Author Topic: STOCK CASUALTIES  (Read 1513 times)

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STOCK CASUALTIES
« on: March 24, 2017, 08:01:38 PM »


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This Chinese stock just mysteriously plunged 90%
by Sherisse Pham   @Sherisse
March 24, 2017: 6:04 AM ET   

china dairy stock fall
Shares in a major Chinese dairy firm suddenly nosedived as much as 91% on Friday leaving investors reeling.
The rapid sell-off wiped $4.1 billion off China Huishan Dairy's market value in Hong Kong before the company requested a trading halt around midday.
One veteran of Hong Kong markets said he'd never seen anything like it before.
"It is very unusual to have a stock drop that far," said Andrew Sullivan, managing director of sales trading at Haitong International Securities in Hong Kong.
Related: Investors wipe $6.6 billion off Toshiba's market value
The volume of trading was "quite incredible," he said, noting a whopping 779 million shares in the company were traded Friday, compared with a daily average of about 14 million.
Huishan declined to provide an immediate comment on the drop in its stock.
The mysterious plunge comes more than three months after U.S. investment research firm Muddy Waters slammed Huishan in a lengthy report. It accused the company of engaging in fraud and reporting fake profits.
A privately held company called Champ Harvest owns about 73% of Huishan, according to FactSet. Champ Harvest lists Huishan Chairman Yang Kai as one of its two directors.
In its December report, Muddy Waters said it was betting Huishan's stock would fall "because we believe it is worth close to zero."
Huishan's shares were halted Friday just a nickel shy of Muddy Waters' valuation, at $0.42 Hong Kong dollars (about 5 U.S. cents).
Related: Muddy Waters: Be wary of Hong Kong listed Chinese companies
Huishan rejected the Muddy Waters report when it was published in December, calling the allegations "groundless" and saying the report contained "obvious factual errors."
Nevertheless, the day after Muddy Waters published its report, Huishan requested a trading halt of its shares for three days.
But the stock has since resumed trading and it wasn't immediately clear what had triggered the crash on Friday. Even Carson Block, the founder of Muddy Waters, was taken aback.
"I haven't ever been involved with a stock that holds this steady pattern for a few months after our initial report, and then just crashes with no advance warning -- that's the first time for me," Block told Bloomberg.
Muddy Waters has been sounding the alarm for years on questionable accounting practices by Chinese companies listed in the U.S., Canada and Hong Kong.
The firm made a name for itself in 2011, after it accused Chinese timber company Sino-Forest of fraud. The scathing report triggered a massive sell-off in Sino-Forest shares in Toronto before they were eventually delisted.
CNNMoney (Hong Kong )

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STOCK CASUALTIES
« on: March 24, 2017, 08:01:38 PM »

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Re: STOCK CASUALTIES
« Reply #1 on: March 24, 2017, 08:03:04 PM »



BUSINESS
Wall Street prodigy is closing down his $7 billion hedge fund
By Carleton English March 23, 2017 | 3:00pm | Updated
Modal Trigger Wall Street prodigy is closing down his $7 billion hedge fund
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HEDGE FUNDS

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Eric Mindich’s crystal ball told him to cut his losses and run.

The 49-year-old investing prodigy — who first gained notoriety at 27 when he was named the youngest partner ever at Goldman Sachs — said Thursday that his $7 billion hedge fund Eton Park Capital Management was closing down.

Mindich said he was returning money to investors after losing 9 percent in 2016. That’s despite the fund posting four consecutive years of gains, including a 22-percent jump in 2013 and returning 6 percent in both 2014 and 2015.

Performance this year has been flat.

In a letter to investors, Mindich said he was throwing in the towel “from a position of relative strength.”

Mindich blamed “a combination of industry headwinds, a difficult market environment and, importantly, our own disappointing 2016 results.”

–– ADVERTISEMENT ––


Eton Park, founded in 2004, quietly shuttered its London offices last week, according to reports. The Manhattan-based fund also operated a Hong Kong office.

The hedge fund plans to return 40 percent of its capital to investors by the end of next month and added that some of its investments may take longer to unwind.

Eton Park’s fall marks a stunning defeat for a story-book career on Wall Street.

Before striking out on his own, Harvard-educated Mindich spent 15 years at Goldman Sachs. He took he helm of the bank’s arbitrage desk at age 25 before being named partner two years later.

Mindich raised $3.5 billion to launch Eton Park in 2004, making it one of the largest hedge fund launches at the time — despite the fact that the fund had an unusually lengthy two-year lock up period.

Still, Mindich isn’t the only Goldman alum to shutter a flashy, multibillion-dollar hedge fund of late. Richard Perry did just that last September.

Representatives for Eton Park did not comment on what Mindich will do next.

Outside of Eton Park, Mindich serves on the board of Lincoln Center Theater. He has been married to his wife Stacey, Tony Award-winning producer, for twenty years.

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Re: STOCK CASUALTIES
« Reply #2 on: March 24, 2017, 08:44:43 PM »
tis co must be got hanky panky lar...dat y internal lari first....not market crash lar....

"The mysterious plunge comes more than three months after U.S. investment research firm Muddy Waters slammed Huishan in a lengthy report. It accused the company of engaging in fraud and reporting fake profits."



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This Chinese stock just mysteriously plunged 90%
by Sherisse Pham   @Sherisse
March 24, 2017: 6:04 AM ET   

china dairy stock fall
Shares in a major Chinese dairy firm suddenly nosedived as much as 91% on Friday leaving investors reeling.
The rapid sell-off wiped $4.1 billion off China Huishan Dairy's market value in Hong Kong before the company requested a trading halt around midday.
One veteran of Hong Kong markets said he'd never seen anything like it before.
"It is very unusual to have a stock drop that far," said Andrew Sullivan, managing director of sales trading at Haitong International Securities in Hong Kong.
Related: Investors wipe $6.6 billion off Toshiba's market value
The volume of trading was "quite incredible," he said, noting a whopping 779 million shares in the company were traded Friday, compared with a daily average of about 14 million.
Huishan declined to provide an immediate comment on the drop in its stock.
The mysterious plunge comes more than three months after U.S. investment research firm Muddy Waters slammed Huishan in a lengthy report. It accused the company of engaging in fraud and reporting fake profits.
A privately held company called Champ Harvest owns about 73% of Huishan, according to FactSet. Champ Harvest lists Huishan Chairman Yang Kai as one of its two directors.
In its December report, Muddy Waters said it was betting Huishan's stock would fall "because we believe it is worth close to zero."
Huishan's shares were halted Friday just a nickel shy of Muddy Waters' valuation, at $0.42 Hong Kong dollars (about 5 U.S. cents).
Related: Muddy Waters: Be wary of Hong Kong listed Chinese companies
Huishan rejected the Muddy Waters report when it was published in December, calling the allegations "groundless" and saying the report contained "obvious factual errors."
Nevertheless, the day after Muddy Waters published its report, Huishan requested a trading halt of its shares for three days.
But the stock has since resumed trading and it wasn't immediately clear what had triggered the crash on Friday. Even Carson Block, the founder of Muddy Waters, was taken aback.
"I haven't ever been involved with a stock that holds this steady pattern for a few months after our initial report, and then just crashes with no advance warning -- that's the first time for me," Block told Bloomberg.
Muddy Waters has been sounding the alarm for years on questionable accounting practices by Chinese companies listed in the U.S., Canada and Hong Kong.
The firm made a name for itself in 2011, after it accused Chinese timber company Sino-Forest of fraud. The scathing report triggered a massive sell-off in Sino-Forest shares in Toronto before they were eventually delisted.
CNNMoney (Hong Kong )
malimalimaliongongongnotongchefbutishua thuatong

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Re: STOCK CASUALTIES
« Reply #3 on: March 24, 2017, 08:59:37 PM »
Our Bursa also got similar cornman counters which are very active now ?

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Re: STOCK CASUALTIES
« Reply #4 on: March 25, 2017, 07:15:08 AM »



Friday, 24 March 2017 | MYT 9:02 PM
HK bourse is not a “casino”, says HKEX CEO after big stock plunge
image: http://www.thestar.com.my/~/media/online/2017/03/24/13/08/dcx_doc6tgstcx8uhue2vvbea2.ashx/?w=620&h=413&crop=1&hash=203EA56A687C5E2CEFF0768A4C2623320D47C84D
Li (left), seen here with floor traders, warns against too much regulation by the bourse. - Reuters pic
Li (left), seen here with floor traders, warns against too much regulation by the bourse. - Reuters pic
 
SINGAPORE: Hong Kong’s stock market is well regulated and is not becoming a stock “casino”, the CEO of the stock exchange operator said on Friday after shares in China Huishan Dairy Holdings plunged 85%.

It was not immediately clear what triggered the slide in Huishan Dairy’s stock, which wiped US$4bil from its market value before trading was halted.

“First of all, Hong Kong capital market is not a stock casino and let’s put the record straight on that,” Hong Kong Exchanges and Clearing Ltd (HKEX) chief executive Charles Li said in response to a question at the Foreign Correspondents’ Club.

He was asked how the HKEX was looking to keep a balance between attracting Chinese money and maintaining a well functioning market. Li did not specifically mention Huishan Dairy, but was asked about it by a journalist at the event.

Barron’s Asia quoted Huishan Dairy’s chairman Yang Kai as saying the decline was the result of a short seller attack. The firm has previously come under attack from US based short-seller Muddy Waters.

HKEX’s Li said the market had seen an increase in different types of new investors from China, but warned against too much regulation by the bourse.

“When the market starts to lose its way, then we will come in,” he added.

Hong Kong has tightened listing and takeover requirements, and stepped up enforcement after instances of erratic price movements sparked fear of manipulation in the market.

“We all need to relax. This is a great market. You don’t want (the) regulator to solve all your problems,” Li said. - Reuters

Read more at http://www.thestar.com.my/business/business-news/2017/03/24/hk-bourse-is-not-a-casino-says-hkex-ceo/#2xpibfL3Ix3hScGc.99

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Re: STOCK CASUALTIES
« Reply #5 on: March 26, 2017, 09:34:30 PM »




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BUSINESS
Ackman dumps Valeant stake hours after being squeezed on Herbalife
By Carleton English March 13, 2017 | 9:50pm | Updated
Modal Trigger Ackman dumps Valeant stake hours after being squeezed on Herbalife
Bill Ackman Getty Images
SEE ALSO
 Icahn ups Herbalife bet again, squeezing nemesis Ackman
Icahn ups Herbalife bet again, squeezing nemesis Ackman
Bill Ackman screamed “uncle” on one of his worst bets ever — while getting squeezed by Carl Icahn on his second-worst bet.

The New York tycoon behind Pershing Square Capital Management on Monday announced that he has completely sold his 5.3 percent stake in Valeant Pharmaceuticals, just hours after his nemesis Icahn revealed he has enlarged his stake in Herbalife, whose shares Ackman has bet against to the tune of $1 billion.

In a statement released after Monday’s market close, Ackman’s Pershing Square said its Valeant investment “required a disproportionately large amount of time and resources.”

The scandal-ridden Canadian drug company’s share price has fallen by more than 95 percent from its August 2015 high of $262, to close at $12.11 on Monday. It has been accused of price-gouging and accounting fraud, and saw two of its former executives arrested late last year.

Ackman’s exit sent shares down nearly 10 percent in after-hours trading.

Valeant’s weak performance was largely responsible for Pershing Square’s two consecutive years of double-digit losses, down 20.5 percent in 2015 and 13.5 percent in 2016.

MORE ON:
VALEANT PHARMACEUTICALS

Bill Ackman can't escape Valeant lawsuit

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Pharma giant Valeant looking more desperate than ever

Valeant shares tank despite better-than-expected 4Q results
Ackman currently sits on Valeant’s board, along with Pershing Square’s vice chairman, Steve Fraidin. Neither will stand for re-election at Valeant’s next shareholder meeting, Pershing Square said.

The battered hedge fund tried to highlight some of the progress Valeant has made since Ackman and Fraidin joined the board last March. Such efforts include replacing disgraced Chief Executive Michael Pearson with former Perrigo CEO Joe Papa, and Valeant paying down approximately $2.7 billion of its nearly $30 billion junk-rated debt load.

Still, investors haven’t been buying tales of the “new Valeant.” Late last month, Valeant shares plunged 14 percent in a single day despite the company reporting fourth-quarter and full-year results that beat analyst estimates.

Separately Monday, shares of Herbalife — the nutritional supplement company Ackman famously called a “pyramid scheme” as he shorted it in December 2012 — jumped 2.7 percent after Icahn disclosed he had enlarged his stake to 24.6 percent from 24.2 percent.

Icahn “may be trying to send a signal, showing that he is still buying and thus scaring the shorts and potential shorts,” John Coffee of Columbia Law School told The Post.


FILED UNDER BILL ACKMAN ,  CARL ICAHN ,  HERBALIFE , 

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Re: STOCK CASUALTIES
« Reply #6 on: March 30, 2017, 08:41:32 PM »



Huishan Turmoil Highlights China's $8 Trillion Shadow Loan Risk
Bloomberg News
March 29, 2017, 1:48 PM GMT+8
Jiutai Bank discloses 1.35 billion yuan credit to Huishan
Some Huishan loans were arranged as investment receivables


0:06
0:15
Huishan Dairy Doesn't Believe Funds Were Misappropriated
Huishan Dairy Doesn't Believe Funds Were Misappropriated
Turmoil at a small Chinese dairy company is shedding rare light on the final destination for some of the country’s estimated $8 trillion of shadow banking loans.

Jilin Jiutai Rural Commercial Bank Corp., a major creditor to embattled China Huishan Dairy Holdings Co., said late Tuesday it has extended a total of 1.35 billion yuan ($196 million) in credit to the dairy producer, including 750 million yuan through the purchase of investment receivables from a finance lease company.

Investment receivables -- a category that can include using wealth-management products, asset-management plans and trust-beneficiary rights to disguise what are in effect loans -- allow banks to reduce the amount of cash they need to set aside for capital and provisions for loan losses.


The practice of recording loan-type exposures on balance sheets under categories including investment receivables has allowed hundreds of smaller Chinese banks to boost assets and profits. At the same time, it has created opaque risks that could lead to failures, bailouts or liquidity shocks with the potential to jolt national and global markets.

The external public relations agency for Jiutai didn’t immediately reply to an email seeking comment. The bank doesn’t appear to have broken any disclosure rules on its receivables.

China’s shadow banking system could lead to losses of $375 billion, CLSA Ltd. estimated in September. The brokerage said such financing expanded at an annual 30 percent pace from 2011 through 2015 to reach 54 trillion yuan, or 79 percent of the nation’s gross domestic product. But details have rarely surfaced on the specifics of individual shadow banking arrangements.

QuickTake Q&A: Don’t Say You Weren’t Warned About China’s WMPs

"Chinese banks are lending more and more money to companies in recent years through investment receivables, partly to circumvent regulatory or internal rules," said Yulia Wan, a Shanghai-based banking analyst at Moody’s Investors Service. Lenders don’t disclose enough information about where the money goes, according to Wan.


In addition, the banks usually don’t provision enough for such exposures, and they fund the transactions through short-term borrowing from other financial institutions, Wan said. "This practice poses risks to both investors and banks themselves."

While China’s shadow-financing system is smaller and less complex than in developed markets, the challenges include poor disclosure, which hampers investors’ assessment of risks. The nation’s financial regulators have taken steps since August to limit exposure at smaller lenders that used short-term interbank borrowings to boost investments in opaque products issued by other financial institutions.

Huishan’s Woes

Huishan Dairy called a meeting with eight creditors on Monday asking them not to call in outstanding loans, delay new loans or file lawsuits, according to a message posted Wednesday morning by Hongling Capital Chairman Zhou Shiping in the company’s media WeChat group. The P2P lender has brokered loans to Huishan.

Jiutai said in its statement Tuesday that there have been no defaults on interest due from the 1.35 billion yuan in total credit to Huishan Dairy, which includes 750 million yuan extended on Dec. 1 and 600 million yuan on March 7. The lender also said it will take all necessary measures to ensure the security of the credit.

About two weeks after the first loan, Carson Block, the short seller and founder of Muddy Waters LLC, issued a report on Huishan Dairy alleging the company was worth “close to zero.”

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Jiutai, based in the northeast city of Changchun, had 191 billion yuan of total assets as of Dec. 31, of which 31 percent was categorized as loans, according to its annual report. The report listed the size of Jiutai’s 10 largest loans, the biggest of which had an outstanding amount of 615 million yuan. That suggests the bank didn’t categorize its 750 million yuan Huishan transaction on Dec. 1 as a loan.

Jiutai’s investment receivables amounted to 11 billion yuan, or 5.6 percent of the bank’s total assets. The figure for Jiangsu Jiangyin Rural Commercial Bank Co., another rural lender, was 0.86 percent.

In Huishan Dairy’s first detailed statement since it halted trading in its shares on Friday after a 85 percent tumble, the company said Tuesday that it had been unable to contact one of its executive directors for the past week. Huishan said it was late on some bank payments and that its stock would stay suspended until the board received an update on the firm’s financial position

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Re: STOCK CASUALTIES
« Reply #7 on: April 04, 2017, 06:32:40 AM »



LATEST NEWS, CORPORATE
WORLD
Four Huishan directors resign in wake of mystery 85% stock plunge
By Bloomberg / Bloomberg   | April 4, 2017 : 12:43 AM MYT   
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Translated by Google Translator:
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(April 3): China Huishan Dairy Holdings Co said its four remaining non-executive directors resigned and the company still can’t locate its treasury head, adding to concern about the indebted farm operator’s corporate governance and finances.

The directors tendered their resignations effective March 31, with all four citing other commitments, according to a stock exchange filing late Friday. The Shenyang, China-based company said Ge Kun, who manages the company’s treasury and cash operations, was last known to be in Hong Kong and a missing person’s report has been filed with the city’s police.

An unexplained 85 percent plunge in Huishan’s shares on March 24 has drawn attention to the transparency of Chinese listed companies in Hong Kong, with such events becoming a familiar sight. Huishan’s creditors held an emergency meeting the day before the rout to discuss a cash shortage at the milk producer, according to Hongling Capital, a peer-to-peer lender that attended the gathering.

The company is reviewing its financial position in Ge’s absence, which is taking longer than initially expected, and intends to provide an update in a week’s time, according to Friday’s statement. A Hong Kong police spokesperson said they were unable to verify whether a missing person report was filed without knowing further details.

A Hong Kong court rejected an application by Chinese money manager Gopher Asset Management Co to freeze assets of Huishan Dairy, according to the same statement.

Majority shareholder Champ Harvest Ltd, controlled by Yang Kai, sold part of its stake as Huishan Dairy plummeted, a separate statement on Friday showed. The holder sold 250.9 million shares at an average price of 39.4 Hong Kong cents apiece on March 24. That alone would have been the highest daily volume since August 2015, and accounted for about a third of the stock that changed hands as Huishan Dairy plummeted from HK$2.81 to as low as 25 Hong Kong cents. The disclosure didn’t say whether the selling was forced.

Huishan Dairy has no members on its audit committee after Song Kungang, Gu Ruixia, Tsui Kei Pang and Kan Yu Leung Peter resigned as independent non-executive directors. Huishan Dairy’s chief financial officer Eddie So, the company’s media representative and auditor KPMG LLP didn’t immediately respond to e-mailed requests asking when the company will report its results for the year ended March 31.

The selloff came about three months after Carson Block, the short seller and founder of Muddy Waters LLC, issued a report on Huishan Dairy alleging the company was worth “close to zero.” Even so, the stock fluctuated in a narrow range between HK$2.69 and HK$3.23 from the start of October 2015 through to March 23. Huishan has said that the allegations in Block’s December report were groundless and contained misrepresentations.

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Re: STOCK CASUALTIES
« Reply #8 on: April 06, 2017, 03:17:57 PM »




大刘出手快狠准
却因这个惨赔114亿……
290点看 2017年4月6日
 
刘銮雄是香港商场上的一页传奇。(网络图)

(香港6日讯)65岁香港“华人置业”大股东刘銮雄(大刘),身家高达数百亿令吉,名列香港巨富之一。当年他眼光精准投资风扇厂赚大钱,二十几岁银行存款就超过一亿港元,超越常人。


后来风扇厂利润降低,大刘毅然决然收掉工厂转投金融及地产业,狙击不少上市公司,还因此获得“股坛狙击手”封号。其后成功夺下“华人置业”让他迅速累积财富。然而大刘不是每次出手都成功,有一回就让他惨赔近114亿令吉。


香港“娱乐行”是一栋历史悠久的商业大楼。(网络图)

大刘1996年底以超过20亿令吉高价将娱乐行(香港老牌商业大楼)卖掉大赚一笔,但1997金融风暴让华人置业原本赚的20亿令吉蒸发,还倒赔17亿令吉,加上自己也输了几十亿令吉,一共输掉近114亿令吉,把先前卖掉娱乐行赚的钱全部都吐回去,经历一段惨痛教训。

然而他没因此被打倒,2008年雷曼兄弟金融风暴时,让一票投资人血本无归,但大刘却逆势大赚,重回巅峰。

新闻来源:苹果日报


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Re: STOCK CASUALTIES
« Reply #9 on: April 11, 2017, 06:19:59 AM »



3信号显现公司造假/施宏毅
431点看 2017年4月10日
施凌部署●施宏毅


青蛙王子﹑雨润食品﹑辉山乳业,全部这些股票都令人闻风丧胆,因为只要你持有,便有可能大跌九成,因为当中共通点都是被人追击或是自己透露账帐目有问题,但事前你是绝逃不掉。


所以今天会跟大家分析财技,只需三个讯号就知道一家公司有没有古怪,基本上只要公司有古怪便不要去买入,这样就可以连被大户追击的机会你都可以消除。

没有盈利,只有财技

首先华人饮食在去年10月25日宣布两股合一股,之后再宣布一股供九股并于同日进行,供股价0.13港元。去到今日股价只剩下0.03港元,他的最大弊处就是没有盈利只有财技。

正常一家公司资金来源在于公司赚钱﹑卖资产以及融资,从报表上就可以看见都是亏蚀,而在派息纪录中就会看到钱从股东身上取得。

股权高度集中

我们在财技班都有提及恩达集团,只要在当天最高价买入一手,单日便蚀16万9200港元(9.67万令吉)。

最大问题就在于股权高度集中。

你只要在网上搜寻证监会股权高度集中便可找到,股权高度集中意思就是大股东股权高于75%,街货量持有不足25%。即是大股东任意通过公司所有决定,而公众都不能推返。

最大问题是2015年5月7日证监会议已公布恩达集团股权属高度集中,去到翌日公司再展开财技令股价大幅波动。

前言不对后语

第三就是思捷环球在2010年尾出现一宗交易,之后股价大跌一半。

2002年时候在思捷化身为蓝筹股后,主席邢李已辞去职务,但仍持有股份。

其实同年已开始沽售思捷,不过对外跟传媒解释说不代表看淡公司后市,业务仍然稳健。

在此想问一下大家,如果你是公司主席,亦知道公司未来发展开始向下,到底你会在高价卖出股票,还是真正走下坡才卖?

去到第二个问题,就在2012年业绩已倒退74%,在2013年6月,首次宣布两股供一股,除净日在10月29,当时解释是为未来公司发展之用,结果公司在一个月后发出盈警。

试问在供股前管理层会否不知道公司业绩会有危机?若他们是知道的话,你会选择在公布业绩前,股价仍在高位供股,还是公布后股价下跌才供?

