You are right. People here generally do not panic.Originally Posted by Unregistered
That's why we still don't understand why some keep saying there is panic selling.
There isn't any panic selling and the price is still very firm.
You are right. People here generally do not panic.
That's why we still don't understand why some keep saying there is panic selling.
There isn't any panic selling and the price is still very firm.
Quote:
Originally Posted by Unregistered
It is true that construction costs have gone up, and that new units have to costs $200-300 psf more. So those who have bought their units in 2006 can charge correspondingly more.
But equally, it would be stupid to go into the market now to take over the inflated costs from someone and run the risk of a property price slide. Even if the property prices don't slide, one may not gain much at this stage.
There would be more opportunities in stocks.
If you think stock has more opportunity to move up now, after stock moves up property will follow closely to up more.
Stock has almost hit bottom, next few weeks, you will see stock flying like eagle. Similarly, next few months, you will see spore property shot up like rocket.
Also, oil & gold going to fall badly, that will help global economy to be stabilised & growth strongly again.
Time has come, you decide, miss the boat again or ride the transformation train.
Agree - on the other hand there is no panic buying either. Yet that HK copycat keeps inciting fear of a price hike.
price do hike in Feb from latest report today,
For units sold in the Rest of Central Region (RCR), the lowest median price increased 14.2 per cent from $765 psf in January to $874 psf in February.
Wow! Prices still going up!
Yes!
Yes, it is good indeed.
Prices went up by 14.2%.
Keep going. Don't stop.
I think I'm a bit of panic or nervous already. I hv to buy now. The price is continue to go up for sure.
You are right. People here generally do not panic.
That's why we still don't understand why some keep saying there is panic selling.
There isn't any panic selling and the price is still very firm.The Hong Kong copycat is the antidote to the US copycat.
Anyway. A lot of sour grapes here say that the Singapore Government will rein in property prices.
Well, let's look at facts and figures.
Residential Price Index Comparison Between Singapore and Hong Kong between 1979 and 2004.
Year...........Singapore...........Hong Kong
1979................20...................20
1989................50...................50
1996(Peak)........185.................200
1998(Crash).......120.................120
2004(Pre-Boom)..110.................100
Sources:
Singapore 1960 to 2006
http://www.redas.com/einformation/mt...vtmeasures.pdf
Hong Kong 1979 to 2004
http://business.fullerton.edu/financ...05.337_356.pdf
If you look at the property price index trends of the two economies, they're very similar and track each other very well.
Hence I think that the Hong Kong copycat is more justified than the US copycat.
The reason is very simple, both are Asian economies.
Both are Asian economies and one is trying eat the other's pie.
Wall Street Jumps as Goldman Sachs and Lehman Brothers Beat Forecasts
Caroline Valetkevitch
Reuters
New York, New York, U.S.
10:25am U.S. ET
Traders work on the floor of the New York Stock Exchange March 17, 2008. - Photo: Brendan McDermid, Reuters
Stocks jumped on Tuesday as stronger-than-expected earnings from Goldman Sachs Group Inc's and Lehman Brothers Holdings Inc provided some reassurance about the ailing financial sector.
All three major indexes were up close to 2%.
Investors also looked forward to what is expected to be a steep interest rate cut from the Federal Reserve's policy-setting committee around 2:15 pm U.S. Eastern Time on Tuesday.
Goldman and Lehman shares jumped in early trading, leading a rebound in financial stocks, which tumbled on Monday after JPMorgan Chase & Co's deal to buy struggling brokerage Bear Stearns at a rock-bottom price. A broker dealer index surged 5.9%.
"Today's a day for good news, with Goldman and Lehman results beating estimates. Right now the focus is that these earnings weren't as bad as they could have been," said Giri Cherukuri, head trader at OakBrook Investments LLC in Lisle, Illinois.
The Dow Jones industrial average rose 231.78 points, or 1.94%, to 12,204.03. The Standard & Poor's 500 Index gained 28.18 points, or 2.21%, to 1,304.78. The Nasdaq Composite Index jumped 44.25 points, or 2.03%, to 2,221.26.
Shares of Fannie Mae and Freddie Mac rose on expectations their regulator will ease restrictions on the government-chartered companies and help them increase spending in the U.S. housing market. Fannie was up 11.8% at $24.86, while Freddie Mac was up 12.3% at $23.15.
Shares of Goldman were up 8.5% at $163.70 while Lehman was up 17% at $37.12 after reporting results that beat Wall Street estimates.
On the Nasdaq, Yahoo Inc shares rose 4.7% to $27.07 after the Internet search company affirmed its outlook for the first quarter and full year.
Interest rate futures show investors are fully pricing in a one percentage-point cut in U.S. short-term rates, which would take the benchmark fed funds target rate down to 2%.
Over the weekend, the Fed made an emergency quarter-point cut to its discount rate to 3.25% and expanded lending to a wider range of big financial firms, in the first such move since the Great Depression of nearly 80 years ago.
Data before the opening on U.S. housing starts was stronger than expected, adding further support to the market.
Any correction for exchange rates? Isn't the HK pegged to the USD which has fallen somewhat over time?
