Dow Down Another 450 Points


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SEPTEMBER 18, 2008

Worst Crisis Since ’30s, With No End Yet in Sight
By JON HILSENRATH, SERENA NG and DAMIAN PALETTA

The financial crisis that began 13 months ago has entered a new, far more serious phase.
Lingering hopes that the damage could be contained to a handful of financial institutions that made bad bets on mortgages have evaporated. The latest turmoil comes not so much from the original problem — troubled subprime mortgages — but from losses on credit-default swaps, the insurance contracts sold by American International Group Inc. and others to those seeking protection against other companies’ defaulting.
The consequences for companies and chief executives who tarry — hoping for better times in which to raise capital, sell assets or acknowledge losses — are now clear and brutal, as falling share prices and fearful lenders send troubled companies into ever-deeper holes. This weekend, such a realization led John Thain to sell the century-old Merrill Lynch & Co. to Bank of America Corp. Each episode seems to bring intervention by the government that is more extensive and expensive than the previous one, and carries greater risk of unintended consequences.
Expectations for a quick end to the crisis are fading fast. "I think it’s going to last a lot longer than perhaps we would have anticipated," Anne Mulcahy, chief executive of Xerox Corp., said Wednesday.
"This has been the worst financial crisis since the Great Depression. There is no question about it," said Mark Gertler, a New York University economist who worked with fellow academic Ben Bernanke, now the Federal Reserve chairman, to explain how financial turmoil can infect the overall economy. "But at the same time we have the policy mechanisms in place fighting it, which is something we didn’t have during the Great Depression."
In the wake of this past week’s market meltdown, WSJ’s economics editor David Wessel looks at the shakeup and sees one of two outcomes: the crisis as catharsis or a drawn-out mess.
The U.S. financial system resembles a patient in intensive care. The body is trying to fight off a disease that is spreading, and as it does so, the body convulses, settles for a time and then convulses again. Disease has overwhelmed the self-healing tendencies of markets. The doctors in charge are resorting to ever-more invasive treatment, and are now experimenting with remedies that have never before been applied.
Fed Chairman Bernanke and Treasury Secretary Henry Paulson walked into the hastily arranged meeting with congressional leaders Tuesday night to brief them on the government’s unprecedented rescue of AIG. They looked like exhausted surgeons delivering grim news to the family.
"These are huge, momentous events with cataclysmic implications," Sen. Chris Dodd, a Connecticut Democrat, said in an interview after the meeting.
Fed and Treasury officials have identified the disease. It’s called deleveraging. During the credit boom, financial institutions and American households took on too much debt. Between 2002 and 2006, household borrowing grew at an average annual rate of 11%, far outpacing overall economic growth. Borrowing by financial institutions grew by a 10% annualized rate. Now many of those borrowers can’t pay back the loans, partly because of the collapse in housing prices. They need to reduce their dependence on borrowed money, a painful and drawn-out process that can choke off credit and economic growth.
At least three things need to happen to bring the deleveraging process to an end, and they’re hard to do at once. Financial institutions and others need to fess up to their mistakes by selling or writing down the value of distressed assets they bought with borrowed money. They need to pay off debt. Finally, they need to rebuild their capital cushions, which have been eroded by losses on those distressed assets.
But many of the distressed assets are hard to value and there are few if any buyers. Deleveraging also feeds on itself in a way that can create a downward spiral: Trying to sell assets pushes down the assets’ prices, which makes them harder to sell and leads firms to try to sell more assets. That, in turn, suppresses these firms’ share prices and makes it harder for them to sell new shares to raise capital. Mr. Bernanke, as an academic, dubbed this self-feeding loop a "financial accelerator."
More on the Crisis
Mounting Fears Pummel World MarketsMorgan Stanley in Talks With Wachovia, OthersUnheard Pleas, Lost Chances for AIG Complete Coverage: Wall Street in Crisis"Many of the CEO types weren’t willing…to take these losses, and say, ‘I accept the fact that I’m selling these way below fundamental value,’ " says Anil Kashyap, a University of Chicago business professor. "The ones that had the biggest exposure, they’ve all died."
Deleveraging started with securities tied to subprime mortgages, where defaults started rising rapidly in 2006. But the deleveraging process has now spread well beyond, to commercial real estate and auto loans to the short-term commitments on which investment banks rely to fund themselves. In the first quarter, financial-sector borrowing slowed to a 5.1% growth rate, about half of the average from 2002 to 2007. Household borrowing has slowed even more, to a 3.5% pace.
Goldman Sachs Group Inc. economist Jan Hatzius estimates that in the past year, financial institutions around the world have already written down 8 billion worth of assets and raised 7 billion worth of capital.