从2011年业绩会看到,业绩都是亏蚀,所以问题重点在于公司发盈警前供股杀投资者一个措手不及。

辉山乳业没盈利负债高

去到近期辉山乳业被沽空机构浑水狙击,浑水透过沽空股票去获利。

而辉山乳业最大错处是没有盈利,负债比率更去到非常高水平。

加上被人发现主席抵押股票进行借贷,虽然暂未形成前言不对后语,不过事情慢慢就会水落石出。

另外股票方面虽然未去到高度集中地步但亦相差不远。

其实香港、美国、内地都有不同优质资产,不同一定要买入这些财技股。


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Re: STOCK CASUALTIES
« Reply #10 on: April 11, 2017, 05:35:15 PM »



港股再现断崖式暴跌
中国金控半小时跌80%
49点看 2017年4月11日
 
中国金控上午10时左右开始急速下跌,现跌75.591%。

(香港11日讯)4月11日港股再有股票断崖式暴跌,中国金控上午10时左右开始急速下跌,现跌75.591%,报0.031港元,半小时内跌幅达80%,盘中最深跌幅达83.46%。同时港股急跌逾200点,逼近24000点。


下午,中国金控多空力量争夺激烈。

截止4月11日收盘,中国金控跌57.48%,报0.054港元/股。恒生指数收盘跌0.72%,报24088.46点。

中国金控此番下跌是进一步巩固了其仙股低位,仙股是指港股中价格低于1元的股票。

中国金控本来是一家主营农业的公司,此前公司名为从玉农业;而在2015年,公司相继开展放债业务和互联网融资业务。

集团于3月底公布2016年业绩,全年亏损5.2亿元,而对上一年亏损约4200万元。

值得注意的是,中国金控的业绩一直不佳,从2010年至2015年公司只有在2012年获得了盈利,其他年份均是亏损,2015年中国金控还亏损4240万港元。

此外,中国金控的股价表现起伏也较大。2015年,公司股价从每股0.068港元一直涨至0.84港元,随后又开始震荡走低。

除了起伏很大的股价,中国金控资本运作频率也不低。从2015年4月到2016年4月,中国金控先后5次以配售新股、发行新股等方式试图获得资金,但其中有3次都尚未完成。


互联网上关于中国金控的公开资料较少。

互联网上关于中国金控的公开资料较少,从同花顺F10查阅到,公司注册地为百慕达,董事会主席为林裕豪。


Offline ikan besar

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Re: STOCK CASUALTIES
« Reply #11 on: April 11, 2017, 07:58:34 PM »
Goodway become bad way

sometimes win sometimes lose
biasa lah

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Re: STOCK CASUALTIES
« Reply #12 on: May 19, 2017, 07:03:26 AM »



Former Megan Media chairman jailed 18 months, fined
Posted on 18 May 2017 - 10:39am
sunbiz@thesundaily.com
Print
KUALA LUMPUR: A former executive chairman of Megan Media Holdings Bhd has been sentenced to 18 months’ jail and fined RM300,000 for submission of false information, the longest jail term for the infraction thus far.

Megan Media was delisted from the local stock exchange in 2008.

The Kuala Lumpur Sessions Court sentenced Datuk Dr Mohd Adam Che Harun, aged 73, to 18 months’ jail and fined him RM300,000, or in default one year’s imprisonment, for having furnished false information to Bursa Malaysia pertaining to the revenue of Megan Media in its quarterly results for the financial period ended Jan 31, 2007.

The false information related to Megan Media’s revenue amounting to RM306 million.

In sentencing the accused, Sessions Court judge Zulqarnain Hassan said he viewed the offence seriously and held that the accused should have refrained from providing such false information to Bursa. The judge also held that it was important for investors to have confidence in the capital market.

The offence under Section 122B, read together with 122(1) of the Securities Industry Act 1983, carries a penalty of a fine of not more than RM3 million, or jail not exceeding 10 years, or both.

Offline Kop Aisy

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Re: STOCK CASUALTIES
« Reply #13 on: May 19, 2017, 08:02:09 AM »
This case took 10 years to sentence. Itu chairman pun sudah tua.  :shake:

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Re: STOCK CASUALTIES
« Reply #14 on: May 25, 2017, 03:05:27 PM »




涉嫌10年前环球控股内线交易
证监会起诉刘秀梅戴良业等7人
493点看 2017年5月25日
(吉隆坡25日讯)证监会针对环球控股(Worldwide Holdings)约10年前在私有化过程中的内线交易,起诉7人,包括公司董事拿汀巴杜卡刘秀梅,以及知名华商拿督戴良业。

证监会在文告中指出,另5人为陈锦德、廖发兴、何铭盛、蔡健鸿和戴良兴(皆译音)。


2006年雪州发展局(PKNS)私有化环球控股时,刘秀梅作为雪州发展局副总经理和环球控股董事,将消息透露给戴良业和陈锦德,后两者再透露消息给另外4人。

证监会要求7人交出从该项内线交易中所获得利益的3倍金额。同时,他们各面对高达100万令吉的民事罚款。

戴良业目前是征阳集团(SUNSURIA,3743,主板工产业股)执行主席,兼全国总商会与大马中华总商会总会长。


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Re: STOCK CASUALTIES
« Reply #15 on: May 25, 2017, 06:32:31 PM »



Highlight
SC sues seven individuals for insider trading involving Worldwide Holdings shares
Surin Murugiah
/
theedgemarkets.com

May 25, 2017 12:10 pm MYT
-A+A
KUALA LUMPUR (May 25): Securities Commission Malaysia (SC) has filed a civil suit at the Kuala Lumpur High Court against seven individuals for insider trading involving the shares of Worldwide Holdings Bhd (Worldwide), a company previously listed on Bursa Malaysia.

In a statement today, the SC said Datin Paduka Low Siew Moi, Tan Cheng Teik, Liaw Huat Hin, Hoi Main Seng, Chua Keng Hong, Datuk Ter Leong Yap, and Ter Leong Hing were alleged to have been involved in the insider trading of Worldwide shares between 2006 and 2007.

In the suit filed on May 18, SC claimed that Low had communicated material non-public information, namely the proposed privatisation of Worldwide, which was undertaken by Perbadanan Kemajuan Negeri Selangor (PKNS), to Tan, Liaw, Hoi, Chua, and Ter Leong Yap, in breach of section 89E(3)(a) of the Securities Industry Act 1983.

The SC said Low was the deputy general manager in PKNS and a director of Worldwide at the material time.

The SC also alleged that Ter Leong Yap and Tan had further communicated the said information to Ter Leong Hing, and also Hoi and Liaw respectively.

The SC claimed that Tan, Chua, Hoi, Liaw and Ter Leong Hing breached section 89E(2)(a) of the SIA when they purchased Worldwide shares while in possession of the material non-public information.

The SC said it is seeking a disgorgement of three times the profits earned by the defendants as a result of the insider trading and a civil penalty of RM1 million from each of the defendants.


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Re: STOCK CASUALTIES
« Reply #16 on: May 26, 2017, 05:08:16 PM »



Business NewsHome > Business > Business News
Friday, 26 May 2017 | MYT 12:41 PM
Ex-CIMB banker admits insider trades in Singapore takeovers
image: http://www.thestar.com.my/~/media/online/2015/09/22/13/02/sgx22sept15.ashx/?w=620&h=413&crop=1&hash=70E80AB218026FF66AF38798D463A07972BC2324

 
SINGAPORE: Alan Tay Yeow Kee, a former CIMB Group Holdings Bhd. banker, admitted to insider trading on two stocks before the companies received takeover offers.

Tay, 41, pleaded guilty to trading on price-sensitive information in a Singapore State Court on Friday and was fined S$180,000 (RM555,600).
 
He bought shares in Qualitas Medical Group Ltd. and wielding products supplier Leeden Ltd. in 2011 before the information he had was publicly available.

CIMB was the financial adviser in both deals, prosecutor Joel Chen said in court. The companies were delisted from Singapore’s stock exchange after being acquired.

Tay has had to “shoulder the weight” of the investigation, his lawyer Hamidul Haq said in court. He is remorseful and is unemployed, Haq said.

Singapore has been clamping down on market misconduct to protect its image as a financial hub.

The Monetary Authority of Singapore is appealing in court to raise the civil penalties imposed on a divorced couple for unauthorised stock trading.

The regulator has said it will continue to boost enforcement and surveillance abilities to deter criminal behavior and poor controls.

Tay, who was an associate director in the corporate client solutions department at CIMB, was also accused of encouraging Cheng Hong Wee Eddy to buy the stocks, according to charge sheets when the men were indicted last year.

Tay persuaded his former schoolmate Cheng to buy shares in Qualitas and Leeden, Chen said Friday. The men split profits of about S$60,000, he said.

Charges against Cheng were dropped, though Chen declined to say why.

The criminal case is Prosecutor v Tay Yeow Kee, Singapore State Court. - Bloomberg
 
TAGS / KEYWORDS:
Stocks , Markets

Read more at http://www.thestar.com.my/business/business-news/2017/05/26/ex-cimb-banker-admits-insider-trades-in-singapore-takeovers/#hYqBCTb2hgw8MAvq.99

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Re: STOCK CASUALTIES
« Reply #17 on: May 27, 2017, 03:08:41 PM »



1997 Asian financial crisis

The countries most affected by the 1997 Asian financial crisis
The Asian financial crisis was a period of financial crisis that gripped much of East Asia beginning in July 1997 and raised fears of a worldwide economic meltdown due to financial contagion.

The crisis started in Thailand (known in Thailand as the Tom Yum Goong crisis; Thai: วิกฤตต้มยำกุ้ง) with the financial collapse of the Thai baht after the Thai government was forced to float the baht due to lack of foreign currency to support its currency peg to the U.S. dollar. At the time, Thailand had acquired a burden of foreign debt that made the country effectively bankrupt even before the collapse of its currency.[1] As the crisis spread, most of Southeast Asia and Japan saw slumping currencies,[2] devalued stock markets and other asset prices, and a precipitous rise in private debt.[3]

Indonesia, South Korea, and Thailand were the countries most affected by the crisis. Hong Kong, Laos, Malaysia and the Philippines were also hurt by the slump. Brunei, China, Singapore, Taiwan, and Vietnam were less affected, although all suffered from a loss of demand and confidence throughout the region.

Foreign debt-to-GDP ratios rose from 100% to 167% in the four large Association of Southeast Asian Nations (ASEAN) economies in 1993–96, then shot up beyond 180% during the worst of the crisis. In South Korea, the ratios rose from 13% to 21% and then as high as 40%, while the other northern newly industrialized countries fared much better. Only in Thailand and South Korea did debt service-to-exports ratios rise.[4]

Although most of the governments of Asia had seemingly sound fiscal policies, the International Monetary Fund (IMF) stepped in to initiate a $40 billion program to stabilize the currencies of South Korea, Thailand, and Indonesia, economies particularly hard hit by the crisis. The efforts to stem a global economic crisis did little to stabilize the domestic situation in Indonesia, however. After 30 years in power, President Suharto was forced to step down on 21 May 1998 in the wake of widespread rioting that followed sharp price increases caused by a drastic devaluation of the rupiah. The effects of the crisis lingered through 1998. In 1998 the Philippines growth dropped to virtually zero. Only Singapore and Taiwan proved relatively insulated from the shock, but both suffered serious hits in passing, the former more so due to its size and geographical location between Malaysia and Indonesia. By 1999, however, analysts saw signs that the economies of Asia were beginning to recover.[5] After the 1997 Asian Financial Crisis, economies in the region are working toward financial stability on financial supervision.[6]

Until 1999, Asia attracted almost half of the total capital inflow into developing countries. The economies of Southeast Asia in particular maintained high interest rates attractive to foreign investors looking for a high rate of return. As a result, the region's economies received a large inflow of money and experienced a dramatic run-up in asset prices. At the same time, the regional economies of Thailand, Malaysia, Indonesia, Singapore, and South Korea experienced high growth rates, 8–12% GDP, in the late 1980s and early 1993. This achievement was widely acclaimed by financial institutions including IMF and World Bank, and was known as part of the "Asian economic miracle".

Contents
Credit bubbles and fixed currency exchange rates   Edit
The causes of the debacle are many and disputed. Thailand's economy developed into an economic bubble fueled by hot money. More and more was required as the size of the bubble grew. The same type of situation happened in Malaysia, and Indonesia, which had the added complication of what was called "crony capitalism".[7] The short-term capital flow was expensive and often highly conditioned for quick profit. Development money went in a largely uncontrolled manner to certain people only, not particularly the best suited or most efficient, but those closest to the centers of power.[8]

At the time of the mid-1990s, Thailand, Indonesia and South Korea had large private current account deficits and the maintenance of fixed exchange rates encouraged external borrowing and led to excessive exposure to foreign exchange risk in both the financial and corporate sectors.

In the mid-1990s, a series of external shocks began to change the economic environment – the devaluation of the Chinese renminbi, and the Japanese yen due to the Plaza Accord of 1985, raising of U.S. interest rates which led to a strong U.S. dollar, the sharp decline in semiconductor prices; adversely affected their growth.[9] As the U.S. economy recovered from a recession in the early 1990s, the U.S. Federal Reserve Bank under Alan Greenspan began to raise U.S. interest rates to head off inflation.

This made the United States a more attractive investment destination relative to Southeast Asia, which had been attracting hot money flows through high short-term interest rates, and raised the value of the U.S. dollar. For the Southeast Asian nations which had currencies pegged to the U.S. dollar, the higher U.S. dollar caused their own exports to become more expensive and less competitive in the global markets. At the same time, Southeast Asia's export growth slowed dramatically in the spring of 1996, deteriorating their current account position.

Some economists have advanced the growing exports of China as a contributing factor to ASEAN nations' export growth slowdown, though these economists maintain the main cause of the crises was excessive real estate speculation.[10] China had begun to compete effectively with other Asian exporters particularly in the 1990s after the implementation of a number of export-oriented reforms. Other economists dispute China's impact, noting that both ASEAN and China experienced simultaneous rapid export growth in the early 1990s.[11]

Many economists believe that the Asian crisis was created not by market psychology or technology, but by policies that distorted incentives within the lender–borrower relationship. The resulting large quantities of credit that became available generated a highly leveraged economic climate, and pushed up asset prices to an unsustainable level.[12] These asset prices eventually began to collapse, causing individuals and companies to default on debt obligations.

Panic amongst lenders and withdrawal of credit   Edit
The resulting panic among lenders led to a large withdrawal of credit from the crisis countries, causing a credit crunch and further bankruptcies. In addition, as foreign investors attempted to withdraw their money, the exchange market was flooded with the currencies of the crisis countries, putting depreciative pressure on their exchange rates. To prevent currency values collapsing, these countries' governments raised domestic interest rates to exceedingly high levels (to help diminish flight of capital by making lending more attractive to investors) and to intervene in the exchange market, buying up any excess domestic currency at the fixed exchange rate with foreign reserves. Neither of these policy responses could be sustained for long.

Very high interest rates, which can be extremely damaging to an economy that is healthy, wreaked further havoc on economies in an already fragile state, while the central banks were hemorrhaging foreign reserves, of which they had finite amounts. When it became clear that the tide of capital fleeing these countries was not to be stopped, the authorities ceased defending their fixed exchange rates and allowed their currencies to float. The resulting depreciated value of those currencies meant that foreign currency-denominated liabilities grew substantially in domestic currency terms, causing more bankruptcies and further deepening the crisis.

Other economists, including Joseph Stiglitz and Jeffrey Sachs, have downplayed the role of the real economy in the crisis compared to the financial markets. The rapidity with which the crisis happened has prompted Sachs and others to compare it to a classic bank run prompted by a sudden risk shock. Sachs pointed to strict monetary and contractory fiscal policies implemented by the governments on the advice of the IMF in the wake of the crisis, while Frederic Mishkin points to the role of asymmetric information in the financial markets that led to a "herd mentality" among investors that magnified a small risk in the real economy. The crisis has thus attracted interest from behavioral economists interested in market psychology.[13]

Another possible cause of the sudden risk shock may also be attributable to the handover of Hong Kong sovereignty on 1 July 1997. During the 1990s, hot money flew into the Southeast Asia region through financial hubs, especially Hong Kong. The investors were often ignorant of the actual fundamentals or risk profiles of the respective economies, and once the crisis gripped the region, coupled with the political uncertainty regarding the future of Hong Kong as an Asian financial centre led some investors to withdraw from Asia altogether. This shrink in investments only worsened the financial conditions in Asia[14] (subsequently leading to the depreciation of the Thai baht on 2 July 1997).[15]

Several case studies on the topic of the application of network analysis of a financial system help to explain the interconnectivity of financial markets, as well as the significance of the robustness of hubs (or main nodes).[16][17][18] Any negative externalities in the hubs creates a ripple effect through the financial system and the economy (as well as any connected economies) as a whole.[19][20][21]

The foreign ministers of the 10 ASEAN countries believed that the well co-ordinated manipulation of their currencies was a deliberate attempt to destabilize the ASEAN economies. Former Malaysian Prime Minister Mahathir Mohamad accused George Soros of ruining Malaysia's economy with "massive currency speculation". Soros claims to have been a buyer of the ringgit during its fall, having sold it short in 1997.

At the 30th ASEAN Ministerial Meeting held in Subang Jaya, Malaysia, the foreign ministers issued a joint declaration on 25 July 1997 expressing serious concern and called for further intensification of ASEAN's cooperation to safeguard and promote ASEAN's interest in this regard.[22] Coincidentally, on that same day, the central bankers of most of the affected countries were at the EMEAP (Executive Meeting of East Asia Pacific) meeting in Shanghai, and they failed to make the "New Arrangement to Borrow" operational. A year earlier, the finance ministers of these same countries had attended the 3rd APEC finance ministers meeting in Kyoto, Japan, on 17 March 1996, and according to that joint declaration, they had been unable to double the amounts available under the "General Agreement to Borrow" and the "Emergency Finance Mechanism".

As such, the crisis could be seen as the failure to adequately build capacity in time to prevent currency manipulation. This hypothesis enjoyed little support among economists, however, who argue that no single investor could have had enough impact on the market to successfully manipulate the currencies' values. In addition, the level of organization necessary to coordinate a massive exodus of investors from Southeast Asian currencies in order to manipulate their values rendered this possibility remote.[citation needed]

IMF role   Edit
Such was the scope and the severity of the collapses involved that outside intervention, considered by many as a new kind of colonialism,[23] became urgently needed. Since the countries

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Re: STOCK CASUALTIES
« Reply #18 on: May 27, 2017, 03:11:10 PM »



   IMF role   Edit
Such was the scope and the severity of the collapses involved that outside intervention, considered by many as a new kind of colonialism,[23] became urgently needed. Since the countries melting down were among not only the richest in their region, but in the world, and since hundreds of billions of dollars were at stake, any response to the crisis was likely to be cooperative and international, in this case through the International Monetary Fund (IMF). The IMF created a series of bailouts ("rescue packages") for the most-affected economies to enable affected nations to avoid default, tying the packages to currency, banking and financial system reforms.[24]

Economic reforms   Edit
The IMF's support was conditional on a series of economic reforms, the "structural adjustment package" (SAP). The SAPs called on crisis-struck nations to reduce government spending and deficits, allow insolvent banks and financial institutions to fail, and aggressively raise interest rates. The reasoning was that these steps would restore confidence in the nations' fiscal solvency, penalize insolvent companies, and protect currency values. Above all, it was stipulated that IMF-funded capital had to be administered rationally in the future, with no favored parties receiving funds by preference. In at least one of the affected countries the restrictions on foreign ownership were greatly reduced.[25]

There were to be adequate government controls set up to supervise all financial activities, ones that were to be independent, in theory, of private interest. Insolvent institutions had to be closed, and insolvency itself had to be clearly defined. In addition, financial systems were to become "transparent", that is, provide the kind of reliable financial information used in the West to make sound financial decisions.[26]

As countries fell into crisis, many local businesses and governments that had taken out loans in US dollars, which suddenly became much more expensive relative to the local currency which formed their earned income, found themselves unable to pay their creditors. The dynamics of the situation were similar to that of the Latin American debt crisis. The effects of the SAPs were mixed and their impact controversial. Critics, however, noted the contractionary nature of these policies, arguing that in a recession, the traditional Keynesian response was to increase government spending, prop up major companies, and lower interest rates.

The reasoning was that by stimulating the economy and staving off recession, governments could restore confidence while preventing economic loss. They pointed out that the U.S. government had pursued expansionary policies, such as lowering interest rates, increasing government spending, and cutting taxes, when the United States itself entered a recession in 2001, and arguably the same in the fiscal and monetary policies during the 2008–2009 Global Financial Crisis.

Many commentators in retrospect criticized the IMF for encouraging the developing economies of Asia down the path of "fast-track capitalism", meaning liberalization of the financial sector (elimination of restrictions on capital flows), maintenance of high domestic interest rates to attract portfolio investment and bank capital, and pegging of the national currency to the dollar to reassure foreign investors against currency risk.[27]

IMF and high interest rates   Edit
The conventional high-interest-rate economic wisdom is normally employed by monetary authorities to attain the chain objectives of tightened money supply, discouraged currency speculation, stabilized exchange rate, curbed currency depreciation, and ultimately contained inflation.

In the Asian meltdown, highest IMF officials rationalized their prescribed high interest rates as follows:

From then IMF First Deputy managing director, Stanley Fischer (Stanley Fischer, "The IMF and the Asian Crisis," Forum Funds Lecture at UCLA, Los Angeles on 20 March 1998):

"When their governments "approached the IMF, the reserves of Thailand and South Korea were perilously low, and the Indonesian Rupiah was excessively depreciated. Thus, the first order of business was... to restore confidence in the currency. To achieve this, countries have to make it more attractive to hold domestic currency, which in turn, requires increasing interest rates temporarily, even if higher interest costs complicate the situation of weak banks and corporations...
"Why not operate with lower interest rates and a greater devaluation? This is a relevant tradeoff, but there can be no question that the degree of devaluation in the Asian countries is excessive, both from the viewpoint of the individual countries, and from the viewpoint of the international system. Looking first to the individual country, companies with substantial foreign currency debts, as so many companies in these countries have, stood to suffer far more from… currency (depreciation) than from a temporary rise in domestic interest rates…. Thus, on macroeconomics… monetary policy has to be kept tight to restore confidence in the currency...."
From the then IMF managing director Michel Camdessus ("Doctor Knows Best?" Asiaweek, 17 July 1998, p. 46):

"To reverse (currency depreciation), countries have to make it more attractive to hold domestic currency, and that means temporarily raising interest rates, even if this (hurts) weak banks and corporations."
Thailand   Edit

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Re: STOCK CASUALTIES
« Reply #19 on: May 27, 2017, 03:12:34 PM »



   Thailand   Edit
Further information: Economy of Thailand
From 1985 to 1996, Thailand's economy grew at an average of over 9% per year, the highest economic growth rate of any country at the time. Inflation was kept reasonably low within a range of 3.4–5.7%.[28] The baht was pegged at 25 to the U.S. dollar.

On 14 May and 15 May 1997, the Thai baht was hit by massive speculative attacks. On 30 June 1997, Prime Minister Chavalit Yongchaiyudh said that he would not devalue the baht. However, Thailand lacked the foreign reserves to support the USD–Baht currency peg, and the Thai government was eventually forced to float the Baht, on 2 July 1997, allowing the value of the Baht to be set by the currency market. This caused a chain reaction of events, eventually culminating into a region-wide crisis.[29]

Thailand's booming economy came to a halt amid massive layoffs in finance, real estate, and construction that resulted in huge numbers of workers returning to their villages in the countryside and 600,000 foreign workers being sent back to their home countries.[30] The baht devalued swiftly and lost more than half of its value. The baht reached its lowest point of 56 units to the U.S. dollar in January 1998. The Thai stock market dropped 75%. Finance One, the largest Thai finance company until then, collapsed.[31]

On 11 August 1997, the IMF unveiled a rescue package for Thailand with more than $17 billion, subject to conditions such as passing laws relating to bankruptcy (reorganizing and restructuring) procedures and establishing strong regulation frameworks for banks and other financial institutions. The IMF approved on 20 August 1997, another bailout package of $2.9 billion.

By 2001, Thailand's economy had recovered. The increasing tax revenues allowed the country to balance its budget and repay its debts to the IMF in 2003, four years ahead of schedule. The Thai baht continued to appreciate to 29 Baht to the U.S. dollar in October 2010.