Foreign companies are flocking to our little island as they see great potential in the re-making of Singapore. They foresee prices increase in office as well as properties. However, our citizens seems to think otherwise. They even took a step further by hoping for a crash in prices.
What a irony....
Not so bad lah!
Wall Street Jumps as Goldman Sachs and Lehman Brothers Beat Forecasts
Caroline Valetkevitch
Reuters
New York, New York, U.S.
10:25am U.S. ET
Traders work on the floor of the New York Stock Exchange March 17, 2008. - Photo: Brendan McDermid, Reuters
Stocks jumped on Tuesday as stronger-than-expected earnings from Goldman Sachs Group Inc's and Lehman Brothers Holdings Inc provided some reassurance about the ailing financial sector.
All three major indexes were up close to 2%.
Investors also looked forward to what is expected to be a steep interest rate cut from the Federal Reserve's policy-setting committee around 2:15 pm U.S. Eastern Time on Tuesday.
Goldman and Lehman shares jumped in early trading, leading a rebound in financial stocks, which tumbled on Monday after JPMorgan Chase & Co's deal to buy struggling brokerage Bear Stearns at a rock-bottom price. A broker dealer index surged 5.9%.
"Today's a day for good news, with Goldman and Lehman results beating estimates. Right now the focus is that these earnings weren't as bad as they could have been," said Giri Cherukuri, head trader at OakBrook Investments LLC in Lisle, Illinois.
The Dow Jones industrial average rose 231.78 points, or 1.94%, to 12,204.03. The Standard & Poor's 500 Index gained 28.18 points, or 2.21%, to 1,304.78. The Nasdaq Composite Index jumped 44.25 points, or 2.03%, to 2,221.26.
Shares of Fannie Mae and Freddie Mac rose on expectations their regulator will ease restrictions on the government-chartered companies and help them increase spending in the U.S. housing market. Fannie was up 11.8% at $24.86, while Freddie Mac was up 12.3% at $23.15.
Shares of Goldman were up 8.5% at $163.70 while Lehman was up 17% at $37.12 after reporting results that beat Wall Street estimates.
On the Nasdaq, Yahoo Inc shares rose 4.7% to $27.07 after the Internet search company affirmed its outlook for the first quarter and full year.
Interest rate futures show investors are fully pricing in a one percentage-point cut in U.S. short-term rates, which would take the benchmark fed funds target rate down to 2%.
Over the weekend, the Fed made an emergency quarter-point cut to its discount rate to 3.25% and expanded lending to a wider range of big financial firms, in the first such move since the Great Depression of nearly 80 years ago.
Data before the opening on U.S. housing starts was stronger than expected, adding further support to the market.
Brother - Next will be different story - DOW 300 points down
Wall Street, global stocks surge as Fed delivers rate cut
Agence France-Presse
New York, New York, U.S.
Tuesday, 18 March 2008, 5:02 PM U.S. ET
Traders work the floor of the New York Stock Exchange after the Fed board rate was announced, in New York City. Wall Street joined a potent global stock rally Tuesday as the U.S. Federal Reserve delivered a hefty rate cut aimed at easing credit turmoil and reviving growth in the world's biggest economy. - Photo: Getty Images, AFP
Wall Street joined a potent global stock rally Tuesday as the US Federal Reserve delivered a hefty rate cut aimed at easing credit turmoil and reviving growth in the world's biggest economy.
Stronger-than-expected results from investment banks Goldman Sachs and Lehman Brothers, which managed to weather the market turbulence, also contributed to an ebullient mood among traders.
US stocks vaulted higher in the wake of the Fed's action to cut key rates by 75 basis points as the Dow Jones Industrial Average rocketed 3.51% to 12,391.66.
The tech-heavy Nasdaq composite meanwhile jumped 4.19% to 2,268.26 and the broad-market Standard & Poor's 500 index soared 4.24% to 1,330.74.
The aggressive move by the Fed, which lowered its federal funds rate to 2.25%, fueled hopes that the central bank is finally getting its arms around what has seemed an intractable credit crunch that has been threatening the global economy.
Brian Bethune, economist at Global Insight, said the Fed's multi-front battle has not only cut rates but helped provided liquidity to financial firms being squeezed.
"The Fed is not only providing low-cost oxygen to the markets at a critical point in the business and credit cycle, it has also increased the flow of this oxygen quite significantly," Bethune said.
In Europe, shares rallied in anticipation of the Fed action.
The London FTSE 100 index soared 3.54% to 5,605.80. In Paris, the CAC 40 shot up 3.42% to close at 4,582.59 while in Frankfurt the Dax rose 3.41% to finish at 6,393.39.
Expectations of the cut galvanized investor spirits that had been dashed on Monday on news of the collapse and sale of US investment bank Bear Stearns.
The fate of Bear Stearns sparked fears that more big banks could succumb to a global credit crunch brought on by the sharp downturn in the US housing market.
Earnings reports from two other big Wall Street firms eased concerns however that they could become victims of the crisis. Even though earnings were hit by the subprime real estate crisis, the two still beat expectations with solid profits.
