18.55 percent this year.

But the tepid demand for recent Treasury auctions shows investors are tiring of bonds, Deighan says.

"I think it's clear with what's been happening in December that it's time to (exit bonds). The yield curve is steepening." (more)

How the Financially Connected Prospered in a Decade where Wealth Evaporated for the Majority: S&P 500 Down 24 Percent for the Decade, Real Home Values

As we usher in the New Year the filthy rich are counting their blessings and must be very appreciative of the massive bailouts that protected their wealth. The top one percent of this country control 42 percent of all financial wealth so it shouldn’t come as any surprise that most of the bailouts went to Wall Street and those that are tethered to it for income. As the stock market continues to rally Americans collecting food stamps stands at the highest number ever at 37 million. We also have 27 million Americans looking for work or are simply stringing a few hours together to keep some sort of paycheck coming in. The vast majority of Americans are simply exhaling a sigh of relief that the 2000s are now a thing of the past. Yet if something isn’t changed radically in our system we are bound to enter another financial shock in the near term.

First, the S&P 500 is down a stunning 24.1 percent since the start of the decade. Yet Goldman Sachs managed to pull off almost an 80 percent gain during the same time: (more)

Case: Housing Prices Poised to Fall 15 Percent

The run-up in housing prices that began earlier this year may soon be a thing of the past, says Wellesley College economist Karl Case.

The Standard & Poor’s/Case-Shiller home price index for 20 major cities, which he co-founded, rose 0.4 percent in October from September.

That represented the fifth straight month of rising prices, but the rate of increase has plummeted.

And prices were unchanged or fell in nine cities.

“I’m worried. Everyone’s worried,” Case told The New York Times. (more)

Kiplinger's Personal Finance - February 2010

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Business Week - 11 January 2010

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The Economist - 02 January 2010

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