But that doesn’t appear to be enough. Every time financial firms and investors suggest that they’ve written assets down enough and raised enough new capital, a new wave of selling triggers a reevaluation, propelling the crisis into new territory. Residential mortgage losses alone could hit 6 billion by 2012, Goldman estimates, triggering widespread retrenchment in bank lending. That could shave 1.8 percentage points a year off economic growth in 2008 and 2009 — the equivalent of 0 billion in lost good in services each year.
"This is a deleveraging like nothing we’ve ever seen before," said Robert Glauber, now a professor of Harvard’s government and law schools who came to the Washington in 1989 to help organize the savings and loan cleanup of the early 1990s. "The S&L losses to the government were small compared to this."
Hedge funds could be among the next problem areas. Many rely on borrowed money, or leverage, to amplify their returns. With banks under pressure, many hedge funds are less able to borrow this money now, pressuring returns. Meanwhile, there are growing indications that fewer investors are shifting into hedge funds while others are pulling out. Fund investors are dealing with their own problems: Many use borrowed money to invest in the funds and are finding it more difficult to borrow.
That all makes it likely that more hedge funds will shutter in the months ahead, forcing them to sell their investments, further weighing on the market.
Debt-driven financial traumas have a long history, of course, from the Great Depression to the S&L crisis to the Asian financial crisis of the late 1990s. Neither economists nor policymakers have easy solutions. Cutting interest rates and writing stimulus checks to families can help — and may have prevented or delayed a deep recession. But, at least in this instance, they don’t suffice.
In such circumstances, governments almost invariably experiment with solutions with varying degrees of success. Franklin Delano Roosevelt unleashed an alphabet soup of new agencies and a host of new regulations in the aftermath of the market crash of 1929. In the 1990s, Japan embarked on a decade of often-wasteful government spending to counter the aftereffects of a bursting bubble. President George H.W. Bush and Congress created the Resolution Trust Corp. to take and sell the assets of failed thrifts. Hong Kong’s free-market government went on a massive stock-buying spree in 1998, buying up shares of every company listed in the benchmark Hang Seng index. It ended up packaging them into an exchange traded fund and making money.
Today, Mr. Bernanke is taking out his playbook, said NYU economist Mr. Gertler, "and rewriting it as we go."
Merrill Lynch & Co.’s emergency sale to Bank of America Corp. last weekend was an example of the perniciousness and unpredictability of deleveraging. In the past year, Merrill has hired a new chief executive, written off .4 billion in assets and raised billion in equity capital.
But Merrill couldn’t keep up. The more it raised, the more it was forced to write off. When Merrill CEO John Thain attended a meeting with the New York Fed and other Wall Street executives last week, he saw that Merrill was the next most vulnerable brokerage firm. "We watched Bear and Lehman. We knew we could be next," said one Merrill executive. Fearful that its lenders would shut the firm off, he sold to Bank of America.
This crisis is complicated by innovative financial instruments that Wall Street created and distributed. They’re making it harder for officials and Wall Street executives to know where the next set of risks are hiding and also spreading the fault lines of the crisis.
The latest trouble spot is an area called credit-default swaps, which are private contracts that let firms trade bets on whether a borrower is going to default. When a default occurs, one party pays off the other. The value of the swaps rise and fall as market reassesses the risk that a company won’t be able to honor its obligations. Firms use these instruments both as insurance — to hedge their exposures to risk — and to wager on the health of other companies. There are now credit-default swaps on more than trillion in debt — up from about 4 million a decade ago.
One of the big new players in the swaps game was AIG, the world’s largest insurer and a major seller of credit-default swaps to financial institutions and companies. When the credit markets were booming, many firms bought this insurance from AIG, believing the insurance giant’s strong credit ratings and large balance sheet could protect them from bond and loan defaults. AIG, which collected generous premiums for the swaps, believed the risk of default was low on many securities it insured.
As of June 30, an AIG unit had written credit-default swaps on more than 6 billion in credit assets, including mortgage securities, corporate loans and complex structured products. Last year, when rising subprime mortgage delinquencies damaged the value of many securities AIG had insured, the firm was forced to book large write-downs on its derivative positions. That spooked investors, who reacted by dumping its shares, making it harder for AIG to raise the capital it increasingly needed.