Goldman Sachs's fiscal first-quarter earnings fell 53% to 1.51 billion dollars while Lehman Brothers's fiscal first-quarter profits slumped 57% to 489 million dollars.
Analysts said it was too soon to celebrate an end to the crunch but that the Fed actions are at least helping to minimize the damage and avert a calamity.
"The Fed is rapidly using up all its bullets but there is no other choice." said Joel Naroff of Naroff Economic Advisors.
"It will probably have to use more up before the coast is clear. Ultimately, I believe the Fed will succeed in keeping us out of a steep and protracted recession and I still feel that the economy will be up and running by the end of the year."
Gregory Drahuschak at Janney Montgomery Scott said there was reason for cautious optimism.
Drahuschak said it its "too simplistic" to believe the Fed will cure all market ills but that the Fed is a powerful force.
"The old cliche that says 'don't fight the Fed' has been sage advice for decades," he said. "Unless something else comes along of the magnitude of the housing or related credit market issues, the Fed's action should be a significant factor getting the market and the economy back on track."
In other markets, the Brazilian Bovespa jumped 3.2%, Canada's S&P/TSX added 1.42% and the Mexican Bolsa increased 1.6%.
In Asia, markets also rallied after Monday's bloodletting.
Tokyo gained 1.5% as bargain hunters emerged a day after the index plunged by 3.7%. Hong Kong added 1.42%, Seoul rebounded 0.9% and Mumbai ended a marginal 0.16% higher.
Fed running out of ammunition. Inflation risks high. In a week the situation would be back to square one. No escaping the great recession which is already underway. Hope it doesn't turn into the second 'Great Depression' and pull everyone down with it. Fact that they cut 75 basis points show teh situation. Panic Panic Panic.
Be careful what you wish for.....
Re: Private fund buys remaining 53 Grange Infinite units
agree lah - in stock market they say sell in may go away
may be thats now true for march08
Doesnt matter what we wish for..what will be will be.
stock market is like that, when everyone lose confidence, sell away everything, walk out, then the market will come.
Apr is good time, May is best.
say what you want to say, let time tell.
You keep saying things and saying things, and then you say "time will tell".
Why don't you say nothing and let time tell?
medicine time.
Morgan Stanley 1Q profit tops estimates
Joe Bel Bruno
Business Writer
Associated Press
Wednesday, 19 March 2008, 4:43 PM U.S. ET
The Morgan Stanley headquarters is seen in New York 30 January 2008. - Photo: Shannon Stapleton, Reuters
Morgan Stanley posted better-than-expected quarterly earnings on Wednesday, joining those from two of its rivals and indicating that Wall Street may be getting a better grip on the credit crisis.
The nation's second-largest investment bank was able to parlay aggressive stock and bond trading into offsetting more losses linked to subprime mortgages. Morgan Stanley — like Lehman Brothers and Goldman Sachs on Tuesday — was also able to top Wall Street's reduced expectations by a wide margin.
Morgan Stanley's results came during a tumultuous week. Just a few days earlier, rival Bear Stearns Cos. sold itself at a fire-sale $2 per share price to JPMorgan Chase & Co. in order to avoid declaring bankruptcy. That sent a shockwave through Wall Street as investors wondered if other investment banks might be in the same predicament.
But the strong results from Morgan Stanley, Goldman and Lehman helped assuage fears of a wider meltdown in the financial system — at least for now.
"Fact is, like it or not, this is an inherently risky business where the returns will shift to those willing to take the most leverage," said Jack Ablin, chief investment officer of Harris Private Bank. "Expectations had us in a tailspin."
The earnings results not only helped shares of the investment banks recover from the lows they hit Monday in the aftermath of Bear's sale, but also backed claims by the companies' chief executives that they could take advantage of the market's dislocation.
John Mack, Morgan Stanley's CEO, said the investment house known for its trading prowess "effectively capitalized on market opportunities and aggressively managed our positions." The company had about $2.3 billion worth of write-downs linked to the credit and housing market crisis, but one of its best trading performances in history.
Morgan Stanley wrote down about $9.4 billion during last year's second half. Global banks and brokerages have so far claimed about $200 billion worth of write-downs since last year.
"While many of our businesses are facing challenging market conditions that we expect to continue in the months ahead, we are satisfied with how Morgan Stanley navigated the ongoing market turbulence," Mack said in a statement.
The company said it earned $1.53 billion after preferred dividends, or $1.45 per share, down 42% from $2.66 billion, or $2.17 per share, a year earlier. Revenue fell 17% to $8.3 billion from $10 billion a year earlier.
But the lower results easily topped analysts' expectations for a profit of $1.03 per share on $7.19 billion of revenue, according to Thomson Financial.
Its shares closed up 59 cents at $43.45, following a 17% gain in Tuesday's market rally.
Morgan Stanley's institutional securities business — which includes investment banking and trading — posted $6.2 billion of revenue. The results marked the division's third-best quarter ever.
Meanwhile, volatility in the bond market pushed fixed-income sales and trading revenue to their second-best showing with $2.9 billion of revenue.
Though offset by mortgage write-downs, Morgan Stanley relied on robust commodities and currency markets to drive results.