Indonesia   Edit
See also: Fall of Suharto and Economy of Indonesia

Fall of Suharto: President Suharto resigns, 21 May 1998.
In June 1997, Indonesia seemed far from crisis. Unlike Thailand, Indonesia had low inflation, a trade surplus of more than $900 million, huge foreign exchange reserves of more than $20 billion, and a good banking sector. But a large number of Indonesian corporations had been borrowing in U.S. dollars. During the preceding years, as the rupiah had strengthened respective to the dollar, this practice had worked well for these corporations; their effective levels of debt and financing costs had decreased as the local currency's value rose.

In July 1997, when Thailand floated the baht, Indonesia's monetary authorities widened the rupiah currency trading band from 8% to 12%. The rupiah suddenly came under severe attack in August. On 14 August 1997, the managed floating exchange regime was replaced by a free-floating exchange rate arrangement. The rupiah dropped further. The IMF came forward with a rescue package of $23 billion, but the rupiah was sinking further amid fears over corporate debts, massive selling of rupiah, and strong demand for dollars. The rupiah and the Jakarta Stock Exchange touched a historic low in September. Moody's eventually downgraded Indonesia's long-term debt to "junk bond".[32]

Although the rupiah crisis began in July and August 1997, it intensified in November when the effects of that summer devaluation showed up on corporate balance sheets. Companies that had borrowed in dollars had to face the higher costs imposed upon them by the rupiah's decline, and many reacted by buying dollars through selling rupiah, undermining the value of the latter further. In February 1998, President Suharto sacked Bank Indonesia Governor J. Soedradjad Djiwandono, but this proved insufficient. Suharto resigned under public pressure in May 1998 and Vice President B. J. Habibie was elevated in his place. Before the crisis, the exchange rate between the rupiah and the dollar was roughly 2,600 rupiah to 1 U.S. dollar.[33]

The rate plunged to over 11,000 rupiah to 1 U.S. dollar on 9 January 1998, with spot rates over 14,000 during 23–26 January and trading again over 14,000 for about six weeks during June–July 1998. On 31 December 1998, the rate was almost exactly 8,000 to 1 U.S. dollar.[34] Indonesia lost 13.5% of its GDP that year.

The crisis also brought independence to East Timor.

South Korea   Edit
The banking sector was burdened with non-performing loans as its large corporations were funding aggressive expansions. During that time, there was a haste to build great conglomerates to compete on the world stage. Many businesses ultimately failed to ensure returns and profitability. The chaebol, South Korean conglomerates, simply absorbed more and more capital investment. Eventually, excess debt led to major failures and takeovers. For example, in July 1997, South Korea's third-largest car maker, Kia Motors, asked for emergency loans.[35]

In the wake of the Asian market downturn, Moody's lowered the credit rating of South Korea from A1 to A3, on 28 November 1997, and downgraded again to B2 on 11 December. That contributed to a further decline in South Korean shares since stock markets were already bearish in November. The Seoul stock exchange fell by 4% on 7 November 1997. On 8 November, it plunged by 7%, its biggest one-day drop to that date. And on 24 November, stocks fell a further 7.2% on fears that the IMF would demand tough reforms. In 1998, Hyundai Motors took over Kia Motors. Samsung Motors' $5 billion venture was dissolved due to the crisis, and eventually Daewoo Motors was sold to the American company General Motors (GM).

The International Monetary Fund (IMF) provided US$57billion as a bailout package. In return, Korea was required to take restructuring measures.[36] The ceiling on foreign investment in Korean companies was raised from 26 percent to 100 percent.[37] In addition, the Korean government started financial sector reform program. Under the program, 787 insolvent financial institutions were closed or merged by June 2003.[38] The number of financial institutions in which foreign investors invested has increased rapidly. Examples include New Bridge Capital's takeover of Korea First Bank.

The South Korean won, meanwhile, weakened to more than 1,700 per U.S. dollar from around 800. Despite an initial sharp economic slowdown and numerous corporate bankruptcies, South Korea has managed to triple its per capita GDP in dollar terms since 1997. Indeed, it resumed its role as the world's fastest-growing economy—since 1960, per capita GDP has grown from $80 in nominal terms to more than $21,000 as of 2007. However, like the chaebol, South Korea's government did not escape unscathed. Its national debt-to-GDP ratio more than doubled (approximately 13% to 30%) as a result of the crisis.

In South Korea, the crisis is also commonly referred to as IMF.

Philippines   Edit
Further information: Economy of the Philippines
In May 1997, the Bangko Sentral ng Pilipinas, the country's central bank, raised interest rates by 1.75 percentage points and again by 2 points on 19 June. Thailand triggered the crisis on 2 July and on 3 July, the Bangko Sentral intervened to defend the peso, raising the overnight rate from 15% to 32% at the onset of the Asian crisis in mid-July 1997. The peso dropped from 26 pesos per dollar at the start of the crisis to 46.50 pesos in early 1998 to 53 pesos as in July 2001.

The Philippine GDP contracted by 0.6% during the worst part of the crisis, but grew by 3% by 2001, despite scandals of the administration of Joseph Estrada in 2001, most notably the "jueteng" scandal, causing the PSE Composite Index, the main index of the Philippine Stock Exchange, to fall to 1,000 points from a high of 3,000 points in 1997. The peso's value declined to around 55.75 pesos to the U.S. dollar. Later that year, Estrada was on the verge of impeachment but his allies in the senate voted against continuing the proceedings.

This led to popular protests culminating in the "EDSA II Revolution", which effected his resignation and elevated Gloria Macapagal-Arroyo to the presidency. Arroyo lessened the crisis in the country. The Philippine peso rose to about 50 pesos by the year's end and traded at around 41 pesos to a dollar in late 2007. The stock market also reached an all-time high in 2007 and the economy was growing by more than 7 percent, its highest in nearly two decades.

Hong Kong   Edit
Further information: Economy of Hong Kong
In October 1997, the Hong Kong dollar, which had been pegged at 7.8 to the U.S. dollar since 1983, came under speculative pressure because Hong Kong's inflation rate had been significantly higher than the United States' for years. Monetary authorities spent more than $1 billion to defend the local currency. Since Hong Kong had more than $80 billion in foreign reserves, which is equivalent to 700% of its M1 money supply and 45% of its M3 money supply,[citation needed] the Hong Kong Monetary Authority (effectively the city's central bank) managed to maintain the peg.

Stock markets became more and more volatile; between 20 and 23 October the Hang Seng Index dropped 23%. The Hong Kong Monetary Authority then promised to protect the currency. On 15 August 1998, it raised overnight interest rates from 8% to 23%, and at one point to '280%'.The HKMA had recognized that speculators were taking advantage of the city's unique currency-board system, in which overnight rates automatically increase in proportion to large net sales of the local currency. The rate hike, however, increased downward pressure on the stock market, allowing speculators to profit by short selling shares. The HKMA started buying component shares of the Hang Seng Index in mid-August.

The HKMA and Donald Tsang, then the Financial Secretary, declared war on speculators. The Government ended up buying approximately HK$120 billion (US$15 billion) worth of shares in various companies,[39] and became the largest shareholder of some of those companies (e.g., the government owned 10% of HSBC) at the end of August, when hostilities ended with the closing of the August Hang Seng Index futures contract. In 1999, the Government started selling those shares by launching the Tracker Fund of Hong Kong, making a profit of about HK$30 billion (US$4 billion).

Malaysia   Edit
Further information: Economy of Malaysia
In July 1997, within days of the Thai baht devaluation, the Malaysian ringgit was heavily traded by speculators. The overnight rate jumped from under 8% to over 40%. This led to rating downgrades and a general sell off on the stock and currency markets. By end of 1997, ratings had fallen many notches from investment grade to junk, the KLSE had lost more than 50% from above 1,200 to under 600, and the ringgit had lost 50% of its value, falling from above 2.50 to under 4.57 on (23 January 1998) to the dollar. The then prime minister, Mahathir Mohammad imposed strict capital controls and introduced a 3.80 peg against the U.S. dollar.

Malaysian moves involved fixing the local currency to the U.S. dollar, stopping the overseas trade in ringgit currency and other ringgit assets therefore making offshore use of the ringgit invalid, restricting the amount of currency and investments that residents can take abroad, and imposed for foreign portfolio funds, a minimum one-year "stay period" which since has been converted to an exit tax. The decision to make ringgit held abroad invalid has also dried up sources of ringgit held abroad that speculators borrow from to manipulate the ringgit, for example by "selling short". Those who did, had to repurchase the limited ringgit at higher prices, making it unattractive to them.[40] In addition, it also fully suspended the trading of CLOB (Central Limit Order Book) counters, indefinitely freezing approximately $4.47 billion worth of shares and affecting 172,000 investors, most of them Singaporeans,[41][42][43] which became a political issue between the two countries.[44]

In 1998, the output of the real economy declined plunging the country into its first recession for many years. The construction sector contracted 23.5%, manufacturing shrunk 9% and the agriculture sector 5.9%. Overall, the country's gross domestic product plunged 6.2% in 1998. During that year, the ringgit plunged below 4.7 and the KLSE fell below 270 points. In September that year, various defensive measures were announced to overcome the crisis.

The principal measure taken were to move the ringgit from a free float to a fixed exchange rate regime. Bank Negara fixed the ringgit at 3.8 to the dollar. Capital controls were imposed while aid offered from the IMF was refused. Various task force agencies were formed. The Corporate Debt Restructuring Committee dealt with corporate loans. Danaharta discounted and bought bad loans from banks to facilitate orderly asset realization. Danamodal recapitalized banks.

Growth then settled at a slower but more sustainable pace. The massive current account deficit became a fairly substantial surplus. Banks were better capitalized and NPLs were realised in an orderly way. Small banks were bought out by strong ones. A large number of PLCs were unable to regulate their financial affairs and were delisted. Compared to the 1997 current account, by 2005, Malaysia was estimated to have a $14.06 billion surplus.[45] Asset values however, have not returned to their pre-crisis highs. Foreign investor confidence was still low, partially due to the lack of transparency shown in how the CLOB counters had been dealt with.[46][47]

In 2005 the last of the crisis measures were removed as taken off the fixed exchange system. But unlike the pre-crisis days, it did not appear to be a free float, but a managed float, like the Singapore dollar.

Mongolia   Edit

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Re: STOCK CASUALTIES
« Reply #20 on: May 27, 2017, 03:13:54 PM »



Mongolia   Edit
Mongolia was adversely affected by the Asian financial crisis of 1997-98 and suffered a further loss of income as a result of the Russian crisis in 1999. Economic growth picked up in 1997–99 after stalling in 1996 due to a series of natural disasters and increases in world prices of copper and cashmere. Public revenues and exports collapsed in 1998 and 1999 due to the repercussions of the Asian financial crisis. In August and September 1999, the economy suffered from a temporary Russian ban on exports of oil and oil products. Mongolia joined the World Trade Organization (WTO) in 1997. The international donor community pledged over $300 million per year at the last Consultative Group Meeting, held in Ulaanbaatar in June 1999.

Singapore   Edit
Further information: Economy of Singapore
As the financial crisis spread the economy of Singapore dipped into a short recession. The short duration and milder effect on its economy was credited to the active management by the government. For example, the Monetary Authority of Singapore allowed for a gradual 20% depreciation of the Singapore dollar to cushion and guide the economy to a soft landing. The timing of government programs such as the Interim Upgrading Program and other construction related projects were brought forward.[48]

Instead of allowing the labor markets to work, the National Wage Council pre-emptively agreed to Central Provident Fund cuts to lower labor costs, with limited impact on disposable income and local demand. Unlike in Hong Kong, no attempt was made to directly intervene in the capital markets and the Straits Times Index was allowed to drop 60%. In less than a year, the Singaporean economy fully recovered and continued on its growth trajectory.[48]

China   Edit
Further information: Economy of the People's Republic of China
The Chinese currency, the renminbi (RMB), had been pegged in 1994 to the U.S. dollar at a ratio of 8.3 RMB to the dollar. Having largely kept itself above the fray throughout 1997–1998, there was heavy speculation in the Western press that China would soon be forced to devalue its currency to protect the competitiveness of its exports vis-a-vis those of the ASEAN nations, whose exports became cheaper relative to China's. However, the RMB's non-convertibility protected its value from currency speculators, and the decision was made to maintain the peg of the currency, thereby improving the country's standing within Asia. The currency peg was partly scrapped in July 2005, rising 2.3% against the dollar, reflecting pressure from the United States.

Unlike investments of many of the Southeast Asian nations, almost all of China's foreign investment took the form of factories on the ground rather than securities, which insulated the country from rapid capital flight. While China was unaffected by the crisis compared to Southeast Asia and South Korea, GDP growth slowed sharply in 1998 and 1999, calling attention to structural problems within its economy. In particular, the Asian financial crisis convinced the Chinese government of the need to resolve the issues of its enormous financial weaknesses, such as having too many non-performing loans within its banking system, and relying heavily on trade with the United States.

United States and Japan   Edit
Further information: Economy of the United States and Economy of Japan
The "Asian flu" had also put pressure on the United States and Japan. Their markets did not collapse, but they were severely hit. On 27 October 1997, the Dow Jones industrial plunged 554 points or 7.2%, amid ongoing worries about the Asian economies. The New York Stock Exchange briefly suspended trading. The crisis led to a drop in consumer and spending confidence (see 27 October 1997 mini-crash). Indirect effects included the dot-com bubble, and years later the housing bubble and the subprime mortgage crisis.[49]

Japan was affected because its economy is prominent in the region. Asian countries usually run a trade deficit with Japan because the latter's economy was more than twice the size of the rest of Asia together; about 40% of Japan's exports go to Asia. The Japanese yen fell to 147 as mass selling began, but Japan was the world's largest holder of currency reserves at the time, so it was easily defended, and quickly bounced back. The real GDP growth rate slowed dramatically in 1997, from 5% to 1.6%, and even sank into recession in 1998 due to intense competition from cheapened rivals. The Asian financial crisis also led to more bankruptcies in Japan. In addition, with South Korea's devalued currency, and China's steady gains, many companies complained outright that they could not compete.[49]

Another longer-term result was the changing relationship between the United States and Japan, with the United States no longer openly supporting the highly artificial trade environment and exchange rates that governed economic relations between the two countries for almost five decades after World War II.[50]

Consequences   Edit
Asia   Edit
The crisis had significant macroeconomic-level effects, including sharp reductions in values of currencies, stock markets, and other asset prices of several Asian countries.[51] The nominal U.S. dollar GDP of ASEAN fell by $9.2 billion in 1997 and $218.2 billion (31.7%) in 1998. In South Korea, the $170.9 billion fall in 1998 was equal to 33.1% of the 1997 GDP.[52] Many businesses collapsed, and as a consequence, millions of people fell below the poverty line in 1997–1998. Indonesia, South Korea and Thailand were the countries most affected by the crisis.

Currency   Exchange rate
(per US$1)[53]   Change
June 1997   July 1998
Thailand Thai baht   24.5   41   Decrease 40.2%
Indonesia Indonesian rupiah   2,380   14,150   Decrease 83.2%
Philippines Philippine peso   26.3   42   Decrease 37.4%
Malaysia Malaysian ringgit   2.48   4.88   Decrease 45.0%
South Korea South Korean won   850   1,290   Decrease 34.1%
Country   GNP (US$1 billion)[53]   Change
June 1997   July 1998
 Thailand   170   102   Decrease 40.0%
 Indonesia   205   34   Decrease 83.4%
 Philippines   75   47   Decrease 37.3%
 Malaysia   90   55   Decrease 38.9%
 South Korea   430   283   Decrease 34.2%
The above tabulation shows that despite the prompt raising of interest rates to 32% in the Philippines upon the onset of crisis in mid-July 1997, and to 65% in Indonesia upon the intensification of crisis in 1998, their local currencies depreciated just the same and did not perform better than those of South Korea, Thailand, and Malaysia, which countries had their high interest rates set at generally lower than 20% during the Asian crisis. This created grave doubts on the credibility of IMF and the validity of its high-interest-rate prescription to economic crisis.

The economic crisis also led to a political upheaval, most notably culminating in the resignations of President Suharto in Indonesia and Prime Minister General Chavalit Yongchaiyudh in Thailand. There was a general rise in anti-Western sentiment, with George Soros and the IMF in particular singled out as targets of criticisms. Heavy U.S. investment in Thailand ended, replaced by mostly European investment, though Japanese investment was sustained.[citation needed] Islamic and other separatist movements intensified in Southeast Asia as central authorities weakened.[54]

New regulations weakened the influence of the bamboo network, a network of overseas Chinese family-owned businesses that dominate the private sector of Southeast Asia. After the crisis, business relationships were more frequently based on contracts, rather than the trust and family ties of the traditional bamboo network.[55]

More long-term consequences included reversal of the relative gains made in the boom years just preceding the crisis. Nominal U.S. dollar GDP per capital fell 42.3% in Indonesia in 1997, 21.2% in Thailand, 19% in Malaysia, 18.5% in South Korea and 12.5% in the Philippines.[52] The CIA World Factbook reported that the per capita income (measured by purchasing power parity) in Thailand declined from $8,800 to $8,300 between 1997 and 2005; in Indonesia it increased from $2,628 to $3,185;[56] in Malaysia it declined from $11,100 to $10,400. Over the same period, world per capita income rose from $6,500 to $9,300.[57] Indeed, the CIA's analysis asserted that the economy of Indonesia was still smaller in 2005 than it had been in 1997, suggesting an impact on that country similar to that of the Great Depression. Within East Asia, the bulk of investment and a significant amount of economic weight shifted from Japan and ASEAN to China and India.[58]

The crisis has been intensively analyzed by economists for its breadth, speed, and dynamism; it affected dozens of countries, had a direct impact on the livelihood of millions, happened within the course of a mere few months, and at each stage of the crisis leading economists, in particular the international institutions, seemed a step behind. Perhaps more interesting to economists was the speed with which it ended, leaving most of the developed economies unharmed. These curiosities have prompted an explosion of literature about financial economics and a litany of explanations why the crisis occurred. A number of critiques have been leveled against the conduct of the IMF in the crisis, including one by former World Bank economist Joseph Stiglitz. Politically there were some benefits. In several countries, particularly South Korea and Indonesia, there was renewed push for improved corporate governance. Rampaging inflation weakened the authority of the Suharto regime and led to its toppling in 1998, as well as accelerating East Timor's independence.[59]

Outside Asia   Edit

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Re: STOCK CASUALTIES
« Reply #21 on: May 27, 2017, 03:14:45 PM »



Outside Asia   Edit
See also: Impeachment of Bill Clinton
See also: September 11 attacks
See also: Economic effects arising from the September 11 attacks
After the Asian crisis, international investors were reluctant to lend to developing countries, leading to economic slowdowns in developing countries in many parts of the world. The powerful negative shock also sharply reduced the price of oil, which reached a low of about $11 per barrel towards the end of 1998, causing a financial pinch in OPEC nations and other oil exporters. In response to a severe fall in oil prices, the supermajors that emerged in the late-1990s, undertook some major mergers and acquisitions between 1998 and 2002 – often in an effort to improve economies of scale, hedge against oil price volatility, and reduce large cash reserves through reinvestment.[60]

The reduction in oil revenue also contributed to the 1998 Russian financial crisis, which in turn caused Long-Term Capital Management in the United States to collapse after losing $4.6 billion in 4 months. A wider collapse in the financial markets was avoided when Alan Greenspan and the Federal Reserve Bank of New York organized a $3.625 billion bailout. Major emerging economies Brazil and Argentina also fell into crisis in the late 1990s (see Argentine debt crisis). The September 11 attacks contributed to major shockwave in Developed and Developing economies Stock market downturn of 2002[61]

The crisis in general was part of a global backlash against the Washington Consensus and institutions such as the IMF and World Bank, which simultaneously became unpopular in developed countries following the rise of the anti-globalization movement in 1999. Four major rounds of world trade talks since the crisis, in Seattle, Doha, Cancún, and Hong Kong, have failed to produce a significant agreement as developing countries have become more assertive, and nations are increasingly turning toward regional or bilateral free trade agreements (FTAs) as an alternative to global institutions.

Many nations learned from this, and quickly built up foreign exchange reserves as a hedge against attacks, including Japan, China, South Korea. Pan Asian currency swaps were introduced in the event of another crisis. However, interestingly enough, such nations as Brazil, Russia, and India as well as most of East Asia began copying the Japanese model of weakening their currencies, and restructuring their economies so as to create a current account surplus to build large foreign currency reserves. This has led to ever-increasing funding for U.S. treasury bonds, allowing or aiding housing (in 2001–2005) and stock asset bubbles (in 1996–2000) to develop in the United States.

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Re: STOCK CASUALTIES
« Reply #22 on: May 27, 2017, 09:12:34 PM »



Financial crisis of 2007–2008
This article is about the financial crisis that peaked in 2008. For the global recession triggered by the financial crisis, see Great Recession.

The TED spread (in red) increased significantly during the financial crisis, reflecting an increase in perceived credit risk

World map showing real GDP growth rates for 2009 (Countries in brown were in recession.)
The financial crisis of 2007–2008, also known as the global financial crisis and the 2008 financial crisis, is considered by many economists to have been the worst financial crisis since the Great Depression of the 1930s.[1][2][3][4]

It began in 2007 with a crisis in the subprime mortgage market in the US, and developed into a full-blown international banking crisis with the collapse of the investment bank Lehman Brothers on September 15, 2008.[5] Excessive risk-taking by banks such as Lehman Brothers helped to magnify the financial impact globally.[6] Massive bail-outs of financial institutions and other palliative monetary and fiscal policies were employed to prevent a possible collapse of the world financial system. The crisis was nonetheless followed by a global economic downturn, the Great Recession. The European debt crisis, a crisis in the banking system of the European countries using the euro, followed later.

The Dodd–Frank Act[7] was enacted in the US in the aftermath of the crisis to "promote the financial stability of the United States".[8] The Basel III capital and liquidity standards were adopted by countries around the world.[9]

Contents
Summary   Edit
Subprime mortgage bubble   Edit
The precipitating factor was a high default rate in the United States subprime home mortgage sector. The expansion of this sector was encouraged by the Community Reinvestment Act (CRA),[10][11][12][13] a US federal law designed to help low- and moderate-income Americans get mortgage loans.[14] Many of these subprime (high risk) loans were then bundled and sold, finally accruing to quasi-government agencies (Fannie Mae and Freddie Mac).[15] The implicit guarantee by the US federal government created a moral hazard and contributed to a glut of risky lending. Many of these loans were also bundled together and formed into new financial instruments called mortgage-backed securities, which could be sold as (ostensibly) low-risk securities partly because they were often backed by credit default swaps insurance.[16] Because mortgage lenders could pass these mortgages (and the associated risks) on in this way, they could and did adopt loose underwriting criteria (encouraged by regulators), and some developed aggressive lending practices. The accumulation and subsequent high default rate of these mortgages led to the financial crisis and the consequent damage to the world economy.

Banking crisis   Edit
High mortgage approval rates led to a large pool of homebuyers, which drove up housing prices. This appreciation in value led large numbers of homeowners (subprime or not) to borrow against their homes as an apparent windfall. This "bubble" would be burst by a rising Single-Family Residential Mortgages Delinquency Rate (beginning in August 2006 and peaking in the first quarter, 2010).[17] The high delinquency rates led to a rapid devaluation of financial instruments (mortgage-backed securities including bundled loan portfolios, derivatives and Credit Default Swaps). As the value of these assets plummeted, the market (buyers) for these securities evaporated and banks who were heavily invested in these assets began to experience a liquidity crisis. Lehman Brothers filed for bankruptcy on September 15, 2008. Merrill Lynch, AIG, Freddie Mac, Fannie Mae, HBOS, Royal Bank of Scotland, Bradford & Bingley, Fortis, Hypo and Alliance & Leicester were all expected to follow – with a US federal bailout announced the following day beginning with $85B to AIG. In spite of trillions[18] paid out by the US federal government, it became much more difficult to borrow money. The resulting decrease in buyers caused housing prices to plummet.