Credit default swaps "didn’t cause the problem, but they certainly exacerbated the financial crisis," says Leslie Rahl, president of Capital Market Risk Advisors, a consulting firm in New York. The sheer volumes of outstanding CDS contracts — and the fact that they trade directly between institutions, without centralized clearing — intertwined the fates of many large banks and brokerages.
Few financial crises have been sorted out in modern times without massive government intervention. Increasingly, officials are coming to the conclusion that even more might be needed. A big problem: The Fed can and has provided short-term money to sound, but struggling, institutions that are out of favor. It can, and has, reduced the interest rates it influences to attempt to reduce borrowing costs through the economy and encourage investment and spending.
But it is ill-equipped to provide the capital that financial institutions now desperately need to shore up their finances and expand lending.
In normal times, capital-starved companies usually can raise capital on their own. In the current crisis, a number of big Wall Street firms, including Citigroup, have turned to sovereign wealth funds, the government-controlled pools of money.
But both on Wall Street and in Washington, there is increasing expectation that U.S. taxpayers will either take the bad assets off the hands of financial institutions so they can raise capital, or put taxpayer capital into the companies, as the Treasury has agreed to do with mortgage giants Fannie Mae and Freddie Mac.
One proposal was raised by Barney Frank, the Massachusetts Democrat who chairs the House Financial Services Committee. Rep. Frank advocated creating an analog to the Resolution Trust Corp., which took assets from failed banks and thrifts and found buyers over several years.
"When you have a big loss in the marketplace, there are only three people that can take the loss — the bondholders, the shareholders and the government," said William Seidman, who led the RTC from 1989 to 1991. "That’s the dance we’re seeing right now. Are we going to shove this loss into the hands of the taxpayers?"
The RTC seemed controversial and ambitious at the time. Any analog today would be even more complex. The RTC dispensed mostly of commercial real estate. Today’s troubled assets are complex debt securities — many of which include pieces of other instruments, which in turn include pieces of yet others, many steps removed from the actual mortgages or consumer loans on which they’re based. Unraveling these strands will be tedious and getting at the underlying collateral, difficult.
In the early stages of this crisis, regulators saw that their rules didn’t fit the rapidly changing financial system they were asked to oversee. Investment banks, at the core of the crisis, weren’t as closely monitored by the Securities and Exchange Commission as commercial banks were by their regulators.
The government has a system to close failed banks, created after the Great Depression in part to avoid sudden runs by depositors. Now, runs happen in spheres regulators barely understand, such as the repurchase agreement, or repo, market, in which investment banks fund their day-to-day operations. And regulators have no process for handling the failure of an investment bank like Lehman. Insurers like AIG aren’t even federally regulated.
Regulators have all but promised that more banks will fail in the coming months. The Federal Deposit Insurance Corp. is drawing up a plan to raise the premiums it charges banks so that it can rebuild the fund it uses to back deposits. Examiners are tightening their leash on banks across the country.
One pleasant mystery is why the financial crisis hasn’t hit the economy harder — at least so far. "This financial crisis hasn’t yet translated into fewer…companies starting up, less research and development, less marketing," Ivan Seidenberg, chief executive of Verizon Communications, said Wednesday. "We haven’t seen that yet. I’m sure every company is keeping their eyes on it."
At 6.1%, the unemployment rate remains well below the peak of 7.8% in 1992, amid the S&L crisis.
In part, that’s because government has reacted aggressively. The Fed’s classic mistake that led to the Great Depression was that it tightened monetary policy when it should have eased. Mr. Bernanke didn’t repeat that error. And Congress moved more swiftly to approve fiscal stimulus than most Washington veterans thought possible.
In part, the broader economy has held mostly steady because exports have been so strong at just the right moment, a reminder the global economy’s importance to the U.S. And in part, it’s because the U.S. economy is demonstrating impressive resilience, as information technology allows executives to react more quickly to emerging problems and — to the discomfort of workers — companies are quicker to adjust wages, hiring and work hours when the economy softens.
But the risk remains that Wall Street’s woes will spread to Main Street, as credit tightens for consumers and business. Already, U.S. auto makers have been forced to tighten the terms on their leasing programs, or abandon writing leases themselves altogether, because of problems in their finance units. Goldman Sachs economists’ optimistic scenario is a couple years of mild recession or painfully slow economy growth.
—Aaron Lucchetti, Mark Whitehouse, Gregory Zuckerman and Sudeep Reddy contributed to this article.Write to Jon Hilsenrath at jon.hilsenrath@wsj.com, Serena Ng at serena.ng@wsj.com and Damian Paletta at damian.paletta@wsj.com