"We believe (Goldman and Morgan Stanley) have shown their ability to trade challenging markets this quarter," said Roger Freeman, an analyst with Lehman Brothers. "There is hope that the Federal Reserve's aggressiveness will begin to unclog the fixed-income markets. ... This could push the group still higher over the next few sessions."
Goldman Sachs, Lehman and Morgan Stanley said they began to test a new program this week that allows them to borrow directly from the central bank to help improve the financial market's liquidity. On Sunday the Fed gave investment banks permission to borrow from its discount window, which had previously been restricted to commercial banks.
The Fed also cut the rate at which financial institutions borrow at its "discount window" to 2.5 percent from 3.5 percent in two separate actions this week.
Though all seemed to be positive steps for Wall Street, that doesn't mean the concerns about the rest of the year have been alleviated.
The fiscal first-quarter for the three banks ended Feb. 29, before most of the market turbulence that rocked Bear Stearns last week. Investors are also still waiting for Merrill Lynch & Co. to finish its first quarter at the end of the month.
And then there's the biggest worry on investors' minds.
"We remain concerned with the deteriorating economy and its impact on the results at these firms, despite (the Fed's) aid with near-term funding," said Standard & Poor's equity analyst Matthew Albrecht.
West Coast condo plot draws whopping 12 bids
Joyce Teo
The Straits Times
Thursday, 20 March 2008
Competitionwas brisk for a 99-year leasehold condominium site in West Coast Crescent, with 12 firms defying signs of a property slowdown to lodge bids.
The bidders included major and mid-sized developers and contractors, with a Hong Kong-linked firm emerging with the highest tender - but only just. Billion Rise, which is linked to the Cheung Kong group, bid $110.44 million for the site - $305 psf of gross floor area - to pip its nearest rival by 1 per cent.
Tian Hock Properties, which has Far East Organization chief executive Philip Ng as a shareholder, tendered $108.9 million or $301 psf. MCL Land was next with $103.5 million or $286 psf.
The response was strong, in contrast to the weak property market sentiment. One sign of that came on Tuesday when the Government decided not to award a leasehold landed plot in Westwood Avenue in Jurong West as the bids were too low.
Consultants pointed to differences between the two sites. They said the West Coast Crescent site's prime location had sparked the keen interest.
Graphics: Tang Wee Cheow, ST.
Source: LTA
It suits a mass market condo project, which would be able to better weather any sector weakness, said Knight Frank director Nicholas Mak.
The Jurong West landed plot was in a less favourable spot and would have accommodated 99-year leasehold landed homes, which typically do not sell as well, he added.
The West Coast Crescent site can be built up to about 36 storeys. Some high-floor units would enjoy good views of the ocean and West Coast Park as surrounding buildings are mostly low- to medium-rise, he said.
This tender also reflects the current market situation as some bids came in relatively low. Industry sources say a few developers were trying their luck with opportunistic bids.
The lowest bid of $50 million, from Teambuild Construction's Scantech Development, works out to just $138 psf.
Other bidders included Sim Lian Land ($236 psf), Hoi Hup Realty ($235 psf), Frasers Centrepoint ($210 psf) and Allgreen Properties ($186 psf). City Developments' Sunny Vista Developments and TID also put in a bid of $180 psf.
Consultants said the top bid of $305 psf will translate into an estimated break-even price of $680 psf to $720 psf for new condos. Units could be sold at between $750 and $800 psf.
Units at nearby Blue Horizon were sold at about $750 psf in the resale market in January and February, while sub-sales of units in Varsity Park and Clementi Woods were done at $680 psf to $750 psf, according to CBRE Research.
Bottoming process begins with Bear Sterns, not bear market
Jennifer Ablan
Reuters
New York, New York, U.S.
Wednesday, 19 March 2008, 9:20 pm U.S. EDT
The Bear Stearns building in New York
Less than a week ago, it seemed like the sky was falling on Wall Street when the spectacular unravelling of investment bank Bear Stearns sent financial markets, in the United States and elsewhere, into panic mode.
Then the Federal Reserve swooped in. Its liquidity action and its brokering of a deal for JPMorgan Chase & Co. to take over Bear Stearns made investors less fearful about the probable crippling of the American banking system that could have occurred.
Bear Stearns' fall to the brink of bankruptcy and the aggressive moves by US policy makers have led many investors to believe that these events mark the beginning of a bottoming process.
For everyone who still thinks that stocks won't hit a bottom until the Standard & Poor's 500 falls into the bear market's grasp, never mind.
'We are in a bottoming process, but it will really be a 'process' because healing of this credit crisis does take time,' said Dan Fuss, vice chairman of Loomis Sayles, an investment company that oversees more than US$100 billion (S$139 billion) in fixed-income securities.
What gives Mr Fuss and other major investors reason to believe that a bottom is in the making is that in nearly every previous one, there typically has been a huge failure of an institution that has led to extreme policy responses.
Think Enron and WorldCom, Long-Term Capital Management and Orange County.
'It usually took a big entity to fall over for aggressive, creative regulatory policy to develop,' said Bob Doll, vice chairman and global chief investment officer of equities at BlackRock, which manages more than US$1.1 trillion in assets.