Consequences   Edit
While the collapse of large financial institutions was prevented by the bailout of banks by nation

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Re: STOCK CASUALTIES
« Reply #23 on: May 27, 2017, 09:18:22 PM »



Consequences   Edit
While the collapse of large financial institutions was prevented by the bailout of banks by national governments, stock markets still dropped worldwide. In many areas, the housing market also suffered, resulting in evictions, foreclosures, and prolonged unemployment. The crisis played a significant role in the failure of key businesses, declines in consumer wealth estimated in trillions of US dollars, and a downturn in economic activity leading to the Great Recession of 2008–2012 and contributing to the European sovereign-debt crisis.[19][20] The active phase of the crisis, which manifested as a liquidity crisis, can be dated from August 9, 2007, when BNP Paribas terminated withdrawals from three hedge funds citing "a complete evaporation of liquidity".[21]

The bursting of the US housing bubble, which peaked at the end of 2006,[22][23] caused the values of securities tied to US real estate pricing to plummet, damaging financial institutions globally.[24][25] The financial crisis was triggered by a complex interplay of policies that encouraged home ownership, providing easier access to loans for subprime borrowers, overvaluation of bundled subprime mortgages based on the theory that housing prices would continue to escalate, questionable trading practices on behalf of both buyers and sellers, compensation structures that prioritize short-term deal flow over long-term value creation, and a lack of adequate capital holdings from banks and insurance companies to back the financial commitments they were making.[26][27][28][29] Questions regarding bank solvency, declines in credit availability, and damaged investor confidence affected global stock markets, where securities suffered large losses during 2008 and early 2009. Economies worldwide slowed during this period, as credit tightened and international trade declined.[30] Governments and central banks responded with unprecedented fiscal stimulus, monetary policy expansion and institutional bailouts.[31] In the US, Congress passed the American Recovery and Reinvestment Act of 2009.

Causes   Edit
Many causes for the financial crisis have been suggested, with varying weight assigned by experts.[32]

The US Senate's Levin–Coburn Report concluded that the crisis was the result of "high risk, complex financial products; undisclosed conflicts of interest; the failure of regulators, the credit rating agencies, and the market itself to rein in the excesses of Wall Street."[33]
The Financial Crisis Inquiry Commission concluded that the financial crisis was avoidable and was caused by "widespread failures in financial regulation and supervision", "dramatic failures of corporate governance and risk management at many systemically important financial institutions", "a combination of excessive borrowing, risky investments, and lack of transparency" by financial institutions, ill preparation and inconsistent action by government that "added to the uncertainty and panic", a "systemic breakdown in accountability and ethics", "collapsing mortgage-lending standards and the mortgage securitization pipeline", deregulation of over-the-counter derivatives, especially credit default swaps, and "the failures of credit rating agencies" to correctly price risk.[34]
The 1999 repeal of the Glass-Steagall Act effectively removed the separation between investment banks and depository banks in the United States.[35]
Critics argued that credit rating agencies and investors failed to accurately price the risk involved with mortgage-related financial products, and that governments did not adjust their regulatory practices to address 21st-century financial markets.[36]
Research into the causes of the financial crisis has also focused on the role of interest rate spreads.[37]
Fair value accounting was issued as US accounting standard SFAS 157 in 2006 by the privately run Financial Accounting Standards Board (FASB)—delegated by the SEC with the task of establishing financial reporting standards.[38] This required that tradable assets such as mortgage securities be valued according to their current market value rather than their historic cost or some future expected value. When the market for such securities became volatile and collapsed, the resulting loss of value had a major financial effect upon the institutions holding them even if they had no immediate plans to sell them.[39]
Background   Edit
Main article: Causes of the Great Recession
The immediate cause or trigger of the crisis was the bursting of the US housing bubble, which peaked in 2006/2007.[22][23] Already-rising default rates on "subprime" and adjustable-rate mortgages (ARM) began to increase quickly thereafter.

Easy availability of credit in the US, fueled by large inflows of foreign funds after the Russian debt crisis and Asian financial crisis of the 1997–1998 period, led to a housing construction boom and facilitated debt-financed consumer spending. As banks began to give out more loans to potential home owners, housing prices began to rise. Lax lending standards and rising real estate prices also contributed to the real estate bubble. Loans of various types (e.g., mortgage, credit card, and auto) were easy to obtain and consumers assumed an unprecedented debt load.[40][41][42]

As part of the housing and credit booms, the number of financial agreements called mortgage-backed securities (MBS) and collateralized debt obligations (CDO), which derived their value from mortgage payments and housing prices, greatly increased.[25] Such financial innovation enabled institutions and investors around the world to invest in the US housing market. As housing prices declined, major global financial institutions that had borrowed and invested heavily in subprime MBS reported significant losses.[43]

Falling prices also resulted in homes worth less than the mortgage loan, providing a financial incentive to enter foreclosure.[clarification needed] The ongoing foreclosure epidemic that began in late 2006 in the US and only reduced to historical levels in early 2014[44] drained significant wealth from consumers, losing up to $4.2 trillion[45] in wealth from home equity. Defaults and losses on other loan types also increased significantly as the crisis expanded from the housing market to other parts of the economy. Total losses are estimated in the trillions of US dollars globally.[43]


Share in GDP of US financial sector since 1860[46]
While the housing and credit bubbles were building, a series of factors caused the financial system to both expand and become increasingly fragile, a process called financialization. US Government policy from the 1970s onward has emphasized deregulation to encourage business, which resulted in less oversight of activities and less disclosure of information about new activities undertaken by banks and other evolving financial institutions. Thus, policymakers did not immediately recognize the increasingly important role played by financial institutions such as investment banks and hedge funds, also known as the shadow banking system. Some experts believe these institutions had become as important as commercial (depository) banks in providing credit to the US economy, but they were not subject to the same regulations.[47]

These institutions, as well as certain regulated banks, had also assumed significant debt burdens while providing the loans described above and did not have a financial cushion sufficient to absorb large loan defaults or MBS losses.[48] These losses affected the ability of financial institutions to lend, slowing economic activity. Concerns regarding the stability of key financial institutions drove central banks to provide funds to encourage lending and restore faith in the commercial paper markets, which are integral to funding business operations. Governments also bailed out key financial institutions and implemented economic stimulus programs, assuming significant additional financial commitments.

The US Financial Crisis Inquiry Commission reported its findings in January 2011. It concluded that:

the crisis was avoidable and was caused by: widespread failures in financial regulation, including the Federal Reserve's failure to stem the tide of toxic mortgages; dramatic breakdowns in corporate governance including too many financial firms acting recklessly and taking on too much risk; an explosive mix of excessive borrowing and risk by households and Wall Street that put the financial system on a collision course with crisis; key policy makers ill prepared for the crisis, lacking a full understanding of the financial system they oversaw; and systemic breaches in accountability and ethics at all levels.[49][50]

Subprime lending   Edit
Main article: Subprime mortgage crisis

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Re: STOCK CASUALTIES
« Reply #24 on: May 27, 2017, 09:23:48 PM »



Subprime lending   Edit
Main article: Subprime mortgage crisis
The 2000s were the decade of subprime borrowers; no longer was this a segment left to fringe lenders. The relaxing of credit lending standards by investment banks and commercial banks drove this about-face. Subprime did not become magically less risky; Wall Street just accepted this higher risk.[51] During a period of tough competition between mortgage lenders for revenue and market share, and when the supply of creditworthy borrowers was limited, mortgage lenders relaxed underwriting standards and originated riskier mortgages to less creditworthy borrowers.[25] In the view of some analysts, the relatively conservative government-sponsored enterprises (GSEs) policed mortgage originators and maintained relatively high underwriting standards prior to 2003. However, as market power shifted from securitizers to originators and as intense competition from private securitizers undermined GSE power, mortgage standards declined and risky loans proliferated.[25] The worst loans were originated in 2004–2007, the years of the most intense competition between securitizers and the lowest market share for the GSEs.


US subprime lending expanded dramatically 2004–2006
As well as easy credit conditions, there is evidence that competitive pressures contributed to an increase in the amount of subprime lending during the years preceding the crisis. Major US investment banks and GSEs such as Fannie Mae played an important role in the expansion of lending, with GSEs eventually relaxing their standards to try to catch up with the private banks.[52][53]

A contrarian view is that Fannie Mae and Freddie Mac led the way to relaxed underwriting standards, starting in 1995, by advocating the use of easy-to-qualify automated underwriting and appraisal systems, by designing the no-downpayment products issued by lenders, by the promotion of thousands of small mortgage brokers, and by their close relationship to subprime loan aggregators such as Countrywide.[54][55]

Depending on how “subprime” mortgages are defined, they remained below 10% of all mortgage originations until 2004, when they rose to nearly 20% and remained there through the 2005–2006 peak of the United States housing bubble.[56]

The majority report of the Financial Crisis Inquiry Commission, written by the six Democratic appointees, the minority report, written by three of the four Republican appointees, studies by Federal Reserve economists, and the work of several independent scholars generally contend that government affordable housing policy was not the primary cause of the financial crisis.[25] Although they concede that governmental policies had some role in causing the crisis, they contend that GSE loans performed better than loans securitized by private investment banks, and performed better than some loans originated by institutions that held loans in their own portfolios.[25]

In his dissent to the majority report of the Financial Crisis Inquiry Commission, American Enterprise Institute fellow Peter J. Wallison[57] stated his belief that the roots of the financial crisis can be traced directly and primarily to affordable housing policies initiated by the US Department of Housing and Urban Development (HUD) in the 1990s and to massive risky loan purchases by government-sponsored entities Fannie Mae and Freddie Mac. Later, based upon information in the SEC's December 2011 securities fraud case against six former executives of Fannie and Freddie, Peter Wallison and Edward Pinto estimated that, in 2008, Fannie and Freddie held 13 million substandard loans totaling over $2 trillion.[58]

In the early and mid-2000s, the Bush administration called numerous times[59] for investigation into the safety and soundness of the GSEs and their swelling portfolio of subprime mortgages. On September 10, 2003, the House Financial Services Committee held a hearing at the urging of the administration to assess safety and soundness issues and to review a recent report by the Office of Federal Housing Enterprise Oversight (OFHEO) that had uncovered accounting discrepancies within the two entities.[60] The hearings never resulted in new legislation or formal investigation of Fannie Mae and Freddie Mac, as many of the committee members refused to accept the report and instead rebuked OFHEO for their attempt at regulation.[61] Some believe this was an early warning to the systemic risk that the growing market in subprime mortgages posed to the US financial system that went unheeded.[62]

A 2000 United States Department of the Treasury study of lending trends for 305 cities from 1993 to 1998 showed that $467 billion of mortgage lending was made by Community Reinvestment Act (CRA)-covered lenders into low and mid level income (LMI) borrowers and neighborhoods, representing 10% of all US mortgage lending during the period. The majority of these were prime loans. Sub-prime loans made by CRA-covered institutions constituted a 3% market share of LMI loans in 1998,[63] but in the run-up to the crisis, fully 25% of all sub-prime lending occurred at CRA-covered institutions and another 25% of sub-prime loans had some connection with CRA.[64] Furthermore, most sub-prime loans were not made to the LMI borrowers targeted by the CRA, especially in the years 2005–2006 leading up to the crisis, nor did it find any evidence that lending under the CRA rules increased delinquency rates or that the CRA indirectly influenced independent mortgage lenders to ramp up sub-prime lending.

To other analysts the delay between CRA rule changes (in 1995) and the explosion of subprime lending is not surprising, and does not exonerate the CRA. They contend that there were two, connected causes to the crisis: the relaxation of underwriting standards in 1995 and the ultra-low interest rates initiated by the Federal Reserve after the terrorist attack on September 11, 2001. Both causes had to be in place before the crisis could take place.[65] Critics also point out that publicly announced CRA loan commitments were massive, totaling $4.5 trillion in the years between 1994 and 2007.[66] They also argue that the Federal Reserve's classification of CRA loans as "prime" is based on the faulty and self-serving assumption that high-interest-rate loans (3 percentage points over average) equal "subprime" loans.[67]

Others have pointed out that there were not enough of these loans made to cause a crisis of this magnitude. In an article in Portfolio Magazine, Michael Lewis spoke with one trader who noted that "There weren't enough Americans with [bad] credit taking out [bad loans] to satisfy investors' appetite for the end product." Essentially, investment banks and hedge funds used financial innovation to enable large wagers to be made, far beyond the actual value of the underlying mortgage loans, using derivatives called credit default swaps, collateralized debt obligations and synthetic CDOs.[68]

As of March 2011, the FDIC had had to pay out $9 billion to cover losses on bad loans at 165 failed financial institutions.[69] The Congressional Budget Office estimated, in June 2011, that the bailout to Fannie Mae and Freddie Mac exceeds $300 billion (calculated by adding the fair value deficits of the entities to the direct bailout funds at the time).[70]

Economist Paul Krugman argued in January 2010 that the simultaneous growth of the residential and commercial real estate pricing bubbles and the global nature of the crisis undermines the case made by those who argue that Fannie Mae, Freddie Mac, CRA, or predatory lending were primary causes of the crisis. In other words, bubbles in both markets developed even though only the residential market was affected by these potential causes.[71]

Countering Krugman, Peter J. Wallison wrote: "It is not true that every bubble—even a large bubble—has the potential to cause a financial crisis when it deflates." Wallison notes that other developed countries had "large bubbles during the 1997–2007 period" but "the losses associated with mortgage delinquencies and defaults when these bubbles deflated were far lower than the losses suffered in the United States when the 1997–2007 [bubble] deflated." According to Wallison, the reason the US residential housing bubble (as opposed to other types of bubbles) led to financial crisis was that it was supported by a huge number of substandard loans—generally with low or no downpayments.[72]

Krugman's contention (that the growth of a commercial real estate bubble indicates that US housing policy was not the cause of the crisis) is challenged by additional analysis. After researching the default of commercial loans during the financial crisis, Xudong An and Anthony B. Sanders reported (in December 2010): "We find limited evidence that substantial deterioration in CMBS [commercial mortgage-backed securities] loan underwriting occurred prior to the crisis."[73] Other analysts support the contention that the crisis in commercial real estate and related lending took place after the crisis in residential real estate. Business journalist Kimberly Amadeo reports: "The first signs of decline in residential real estate occurred in 2006. Three years later, commercial real estate started feeling the effects.[74] Denice A. Gierach, a real estate attorney and CPA, wrote:

...most of the commercial real estate loans were good loans destroyed by a really bad economy. In other words, the borrowers did not cause the loans to go bad, it was the economy.[75]

Growth of the housing bubble   Edit

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Re: STOCK CASUALTIES
« Reply #25 on: May 27, 2017, 09:25:20 PM »



Growth of the housing bubble   Edit
Main article: United States housing bubble

A graph showing the median and average sales prices of new homes sold in the United States between 1963 and 2008 (not adjusted for inflation)[22]
Between 1998 and 2006, the price of the typical American house increased by 124%.[76] During the two decades ending in 2001, the national median home price ranged from 2.9 to 3.1 times median household income. This ratio rose to 4.0 in 2004, and 4.6 in 2006.[77] This housing bubble resulted in many homeowners refinancing their homes at lower interest rates, or financing consumer spending by taking out second mortgages secured by the price appreciation.

In a Peabody Award winning program, NPR correspondents argued that a "Giant Pool of Money" (represented by $70 trillion in worldwide fixed income investments) sought higher yields than those offered by US Treasury bonds early in the decade. This pool of money had roughly doubled in size from 2000 to 2007, yet the supply of relatively safe, income generating investments had not grown as fast. Investment banks on Wall Street answered this demand with products such as the mortgage-backed security and the collateralized debt obligation that were assigned safe ratings by the credit rating agencies.[78]

In effect, Wall Street connected this pool of money to the mortgage market in the US, with enormous fees accruing to those throughout the mortgage supply chain, from the mortgage broker selling the loans to small banks that funded the brokers and the large investment banks behind them. By approximately 2003, the supply of mortgages originated at traditional lending standards had been exhausted, and continued strong demand began to drive down lending standards.[78]

The collateralized debt obligation in particular enabled financial institutions to obtain investor funds to finance subprime and other lending, extending or increasing the housing bubble and generating large fees. This essentially places cash payments from multiple mortgages or other debt obligations into a single pool from which specific securities draw in a specific sequence of priority. Those securities first in line received investment-grade ratings from rating agencies. Securities with lower priority had lower credit ratings but theoretically a higher rate of return on the amount invested.[79][80]

By September 2008, average US housing prices had declined by over 20% from their mid-2006 peak.[81][82] As prices declined, borrowers with adjustable-rate mortgages could not refinance to avoid the higher payments associated with rising interest rates and began to default. During 2007, lenders began foreclosure proceedings on nearly 1.3 million properties, a 79% increase over 2006.[83] This increased to 2.3 million in 2008, an 81% increase vs. 2007.[84] By August 2008, 9.2% of all US mortgages outstanding were either delinquent or in foreclosure.[85] By September 2009, this had risen to 14.4%.[86]

Easy credit conditions   Edit
Lower interest rates encouraged borrowing. From 2000 to 2003, the Federal Reserve lowered the federal funds rate target from 6.5% to 1.0%.[87] This was done to soften the effects of the collapse of the dot-com bubble and the September 2001 terrorist attacks, as well as to combat a perceived risk of deflation.[88] As early as 2002 it was apparent that credit was fueling housing instead of business investment as some economists went so far as to advocate that the Fed "needs to create a housing bubble to replace the Nasdaq bubble".[89] Moreover, empirical studies using data from advanced countries show that excessive credit growth contributed greatly to the severity of the crisis.[90]


US current account deficit.
Additional downward pressure on interest rates was created by the high and rising US current account deficit, which peaked along with the housing bubble in 2006. Federal Reserve chairman Ben Bernanke explained how trade deficits required the US to borrow money from abroad, in the process bidding up bond prices and lowering interest rates.[91]

Bernanke explained that between 1996 and 2004, the US current account deficit increased by $650 billion, from 1.5% to 5.8% of GDP. Financing these deficits required the country to borrow large sums from abroad, much of it from countries running trade surpluses. These were mainly the emerging economies in Asia and oil-exporting nations. The balance of payments identity requires that a country (such as the US) running a current account deficit also have a capital account (investment) surplus of the same amount. Hence large and growing amounts of foreign funds (capital) flowed into the US to finance its imports.

All of this created demand for various types of financial assets, raising the prices of those assets while lowering interest rates. Foreign investors had these funds to lend either because they had very high personal savings rates (as high as 40% in China) or because of high oil prices. Ben Bernanke has referred to this as a "saving glut".[92]

A flood of funds (capital or liquidity) reached the US financial markets. Foreign governments supplied funds by purchasing Treasury bonds and thus avoided much of the direct effect of the crisis. US households, on the other hand, used funds borrowed from foreigners to finance consumption or to bid up the prices of housing and financial assets. Financial institutions invested foreign funds in mortgage-backed securities.

The Fed then raised the Fed funds rate significantly between July 2004 and July 2006.[93] This contributed to an increase in 1-year and 5-year adjustable-rate mortgage (ARM) rates, making ARM interest rate resets more expensive for homeowners.[94] This may have also contributed to the deflating of the housing bubble, as asset prices generally move inversely to interest rates, and it became riskier to speculate in housing.[95][96] US housing and financial assets dramatically declined in value after the housing bubble burst.[97][98]

Weak and fraudulent underwriting practices   Edit
Subprime lending standards declined in the USA: in early 2000, a subprime borrower had a FICO score of 660 or less. By 2005, many lenders dropped the required FICO score to 620, making it much easier to qualify for prime loans and making subprime lending a riskier business. Proof of income and assets were de-emphasized. Loans moved from full documentation to low documentation to no documentation. One subprime mortgage product that gained wide acceptance was the no income, no job, no asset verification required (NINJA) mortgage. Informally, these loans were aptly referred to as "liar loans" because they encouraged borrowers to be less than honest in the loan application process.[99] Testimony given to the Financial Crisis Inquiry Commission by Richard M. Bowen III on events during his tenure as the Business Chief Underwriter for Correspondent Lending in the Consumer Lending Group for Citigroup (where he was responsible for over 220 professional underwriters) suggests that by the final years of the US housing bubble (2006–2007), the collapse of mortgage underwriting standards was endemic. His testimony stated that by 2006, 60% of mortgages purchased by Citi from some 1,600 mortgage companies were "defective" (were not underwritten to policy, or did not contain all policy-required documents)—this, despite the fact that each of these 1,600 originators was contractually responsible (certified via representations and warrantees) that its mortgage originations met Citi's standards. Moreover, during 2007, "defective mortgages (from mortgage originators contractually bound to perform underwriting to Citi's standards) increased ... to over 80% of production".[100]

In separate testimony to Financial Crisis Inquiry Commission, officers of Clayton Holdings—the largest residential loan due diligence and securitization surveillance company in the United States and Europe—testified that Clayton's review of over 900,000 mortgages issued from January 2006 to June 2007 revealed that scarcely 54% of the loans met their originators’ underwriting standards. The analysis (conducted on behalf of 23 investment and commercial banks, including 7 "too big to fail" banks) additionally showed that 28% of the sampled loans did not meet the minimal standards of any issuer. Clayton's analysis further showed that 39% of these loans (i.e. those not meeting any issuer's minimal underwriting standards) were subsequently securitized and sold to investors.[101][102]

There is strong evidence that the GSEs—due to their large size and market power—were far more effective at policing underwriting by originators and forcing underwriters to repurchase defective loans. By contrast, private securitizers have been far less aggressive and less effective in recovering losses from originators on behalf of investors.[25]

Predatory lending   Edit

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Re: STOCK CASUALTIES
« Reply #26 on: May 27, 2017, 09:28:08 PM »



Predatory lending   Edit
Predatory lending refers to the practice of unscrupulous lenders, enticing borrowers to enter into "unsafe" or "unsound" secured loans for inappropriate purposes.[103]

A classic bait-and-switch method was used by Countrywide Financial, advertising low interest rates for home refinancing. Such loans were covered by very detailed contracts, and swapped for more expensive loan products on the day of closing. Whereas the advertisement might state that 1% or 1.5% interest would be charged, the consumer would be put into an adjustable rate mortgage (ARM) in which the interest charged would be greater than the mortgage payments, creating negative amortization which the credit consumer might not notice until long after the loan transaction had been consummated.