Thai gold clerks in a market in downtown Chiang Mai


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Thai people buy and sell gold as a local commodity. In many ways, they tend to trust a hard asset like gold rather than using banks. DSCN2456-1_DCE

Investing in the stocks of companies that produce commodities has always out performed an investment in the commodity itself. For example, an investment in gold mining companies that are growing their net worth has always out performed an investment in gold bullion itself. Discover how net worth growth has always allowed companies to produce superior investment returns far out pacing all other types of investments.

Alternative investment involves investment in assets other than the traditional products of stocks, bonds or cash. These assets include the likes of art, antiques, wine, coins or rare stamps – in other words, rare items. Financial assets like commodities, private equity, hedge funds and financial derivatives are also accommodated in alternative investment. Due to the complexities in their nature and the regulations and the illiquidity involved, alternative investment assets are usually held by institutional investors or accredited individuals.

A thorough investment analysis is required before buying and investing in alternative financial resources. They also involve a high minimum investment and fee structures compared to mutual funds. Traditional investment involves risk. We have seen how in recent times the world of finance was hit as bankruptcy triggered panic across the globe. But even in troubled waters, you don’t need to be bearish if you are the proud owner of a few bottles of Bordeaux or a Penny Black or may be a series of Andy Warhol prints as you are supposed to get their money back virtually.

Why do people go for alternative financial investment?

A probable reason why people invest in alternative resources is to diversify and reduce the overall investment risk. Portfolio diversification is suggested to potential investors to minimize the risk. And this can be achieved through alternative investment.

Advantages to investing alternatively:

1. Alternative investment involves low correlation with traditional financial investments like stocks and bonds. As a result several large institutional funds like the pension and private endowments have already begun allocating a small proportion, less than 10%, of their portfolios to alternative investments like hedge funds.

2. It is comparatively less liquid in nature.

Disadvantages to investing alternatively:

1. Lack of published verifiable performance data and minimum opportunity to advertise to potential investors.

2. Determining the current market value of assets is often difficult.

3. Cost of purchase and sales is relatively high.

The most common types of alternative investment include:

• Hedge funds as alternative financial investments include a wide range of investment assets like stocks and commodities, which principally aim at offsetting the potential losses in the markets.

• Future funds as alternative investments are standardized contracts of sale and purchase of commodity at a predetermined price on a specific date. Futures are used to trade currencies and commodities like petroleum and agricultural products.

• Real estate can also serve as an alternative investment option, which typically involves buying and selling of immovable properties like land and premises. It yields rental income as well as capital appreciation.

• Though not always viewed as such, art is certainly an alternative investment. This investment option gained some new traction after the 2008 market downturn and recession period.