'That's what we saw with Bear Stearns collapsing and the Fed's extraordinary response to it. And that's why confidence is improving,' he added.
An avalanche of fear
Bear Stearns, which had been heavily exposed to the faltering mortgage market, faced a classic 'run on the bank' as the firm burned through cash and lost access to funding when clients furiously yanked assets and unwound trades.
To make matters worse, fears abounded that Lehman Brothers, the fourth-largest US investment bank, could suffer a similar fate as Bear, the fifth-largest.
'The Fed was trying to blunt what could have been a snowballing effect of a lack of faith in the financial system,' said Keith Wirtz, president and chief investment officer at Fifth Third Asset Management, which manages US$22.5 billion.
'The Fed saw that they had to do something absolute to stifle what could have been a developing crisis of a full-fledged lack of faith in the investment banking sector, which could have eventually crept into the commercial money banks as well,' Mr Wirtz said.
Before Monday, Lehman Brothers, Merrill Lynch, and even venerable Goldman Sachs watched their stocks get 'killed' last week, he added.
In fact, from the end of June 2007, which was the start of the credit turmoil, to March 14, 2008, before the Fed stepped in, Goldman's stock was down 28%, Lehman lost 48%, and Merrill also dropped 48 per cent.
Moreover, the Amex Securities Broker-Dealer Index was down 48%.
Pushing open the discount window
On Tuesday, the Fed cut interest rates by three-quarters of a percentage point, the sixth time it has slashed its fed funds rate target for overnight bank loans, to 2.25%.
It wasn't, however, what prevented a near meltdown in stock markets.
The Fed dusted off a Depression-era rule to let securities firms borrow directly from the Fed through its 'discount window' - and that helped restore investors' confidence. That decision was announced along with the Fed's promise to underwrite JPMorgan's takeover of Bear for the 'fire sale' price of US$2 a share. It helped turn the mood around on Wall Street.
From now on, any bank in a liquidity jam will be able to go directly to the Fed's discount window and trade in its hard-to-sell assets, such as mortgage bonds, as collateral for highly liquid government bonds or cash, which it can in turn use to fund its short-term liabilities and keep trading.
'The big news this week was not the Fed's 75 basis points on Tuesday,' Mr Doll said. 'It was what they did with opening the discount window .... that's a huge change.' This week, the Fed cut the discount rate twice - in an emergency move on Sunday night, when it unveiled JPMorgan's deal to buy Bear Stearns at the almost unthinkable price of US$2 a share and again on Tuesday at its regular meeting.
On Wednesday, the federal government came up with another tonic for troubled times. The regulator of Fannie Mae and Freddie Mac, the two biggest US home financing arrangement, relaxed their capital rules and gave them permission to pump US$200 billion more into the struggling US mortgage market.
Goldman shares are trading at US$166.49 per share, up from Friday's close of US$156.86, while Lehman is trading at US$42.23 per share, up from its Friday close of US$39.26.
As for Merrill, its shares closed at US$41.45, down from US$43.51 on Friday.
Letting some air out of oil and gold
Investors also believe the bottom has arrived for technical reasons. The Dow Jones industrial average and the S&P 500's have seen valuations that are much more subdued than when the markets had capitulated in the past.
'Everyone has been looking for the capitulation in the stock market, but they are looking at the wrong place,' Mr Wirtz said.
'Last week was very much a capitulation moment' in the financial sector, the root of the liquidity crisis, he added.
That's not all, folks.
Soon after the last bubble burst in technology and telecommunications stocks in March 2000, investors diversified away from US equities.
'They've been buying foreign stocks and hard assets like commodities and real estate,' Mr Wirtz added.
Now everything from oil to gold to wheat are suffering from what looks like the beginning of a huge downdraft in those leveraged assets. US crude for April delivery dropped nearly US$5 to US$104.48 a barrel, while gold tumbled 6% to a three-week low, under the US$1000 mark to US$940.40 an ounce.
'That's where all the leverage is coming out now, commodities,' Mr Fuss said. 'I think stocks and bonds have gone through their worst beating.' 'Down the road, last week will be looked at as an important moment in time for equity investors,' added Mr Wirtz of Fifth Third, who said the bottom is here.
Fed Juggles Inflation, Sour Economy
Thursday March 20, 3:44 am ET
By Jeannine Aversa, AP Economics Writer
Divisions in Federal Reserve Make Chairman Ben Bernanke's Juggling Act Harder
WASHINGTON (AP) -- Ben Bernanke's juggling act has gotten harder. The Federal Reserve chairman has been taking extraordinary steps to prevent credit, financial and housing problems from driving the country into a deep recession. At the same time, he faces the danger that the very tonic to brace the sickly economy could bring about another dangerous ailment-- inflation.
And, rare divisions have surfaced among Bernanke and his central bank colleagues about just how aggressive the Fed should be in lowering interest rates to treat the wobbly economy.