Countrywide, sued by California Attorney General Jerry Brown for "unfair business practices" and "false advertising", was making high cost mortgages "to homeowners with weak credit, adjustable rate mortgages (ARMs) that allowed homeowners to make interest-only payments".[104] When housing prices decreased, homeowners in ARMs then had little incentive to pay their monthly payments, since their home equity had disappeared. This caused Countrywide's financial condition to deteriorate, ultimately resulting in a decision by the Office of Thrift Supervision to seize the lender. One Countrywide employee—who would later plead guilty to two counts of wire fraud and spent 18 months in prison—stated that, “If you had a pulse, we gave you a loan."[105]

Former employees from Ameriquest, which was United States' leading wholesale lender,[106] described a system in which they were pushed to falsify mortgage documents and then sell the mortgages to Wall Street banks eager to make fast profits.[106] There is growing evidence that such mortgage frauds may be a cause of the crisis.[106]

Deregulation   Edit
Further information: Government policies and the subprime mortgage crisis
A 2012 OECD study[107] suggest that bank regulation based on the Basel accords encourage unconventional business practices and contributed to or even reinforced the financial crisis. In other cases, laws were changed or enforcement weakened in parts of the financial system. Key examples include:

Jimmy Carter's Depository Institutions Deregulation and Monetary Control Act of 1980 (DIDMCA) phased out a number of restrictions on banks' financial practices, broadened their lending powers, allowed credit unions and savings and loans to offer checkable deposits, and raised the deposit insurance limit from $40,000 to $100,000 (thereby potentially lessening depositor scrutiny of lenders' risk management policies).[108]
In October 1982, US President Ronald Reagan signed into law the Garn–St. Germain Depository Institutions Act, which provided for adjustable-rate mortgage loans, began the process of banking deregulation, and contributed to the savings and loan crisis of the late 1980s/early 1990s.[109]
In November 1999, US President Bill Clinton signed into law the Gramm–Leach–Bliley Act, which repealed provisions of the Glass-Steagall Act that prohibit a bank holding company from owning other financial companies. The repeal effectively removed the separation that previously existed between Wall Street investment banks and depository banks, providing a government stamp of approval for a universal risk-taking banking model. Investment banks such as Lehman would now be thrust into direct competition with commercial banks.[110] Most analysts say that this repeal directly contributed to the severity of the Financial crisis of 2007–2010.[111] However, there is perspective that repeal made little difference because the institutions that were greatly affected did not fall under the jurisdiction of the act itself.[112]
In 2004, the US Securities and Exchange Commission relaxed the net capital rule, which enabled investment banks to substantially increase the level of debt they were taking on, fueling the growth in mortgage-backed securities supporting subprime mortgages. The SEC has conceded that self-regulation of investment banks contributed to the crisis.[113][114]
Financial institutions in the shadow banking system are not subject to the same regulation as depository banks, allowing them to assume additional debt obligations relative to their financial cushion or capital base.[115] This was the case despite the Long-Term Capital Management debacle in 1998, where a highly leveraged shadow institution failed with systemic implications.
Regulators and accounting standard-setters allowed depository banks such as Citigroup to move significant amounts of assets and liabilities off-balance sheet into complex legal entities called structured investment vehicles, masking the weakness of the capital base of the firm or degree of leverage or risk taken. One news agency estimated that the top four US banks will have to return between $500 billion and $1 trillion to their balance sheets during 2009.[116] This increased uncertainty during the crisis regarding the financial position of the major banks.[117] Off-balance sheet entities were also used by Enron as part of the scandal that brought down that company in 2001.[118]
As early as 1997, Federal Reserve chairman Alan Greenspan fought to keep the derivatives market unregulated.[119] With the advice of the President's Working Group on Financial Markets,[120] the US Congress and President Bill Clinton allowed the self-regulation of the over-the-counter derivatives market when they enacted the Commodity Futures Modernization Act of 2000. Derivatives such as credit default swaps (CDS) can be used to hedge or speculate against particular credit risks without necessarily owning the underlying debt instruments. The volume of CDS outstanding increased 100-fold from 1998 to 2008, with estimates of the debt covered by CDS contracts, as of November 2008, ranging from US$33 to $47 trillion. Total over-the-counter (OTC) derivative notional value rose to $683 trillion by June 2008.[121] Warren Buffett famously referred to derivatives as "financial weapons of mass destruction" in early 2003.[122][123]
Increased debt burden or overleveraging   Edit

Leverage ratios of investment banks increased significantly between 2003 and 2007.
Prior to the crisis, financial institutions became highly leveraged, increasing their appetite for risky investments and reducing their resilience in case of losses. Much of this leverage was achieved using complex financial instruments such as off-balance sheet securitization and derivatives, which made it difficult for creditors and regulators to monitor and try to reduce financial institution risk levels.[27] These instruments also made it virtually impossible to reorganize financial institutions in bankruptcy, and contributed to the need for government bailouts.[27]


Household debt relative to disposable income and GDP.
US households and financial institutions became increasingly indebted or overleveraged during the years preceding the crisis.[124] This increased their vulnerability to the collapse of the housing bubble and worsened the ensuing economic downturn.[125] Key statistics include:

Free cash used by consumers from home equity extraction doubled from $627 billion in 2001 to $1,428 billion in 2005 as the housing bubble built, a total of nearly $5 trillion over the period, contributing to economic growth worldwide.[126][127][128] US home mortgage debt relative to GDP increased from an average of 46% during the 1990s to 73% during 2008, reaching $10.5 trillion.[129]

US household debt as a percentage of annual disposable personal income was 127% at the end of 2007, versus 77% in 1990.[124] In 1981, US private debt was 123% of GDP; by the third quarter of 2008, it was 290%.[130]

From 2004 to 2007, the top five US investment banks each significantly increased their financial leverage (see diagram), which increased their vulnerability to a financial shock. Changes in capital requirements, intended to keep US banks competitive with their European counterparts, allowed lower risk weightings for AAA securities. The shift from first-loss tranches to AAA tranches was seen by regulators as a risk reduction that compensated the higher leverage.[131] These five institutions reported over $4.1 trillion in debt for fiscal year 2007, about 30% of US nominal GDP for 2007. Lehman Brothers went bankrupt and was liquidated, Bear Stearns and Merrill Lynch were sold at fire-sale prices, and Goldman Sachs and Morgan Stanley became commercial banks, subjecting themselves to more stringent regulation. With the exception of Lehman, these companies required or received government support.[132] Lehman reported that it had been in talks with Bank of America and Barclays for the company's possible sale. However, both Barclays and Bank of America ultimately declined to purchase the entire company.[133]

Fannie Mae and Freddie Mac, two US government-sponsored enterprises, owned or guaranteed nearly $5 trillion in mortgage obligations at the time they were placed into conservatorship by the US government in September 2008.[134][135]

These seven entities were highly leveraged and had $9 trillion in debt or guarantee obligations; yet they were not subject to the same regulation as depository banks.[115][136]

Behavior that may be optimal for an individual (e.g., saving more during adverse economic conditions) can be detrimental if too many individuals pursue the same behavior, as ultimately one person's consumption is another person's income. Too many consumers attempting to save (or pay down debt) simultaneously is called the paradox of thrift and can cause or deepen a recession. Economist Hyman Minsky also described a "paradox of deleveraging" as financial institutions that have too much leverage (debt relative to equity) cannot all de-leverage simultaneously without significant declines in the value of their assets.[125]

During April 2009, US Federal Reserve vice-chair Janet Yellen discussed these paradoxes:

Once this massive credit crunch hit, it didn't take long before we were in a recession. The recession, in turn, deepened the credit crunch as demand and employment fell, and credit losses of financial institutions surged. Indeed, we have been in the grips of precisely this adverse feedback loop for more than a year. A process of balance sheet deleveraging has spread to nearly every corner of the economy. Consumers are pulling back on purchases, especially on durable goods, to build their savings. Businesses are cancelling planned investments and laying off workers to preserve cash. And, financial institutions are shrinking assets to bolster capital and improve their chances of weathering the current storm. Once again, Minsky understood this dynamic. He spoke of the paradox of deleveraging, in which precautions that may be smart for individuals and firms—and indeed essential to return the economy to a normal state—nevertheless magnify the distress of the economy as a whole.[125]

Financial innovation and complexity   Edit

IMF Diagram of CDO and RMBS
The term financial innovation refers to the ongoing development of financial products designed to achieve particular client objectives, such as offsetting a particular risk exposure (such as the

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Re: STOCK CASUALTIES
« Reply #27 on: May 27, 2017, 09:31:09 PM »



Financial innovation and complexity   Edit

IMF Diagram of CDO and RMBS
The term financial innovation refers to the ongoing development of financial products designed to achieve particular client objectives, such as offsetting a particular risk exposure (such as the default of a borrower) or to assist with obtaining financing. Examples pertinent to this crisis included: the adjustable-rate mortgage; the bundling of subprime mortgages into mortgage-backed securities (MBS) or collateralized debt obligations (CDO) for sale to investors, a type of securitization; and a form of credit insurance called credit default swaps (CDS). The usage of these products expanded dramatically in the years leading up to the crisis. These products vary in complexity and the ease with which they can be valued on the books of financial institutions.

CDO issuance grew from an estimated $20 billion in Q1 2004 to its peak of over $180 billion by Q1 2007, then declined back under $20 billion by Q1 2008. Further, the credit quality of CDO's declined from 2000 to 2007, as the level of subprime and other non-prime mortgage debt increased from 5% to 36% of CDO assets.[137] As described in the section on subprime lending, the CDS and portfolio of CDS called synthetic CDO enabled a theoretically infinite amount to be wagered on the finite value of housing loans outstanding, provided that buyers and sellers of the derivatives could be found. For example, buying a CDS to insure a CDO ended up giving the seller the same risk as if they owned the CDO, when those CDO's became worthless.[138]


Diagram of CMLTI 2006 – NC2
This boom in innovative financial products went hand in hand with more complexity. It multiplied the number of actors connected to a single mortgage (including mortgage brokers, specialized originators, the securitizers and their due diligence firms, managing agents and trading desks, and finally investors, insurances and providers of repo funding). With increasing distance from the underlying asset these actors relied more and more on indirect information (including FICO scores on creditworthiness, appraisals and due diligence checks by third party organizations, and most importantly the computer models of rating agencies and risk management desks). Instead of spreading risk this provided the ground for fraudulent acts, misjudgments and finally market collapse.[139]

Martin Wolf further wrote in June 2009 that certain financial innovations enabled firms to circumvent regulations, such as off-balance sheet financing that affects the leverage or capital cushion reported by major banks, stating: "...an enormous part of what banks did in the early part of this decade—the off-balance-sheet vehicles, the derivatives and the 'shadow banking system' itself—was to find a way round regulation."[140]

Incorrect pricing of risk   Edit

A protester on Wall Street in the wake of the AIG bonus payments controversy is interviewed by news media.
The pricing of risk refers to the incremental compensation required by investors for taking on additional risk, which may be measured by interest rates or fees. Several scholars have argued that a lack of transparency about banks' risk exposures prevented markets from correctly pricing risk before the crisis, enabled the mortgage market to grow larger than it otherwise would have, and made the financial crisis far more disruptive than it would have been if risk levels had been disclosed in a straightforward, readily understandable format.[25][27]

For a variety of reasons, market participants did not accurately measure the risk inherent with financial innovation such as MBS and CDOs or understand its effect on the overall stability of the financial system.[36] For example, the pricing model for CDOs clearly did not reflect the level of risk they introduced into the system. Banks estimated that $450bn of CDO were sold between "late 2005 to the middle of 2007"; among the $102bn of those that had been liquidated, JPMorgan estimated that the average recovery rate for "high quality" CDOs was approximately 32 cents on the dollar, while the recovery rate for mezzanine CDO was approximately five cents for every dollar.[141]

Another example relates to AIG, which insured obligations of various financial institutions through the usage of credit default swaps. The basic CDS transaction involved AIG receiving a premium in exchange for a promise to pay money to party A in the event party B defaulted. However, AIG did not have the financial strength to support its many CDS commitments as the crisis progressed and was taken over by the government in September 2008. US taxpayers provided over $180 billion in government support to AIG during 2008 and early 2009, through which the money flowed to various counterparties to CDS transactions, including many large global financial institutions.[142][143]

The Financial Crisis Inquiry Commission (FCIC) made the major government study of the crisis. It concluded in January 2011:

The Commission concludes AIG failed and was rescued by the government primarily because its enormous sales of credit default swaps were made without putting up the initial collateral, setting aside capital reserves, or hedging its exposure – a profound failure in corporate governance, particularly its risk management practices. AIG's failure was possible because of the sweeping deregulation of over-the-counter (OTC) derivatives, including credit default swaps, which effectively eliminated federal and state regulation of these products, including capital and margin requirements that would have lessened the likelihood of AIG's failure.[144][145][146]

The limitations of a widely used financial model also were not properly understood.[147][148] This formula assumed that the price of CDS was correlated with and could predict the correct price of mortgage-backed securities. Because it was highly tractable, it rapidly came to be used by a huge percentage of CDO and CDS investors, issuers, and rating agencies.[148] According to one wired.com article:

Then the model fell apart. Cracks started appearing early on, when financial markets began behaving in ways that users of Li's formula hadn't expected. The cracks became full-fledged canyons in 2008—when ruptures in the financial system's foundation swallowed up trillions of dollars and put the survival of the global banking system in serious peril... Li's Gaussian copula formula will go down in history as instrumental in causing the unfathomable losses that brought the world financial system to its knees.[148]

As financial assets became more complex and harder to value, investors were reassured by the fact that the international bond rating agencies and bank regulators accepted as valid some complex mathematical models that showed the risks were much smaller than they actually were.[149] George Soros commented that "The super-boom got out of hand when the new products became so complicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves. Similarly, the rating agencies relied on the information provided by the originators of synthetic products. It was a shocking abdication of responsibility."[150]

Moreover, a conflict of interest between professional investment managers and their institutional clients, combined with a global glut in investment capital, led to bad investments by asset

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Re: STOCK CASUALTIES
« Reply #28 on: May 27, 2017, 09:34:06 PM »



Financial innovation and complexity   Edit

IMF Diagram of CDO and RMBS
The term financial innovation refers to the ongoing development of financial products designed to achieve particular client objectives, such as offsetting a particular risk exposure (such as the default of a borrower) or to assist with obtaining financing. Examples pertinent to this crisis included: the adjustable-rate mortgage; the bundling of subprime mortgages into mortgage-backed securities (MBS) or collateralized debt obligations (CDO) for sale to investors, a type of securitization; and a form of credit insurance called credit default swaps (CDS). The usage of these products expanded dramatically in the years leading up to the crisis. These products vary in complexity and the ease with which they can be valued on the books of financial institutions.

CDO issuance grew from an estimated $20 billion in Q1 2004 to its peak of over $180 billion by Q1 2007, then declined back under $20 billion by Q1 2008. Further, the credit quality of CDO's declined from 2000 to 2007, as the level of subprime and other non-prime mortgage debt increased from 5% to 36% of CDO assets.[137] As described in the section on subprime lending, the CDS and portfolio of CDS called synthetic CDO enabled a theoretically infinite amount to be wagered on the finite value of housing loans outstanding, provided that buyers and sellers of the derivatives could be found. For example, buying a CDS to insure a CDO ended up giving the seller the same risk as if they owned the CDO, when those CDO's became worthless.[138]


Diagram of CMLTI 2006 – NC2
This boom in innovative financial products went hand in hand with more complexity. It multiplied the number of actors connected to a single mortgage (including mortgage brokers, specialized originators, the securitizers and their due diligence firms, managing agents and trading desks, and finally investors, insurances and providers of repo funding). With increasing distance from the underlying asset these actors relied more and more on indirect information (including FICO scores on creditworthiness, appraisals and due diligence checks by third party organizations, and most importantly the computer models of rating agencies and risk management desks). Instead of spreading risk this provided the ground for fraudulent acts, misjudgments and finally market collapse.[139]

Martin Wolf further wrote in June 2009 that certain financial innovations enabled firms to circumvent regulations, such as off-balance sheet financing that affects the leverage or capital cushion reported by major banks, stating: "...an enormous part of what banks did in the early part of this decade—the off-balance-sheet vehicles, the derivatives and the 'shadow banking system' itself—was to find a way round regulation."[140]

Incorrect pricing of risk   Edit

A protester on Wall Street in the wake of the AIG bonus payments controversy is interviewed by news media.
The pricing of risk refers to the incremental compensation required by investors for taking on additional risk, which may be measured by interest rates or fees. Several scholars have argued that a lack of transparency about banks' risk exposures prevented markets from correctly pricing risk before the crisis, enabled the mortgage market to grow larger than it otherwise would have, and made the financial crisis far more disruptive than it would have been if risk levels had been disclosed in a straightforward, readily understandable format.[25][27]

For a variety of reasons, market participants did not accurately measure the risk inherent with financial innovation such as MBS and CDOs or understand its effect on the overall stability of the financial system.[36] For example, the pricing model for CDOs clearly did not reflect the level of risk they introduced into the system. Banks estimated that $450bn of CDO were sold between "late 2005 to the middle of 2007"; among the $102bn of those that had been liquidated, JPMorgan estimated that the average recovery rate for "high quality" CDOs was approximately 32 cents on the dollar, while the recovery rate for mezzanine CDO was approximately five cents for every dollar.[141]

Another example relates to AIG, which insured obligations of various financial institutions through the usage of credit default swaps. The basic CDS transaction involved AIG receiving a premium in exchange for a promise to pay money to party A in the event party B defaulted. However, AIG did not have the financial strength to support its many CDS commitments as the crisis progressed and was taken over by the government in September 2008. US taxpayers provided over $180 billion in government support to AIG during 2008 and early 2009, through which the money flowed to various counterparties to CDS transactions, including many large global financial institutions.[142][143]

The Financial Crisis Inquiry Commission (FCIC) made the major government study of the crisis. It concluded in January 2011:

The Commission concludes AIG failed and was rescued by the government primarily because its enormous sales of credit default swaps were made without putting up the initial collateral, setting aside capital reserves, or hedging its exposure – a profound failure in corporate governance, particularly its risk management practices. AIG's failure was possible because of the sweeping deregulation of over-the-counter (OTC) derivatives, including credit default swaps, which effectively eliminated federal and state regulation of these products, including capital and margin requirements that would have lessened the likelihood of AIG's failure.[144][145][146]

The limitations of a widely used financial model also were not properly understood.[147][148] This formula assumed that the price of CDS was correlated with and could predict the correct price of mortgage-backed securities. Because it was highly tractable, it rapidly came to be used by a huge percentage of CDO and CDS investors, issuers, and rating agencies.[148] According to one wired.com article:

Then the model fell apart. Cracks started appearing early on, when financial markets began behaving in ways that users of Li's formula hadn't expected. The cracks became full-fledged canyons in 2008—when ruptures in the financial system's foundation swallowed up trillions of dollars and put the survival of the global banking system in serious peril... Li's Gaussian copula formula will go down in history as instrumental in causing the unfathomable losses that brought the world financial system to its knees.[148]

As financial assets became more complex and harder to value, investors were reassured by the fact that the international bond rating agencies and bank regulators accepted as valid some complex mathematical models that showed the risks were much smaller than they actually were.[149] George Soros commented that "The super-boom got out of hand when the new products became so complicated that the authorities could no longer calculate the risks and started relying on the risk management methods of the banks themselves. Similarly, the rating agencies relied on the information provided by the originators of synthetic products. It was a shocking abdication of responsibility."[150]

Moreover, a conflict of interest between professional investment managers and their institutional clients, combined with a global glut in investment capital, led to bad investments by asset

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Re: STOCK CASUALTIES
« Reply #29 on: May 27, 2017, 09:37:20 PM »



Moreover, a conflict of interest between professional investment managers and their institutional clients, combined with a global glut in investment capital, led to bad investments by asset managers in over-priced credit assets. Professional investment managers generally are compensated based on the volume of client assets under management. There is, therefore, an incentive for asset managers to expand their assets under management in order to maximize their compensation. As the glut in global investment capital caused the yields on credit assets to decline, asset managers were faced with the choice of either investing in assets where returns did not reflect true credit risk or returning funds to clients. Many asset managers continued to invest client funds in over-priced (under-yielding) investments, to the detriment of their clients, so they could maintain their assets under management. They supported this choice with a "plausible deniability" of the risks associated with subprime-based credit assets because the loss experience with early "vintages" of subprime loans was so low.[151]

Despite the dominance of the above formula, there are documented attempts of the financial industry, occurring before the crisis, to address the formula limitations, specifically the lack of dependence dynamics and the poor representation of extreme events.[152] The volume "Credit Correlation: Life After Copulas", published in 2007 by World Scientific, summarizes a 2006 conference held by Merrill Lynch in London where several practitioners attempted to propose models rectifying some of the copula limitations. See also the article by Donnelly and Embrechts[153] and the book by Brigo, Pallavicini and Torresetti, that reports relevant warnings and research on CDOs appeared in 2006.[154]

Mortgage risks were underestimated by every institution in the chain from originator to investor by underweighting the possibility of falling housing prices based on historical trends of the past 50 years. Limitations of default and prepayment models, the heart of pricing models, led to overvaluation of mortgage and asset-backed products and their derivatives by originators, securitizers, broker-dealers, rating-agencies, insurance underwriters and investors. [155][156]

Boom and collapse of the shadow banking system   Edit

Securitization markets were impaired during the crisis
There is strong evidence that the riskiest, worst performing mortgages were funded through the "shadow banking system" and that competition from the shadow banking system may have pressured more traditional institutions to lower their own underwriting standards and originate riskier loans.[25]

In a June 2008 speech, President and CEO of the New York Federal Reserve Bank Timothy Geithner—who in 2009 became Secretary of the United States Treasury—placed significant blame for the freezing of credit markets on a "run" on the entities in the "parallel" banking system, also called the shadow banking system. These entities became critical to the credit markets underpinning the financial system, but were not subject to the same regulatory controls. Further, these entities were vulnerable because of maturity mismatch, meaning that they borrowed short-term in liquid markets to purchase long-term, illiquid and risky assets. This meant that disruptions in credit markets would make them subject to rapid deleveraging, selling their long-term assets at depressed prices. He described the significance of these entities:

In early 2007, asset-backed commercial paper conduits, in structured investment vehicles, in auction-rate preferred securities, tender option bonds and variable rate demand notes, had a combined asset size of roughly $2.2 trillion. Assets financed overnight in triparty repo grew to $2.5 trillion. Assets held in hedge funds grew to roughly $1.8 trillion. The combined balance sheets of the then five major investment banks totaled $4 trillion. In comparison, the total assets of the top five bank holding companies in the United States at that point were just over $6 trillion, and total assets of the entire banking system were about $10 trillion. The combined effect of these factors was a financial system vulnerable to self-reinforcing asset price and credit cycles.[47]

Paul Krugman, laureate of the Nobel Prize in Economics, described the run on the shadow banking system as the "core of what happened" to cause the crisis. He referred to this lack of controls as "malign neglect" and argued that regulation should have been imposed on all banking-like activity.[115]

The securitization markets supported by the shadow banking system started to close down in the spring of 2007 and nearly shut-down in the fall of 2008. More than a third of the private credit markets thus became unavailable as a source of funds.[157] According to the Brookings Institution, the traditional banking system does not have the capital to close this gap as of June 2009: "It would take a number of years of strong profits to generate sufficient capital to support that additional lending volume." The authors also indicate that some forms of securitization are "likely to vanish forever, having been an artifact of excessively loose credit conditions."[158]

Commodities boom   Edit
Main article: 2000s commodities boom
Rapid increases in a number of commodity prices followed the collapse in the housing bubble. The price of oil nearly tripled from $50 to $147 from early 2007 to 2008, before plunging as the financial crisis began to take hold in late 2008.[159] Experts debate the causes, with some attributing it to speculative flow of money from housing and other investments into commodities, some to monetary policy,[160] and some to the increasing feeling of raw materials scarcity in a fast-growing world, leading to long positions taken on those markets, such as Chinese increasing presence in Africa. An increase in oil prices tends to divert a larger share of consumer spending into gasoline, which creates downward pressure on economic growth in oil importing countries, as wealth flows to oil-producing states.[161] A pattern of spiking instability in the price of oil over the decade leading up to the price high of 2008 has been recently identified.[162] The destabilizing effects of this price variance has been proposed as a contributory factor in the financial crisis.


Global copper prices
Copper prices increased at the same time as oil prices. Copper traded at about $2,500 per ton from 1990 until 1999, when it fell to about $1,600. The price slump lasted until 2004, when a price surge pushed copper to $7,040 per ton in 2008.[163]

Nickel prices boomed in the late 1990s, then declined from around $51,000 /£36,700 per metric ton in May 2007 to about $11,550/£8,300 per metric ton in January 2009. Prices were only just starting to recover as of January 2010, but most of Australia's nickel mines had gone bankrupt by then.[164] As the price for high grade nickel sulphate ore recovered in 2010, so did the Australian nickel mining industry.[165]

Coincidentally with these price fluctuations, long-only commodity index funds became popular—by one estimate investment increased from $90 billion in 2006 to $200 billion at the end of 2007, while commodity prices increased 71% – which raised concern as to whether these index funds caused the commodity bubble.[166] The empirical research has been mixed.[166]

Systemic crisis   Edit
Another analysis, different from the mainstream explanation, is that the financial crisis is merely a symptom of another, deeper crisis, which is a systemic crisis of capitalism itself.[167]

Ravi Batra's theory is that growing inequality of financial capitalism produces speculative bubbles that burst and result in depression and major political changes. He has also suggested that a "demand gap" related to differing wage and productivity growth explains deficit and debt dynamics important to stock market developments.[168]

John Bellamy Foster, a political economy analyst and editor of the Monthly Review, believes that the decrease in GDP growth rates since the early 1970s is due to increasing market saturation.[169]

In 2005, John C. Bogle wrote that a series of challenges face capitalism that have contributed to past financial crises and have not been sufficiently addressed:

Corporate America went astray largely because the power of managers went virtually unchecked by our gatekeepers for far too long... They failed to 'keep an eye on these geniuses' to whom they had entrusted the responsibility of the management of America's great corporations.