• Investment in vintage items, such as fine wine, has proved profitable with consistent high-yield returns, even in the months of 2008 credit crunch.

• The precious metal gold is used as a defensive alternative financial investment, which tends to grow in popularity during periods of prolonged economic upheavals.

In this readily evolving economic climate, as investors are striving to locate the best investment niche, these alternative financial investment options are gaining greater and greater appreciation due to their low-risk and high-yield nature.

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Clean energy at work for earthday!


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Happy Earthday, enjoy the view from Freiburg, Germany!
The Solar Settlement in Freiburg –

The Solar Settlement generates 420,000 kWh of solar energy from a total photovoltaic output of about 445 kW peak per year. If one calculates the energy savings from the optimal efficiency, here annually 200,000 liters of oil and 500 tons of CO2 are saved. For the first time worldwide, even until today, PlusEnergy was implemented as a community in Freiburg – receiving heavy worldwide response and exciting awards.

For the undertaking, financing and marketing of this PlusEnergy pilot-project a building development company was founded. A portion of the marketing was completed through four ‚Freiburg Solar Funds,‘ corporate real estate funds and simultaneously an ethical-ecological financial investment.

The Solar Settlement in Freiburg – the Sun Ship in the foreground

▲ to top ► www.plusenergiehaus.de

www.rolfdisch.de/index.php?p=home&pid=78&L=1&…

Voiture à hydrogène BMW de démonstration (Clean Energy) devant le palais de la découverte (Paris)


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La BMW Hydrogen 7, est la première voiture de série fonctionnant à l’hydrogène. La combustion de l’hydrogène ne rejette que de la vapeur d’eau dans l’atmosphère. C’est de l’énergie totalement propre.

Le véhicule est en démonstration devant le Palais de la Découverte à Paris, à l’occasion de l’ouverture d’une salle consacrée à l’hydrogène et à ses applications.

www.palais-decouverte.fr/index.php?id=accueil2

Commodities Investing, With Less of the Risk
Commodity funds offer a way to track inflation and gain from growth in emerging markets, while providing diversity and reducing risk.
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Investors concerned about inflation should consider commodities
As the economy returns to growth mode and inflation begins to pick up, investors should consider investing in hard assets that will maintain their value over time, a panel of commodities experts said on Wednesday.
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In this Illustration we have my concept for a floating turbine wind farm that would be deployed far out to sea, over the horizon as to not effect the skyline or the fishing industry. Conventional sea based wind farms are expensive to build and the consumers see this reflected in their utility bills. Conventional wind turbine projects cause controversy with the resident that live near them. My wind to hydrogen concept will turn sea water into liquid hydrogen "Electrolysis" that can be used to heat homes, power fuel cells for hybrid vehicles, Electric utility corporations will be using the same infrastructure they use now to store and transport this fuel, and use the same natural gas burning facilities they currently have in place with little or no modifications. Liquid hydrogen gas burning facilities will turn sea water into clean fresh "Desalinated Water" and generate electricity at the same time. Wind and Hydrogen will not run out or change the worlds climate like burning fossil fuels. We can be Clean, Green, and live the kind of lifestyle we are accustom to living today.

The major advantages of this concept over "conventional" wind to electricity projects, is that Hydrogen can be stored and shipped all over the world, not just to the folks that live near the sea. This concept makes 5 products: Hydrogen, Oxygen, Drinking Water, Sea Salt and Electricity, from the same energy cost of conventional wind to electricity turbines. Conventional wind turbines makes electricity that is transmitted over a short distance, and this electricity can not be stored, it has to be used as it is made. Conventional wind farms are expensive, permanent, inshore platforms that many people think are ugly and protest to stop projects. This concept will be relocated or duplicated anywhere wind and water are found. No need to to purchase land rights and "Utility Rate Payers", ( This is all of us ) will not see a change in cost because the electric companies will be buying the fuel just as they do now, but rather than natural gas, it will be Clean Burning Liquid Hydrogen!

FACT: The ocean covers 71% of the Earth’s surface and contains 97 percent of the planet’s water. The highest average wind speeds accessible to wind energy development can only be found only far out to sea.