Two of the Fed's members -- Charles Plosser, president of the Federal Reserve Bank of Philadelphia, and Richard Fisher, president of the Federal Reserve Bank of Dallas -- on Tuesday opposed cutting a key interest rate by a hefty three-quarters point. Instead, they favored a smaller reduction. It was a crack in the mostly unified front the Fed often shows the public. The last time there was a double dissent was in fall 2002 under chairman Alan Greenspan.
The reasons for the Plosser's and Fisher's dissenting votes weren't laid out in the statement explaining the Fed's action, although both men have a reputation for being especially vigilant about fighting inflation.
"Containing inflation is the purpose of the ship I crew for, and if a temporary economic slowdown is what we must endure while we achieve that purpose, then it is, in my opinion, a burden we must bear, however politically inconvenient," Fisher said in a speech earlier this month.
In fact, the Fed as a whole expressed concern on Tuesday about higher inflation -- something it didn't mention in the statement issued after its previous meeting, which concluded on Jan. 30.
"Inflation has been elevated, and some indicators of inflation expectations have risen," the Fed said Tuesday. Although policymakers were hopeful that prices would moderate in the coming quarters, they acknowledged that "uncertainty about the inflation outlook has increased."
Rising inflation, fueled in large measure by skyrocketing energy prices, complicates Bernanke's job of trying to get the economy back on firm footing.
The Fed started cutting rates last September and turned much more forceful this year. Those lower rates can aggravate inflation at a time when people and businesses already are smarting from high energy and food prices. The Fed's rate cuts also have weakened the dollar. That has raised the cost of imported goods coming into the U.S. and could lead American companies to raise their prices as foreign-made goods become more expensive.
If treating inflation were the priority, the Fed would take the opposite action and raise rates.
Fears have grown that the country could be headed for "stagflation," a toxic mix of stagnant economic activity and rising inflation not seen in three decades. "I don't anticipate stagflation," Bernanke told Congress last month. "I don't think we're anywhere near the situation that prevailed in the 1970s."
Oil prices, which have galloped to record highs in recent weeks, have eased but still top $104 a barrel. Gasoline prices have marched upward and are expected to hit $4 a gallon nationwide this spring.
"I think the threat of inflation is as high as it's been since the 1970s. Bernanke and the rest of them have a challenging task to navigate the economy away from recession and at the same time avoid inflation taking root," said Sean Snaith, economics professor at the University of Central Florida. "If Bernanke can do this, he'll look like a hero."
Snaith and other economists said that Tuesday's double dissents and the Fed's talk about inflation concerns could make it more difficult for Bernanke to build consensus around the Fed's next move on interest rates. "One more dissent would be an open revolt," said Ken Mayland, economist at ClearView Economics.
The Fed's next scheduled meeting on interest rates is April 29-30. Some believe the Fed might be more inclined to order a smaller rate cut at that time, depending on economic and financial conditions.
"Bernanke will have a tougher juggling act to do in the future," Mayland said. "It is a fine line that they are walking here between two troubles."
In slashing interest rates, the Fed has been squarely focused on rescuing the economy. At the same time, Bernanke has repeatedly said the Fed must be on guard for any inflation danger signs.
Why? Because once inflation gets a grip on the economy, it can be hard to break. A rapid rise in price erodes the purchasing power of people. It squeezes companies' profits, too, and can make them more reluctant to hire and expand. It eats into returns on investments. As people and companies hunker down, that further restrains overall economic growth.
Former Fed Chairman Paul Volcker ratcheted rates up to the highest levels since the Civil War to break inflation's hold. That jolt, however, plunged the country into the painful 1981-82 recession.
"There is increasing concern among some on the (Fed) that freewheeling rate cuts are creating a significant problem with the Fed's goal of anchoring inflation expectations," said Scott Anderson, senior economist at Wells Fargo Economics. If people, companies and investors believe inflation will pick up, he said, they will act in ways that can make inflation worse.
"It is important that inflation expectations remain stable. If those expectations become unhinged, they could rapidly fuel inflation," Plosser said in February. "Moreover, as we learned from the experience of the 1970s, once the public loses confidence in the Fed's commitment to price stability, it is very costly to the economy for the Fed to regain that confidence."
U.S. Sneezes, China's Just Fine
Economists say a global slowdown will largely spare a mainland economy still based on domestic consumption and cushioned by vast cash reserves
Frederik Balfour
Asia Correspondent
Business Week
Hong Kong SAR
Tuesday, 18 March 2008, 7:28 PM
The Year of the Rat has certainly gotten off to a less than auspicious start for China. The country got buffeted by the worst winter storms in half a decade, causing food prices to soar and pushing inflation to an alarming 8.7% in February. The Shanghai Composite Index is off 30% since the beginning of 2008, and property prices have started falling in several major cities. China's heavy economic involvement with the internationally unpopular regime in Sudan, and most recently the bloodshed in Tibet threaten to spoil the country's Olympic parade.
Now comes the U.S. bear market and housing collapse. If you heap this looming U.S. recession onto the litany of China's other woes does it spell a recipe for a total China meltdown? Don't bet on it. In fact, analysts say that the question of decoupling—the notion that China is contagion free from a global slowdown—is actually a misnomer, since "historically, the Chinese economy has never been coupled," says Jonathan Anderson, Asian chief economist at UBS.