Echoing the central thesis of James Burnham's 1941 seminal book, The Managerial Revolution, Bogle cites particular issues, including:[170]

that "Manager's capitalism" has replaced "owner's capitalism", meaning management runs the firm for its benefit rather than for the shareholders, a variation on the principal–agent problem;
the burgeoning executive compensation;
the management of earnings, mainly a focus on share price rather than the creation of genuine value; and
the failure of gatekeepers, including auditors, boards of directors, Wall Street analysts, and career politicians.
An analysis conducted by Mark Roeder, a former executive at the Swiss-based UBS Bank, suggested that large-scale momentum, or The Big Mo "played a pivotal role" in the 2008–09 global financial crisis. Roeder suggested that "recent technological advances, such as computer-driven trading programs, together with the increasingly interconnected nature of markets, has magnified the momentum effect. This has made the financial sector inherently unstable."[171]

Robert Reich attributes the current economic downturn to the stagnation of wages in the United States, particularly those of the hourly workers who comprise 80% of the workforce. He says this stagnation forced the population to borrow to meet the cost of living.[172]

Economists Ailsa McKay and Margunn Bjørnholt argue that the financial crisis and the response to it revealed a crisis of ideas in mainstream economics and within the economics profession, and call for a reshaping of both the economy, economic theory and the economics profession.[173]

Role of economic forecasting   Edit
The former Governor of the Reserve Bank of India Raghuram Rajan had predicted the crisis in 2005 when he became chief economist at the International Monetary Fund.In 2005, at a celebration honouring Alan Greenspan, who was about to retire as chairman of the US Federal Reserve, Rajan delivered a controversial paper that was critical of the financial sector.[174] In that paper, "Has Financial Development Made the World Riskier?", Rajan "argued that disaster might loom."[175] Rajan argued that financial sector managers were encouraged to "take risks that generate severe adverse consequences with small probability but, in return, offer generous compensation the rest of the time. These risks are known as tail risks. But perhaps the most important concern is whether banks will be able to provide liquidity to financial markets so that if the tail risk does materialise, financial positions can be unwound and losses allocated so that t

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« Reply #30 on: May 27, 2017, 09:39:44 PM »



Role of economic forecasting   Edit
The former Governor of the Reserve Bank of India Raghuram Rajan had predicted the crisis in 2005 when he became chief economist at the International Monetary Fund.In 2005, at a celebration honouring Alan Greenspan, who was about to retire as chairman of the US Federal Reserve, Rajan delivered a controversial paper that was critical of the financial sector.[174] In that paper, "Has Financial Development Made the World Riskier?", Rajan "argued that disaster might loom."[175] Rajan argued that financial sector managers were encouraged to "take risks that generate severe adverse consequences with small probability but, in return, offer generous compensation the rest of the time. These risks are known as tail risks. But perhaps the most important concern is whether banks will be able to provide liquidity to financial markets so that if the tail risk does materialise, financial positions can be unwound and losses allocated so that the consequences to the real economy are minimised."

The financial crisis was not widely predicted by mainstream economists except Raghuram Rajan, who instead spoke of the Great Moderation. A number of heterodox economists predicted the crisis, with varying arguments. Dirk Bezemer in his research[176] credits (with supporting argument and estimates of timing) 12 economists with predicting the crisis: Dean Baker (US), Wynne Godley (UK), Fred Harrison (UK), Michael Hudson (US), Eric Janszen (US), Steve Keen (Australia), Jakob Brøchner Madsen & Jens Kjaer Sørensen (Denmark), Kurt Richebächer (US), Nouriel Roubini (US), Peter Schiff (US), and Robert Shiller (US). Examples of other experts who gave indications of a financial crisis have also been given.[177][178][179] Not surprisingly, the Austrian economic school regarded the crisis as a vindication and classic example of a predictable credit-fueled bubble that could not forestall the disregarded but inevitable effect of an artificial, manufactured laxity in monetary supply,[180] a perspective that even former Fed Chair Alan Greenspan in Congressional testimony confessed himself forced to return to.[181]

A cover story in BusinessWeek magazine claims that economists mostly failed to predict the worst international economic crisis since the Great Depression of the 1930s.[182] The Wharton School of the University of Pennsylvania's online business journal examines why economists failed to predict a major global financial crisis.[183] Popular articles published in the mass media have led the general public to believe that the majority of economists have failed in their obligation to predict the financial crisis. For example, an article in the New York Times informs that economist Nouriel Roubini warned of such crisis as early as September 2006, and the article goes on to state that the profession of economics is bad at predicting recessions.[184] According to The Guardian, Roubini was ridiculed for predicting a collapse of the housing market and worldwide recession, while The New York Times labelled him "Dr. Doom".[185]

Shiller, an expert in housing markets, wrote an article a year before the collapse of Lehman Brothers in which he predicted that a slowing US housing market would cause the housing bubble to burst, leading to financial collapse.[186] Schiff regularly appeared on television in the years before the crisis and warned of the impending real estate collapse.[187]

Within mainstream financial economics, most believe that financial crises are simply unpredictable,[188] following Eugene Fama's efficient-market hypothesis and the related random-walk hypothesis, which state respectively that markets contain all information about possible future movements, and that the movements of financial prices are random and unpredictable. Recent research casts doubt on the accuracy of "early warning" systems of potential crises, which must also predict their timing.[189]

Stock trader and financial risk engineer Nassim Nicholas Taleb, author of the 2007 book The Black Swan, spent years warning against the breakdown of the banking system in particular and the economy in general owing to their use of bad risk models and reliance on forecasting, and their reliance on bad models, and framed the problem as part of "robustness and fragility".[190][191] He also took action against the establishment view by making a big financial bet on banking stocks and making a fortune from the crisis ("They didn't listen, so I took their money").[192] According to David Brooks from the New York Times, "Taleb not only has an explanation for what’s happening, he saw it coming."[193]

Impact on financial markets   Edit
US stock market   Edit
Main article: United States bear market of 2007–2009
The US stock market peaked in October 2007, when the Dow Jones Industrial Average index exceeded 14,000 points. It then entered a pronounced decline, which accelerated markedly in October 2008. By March 2009, the Dow Jones average had reached a trough of around 6,600. Four years later, it hit an all-time high. It is probable, but debated, that the Federal Reserve's aggressive policy of quantitative easing spurred the partial recovery in the stock market.[194][195][196]

Market strategist Phil Dow believes distinctions exist "between the current market malaise" and the Great Depression. He says the Dow Jones average's fall of more than 50% over a period of 17 months is similar to a 54.7% fall in the Great Depression, followed by a total drop of 89% over the following 16 months. "It's very troubling if you have a mirror image," said Dow.[197] Floyd Norris, the chief financial correspondent of The New York Times, wrote in a blog entry in March 2009 that the decline has not been a mirror image of the Great Depression, explaining that although the decline amounts were nearly the same at the time, the rates of decline had started much faster in 2007, and that the past year had only ranked eighth among the worst recorded years of percentage drops in the Dow. The past two years ranked third, however.[198]

Financial institutions   Edit

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Re: STOCK CASUALTIES
« Reply #31 on: May 27, 2017, 09:42:03 PM »



US stock market   Edit
Main article: United States bear market of 2007–2009
The US stock market peaked in October 2007, when the Dow Jones Industrial Average index exceeded 14,000 points. It then entered a pronounced decline, which accelerated markedly in October 2008. By March 2009, the Dow Jones average had reached a trough of around 6,600. Four years later, it hit an all-time high. It is probable, but debated, that the Federal Reserve's aggressive policy of quantitative easing spurred the partial recovery in the stock market.[194][195][196]

Market strategist Phil Dow believes distinctions exist "between the current market malaise" and the Great Depression. He says the Dow Jones average's fall of more than 50% over a period of 17 months is similar to a 54.7% fall in the Great Depression, followed by a total drop of 89% over the following 16 months. "It's very troubling if you have a mirror image," said Dow.[197] Floyd Norris, the chief financial correspondent of The New York Times, wrote in a blog entry in March 2009 that the decline has not been a mirror image of the Great Depression, explaining that although the decline amounts were nearly the same at the time, the rates of decline had started much faster in 2007, and that the past year had only ranked eighth among the worst recorded years of percentage drops in the Dow. The past two years ranked third, however.[198]

Financial institutions   Edit
See also: Nationalisation of Northern Rock and Federal takeover of Fannie Mae and Freddie Mac

2007 bank run on Northern Rock, a UK bank
The first notable event signaling a possible financial crisis occurred in the United Kingdom on August 9, 2007, when BNP Paribas, citing "a complete evaporation of liquidity", blocked withdrawals from three hedge funds. The significance of this event was not immediately recognized but soon led to a panic as investors and savers attempted to liquidate assets deposited in highly leveraged financial institutions.[21]

The International Monetary Fund estimated that large US and European banks lost more than $1 trillion on toxic assets and from bad loans from January 2007 to September 2009. These losses are expected to top $2.8 trillion from 2007 to 2010. US bank losses were forecast to hit $1 trillion and European bank losses will reach $1.6 trillion. The International Monetary Fund (IMF) estimated that US banks were about 60% through their losses, but British and eurozone banks only 40%.[199]

One of the first victims was Northern Rock, a medium-sized British bank.[200] The highly leveraged nature of its business led the bank to request security from the Bank of England. This in turn led to investor panic and a bank run[201] in mid-September 2007. Calls by Liberal Democrat Treasury Spokesman Vince Cable to nationalise the institution were initially ignored; in February 2008, however, the British government (having failed to find a private sector buyer) relented, and the bank was taken into public hands. Northern Rock's problems proved to be an early indication of the troubles that would soon befall other banks and financial institutions.

IndyMac   Edit
The first visible institution to run into trouble in the United States was the Southern California–based IndyMac, a spin-off of Countrywide Financial. Before its failure, IndyMac Bank was the largest savings and loan association in the Los Angeles market and the seventh largest mortgage originator in the United States.[202] The failure of IndyMac Bank on July 11, 2008, was the fourth

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« Reply #32 on: May 27, 2017, 09:44:11 PM »



   IndyMac   Edit
The first visible institution to run into trouble in the United States was the Southern California–based IndyMac, a spin-off of Countrywide Financial. Before its failure, IndyMac Bank was the largest savings and loan association in the Los Angeles market and the seventh largest mortgage originator in the United States.[202] The failure of IndyMac Bank on July 11, 2008, was the fourth largest bank failure in United States history up until the crisis precipitated even larger failures,[203] and the second largest failure of a regulated thrift.[204] IndyMac Bank's parent corporation was IndyMac Bancorp until the FDIC seized IndyMac Bank.[205] IndyMac Bancorp filed for Chapter 7 bankruptcy in July 2008.[205]

IndyMac Bank was founded as Countrywide Mortgage Investment in 1985 by David S. Loeb and Angelo Mozilo[206][207] as a means of collateralizing Countrywide Financial loans too big to be sold to Freddie Mac and Fannie Mae. In 1997, Countrywide spun off IndyMac as an independent company run by Mike Perry, who remained its CEO until the downfall of the bank in July 2008.[208]

The primary causes of its failure were largely associated with its business strategy of originating and securitizing Alt-A loans on a large scale. This strategy resulted in rapid growth and a high concentration of risky assets. From its inception as a savings association in 2000, IndyMac grew to the seventh largest savings and loan and ninth largest originator of mortgage loans in the United States. During 2006, IndyMac originated over $90 billion of mortgages.

IndyMac’s aggressive growth strategy, use of Alt-A and other nontraditional loan products, insufficient underwriting, credit concentrations in residential real estate in the California and Florida markets—states, alongside Nevada and Arizona, where the housing bubble was most pronounced—and heavy reliance on costly funds borrowed from a Federal Home Loan Bank (FHLB) and from brokered deposits, led to its demise when the mortgage market declined in 2007.

IndyMac often made loans without verification of the borrower’s income or assets, and to borrowers with poor credit histories. Appraisals obtained by IndyMac on underlying collateral were often questionable as well. As an Alt-A lender, IndyMac’s business model was to offer loan products to fit the borrower’s needs, using an extensive array of risky option-adjustable-rate-mortgages (option ARMs), subprime loans, 80/20 loans, and other nontraditional products. Ultimately, loans were made to many borrowers who simply could not afford to make their payments. The thrift remained profitable only as long as it was able to sell those loans in the secondary mortgage market. IndyMac resisted efforts to regulate its involvement in those loans or tighten their issuing criteria: see the comment by Ruthann Melbourne, Chief Risk Officer, to the regulating agencies.[209][210][211]

May 12, 2008, in a small note in the "Capital" section of its what would become its last 10-Q released before receivership, IndyMac revealed – but did not admit – that it was no longer a well-capitalized institution and that it was headed for insolvency.

IndyMac reported that during April 2008, Moody's and Standard & Poor's downgraded the ratings on a significant number of Mortgage-backed security (MBS) bonds—including $160 million issued by IndyMac that the bank retained in its MBS portfolio. IndyMac concluded that these downgrades would have harmed the Company's risk-based capital ratio as of June 30, 2008. Had these lowered ratings been in effect at March 31, 2008, IndyMac concluded that the bank's capital ratio would have been 9.27% total risk-based. IndyMac warned that if its regulators found its capital position to have fallen below "well capitalized" (minimum 10% risk-based capital ratio) to "adequately capitalized" (8–10% risk-based capital ratio) the bank might no longer be able to use brokered deposits as a source of funds.

Senator Charles Schumer (D-NY) later pointed out that brokered deposits made up more than 37 percent of IndyMac's total deposits, and ask the Federal Deposit Insurance Corporation (FDIC) whether it had considered ordering IndyMac to reduce its reliance on these deposits.[212] With $18.9 billion in total deposits reported on March 31,[213] Senator Schumer would have been referring to a little over $7 billion in brokered deposits. While the breakout of maturities of these deposits is not known exactly, a simple averaging would have put the threat of brokered deposits loss to IndyMac at $500 million a month, had the regulator disallowed IndyMac from acquiring new brokered deposits on June 30.

IndyMac was taking new measures to preserve capital, such as deferring interest payments on some preferred securities. Dividends on common shares had already been suspended for the first quarter of 2008, after being cut in half the previous quarter. The company still had not secured a significant capital infusion nor found a ready buyer.[214][215]

IndyMac reported that the bank's risk-based capital was only $47 million above the minimum required for this 10% mark. But it did not reveal some of that $47 million capital it claimed it had, as of March 31, 2008, was fabricated.

Collapse   Edit
   Wikinews has related news: IndyMac Bank placed into conservatorship by US Government
When home prices declined in the latter half of 2007 and the secondary mortgage market collapsed, IndyMac was forced to hold $10.7 billion of loans it could not sell in the secondary market. Its reduced liquidity was further exacerbated in late June 2008 when account holders withdrew $1.55 billion or about 7.5% of IndyMac's deposits.[216] This “run” on the thrift followed the public release of a letter from Senator Charles Schumer to the FDIC and OTS. The letter outlined the Senator’s concerns with IndyMac. While the run was a contributing factor in the timing of IndyMac’s demise, the underlying cause of the failure was the unsafe and unsound way they operated the thrift.[209]

On June 26, 2008, Senator Charles Schumer (D-NY), a member of the Senate Banking Committee, chairman of Congress' Joint Economic Committee and the third-ranking Democrat in the Senate,[217] released several letters he had sent to regulators, which warned that, "The possible collapse of big mortgage lender IndyMac Bancorp Inc. poses significant financial risks to its borrowers and depositors, and regulators may not be ready to intervene to protect them." Some worried depositors began to withdraw money.[218]

On July 7, 2008, IndyMac announced on the company blog that it:

Had failed to raise capital since its May 12, 2008 quarterly earnings report;
Had been notified by bank and thrift regulators that IndyMac Bank was no longer deemed "well-capitalized";
IndyMac announced the closure of both its retail lending and wholesale divisions, halted new loan submissions, and cut 3,800 jobs.[219]

On July 11, 2008, citing liquidity concerns, the FDIC put IndyMac Bank into conservatorship. A bridge bank, IndyMac Federal Bank, FSB, was established to assume control of IndyMac Bank's assets, its secured liabilities, and its insured deposit accounts. The FDIC announced plans to open IndyMac Federal Bank, FSB on July 14, 2008. Until then, depositors would have access their insured deposits through ATMs, their existing checks, and their existing debit cards. Telephone and Internet account access was restored when the bank reopened.[220][221][222] The FDIC guarantees the funds of all insured accounts up to US$100,000, and has declared a special advance dividend to the roughly 10,000 depositors with funds in excess of the insured amount, guaranteeing 50% of any amounts in excess of $100,000.[204] Yet, even with the pending sale of Indymac to IMB Management Holdings, an estimated 10,000 uninsured depositors of Indymac are still at a loss of over $270 million.[223][224]

With $32 billion in assets, IndyMac Bank was one of the largest bank failures in American history.

IndyMac Bancorp filed for Chapter 7 bankruptcy on July 31, 2008.[205]

Initially the companies affected were those directly involved in home construction and mortgage lending such as Northern Rock and Countrywide Financial, as they could no longer obtain financing through the credit markets. Over 100 mortgage lenders went bankrupt during 2007 and 2008. Concerns that investment bank Bear Stearns would collapse in March 2008 resulted in its fire-sale to JP Morgan Chase. The financial institution crisis hit its peak in September and October 2008. Several major institutions either failed, were acquired under duress, or were subject to government takeover. These included Lehman Brothers, Merrill Lynch, Fannie Mae, Freddie Mac, Washington Mutual, Wachovia, Citigroup, and AIG.[225] On Oct. 6, 2008, three weeks after Lehman Brothers filed the largest bankruptcy in US history, Lehman's former CEO found himself before Representative Henry A. Waxman, the California Democrat who chaired the House Committee on Oversight and Government Reform. Fuld said he was a victim of the collapse, blaming a "crisis of confidence" in the markets for dooming his firm.[226]

Credit markets and the shadow banking system   Edit

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« Reply #33 on: May 27, 2017, 09:46:20 PM »



Credit markets and the shadow banking system   Edit

TED spread and components during 2008
In September 2008, the crisis hit its most critical stage. There was the equivalent of a bank run on the money market funds, which frequently invest in commercial paper issued by corporations to fund their operations and payrolls. Withdrawal from money markets were $144.5 billion during one week, versus $7.1 billion the week prior. This interrupted the ability of corporations to rollover (replace) their short-term debt. The US government responded by extending insurance for money market accounts analogous to bank deposit insurance via a temporary guarantee[227] and with Federal Reserve programs to purchase commercial paper. The TED spread, an indicator of perceived credit risk in the general economy, spiked up in July 2007, remained volatile for a year, then spiked even higher in September 2008,[228] reaching a record 4.65% on October 10, 2008.

In a dramatic meeting on September 18, 2008, Treasury Secretary Henry Paulson and Fed chairman Ben Bernanke met with key legislators to propose a $700 billion emergency bailout. Bernanke reportedly told them: "If we don't do this, we may not have an economy on Monday."[229] The Emergency Economic Stabilization Act, which implemented the Troubled Asset Relief Program (TARP), was signed into law on October 3, 2008.[230]

Economist Paul Krugman and US Treasury Secretary Timothy Geithner explain the credit crisis via the implosion of the shadow banking system, which had grown to nearly equal the importance of the traditional commercial banking sector as described above. Without the ability to obtain investor funds in exchange for most types of mortgage-backed securities or asset-backed commercial paper, investment banks and other entities in the shadow banking system could not provide funds to mortgage firms and other corporations.[47][115]

This meant that nearly one-third of the US lending mechanism was frozen and continued to be frozen into June 2009.[157] According to the Brookings Institution, the traditional banking system does not have the capital to close this gap as of June 2009: "It would take a number of years of strong profits to generate sufficient capital to support that additional lending volume". The authors also indicate that some forms of securitization are "likely to vanish forever, having been an artifact of excessively loose credit conditions". While traditional banks have raised their lending standards, it was the collapse of the shadow banking system that is the primary cause of the reduction in funds available for borrowing.[231]

Wealth effects   Edit

The New York City headquarters of Lehman Brothers
There is a direct relationship between declines in wealth and declines in consumption and business investment, which along with government spending, represent the economic engine. Between June 2007 and November 2008, Americans lost an estimated average of more than a quarter of their collective net worth.[citation needed] By early November 2008, a broad US stock index the S&P 500, was down 45% from its 2007 high. Housing prices had dropped 20% from their 2006 peak, with futures markets signaling a 30–35% potential drop. Total home equity in the United States, which was valued at $13 trillion at its peak in 2006, had dropped to $8.8 trillion by mid-2008 and was still falling in late 2008. Total retirement assets, Americans' second-largest household asset, dropped by 22%, from $10.3 trillion in 2006 to $8 trillion in mid-2008. During the same period, savings and investment assets (apart from retirement savings) lost $1.2 trillion and pension assets lost $1.3 trillion. Taken together, these losses total a staggering $8.3 trillion.[225] Since peaking in the second quarter of 2007, household wealth is down $14 trillion.[232]

Further, US homeowners had extracted significant equity in their homes in the years leading up to the crisis, which they could no longer do once housing prices collapsed. Free cash used by consumers from home equity extraction doubled from $627 billion in 2001 to $1,428 billion in 2005 as the housing bubble built, a total of nearly $5 trillion over the period.[126][127][128] US home mortgage debt relative to GDP increased from an average of 46% during the 1990s to 73% during 2008, reaching $10.5 trillion.[129]

To offset this decline in consumption and lending capacity, the US government and US Federal Reserve have committed $13.9 trillion, of which $6.8 trillion has been invested or spent, as of June 2009.[233] In effect, the Fed has gone from being the "lender of last resort" to the "lender of only resort" for a significant portion of the economy. In some cases the Fed can now be considered the "buyer of last resort".

In November 2008, economist Dean Baker observed:

There is a really good reason for tighter credit. Tens of millions of homeowners who had substantial equity in their homes two years ago have little or nothing today. Businesses are facing the worst downturn since the Great Depression. This matters for credit decisions. A homeowner with equity in her home is very unlikely to default on a car loan or credit card debt. They will draw on this equity rather than lose their car and/or have a default placed on their credit record. On the other hand, a homeowner who has no equity is a serious default risk. In the case of businesses, their creditworthiness depends on their future profits. Profit prospects look much worse in November 2008 than they did in November 2007... While many banks are obviously at the brink, consumers and businesses would be facing a much harder time getting credit right now even if the financial system were rock solid. The problem with the economy is the loss of close to $6 trillion in housing wealth and an even larger amount of stock wealth.[234]

At the heart of the portfolios of many of these institutions were investments whose assets had been derived from bundled home mortgages. Exposure to these mortgage-backed securities, or to the credit derivatives used to insure them against failure, caused the collapse or takeover of several key firms such as Lehman Brothers, AIG, Merrill Lynch, and HBOS.[235][236][237]

European contagion   Edit
The crisis rapidly developed and spread into a global economic shock, resulting in a number of European bank failures, declines in various stock indexes, and large reductions in the market value of equities[238] and commodities.[239]

Both MBS and CDO were purchased by corporate and institutional investors globally. Derivatives such as credit default swaps also increased the linkage between large financial institutions. Moreover, the de-leveraging of financial institutions, as assets were sold to pay back obligations that could not be refinanced in frozen credit markets, further accelerated the solvency crisis and caused a decrease in international trade.