My concept could be mass-produced on land and assembled in a few hours at sea. At a fraction of the cost of Conventional sea based wind farms that require specialized equipment and personnel to constructed them and this comes at cost. My concept will Eliminate the need for inverters to match the currant to the power grid and it would eliminate the need miles of transmission lines. At the same time it will be creating thousands of "New Jobs" where ever this technology is duplicated. New jobs, not for a select few, but rather jobs in many trades and professions the world over.

The National Renewable Energy Laboratory (NREL), found that a kilogram of hydrogen (roughly equivalent to a gallon of gasoline) could be produced by wind powered electrolysis for between .55 in the near term and .27 in the long term. Using conventional wind turbines.
www.nrel.gov/wind/nwtc.html

The total solar energy absorbed by Earth’s atmosphere, oceans and land masses is approximately 3,850,000 exajoules (EJ) per year. This is more energy in one hour than the Earths population uses in one year.

This is not science fiction, the technology is here today!

"Not just whining about it, I have solutions!
My goal here and in life, is to be part of the solution, not a spectator!".
K.R.Moore 2010.

Timeline of hydrogen technologies
en.wikipedia.org/wiki/Timeline_of_hydrogen_technologies

Please feel free to share this with anyone you may feel that would have an interest
Thank you !
Kevin

The floating platform is based on the same concept as the "FLIP" floating instrument platform, launched in 1962 by Scripps Institution of Oceanography, University of California, San Diego and is a very stable platform in all weather.
en.wikipedia.org/wiki/RP_FLIP

www.ceoe.udel.edu/WindPower/ResourceMap/index-wind.html

IndexIQ Announces January 2011 Performance of Its IQ Hedge Family of Investable Benchmark Hedge Fund Replication Indexes
RYE BROOK, N.Y.–(BUSINESS WIRE)–IndexIQ, a leading developer of index-based alternative investment solutions, today announced the performance of its proprietary family of hedge fund replication and alternative beta indexes. Designed as investable benchmarks that replicate the performance characteristics of sophisticated hedge fund strategies, the IQ Hedge™ benchmark indexes were originally …
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Currensee Introduces World Currency Markets as an Alternative to Stock Market Investing
CEO Presents Trade Leaders Investment Program at The International Traders Expo
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One High-Yielding Commodity Play
Skyrocketing oil prices helped to push the Dow Jones UBS Commodity Index higher on Monday as the dai
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Would You Invest in a Ferrari Fund?
In 2009, investment funds based on collectibles–art, wine, mansions–had a miserable year. Yet somehow, magically, collectibles funds are back. With auction prices setting records again, fund managers are cashing in by creating all manner of new funds. Should you dive back in?
Read more on Wall Street Journal Blogs

Trends Push New Ventures Into Investment Spotlight NASDAQ has announced new additions to its Clean Edge Green Energy Index, with the following five companies added to the Index: Broadwind Energy, Inc. (Nasdaq:BWEN), Comverge, Inc. (Nasdaq:COMV), Capstone Turbine Corporation (Nasdaq:CPST), ESCO Technologies Inc. (NYSE:ESE), and National Semiconductor Corporation (NYSE:NSM). Of the five new additions to the index, two fall under the ten dollar per share price level—Broadwind Energy and Capstone Turbine. Distributed by Tubemogul.

Commodities Now September 2010


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Commodities Now is the global magazine for the traded commodity – covering the majot traded commodity sectors – and the official publication for the Commodity Business Awards. Since 1997 we have been developing our expertise and market connections to provide commodity market professionals and the wider investment community with dedicated research and intelligence on the commodity complex.
As well as the published magazine, our online presence – commodities–now.com – provides updated news, key press releases, data, charts, research and reports dedicated to these markets.

investment lights 2


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spending a perfekt day with big mate est0 to "ehem. bundesgästehaus petersberg". for an investment fund conference with the topic "commodities and energy funds", it was a very nice combination of business and friendship. made some pics, but est0 made muuuuch mooooore thank you for this fine trip!