So questions of semantics aside, what's really going on? The answer is that while China is widely viewed as an export powerhouse, selling everything from garden gnomes to laptop computers overseas, most of its economic growth is still fueled by domestic investment and consumption, neither of which has shown much sign of slowdown so far. Anderson reckons that China's gross domestic product growth will slow to 10% this year, down from 11.4% in 2007, hardly the kind of slump to cause serious concern for Beijing.
A More Open Economy
Still, the Chinese economy is far more open than it was during the last U.S. recession of 2001. Back then, exports accounted for just 8.4% of gross domestic product and today it's about 40%. The European Union is China's biggest export market, with 20%, just ahead of the U.S. with 19%, while Japan and the rest of Asia take 25%, says Michael Spencer, Asia chief economist at Deutsche Bank. He's estimating growth will slow to 9.5% this year, but only half of that decline will be due to a slower increase in the growth of China's trade surplus.
The reason the linkages from the trade sector to the rest of the economy aren't greater stems from the fact that domestic content only accounts for 25% of exports. Another is that although the export sector accounts for 80 million jobs, the sector most likely to get badly hurt is light manufacturing, which accounts for about 6.5% of total employment in China, while the export sector as a whole accounts for just 5% of total investment, says Anderson.
Bear in mind too that China continues to amass huge amounts of foreign exchange. In January alone reserves jumped $61.6 billion, bringing the country's cash hoard to $1.589 trillion. That's quite a pile available to the government should the need arise to prime the pump of an ailing economy. But that is highly unlikely, says JPMorgan China economist Frank Gong. "Investment growth, loan growth, consumption growth, and China growth are strong," he says.
The Chinese proclivity to sock away huge amounts of savings provides a further cushion to a downturn. That means the disturbingly high degree of leverage that got U.S. hedge funds and households into the subprime mess is a problem quite unknown in China where the minimum mortgage down payment is 30%. "Residential mortgages are probably the best asset in the banking sector," says Ryan Tsang, senior director of banking research at Standard & Poors.
Fannie and Freddie bounce back
Investors pile into the stocks after the government frees the companies to load up on cheap triple-A mortgage bonds.
Colin Barr
Senior writer
Fortune
New York, New York, U.S.
Thursday, 20 March 2008: 12:55 AM Singapore Time
Shares in both Freddie Mac and Fannie Mae are subject to wide market swings.
The government's efforts to thaw fearful credit markets are lighting a fire under Fannie Mae and Freddie Mac.
Shares in the government-sponsored mortgage companies rose sharply for the second straight day Wednesday. Investors rushed to buy the stock after the firms' regulator, the Office of Federal Housing Enterprise Oversight, eased some capital constraints on Fannie and Freddie in hopes of getting the market for mortgage-backed securities back on its feet. Wednesday's rally - which adds to a sharp run-up tied to Tuesday's Federal Reserve interest-rate cuts - puts the shares up more than 60% from their lows of last week.
After long keeping a tight rein on Fannie and Freddie following accounting scandals earlier this decade, Ofheo has now effectively allowed the firms to plow $200 billion into mortgage securities. Investors fled that market last month amid worries about the toll that falling U.S. house prices and rising mortgage defaults might exact on Fannie and Freddie. Widespread selling of triple-A-rated mortgage bonds, including those backed by Fannie and Freddie, helped lead to the collapse of Carlyle Capital, a heavily leveraged Amsterdam-listed fund that held some $21 billion of the bonds, and the near implosion of jumbo mortgage lender Thornburg Mortgage (TMA).
"This is an effort to prevent further Thornburgs and Carlyles," says Gary Gordon, an analyst at Portales Partners in New York.
The Ofheo decision isn't just good for the bond market. It's good for shareholders in Fannie (FNM) and Freddie (FRE, Fortune 500) because it gives the companies the power to scoop up highly rated mortgage-backed securities that have been trading at a discount. Gordon, who has a buy rating on Fannie and Freddie, says Wednesday's rally shows that investors are starting to appreciate the companies' growth prospects - which are bolstered by improving pricing in both its credit guarantee and mortgage investment businesses - after months of focusing solely on their credit risks.
"There are two issues with Fannie and Freddie," he says: the risk of credit losses, and the reward of strong revenue growth. "The market seems to focus on one or the other, which is why you get these big swings."
The swings in these stocks have been very large indeed. Fannie and Freddie traded in the high $60s last summer, before the full extent of the mortgage meltdown became apparent. Since then they have traded as low as the high teens amid concerns about their exposure to losses tied to the deteriorating U.S. housing market.
Those worries spiked over the past month after both firms reported multibillion-dollar losses for the fourth quarter, and President Bush signed into law a measure giving Fannie and Freddie ability to buy much bigger loans. That move aimed to support slipping house prices in high-cost areas where many mortgages were above Fannie and Freddie limits - but it caused investors to flee the stocks amid worries that bigger loans would mean hefty losses.
But Wednesday's statement from James Lockhart, Ofheo's director, is clearly intended to soothe those fears. Lockhart said Wednesday's decision will allow the companies to bolster the mortgage markets without causing undue strain on their balance sheets.