World political leaders, national ministers of finance and central bank directors coordinated their efforts to reduce fears, but the crisis continued.[240] At the end of October 2008 a currency crisis developed, with investors transferring vast capital resources into stronger currencies such as the yen, the dollar and the Swiss franc, leading many emergent economies to seek aid from the International Monetary Fund.[241][242]

Effects on the global economy (as of 2009)   Edit
Main article: Great Recession
Global effects   Edit
Several commentators have suggested that if the liquidity crisis continues, an extended recession or worse could occur.[243] The continuing development of the crisis has prompted fears of a global economic collapse although there are now many cautiously optimistic forecasters in addition to some prominent sources who remain negative.[244] The financial crisis is likely to yield the biggest banking shakeout since the savings-and-loan meltdown.[245] Investment bank UBS stated on October 6 that 2008 would see a clear global recession, with recovery unlikely for at least two years.[246] Three days later UBS economists announced that the "beginning of the end" of the crisis had begun, with the world starting to make the necessary actions to fix the crisis: capital injection by governments; injection made systemically; interest rate cuts to help borrowers. The United Kingdom had started systemic injection, and the world's central banks were now cutting interest rates. UBS emphasized the United States needed to implement systemic injection. UBS further emphasized that this fixes only the financial crisis, but that in economic terms "the worst is still to come".[247] UBS quantified their expected recession durations on October 16: the Eurozone's would last two quarters, the United States' would last three quarters, and the United Kingdom's would last four quarters.[248] The economic crisis in Iceland involved all three of the country's major banks. Relative to the size of its economy, Iceland’s banking collapse is the largest suffered by any country in economic history.[249]

At the end of October UBS revised its outlook downwards: the forthcoming recession would be the worst since the early 1980s recession with negative 2009 growth for the US, Eurozone, UK; very limited recovery in 2010; but not as bad as the Great Depression.[250]

The Brookings Institution reported in June 2009 that US consumption accounted for more than a third of the growth in global consumption between 2000 and 2007. "The US economy has been spending too much and borrowing too much for years and the rest of the world depended on the US consumer as a source of global demand." With a recession in the US and the increased savings rate of US consumers, declines in growth elsewhere have been dramatic. For the first quarter of 2009, the annualized rate of decline in GDP was 14.4% in Germany, 15.2% in Japan, 7.4% in the UK, 18% in Latvia,[251] 9.8% in the Euro area and 21.5% for Mexico.[252]

Some developing countries that had seen strong economic growth saw significant slowdowns. For example, growth forecasts in Cambodia show a fall from more than 10% in 2007 to close to zero in 2009, and Kenya may achieve only 3–4% growth in 2009, down from 7% in 2007. According to the research by the Overseas Development Institute, reductions in growth can be attributed to falls in trade, commodity prices, investment and remittances sent from migrant workers (which reached a record $251 billion in 2007, but have fallen in many countries since).[253] This has stark implications and has led to a dramatic rise in the number of households living below the poverty line, be it 300,000 in Bangladesh or 230,000 in Ghana.[253] Especially states with a fragile political system have to fear that investors from Western states withdraw their money because of the crisis. Bruno Wenn of the German DEG recommends to provide a sound economic policymaking and good governance to attract new investors[254]

The World Bank reported in February 2009 that the Arab World was far less severely affected by the credit crunch. With generally good balance of payments positions coming into the crisis or with alternative sources of financing for their large current account deficits, such as remittances, Foreign Direct Investment (FDI) or foreign aid, Arab countries were able to avoid going to the market in the latter part of 2008. This group is in the best position to absorb the economic shocks. They entered the crisis in exceptionally strong positions. This gives them a significant cushion against the global downturn. The greatest effect of the global economic crisis will come in the form of lower oil prices, which remains the single most important determinant of economic performance. Steadily declining oil prices would force them to draw down reserves and cut down on investments. Significantly lower oil prices could cause a reversal of economic performance as has been the case in past oil shocks. Initial impact will be seen on public finances and employment for foreign workers.[255]

US economic effects   Edit
Real gross domestic product   Edit
The output of goods and services produced by labor and property located in the United States—decreased at an annual rate of approximately 6% in the fourth quarter of 2008 and first quarter of 2009, versus activity in the year-ago periods.[256] The US unemployment rate increased to 10.1% by October 2009, the highest rate since 1983 and roughly twice the pre-crisis rate. The average hours per work week declined to 33, the lowest level since the government began collecting the data in 1964.[257][258] With the decline of gross domestic product came the decline in innovatio

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Re: STOCK CASUALTIES
« Reply #34 on: May 27, 2017, 09:47:36 PM »



US economic effects   Edit
Real gross domestic product   Edit
The output of goods and services produced by labor and property located in the United States—decreased at an annual rate of approximately 6% in the fourth quarter of 2008 and first quarter of 2009, versus activity in the year-ago periods.[256] The US unemployment rate increased to 10.1% by October 2009, the highest rate since 1983 and roughly twice the pre-crisis rate. The average hours per work week declined to 33, the lowest level since the government began collecting the data in 1964.[257][258] With the decline of gross domestic product came the decline in innovation. With fewer resources to risk in creative destruction, the number of patent applications flat-lined. Compared to the previous 5 years of exponential increases in patent application, this stagnation correlates to the similar drop in GDP during the same time period.[259]

Distribution of wealth in the US   Edit

US inequality from 1913 to 2008.
Typical American families did not fare as well, nor did those "wealthy-but-not wealthiest" families just beneath the pyramid's top. On the other hand, half of the poorest families did not have wealth declines at all during the crisis. The Federal Reserve surveyed 4,000 households between 2007 and 2009, and found that the total wealth of 63 percent of all Americans declined in that period. 77 percent of the richest families had a decrease in total wealth, while only 50 percent of those on the bottom of the pyramid suffered a decrease.[260][261][262]

Official economic projections   Edit
On November 3, 2008, the European Commission at Brussels predicted for 2009 an extremely weak growth of GDP, by 0.1%, for the countries of the Eurozone (France, Germany, Italy, Belgium etc.) and even negative number for the UK (−1.0%), Ireland and Spain. On November 6, the IMF at Washington, D.C., launched numbers predicting a worldwide recession by −0.3% for 2009, averaged over the developed economies. On the same day, the Bank of England and the European Central Bank, respectively, reduced their interest rates from 4.5% down to 3%, and from 3.75% down to 3.25%. As a consequence, starting from November 2008, several countries launched large "help packages" for their economies.

The US Federal Reserve Open Market Committee release in June 2009 stated:

...the pace of economic contraction is slowing. Conditions in financial markets have generally improved in recent months. Household spending has shown further signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Businesses are cutting back on fixed investment and staffing but appear to be making progress in bringing inventory stocks into better alignment with sales. Although economic activity is likely to remain weak for a time, the Committee continues to anticipate that policy actions to stabilize financial markets and institutions, fiscal and monetary stimulus, and market forces will contribute to a gradual resumption of sustainable economic growth in a context of price stability.[263] Economic projections from the Federal Reserve and Reserve Bank Presidents include a return to typical growth levels (GDP) of 2.5–3% in 2010; an unemployment plateau in 2009 and 2010 around 10% with moderation in 2011; and inflation that remains at typical levels around 1–2%.[264]

Government responses   Edit
Emergency and short-term responses   Edit
Main article: Subprime mortgage crisis § Responses
The US Federal Reserve and central banks around the world took steps to expand money supplies to avoid the risk of a deflationary spiral, in which lower wages and higher unemployment led to a self-reinforcing decline in global consumption. In addition, governments enacted large fiscal stimulus packages, by borrowing and spending to offset the reduction in private sector demand caused by the crisis. The US Federal Reserve's new and expanded liquidity facilities were intended to enable the central bank to fulfill its traditional lender-of-last-resort role during the crisis while mitigating stigma, broadening the set of institutions with access to liquidity, and increasing the flexibility with which institutions could tap such liquidity.[265]

This credit freeze brought the global financial system to the brink of collapse. The response of the Federal Reserve, the European Central Bank, the Bank of England and other central banks was immediate and dramatic. During the last quarter of 2008, these central banks purchased US$2.5 trillion of government debt and troubled private assets from banks. This was the largest liquidity injection into the credit market, and the largest monetary policy action, in world history. Following a model initiated by the United Kingdom bank rescue package,[266][267] the governments of European nations and the US guaranteed the debt issued by their banks and raised the capital of their national banking systems, ultimately purchasing $1.5 trillion newly issued preferred stock in their major banks.[225] In October 2010, Nobel laureate Joseph Stiglitz explained how the US Federal Reserve was implementing another monetary policy —creating currency— as a method to combat the liquidity trap.[268] By creating $600 billion and inserting[clarification needed] this directly into banks, the Federal Reserve intended to spur banks to finance more domestic loans and refinance mortgages. However, banks instead were spending the money in more profitable areas by investing internationally in emerging markets. Banks were also investing in foreign currencies, which Stiglitz and others point out may lead to currency wars while China redirects its currency holdings away from the United States.[269]

Governments have also bailed out a variety of firms as discussed above, incurring large financial obligations. To date, various US government agencies have committed or spent trillions of dollars in loans, asset purchases, guarantees, and direct spending.[270] Significant controversy has accompanied the bailout, leading to the development of a variety of "decision making frameworks", to help balance competing policy interests during times of financial crisis.[271]

The US executed two stimulus packages, totaling nearly $1 trillion during 2008 and 2009.[272] Other countries also implemented fiscal stimulus plans beginning in 2008.

Regulatory proposals and long-term responses   Edit
Further information: Obama financial regulatory reform plan of 2009, Regulatory responses to the subprime crisis, and Subprime mortgage crisis solutions debate
United States President Barack Obama and key advisers introduced a series of regulatory proposals in June 2009. The proposals address consumer protection, executive pay, bank financial cushions or capital requirements, expanded regulation of the shadow banking system and

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Re: STOCK CASUALTIES
« Reply #35 on: May 27, 2017, 09:49:02 PM »



Regulatory proposals and long-term responses   Edit
Further information: Obama financial regulatory reform plan of 2009, Regulatory responses to the subprime crisis, and Subprime mortgage crisis solutions debate
United States President Barack Obama and key advisers introduced a series of regulatory proposals in June 2009. The proposals address consumer protection, executive pay, bank financial cushions or capital requirements, expanded regulation of the shadow banking system and derivatives, and enhanced authority for the Federal Reserve to safely wind-down systemically important institutions, among others.[273][274][275] In January 2010, Obama proposed additional regulations limiting the ability of banks to engage in proprietary trading. The proposals were dubbed "The Volcker Rule", in recognition of Paul Volcker, who has publicly argued for the proposed changes.[276][277]

The US Senate passed a reform bill in May 2010, following the House, which passed a bill in December 2009. These bills must now be reconciled. The New York Times provided a comparative summary of the features of the two bills, which address to varying extent the principles enumerated by the Obama administration.[278] For instance, the Volcker Rule against proprietary trading is not part of the legislation, though in the Senate bill regulators have the discretion but not the obligation to prohibit these trades.

European regulators introduced Basel III regulations for banks.[279] It increased capital ratios, limits on leverage, narrow definition of capital (to exclude subordinated debt), limit counter-party risk, and new liquidity requirements.[280] Critics argue that Basel III doesn’t address the problem of faulty risk-weightings. Major banks suffered losses from AAA-rated created by financial engineering (which creates apparently risk-free assets out of high risk collateral) that required less capital according to Basel II. Lending to AA-rated sovereigns has a risk-weight of zero, thus increasing lending to governments and leading to the next crisis.[281] Johan Norberg argues that regulations (Basel III among others) have indeed led to excessive lending to risky governments (see European sovereign-debt crisis) and the ECB pursues even more lending as the solution.[282]

United States Congress response   Edit
At least two major reports were produced by Congress: the Financial Crisis Inquiry Commission report, released January 2011, and a report by the United States Senate Homeland Security Permanent Subcommittee on Investigations entitled Wall Street and the Financial Crisis: Anatomy of a Financial Collapse (released April 2011).

On December 11, 2009 – House cleared bill H.R.4173 – Wall Street Reform and Consumer Protection Act of 2009.[283]
On April 15, 2010 – Senate introduced bill S.3217 – Restoring American Financial Stability Act of 2010.[284]
On July 21, 2010 – the Dodd–Frank Wall Street Reform and Consumer Protection Act was enacted.[285][286]
Court proceedings   Edit
In Iceland in April 2012, the special Landsdómur court convicted former Prime Minister Geir Haarde of mishandling the 2008–2012 Icelandic financial crisis.

As of September 2011, no individuals in the UK have been prosecuted for misdeeds during the financial meltdown of 2008.[287]

Continuation of the financial crisis in the US housing market   Edit
As of 2012, in the United States, a large volume of troubled mortgages remained in place. It had proved impossible for most homeowners facing foreclosure to refinance or modify their mortgages and foreclosure rates remained high.[288]

Stabilization   Edit
The US recession that began in December 2007 ended in June 2009, according to the US National Bureau of Economic Research (NBER)[289] and the financial crisis appears to have ended about the same time. In April 2009 TIME magazine declared "More Quickly Than It Began, The Banking Crisis Is Over."[290] The United States Financial Crisis Inquiry Commission dates the crisis to 2008.[291][292] President Barack Obama declared on January 27, 2010, "the markets are now stabilized, and we've recovered most of the money we spent on the banks."[293]

The New York Times identifies March 2009 as the "nadir of the crisis" and noted in 2011 that "Most stock markets around the world are at least 75 percent higher than they were then. Financial stocks, which led the markets down, have also led them up." Nevertheless, the lack of fundamental changes in banking and financial markets, worries many market participants, including the International Monetary Fund.[294]

The distribution of household incomes in the United States has become more unequal during the post-2008 economic recovery, a first for the US but in line with the trend over the last ten economic recoveries since 1949.[295][296] Income inequality in the United States has grown from 2005 to 2012 in more than 2 out of 3 metropolitan areas.[297] Median household wealth fell 35% in the US, from $106,591 to $68,839 between 2005 and 2011.[298]

Media coverage   Edit
The financial crises generated many articles and books outside of the scholarly and financial press, including articles and books by author William Greider, economist Michael Hudson, author and former bond salesman Michael Lewis, Kevin Phillips, and investment broker Peter Schiff.

In May 2010, a documentary, Overdose: A Film about the Next Financial Crisis,[299] premiered about how the financial crisis came about and how the solutions that have been applied by many governments are setting the stage for the next crisis. The film is based on the book Financial Fiasco by Johan Norberg and features Alan Greenspan, with funding from the libertarian think tank The Cato Institute. Greenspan is responsible for de-regulating the derivatives market while chairman of the Federal Reserve.

In October 2010, a documentary film about the crisis, Inside Job directed by Charles Ferguson, was released by Sony Pictures Classics. In 2011, it was awarded the Academy Award for Best Documentary Feature at the 83rd Academy Awards.

Time magazine named "25 People to Blame for the Financial Crisis".[300]

Michael Lewis published a best-selling non-fiction book about the crisis, entitled The Big Short. In 2015, it was adapted into a film of the same name, which won the Academy Award for Best Adapted Screenplay. One point raised is to what extent those outside of the markets themselves (i.e., not working for a mainstream investment bank) could forecast the events and be generally less myopic. Subsequent to the crisis itself some observers furthermore noted a change in social relations as some group culpability emerged.[301]

Emerging and developing economies drive global economic growth   Edit
Advanced economies led global economic growth prior to the financial crisis with "emerging" and "developing" economies lagging behind. The crisis overturned this relationship.[302] The International Monetary Fund found that "advanced" economies accounted for only 31% of global GDP while emerging and developing economies accounted for 69% of global GDP from 2007 to 2014.[303] In the tables, the names of emergent economies are shown in boldface type, while the names of developed economies are in Roman (regular) type.

The Twenty Largest Economies By Incremental GDP From 2007 to 2014
Economy   
Incremental GDP (billions in USD)
(01)  China   
6,851
(02)  United States   
2,939
(03)  European Union   
1,155
(04)  Brazil   
877
(05)  India   
809
(06)  Russia   
758
(07)  Australia   
534
(08)  Germany   
492
(09)  Indonesia   
424
(10)  Japan   
413
(11)  Saudi Arabia   
362
(12)  Nigeria   
341
(13)  Canada   
336
(14)  South Korea   
327
(15)  Mexico   
252
(16)  France   
236
(17)   Switzerland   
228
(18)  Argentina   
207
(19)  Colombia   
193
(20)  Turkey   
167
(21)  United Arab Emirates   
159
The twenty largest economies contributing to global GDP growth (2007–2014)[304]


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Re: STOCK CASUALTIES
« Reply #36 on: May 27, 2017, 09:49:59 PM »



The Twenty Largest Economies By Incremental GDP From 2007 to 2014
Economy   
Incremental GDP (billions in USD)
(01)  China   
6,851
(02)  United States   
2,939
(03)  European Union   
1,155
(04)  Brazil   
877
(05)  India   
809
(06)  Russia   
758
(07)  Australia   
534
(08)  Germany   
492
(09)  Indonesia   
424
(10)  Japan   
413
(11)  Saudi Arabia   
362
(12)  Nigeria   
341
(13)  Canada   
336
(14)  South Korea   
327
(15)  Mexico   
252
(16)  France   
236
(17)   Switzerland   
228
(18)  Argentina   
207
(19)  Colombia   
193
(20)  Turkey   
167
(21)  United Arab Emirates   
159
The twenty largest economies contributing to global GDP growth (2007–2014)[304]

See also

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Re: STOCK CASUALTIES
« Reply #37 on: May 27, 2017, 09:54:21 PM »



10年一度金融风暴或重临
档案照
財经 最后更新 2017年05月27日 19时59分
10年一度金融风暴或重临

2分享
(香港27日讯)香港金融管理局前总裁任志刚警告,10年一度的金融风暴,今年可能会捲土重来,威力甚至可能比前两次更强烈。

香港《大公报》周六引述任志刚报导,金融危机每隔10年爆发一次,这个现象虽然无实际理论根据,但过去40年间,確实出现难以解释的巧合,不断重演。

他说,从1977年国际货幣危机、1987年华尔街股市暴跌、1997年亚洲金融风暴,以及2007年美国次贷风暴触发的2008年金融海啸,都是在7字尾年头爆发。今年是2017年,正是另一个7字尾年,金融危机重来阴霾笼罩全球。


他表示,最近数周先后出现加拿大最大非银行房贷机构Home Capital集团挤兑危机、巴西股市单日急挫逾10%,全球金融市场却无动於衷,这是极不寻常的。

此外,香港房地產价格飆升,已连续7年成为全球楼价负担最高的城市;加拿大多伦多楼价的涨幅也超过30%。

不少投资者担心,房地產很可能是全球金融危机的最大火药库,一旦爆破,势必令全球经济陷入长期和严重的衰退。

归根究底,以上现象都是先进经济体繫,在金融海啸后不断印钞、將利率压至最低水准所致。

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Re: STOCK CASUALTIES
« Reply #38 on: May 28, 2017, 04:41:53 PM »



ARKIB : 31/08/2001

Ads by Kiosked
Ho Wah Genting Bhd warrants suspended
KUALA LUMPUR Aug 30 - Ho Wah Genting Bhd's (HWGB) warrants were suspended by the Kuala Lumpur Stock Exchange (KLSE) today.

The KLSE, in a press release, said the suspension took effect from 2.30 p.m. today until further notice.

The organisation said: "In the interest of a fair and orderly market, KLSE in consultation with the Securities Commission has resolved to suspend the trading of Ho Wah Genting Bhd warrant."

KLSE also noted that the suspension of HWGB-warrants does not nullify the designated securities status of the counter.

In recent news reports, the suspension of HWGB-warrants was based on the extraordinary rise in its prices in the past month.

The warrants streaked across the charts up to RM12.60 today from a mere RM1.30 on July 27, 2001.

In the same period, HWGB parent shares were only trading at RM1.65 as at 4.25 p.m. today. On July 24, 2001, HWGB was traded at RM1.30 a piece.

On Aug 13, 2001, the KLSE declared the warrants and its parent shares as designated securities, a form of restriction that required cash up front to own.

Investors who bought them would not be able to sell until delivery of the shares was picked up.

On Monday, the Securities Commission (SC) said it was scrutinising trading in warrants after it became more expensive than its parent shares.

Warrants are securities that gives the right to the owner to buy the parent share plus a specified amount as conversion fee.

The warrants expire on Dec 20, 2001 and if not converted it would become null and void.

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Re: STOCK CASUALTIES
« Reply #39 on: May 28, 2017, 04:46:42 PM »



ARKIB : 08/11/2001

Ads by Kiosked
KLSE lifts suspension on HWGB & HWGB-WA securities trading
KUALA LUMPUR Nov 7 - The Kuala Lumpur Stock Exchange (KLSE), in consultation with the Securities Commission (SC), has resolved to uplift the suspension of trading of the securities of Ho Wah Genting Bhd (HWGB) and Ho Wah Genting Bhd-Warrant (HWGB-WA).

With the upliftment of the trading suspension, HWGB-WA and HWGB will commence trading effective 9 am, Friday (Nov 9), the KLSE said in a statement here today.

In the interest of maintaining an orderly and fair market, the declaration of HWGB-WA and HWGB as designated securities was imposed on Aug 13, 2001 as a result of the continual sharp increase in the price and volume of HWGB-WA and HWGB, despite the announcement by Ho Wah Genting Bhd in response to a KLSE query.

The company announced that there was no material development in the company's business and affairs not previously disclosed.

Subsequently, the trading of HWGB-WA was suspended on Aug 30 and the trading of HWGB was suspended on Sept 3 until further notice to facilitate investigations by the KLSE.

The KLSE said that although the trading of HWGB and HWGB-WA will commence with the upliftment, the securities remained as designated securities.

This is pursuant to a rule on Designated Securities of the Rules of the KLSE as announced on Aug 13.

Also, the KLSE in consultation with the SC, has prohibited the use of margin financing for purchase transactions of HWGB and HWGB-WA securities in accordance with the KLSE Rules.

The KLSE said that it had conducted preliminary investigations with regard to the trading activities of HWGB and HWGB-W A securities and the investigation report has been submitted to the SC for further action.

"The Exchange is undertaking due process and appropriate disciplinary action will be taken against relevant parties under the jurisdiction of the Exchange," it said.

As part of the requirements for the upliftment of suspension of both HWGB and HWGB-WA, the company is required to make announcements on the following:

i. its current financial position;

ii. its development plans; and

iii. a summary of the dealings in its shares and warrants by directors and substantial shareholders since Nov 2, 2000.

On Oct 29, the company announced its current financial position for the period ended Sept 30, 2001. Today, it disclosed information relating to items (ii) and (iii).