"Let me be clear - both companies have prudent cushions above the OFHEO-directed capital requirements and have increased their reserves," Lockhart said in a statement. "We believe they can play an even more positive role in providing the stability and liquidity the markets need right now."
Indeed, additional bond purchases by Fannie and Freddie should support prices in the mortgage bond market - which is good for institutions that hold Fannie and Freddie-backed bonds. Higher prices could also help Fannie and Freddie, which must mark-to-market the value of their mortgage portfolios each quarter. Gordon says a sustained rise in mortgage bond prices could allow Fannie and Freddie to reverse some of the hefty writedowns that contributed to their steep fourth-quarter losses.
Gordon also takes heart in Ofheo's stance on the companies' capital needs. "As a key part of this initiative," the Ofheo statement says, "both companies announced that they will begin the process to raise significant capital." Saying you'll begin the process of raising capital is very different from saying you're going to raise capital now, Gordon points out. He believes that if the markets for mortgage securities return to health, Fannie and Freddie may find their balance sheets bolstered by reversals of earlier mark-to-market writedowns.
If that happens, he says, "They just won't need to raise new capital."
Wall Street rises after Philadelphia Federal Reserve reading
Caroline Valetkevitch
Business Writer
Associated Press
New York, New York, U.S.
Thursday, 20 March 2008, 10:40am U.S. ET
Traders crowd the post that will trade Visa Inc. as they wait for the company's IPO to start trading, Wednesday, 19 March 2008. Visa Inc. shares soared more than 30% in their stock market debut Wednesday as investors latched on to the largest IPO in U.S. history. - AP Photo: Richard Drew
Stocks rebounded Thursday after the previous session's big drop, with investors eager to take advantage of bargains and cheered by a milder-than-expected drop in manufacturing activity in the Philadelphia region. The Dow Jones industrial average rose more than 100 points.
Earlier Thursday, stocks wobbled due to economic worries after the Labor Department said the number of newly laid off workers filing for unemployment benefits rose last week by a more-than-anticipated 22,000 to 378,000. That level is the highest in nearly two months.
But Wall Street found reason to buy back into stocks when the Philadelphia Federal Reserve said manufacturing activity is dropping in March by less than it did in February, and by less than many economists anticipated.
Investors appeared relieved about the Philadelphia Fed's report, but economic jitters are far from alleviated — in addition to the disappointing jobless claims report, the Conference Board said Thursday its index of leading economic indicators fell, as expected, for the fifth straight month in February.
The markets are apt to stay volatile for some time, as investors digest news on the economy and the troubled financial sector.
"It's the every-other-day theory — up one day, and down the next," said Scott Brown, chief economist at Raymond James & Associates.
In midmorning trading, the Dow rose 108.52, or 0.90%, to 12,208.18.
Broader stock indicators also advanced. The Standard & Poor's 500 index rose 12.39, or 0.95%, at 1,310.81, and the Nasdaq composite index rose 21.49, or 0.97%, at 2,231.45.
On Wednesday, stocks plummeted, giving back much of Tuesday's big advance as investors grew worried — once again — about the possibility of further troubles at banks with mortgage-related debt on their books. After surging 420 points on Tuesday, the Dow dropped nearly 300.
Bond prices slipped. The yield on the benchmark 10-year Treasury note, which moves opposite its price, rose to 3.37% from 3.34 percent late Wednesday. Bond trading will be finishing early Thursday ahead of Good Friday, when all the U.S. financial markets will be closed.
In earnings news, Nike Inc. reported late Wednesday a 30% gain in quarterly profit, signaling to Wall Street that some companies are faring well despite the credit crisis. Nike said sales overseas increased largely because of the weak dollar.
A plunge in commodities prices also gave investors some hope that lower energy and food prices might boost consumers' discretionary spending. Crude oil fell back below $100 a barrel on the New York Mercantile Exchange, and gold prices sank.
Some energy and metals companies fell on the pullbacks, however. ConocoPhillips fell $1.21 to $72.38; Barrick Gold Corp. fell $2.30, or 5%, to $42.93; and Newmont Mining Corp. fell $1.86, or 3.8%, to $46.86.
In other corporate news, Borders Group Inc., which has been reporting disappointing earnings in recent quarters, revealed early Thursday it may put itself up for sale. The nation's second-largest bookseller said it has lined up $42.5 million in financing so it can continue operating.
Borders fell $1.47, or 21 percent, to $5.63.
The dollar rose against other major currencies, while gold prices sank.
The Russell 2000 index of smaller companies rose 9.92, or 1.49%, to 674.05.
Advancing issues outnumbered decliners by about 3 to 2 on the New York Stock Exchange, where volume came to a heavy 939.9 million shares.
Stock markets overseas were mostly lower. Hong Kong's Hang Seng Index fell 3.5%, but the Shanghai Composite Index closed 1.1%higher after an early plunge. In afternoon trading, Britain's FTSE 100 fell 1.15%, Germany's DAX index lost 1.08 percent, and France's CAC-40 1.29%.
Japan's markets were closed for a national holiday.
Swee liao lor!
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