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Re: STOCK CASUALTIES
« Reply #40 on: May 28, 2017, 06:56:54 PM »



Joseph Yam urges vigilance against another, far worse financial crisis
Business | May 26, 18:12
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Joseph Yam Chi-kwong, former chief executive of the Hong Kong Monetary Authority, said today the next financial crisis could be far worse than the previous one and called for vigilance as he had done as far back as 2009.
He said a financial crisis has happened every 10 years in the past but that one was not expected this year or next.
Yam served the Hong Kong as Monetary Authority for 16 years since 1993 before he decided to retire in May 2009. With his team at the HKMA, he was instrumental in developing Hong Kong's monetary and financial systems.
After writing his last weekly Viewpoint column in late September that year, he bid farewell to the HKMA. He had begun the column in September 1999 on the HKMA website.
Yam said a financial crisis was not likely to be triggered by China, but in a market functioning under the "Wall Street financial model,'' where several problems such as the culture of speculation remains.
Looking back at the past 20 years after Hong Kong’s handover, Yam said the city has done a good job of maintaining monetary and financial stability.
"But the government and regulators should always be vigilant. The world now is not safe,” he advised.
He said Hong Kong should review its role as an international financial center to avoid being marginalized and become bigger in market size.- CARRIE CHEN

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Re: STOCK CASUALTIES
« Reply #41 on: May 30, 2017, 06:53:14 AM »



今年一路劲涨
美国科技股恐现泡沫
489点看 2017年5月29日
(伦敦29日讯)以苹果等科技巨擘为首的科技类股今年来一路劲涨,带动美股强升,但专家也忧心,美国科技股可能出现泡沫迹象。

《金融时报》专栏作家威格斯沃斯分析,美股今年来的涨势主要是由面子书、苹果、亚马逊、Netflix与谷歌组成的“惊奇五巨头”带动。


Google今年来涨24%,其余4家公司股票都涨超过30%。5家企业的合并市值也达到令人咋舌的2.4兆美元(10.245兆令吉)。

不敢低估惊奇五巨头

然而,投资者忧心,估值水涨船高的科技股已出现大跌前夕的泡沫迹象。

避险基金的持有大幅偏向押注科技股,在高盛追踪的多数基金中,面子书、亚马逊与谷歌是持有部位最高的股票。美银美林的报告也指出,若目前趋势不变,科技共同基金今年的净流入额将是15年最高。

威格斯沃斯说,花旗衡量数据与市场期望落差的“全球经济意外指数”,已降至去年11月来低点,代表在这段期间内买进的投资者,现在可能得三思而后行。

不过,现在预言科技股带动的涨势将终结,可能还言之过早。虽然那斯达克网路指数本益比已达34倍,标普500指数本益比仍处在相对合理的18倍。

此外,也很少人敢低估“惊奇五巨头”的增长潜力。

然而威格斯沃斯提醒,涨势终会反转,一如美银美林的警告:“迹象显示我们正处在超涨的早期阶段。”


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Re: STOCK CASUALTIES
« Reply #42 on: June 02, 2017, 07:16:23 AM »



WORLDCORPORATE
US Stocks
Wall St rises as data points to accelerating economy
Reuters
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Reuters

June 02, 2017 05:19 am MYT
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NEW YORK (June 2): U.S. stocks advanced on Thursday, with each of the major U.S. indexes notching record highs, after a batch of economic data suggested the economy was picking up speed.

The ADP private sector employment report showed 253,000 jobs were added in May, well above the 185,000 estimated by economists polled by Reuters.

The report could signal a strong government payrolls report on Friday that includes hiring in both public and private sectors, which would cement expectations for an interest rate hike by the Federal Reserve in two weeks.

"More than anything it is employment data driven, it was such a resounding uptick over expectations," said Paul Springmeyer, investment managing director at the Private Client Reserve at U.S. Bank in Minneapolis, Minnesota.

"It bodes well for the Fed; certainly the numbers are very, very high in terms of the likelihood of that (hike) coming through for June."

Forecasts are for 185,000 nonfarm jobs created in May.

In addition to the ADP data, a separate report showed factory activity ticked up in May after two straight months of slowing.

San Francisco Federal Reserve Bank President John Williams said on Wednesday that while he sees three interest rate hikes this year as his baseline scenario, four rate increases would also be appropriate if the economy got an unexpected boost.

Fed Governor Jerome Powell, an influential policymaker, told CNBC that he expects three rate hikes this year.

Forecasts from Fed officials suggest that a median of two more hikes are planned before the end of the year.

Traders are currently pricing in an 88.9-percent chance of a quarter-percentage-point rate hike at the U.S. central bank's June 13-14 meeting, according to Thomson Reuters data.

The Dow Jones Industrial Average rose 135.53 points, or 0.65 percent, to end at 21,144.18, the S&P 500 gained 18.26 points, or 0.76 percent, to 2,430.06 and the Nasdaq Composite added 48.31 points, or 0.78 percent, to 6,246.83.

Gains were broad, with each of the 11 major S&P sectors on the plus side, led by gains in materials, up 1.09 percent and healthcare, up 1.18 percent.

Deere's shares were up 1.8 percent to close at $124.70 after the farm and construction major said it would buy privately held German road construction company Wirtgen Group for $5.2 billion, including debt.

Hewlett Packard Enterprise dropped 6.9 percent to $17.52 as the biggest drag on the S&P 500 after the company reported a steep fall in quarterly revenue.

Palo Alto Networks jumped 17.2 percent to a more than four-month high of $138.99 after the cybersecurity company's profit forecast topped expectations.

Advancing issues outnumbered declining ones on the NYSE by a 4.73-to-1 ratio; on Nasdaq, a 3.03-to-1 ratio favored advancers.

The S&P 500 posted 28 new 52-week highs and 11 new lows; the Nasdaq Composite recorded 82 new highs and 70 new lows.

About 6.89 billion shares changed hands in U.S. exchanges, compared with the 6.72 billion daily average over the last 20 sessions. - Reuters

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Re: STOCK CASUALTIES
« Reply #43 on: June 02, 2017, 07:18:31 AM »



Altair's 'sell everything' call brave or reckless?

Patrick Commins
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A principled and brave decision, a cop-out, or something else altogether?

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Fund manager Philip Parker's extraordinary decision to liquidate the Altair Australian share funds and return the hundreds of millions in cash to his investors is as big a statement you can make about how you see the market.

That is, if it really was about the market, and not something else.

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http://www.smh.com.au/business/markets/altairs-sell-everything-call-brave-or-reckless-20170530-gwg4lz.html
Phillip Parker has caused a stir with his move to get out of the market.
Phillip Parker has caused a stir with his move to get out of the market. Photo: Brook Mitchell
As Parker told me: "We didn't want to be the guys to go back to the clients in three, four months or however long it takes, and say, 'You know what? The last three to four years where we've made these big performance fees and charged you a big fat 1 per cent management fee, well, oops we saw it coming but we didn't warn you because we thought we'd just collect our fees'."

That sounds all good and proper, and I have no reason to believe he is not telling the truth. Still, the cynic has to ask - is there something else going on?

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The most obvious recent comparison is Peter Hall's surprise decision to quit Hunter Hall on Christmas Eve of last year. That decision came after a tough period for the fund, which had been positioned for a downturn that never came. Of particular weight were the heavy losses from Hall's outsized exposure to biotech stock Sirtex. The thought of making up those losses seemed to weigh on Hall.

Parker is a former colleague of Peter Hall (albeit two decades back) and describes him as a friend. So the link goes beyond mere circumstance. Perhaps they were schooled in the same high-conviction style of investing.

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Is this the housing market downturn?
Is this the housing market downturn?  Photo: Paul Rovere
But Parker says the only problem stocks they have had in their portfolios was an exposure to Brambles, which copped a sharp downgrade earlier this year, and Estia Health, the aged care operator that almost halved in value in August last year. In that case Parker says the fund got out early, after the shares had dropped a still hefty - but not disastrous - 15 per cent.

In other words, the funds have been performing reasonably well over the past year, and have beat their benchmarks since they started in 2013. There have been no massive outflows that threatened the viability of the business, Parker says. No personal pressures.

Parker said he was worried about a crash in the property market, as well as collection of other looming risks. That might be OK if the sharemarket reflects those risks in asset prices, but it doesn't, Parker argues.

Most of the stocks his funds owned had already blown past Altair's analysts' total return targets for the entire year. Limited upside and gaping downside is a nasty situation to navigate.

Still, isn't that Parker's job? To make money for his clients, particularly during difficult periods? One trader on Twitter likened it to a cricketer who, when things get tough, just takes his bat and ball and heads home. A quitter, in other words - no ticker.

One suspects that your average retail investor does not think that way.

The fund management industry is still getting over the reputational damage following the GFC. Investors in many instances felt that they paid fees for the skill and experience but were still left fully exposed to the crash. Never mind the argument that fund managers are paid to pick stocks, not make asset allocation decisions on behalf of their clients.

Since then the backlash against the industry has continued apace. Central bank intervention has made a mockery of investment skill by pushing up the value of every asset under the sun. That has driven people increasingly into the arms of the passive investment industry – essentially a cheap momentum play that has paid off in spades.

In that context, if that is all that is going on, a bold call by a fund manager to wind up his funds rather than continue to place his clients' money in an increasingly dangerous environment will probably be applauded. Now we just wait to see if Parker is right.

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Re: STOCK CASUALTIES
« Reply #44 on: June 02, 2017, 08:57:58 AM »



BUSINESS NEWS
BUSINESS NEWS
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Altair selling shares to investors 'bold'
Published: 7:20 pm, Tuesday, 30 May 2017

 
Altair Asset Management Chairman Philip Parker says he will liquidate Australian share funds.
h
More than a year after RBS advised investors to 'sell anything', Sydney fund manager Altair Asset Management is doing just that.

Altair Chairman and chief investment officer Philip Parker has revealed the decision to liquidate its the Australian shares funds, returning cash to clients, citing risks including the 'east coast property market bubble and the impending correction'.


In a statement to investors on Monday, Mr Parker said 'Giving up management and performance fees and handing back cash from investments managed by us is a seminal decision, however preserving client's assets is what all fund managers should put before their own interests,'

Speaking with Sky News Business, Sirius Fund Management member Kieran Kelly says Parker should be complimented from going from being fully invested to fully in cash.

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'He didn't just sit there on the cash and say "I'll manage it until times are better", he gave it back. On his morals and his ethics, I can't fault him.' Mr Kelly said.

'I have a problem with people making big bets.'

'He's being very logical and I agree with everything he says, the problem is the stock market at it's core is not logical.'

Mr Parker outlined a roll call of 'the more obvious reasons to exit the riskier asset markets of shares and property'.

They included: the Australian east-coast property market 'bubble' and its 'impending correction'; worries that issues around China's hot property sector and escalating debt levels will blow up 'later this year'; 'oversized' geopolitical risks and an 'unpredictable' US political environment; and the 'overvalued' Aussie equity market.

- See more at: http://www.skynews.com.au/business/business/shares/2017/05/30/altair-selling-shares-to-investors--bold-.html#sthash.9r9Umbrs.dpuf

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Re: STOCK CASUALTIES
« Reply #45 on: June 02, 2017, 09:02:38 AM »



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Why an Australian Fund Manager Decided to Sell Everything
by Wolf Richter • May 30, 2017 • 59 Comments
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Spooked by a “housing calamity,” banks, overvalued stocks, and China.

Philip Parker, chairman and chief investment officer of Sydney-based Altair Asset Management, and “proud to have beaten the relevant benchmarks since inception,” decided it’s time to throw in the towel. With 30 years in the industry, he has seen a few cycles, and the “overvalued and dangerous time in this cycle” has spooked him. In light of “the impending crash” that will “assist investors to take stock of the excessive valuations,” he decided to sell everything.

His firm will hand the money back to investors. This includes returning an advisory contract for “over $2 billion for one of Australia’s largest financial planning companies.”

There are “just too many risks at present,” he wrote in The Australian. “I cannot justify charging our clients fees when there are so many early warning lead indicators of clear and present danger in property and equity markets now.” Among the “more obvious reasons to exit the riskier asset markets of shares and property” are:

The “Australian property market bubble” that reminds him of the “housing calamity” of the early 1990s
“China property and debt issues later this year”
“The overvalued Australian equity markets”
“Oversized geopolitical risks”
And the “unpredictable US political environment.”
He’s not just talking about “sell everything,” as other fund managers have done.

Famously, at the end of July last year, Jeffrey Gundlach, CEO of DoubleLine Capital, told Reuters in an interview that stock investors have entered a “world of uber complacency.” As economic growth looks weak and corporate earnings stagnate, “the stock markets should be down massively but investors seem to have been hypnotized that nothing can go wrong.” In referring to a word painting by artist Christopher Wool, that says “Sell the house, sell the car, sell the kids,” he mused: “That’s exactly how I feel – sell everything. Nothing here looks good.”




 
Gundlach didn’t “sell everything.” But Parker’s Altair Asset Management is in the process of actually doing it. And it wasn’t an easy decision:

“Giving up management and performance fees and handing back cash from investments managed by us is a seminal decision, however preserving client’s assets is what all fund managers should put before their own interests.”

His clients were advised of the decision on May 15. Investors in the firm’s managed funds would get the cash proceeds from the asset sales. Investors in managed discretionary accounts (MDA) would get a choice: either transfer the shares to other fund management firms or have Altair sell the shares and return the cash to investors – and this is what happened next:

“Interestingly, 95 percent of our MDA clients took the latter decision to cash up,” Parker wrote. It seems clients weren’t interested in toughing out an “impending crash” or a “housing calamity” and what that might do to the banks.

Parker goes on:

Lack of upside in our models of course leaves an active manager little alternatives but to hand back cash at such an overvalued and dangerous time in this cycle. From a bottom-up perspective Altair’s analysts’ valuations were indicating sells above their target levels or were at best were severely overstretched even after we upgraded our targets several times this year and late last year.

Members of the Altair investment team, including Parker, “have been warning of the overvalued property and financial markets for at least six months.” The firm’s monthly Altair Insights has been warning about an impending housing market downturn since mid-2016. He writes that the sign posts out there – the “specific identifiers that are extremely recognizable” – are reminiscent of the “late eighties and early nineties housing calamity” in Australia.

Parker is among a number of other Australian fund managers to get spooked. Roger Montgomery, chief investment officer of Montgomery Investment Management warned in December of a potential “property implosion” and its impact on jobs and the overall Australian economy, which has become so dependent on the housing bubble [ “A Warning for Property Investors in Australia”].

So why not just ride out that coming crash and calamity and collect the fees at every step along the way, which is the classic approach other fund managers are following? Well, turns out, Parker has developed a novel concept, that “preserving client’s assets is what all fund managers should always put before their own interests.”

He is going to let the markets and the property sector do their thing, and without any client money at risk, he’s going to watch the spectacle, and as he says, “if my thesis is correct and value indeed reappears as it always does after major corrections,” and when he thinks “there to be real value again,” he might re-enter the markets in some way.

So this would be another case of waiting for the next crash and to then plow back into the markets to benefit from the surge following that crash. The “smart money” is preparing for this opportunity. For example, hedge fund manager Paul Singer just raised $5 billion in 24 hours for this event, as “all hell will break loose,” after which he wants “to take advantage of it.” But all this money piling up with the plan to deploy it during the next crash will impact the market itself. Read… Why I think Stocks Won’t Crash Spectacularly but May Zigzag Lower in Agonizing Ups-and-Downs, Possibly for Decades

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Re: STOCK CASUALTIES
« Reply #46 on: June 02, 2017, 09:04:49 AM »



Breaking news
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NEWS HOME
Altair's Parker defends decision to liquidate investment fund on property bubble fears
BY FINANCE CORRESPONDENT PHILLIP LASKER
UPDATED WED AT 12:29PM
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VIDEO 2:52 An Australian fund manager is handing clients their cash back
THE BUSINESS
In a surprise move, Australia's booming property market has made one asset manager worried enough to shut down his multi-million-dollar fund and hand back all the money to his investors.

Philip Parker, the chairman and chief investment officer of Altair Asset Management, had written to investors explaining that he was returning their funds at an "overvalued and dangerous time in this cycle".

"In the last six to eight months, the investment committee of Altair have felt, to varying degrees, that the property market was heading into bubble territory," he told the ABC in an exclusive radio interview on Business PM.

AUDIO 8:57
Don't overlook 'property mania' Parker warns investors
ABC NEWS
The property market will unwind soon, in Mr Parker's opinion.

"The massive leverage that you're seeing in terms of people's exposure to property will then flow over to other liquid assets," he said.

"Secondly, I felt China property and debt issues will become a major factor later in the year.

"And the overvalued Australian equity market is significant for active investors. We were finding, in the last three to five months, less and less value.

"The fourth reason, that's quite to clear to me, is that there is an oversized geopolitical risk, and there's an unpredictable US political environment."

What will sink housing?
 
A lack of liquidity could drown investors when Australia's booming east coast real estate markets turn, writes Michael Janda.
Altair's investment committee includes prominent economist Gerard Minack, who has been a "bear" on Australia's economic outlook for some time.

"There is a significant risk of recession next year," he said.
"That's in small part due to the increase in US funding costs.

"The far more important issue is that housing - both the direct contribution, which comes from building and owning and transacting housing, as well the indirect contribution that comes from the wealth effect - look set to fade next year."

Mr Minack told the ABC that he played a minor role on the investment committee and the decision to shut down the funds was in no way connected to his views.

Competitor confused by Altair's decision
The decision to shut down has puzzled experienced competitors, such as Anton Tagliaferro, the investment director of Investors Mutual.

"There are a lot of uncertain things at the moment - Donald Trump, China, you can quote a list of ten or twenty uncertainties," he said.

Edge of a cliff? Housing in 2017
 
There are plenty of forecasts around the Australian housing market in 2017 - and few are positive.
However, Mr Tagliaferro said that is a normal state of affairs in markets.

"I think if you go back five years, you'll find another list of uncertainties," he added, citing the Greece debt crisis as an example.

"Be careful of extreme views because there are always people predicting the end of the world next week or a boom next week or something.
"So I was always advised very young in this industry, beware of extreme views."

Mr Parker has defended his decision to cash-out as the right thing to do.

"It behoves me to hand back money when I see excessive risk to people's hard-earned money," he said.

In the meantime, Altair's boss is taking a break, from where he will be watching financial Armageddon unfold.

POSTED WED AT 11:26AM

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Re: STOCK CASUALTIES
« Reply #47 on: June 16, 2017, 08:52:55 AM »



ECONOMY
ECONOMY  WORLD ECONOMY  US ECONOMY  THE FED  CENTRAL BANKS  JOBS  GDP OUTLOOK
It's a 'scary' time with a global crisis on the way, LVMH CEO says
LVMH's CEO says another global financial crisis could hit soon.
Low interest rates and high stock prices risk hurting the economic outlook in the medium term.
Technology and innovation are expected to provide a longer term boost.
Karen Gilchrist   | Arjun Kharpal
10 Hours Ago
CNBC.com
French luxury group LVMH Chairman and Chief Executive Officer Bernard Arnault presents the 2016 full year results at the LVMH headquarters in Paris, on January 26, 2017.
Eric Piermont | AFP | Getty Images
French luxury group LVMH Chairman and Chief Executive Officer Bernard Arnault presents the 2016 full year results at the LVMH headquarters in Paris, on January 26, 2017.
A financial crisis could be just around the corner, according to the chief executive of LVMH, who has described the global economic outlook as "scary".

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"For the economic climate, the present situation is...mid-term scary," Bernard Arnault told CNBC Thursday.

"I don't think we will be able to globally avoid a crisis when I see the interest rates so low, when I see the amounts of money flowing into the world, when I see the stock prices which are much too high, I think a bubble is building and this bubble, one day, will explode."

 Long-term optimistic on economic climate, mid-term seems 'scary' says LVMH CEO   Long-term optimistic on economic climate, mid-term seems 'scary' says LVMH CEO 
10 Hours Ago | 01:26
Arnault, who is responsible for the world's largest luxury goods company, couldn't say whether the crash would be imminent or within the next few years, but he insisted that almost a decade on from the global financial crisis of 2008, one was due.

"There has not been a big crisis for almost ten years now and since I've had a business I have seen crises more than every ten years, so be careful."

Longer term, however, Arnault said he was "optimistic", pointing to advances in technology and innovation, which he said would stimulate the economy.

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Re: STOCK CASUALTIES
« Reply #48 on: June 23, 2017, 08:30:21 PM »





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Visualizing What Happens To Trading During A Market Crash?

Tyler Durden's picture
by Tyler Durden
Jun 23, 2017 4:15 AM
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It’s hard to predict when a stock market crash will occur, so the best defense is to be prepared.

Today’s infographic comes to us from StocksToTrade.com, and it explains what happens when a large enough drop in the market triggers a “circuit breaker”, or a temporary halt in trading.


Courtesy of: Visual Capitalist

As Visual Capitalist's Jeff Desjardins notes, these temporary halts in trading, or “circuit breakers”, are measures approved by the SEC to calm down markets in the event of extreme volatility. The rules apply to NYSE, Nasdaq, and OTC markets, and were put in place following the events of Black Monday in 1987.

CIRCUIT BREAKER RULES

Previously, the Dow Jones Industrial Average (DJIA) was the bellwether for such market interventions.

However, the most recent rules apply to the whole market when a precipitous drop in the S&P 500 occurs:





Upon reaching each of the two first thresholds, a 15-minute halt in trading is prompted. This is the case unless the drop happens in the last 35 minutes of trading.

Upon reaching the third threshold (-20% drop in S&P 500), the day’s trading is stopped altogether.

CAN CIRCUIT BREAKERS STOP A MARKET CRASH?

In theory, the use of circuit breakers can help curb panic-selling, as well as limit opportunities for massive gains (or losses) within a short time frame. Further, by creating a window where trading is paused, circuit breakers help make time for market makers and institutional traders to make rational decisions.

Regulators and exchanges hope that all of this together will give investors a chance to calm down, preventing the next market crash.


But do circuit breakers actually work? While they make logical sense, recent evidence from China paints a murkier picture.

THE ILLUSION OF SAFETY

In Paul Kedrosky’s piece from The New Yorker, titled The Dubious Logic of Stock Market Circuit Breakers, he makes some interesting points on the series of market crashes in China from late-2015 to early-2016.

To understand why circuit breakers can make markets less ‘safe,’ imagine that you’re a Chinese trader on a day when markets are approaching a five-per-cent decline. What do you do?
 
– Paul Kedrosky, The New Yorker
Kedrosky continues by explaining that a market participant in that situation would try to get as many sell orders in as possible, before the circuit breaker is triggered.

Further, when the markets re-open, the same trader would again sell immediately to avoid the second breaker (which triggers an end in trading for the day). Each time the breakers get triggered, it creates a market memory of the events, and traders try to avoid future shutdowns by selling faster.

PREPARATION IS KEY

Whether they work or not, it is essential for investors to understand the rules behind circuit breakers, as well as how markets think and react after these pauses in action.

In the event of a market crash, this preparation could help to make a difference.

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Re: STOCK CASUALTIES
« Reply #49 on: June 27, 2017, 09:19:39 AM »





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"It’ll Be An Avalanche": Hedge Fund CIO Sets The Day When The Next Crash Begins

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by Tyler Durden
Jun 26, 2017 1:29 AM
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While most asset managers have been growing increasingly skeptical and gloomy in recent weeks (despite a few ideological contrarian holdouts), joining the rising chorus of bank analysts including those of Citi, JPM, BofA and Goldman all urging clients to "go to cash", none have dared to commit the cardinal sin of actually predicting when the next crash will take place.

On Sunday a prominent hedge fund manager, One River Asset Management's CIO Eric Peters broke with that tradition and dared to "pin a tail on the donkey" of when the next market crash - one which he agrees with us will be driven by a collapse in the global credit impulse - will take place. His prediction: Valentine's Day 2018.

Here is what Peters believes will happen over the next 8 months, a period which will begin with an increasingly tighter Fed and conclude with a market avalanche:



“The Fed hikes rates to lean against inflation,” said the CIO. “And they’ll reduce the balance sheet to dampen growing financial instability,” he continued. “They’ll signal less about rates and focus on balance sheet reduction in Sep.”
 
Inflation is softening as the gap between the real economy and financial asset prices is widening. “If they break the economy with rate hikes, everyone will blame the Fed.” They can’t afford that political risk.
 
“But no one understands the balance sheet, so if something breaks because they reduce it, they’ll get a free pass.”
 
“The Fed has convinced itself that forward guidance was far more powerful than QE,” continued the same CIO.
 
“This allows them to argue that reversing QE without reversing forward guidance should be uneventful.” Like watching paint dry. “Balance sheet reduction will start slowly. And proceed for a few months without a noticeable impact,” he said. “The Fed will feel validated.” Like they’ve been right all along.
 
“But when the global credit impulse reverses, it’ll be a cascade, an avalanche. And I pin the tail on that donkey to be Valentine’s Day 2018.”
Of course, the global credit impulse is something that we have been exclusively warning about for the past 4 months...





... but "apparently" it wasn't until Citi's report last week which explained it's all that matters:



... that suddenly everyone admits to paying attention. We'll take it.

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Re: STOCK CASUALTIES
« Reply #49 on: June 27, 2017, 09:19:39 AM »