No Depression Or Major Recession From US Crisis - Bill Gates

[Desperadoo]

*DJ SC Global Target Cut To S$1.34 From S$2.76 By BNP Paribas

SC Global is now trading at 0.60 cents. Please do not sound desperate digging up all the old reports. YOU WILL NEVER BE ABLE TO BUY ANY PROPERTY IN SINGAPORE. That is very sad. Posting here nonsensically is not going to help the market to crash.

[IMF.]

Oct 8, 2008

IMF sees major downturn

# IMF says coordinated rate cuts step in right direction
# IMF says more action needed, especially in Europe

WASHINGTON - THE International Monetary Fund, in its bleakest forecast in years, said on Wednesday the world economy was set for a major downturn with the United States and Europe either in or on the brink of recession.

The IMF said a still-developing financial upheaval - the most violent since the 1930s - would exact a heavy economic toll as markets wrestle with a crisis of confidence and global credit is choked off.

The IMF's assessment was written before a coordinated interest-rate cut of half a percentage point delivered by the US Federal Reserve, European Central Bank, Bank of England, Switzerland, Canada and Sweden on Wednesday.

China also cut its key rate 27 basis points and its reserve requirements for banks by half a percentage point.

The IMF's new chief economist, Mr Olivier Blanchard, said the coordinated drive was a step in the right direction but more action may be needed as the world economy slows.

'Fifty basis points is nothing,' Mr Blanchard told a news conference, adding that monetary policy was only part of the answer and further measures were needed to clear up clogged credit markets.

'More is needed, in particular in Europe, at this point,' he said.

In its twice-yearly World Economic Outlook, the IMF slashed its 2009 forecast for world growth to 3 per cent, which would be the slowest pace in seven years, from a July projection of 3.9 per cent, and warned that a recovery would be unusually slow.

[Recession >> RUN]

Thursday, 9 October 2008

Paul Markowski's thoughts on the coordinated interest rate cuts
 
• Too little, too late. These cuts should have been a month or two ago before the cumulative data showing that we are in the midst of a deepening global recession.

• Q3/Q4 corporate reports are going to be ugly.

• The central banks have coordinated on rate cuts for the first time since November 2001. Unfortunately, they are giving cold medicine to a patient with pneumonia. They have to do more; and, it will be necessary for the G-7 ministers to announce this weekend that they are willing to pull out all stops.

• The cumulative effect of rate cuts and other central bank/government actions will be positive; but, it will take a while and a Dow at 8000-8500 before we see recovery. This assumes the oil price drops to $75 and will weigh heavily on the oils in the Dow and S&P 500.

• Commodity prices will fall further into Q1/2009.

[Don't worry]

Thursday, 9 October 2008

Paul Markowski's thoughts on the coordinated interest rate cuts
 
• Too little, too late. These cuts should have been a month or two ago before the cumulative data showing that we are in the midst of a deepening global recession.

• Q3/Q4 corporate reports are going to be ugly.

• The central banks have coordinated on rate cuts for the first time since November 2001. Unfortunately, they are giving cold medicine to a patient with pneumonia. They have to do more; and, it will be necessary for the G-7 ministers to announce this weekend that they are willing to pull out all stops.

• The cumulative effect of rate cuts and other central bank/government actions will be positive; but, it will take a while and a Dow at 8000-8500 before we see recovery. This assumes the oil price drops to $75 and will weigh heavily on the oils in the Dow and S&P 500.

• Commodity prices will fall further into Q1/2009.

As long as it does not turn into a depression we will all be fine. What is most critical is whether the recession lasts 2 years or 1 years, majority should remain employed .

[VIX.]

UPDATE 2-Options fear gauge ends at record high
Wed Oct 8, 2008 6:29pm EDT 

By Doris Frankel

CHICAGO, Oct 8 (Reuters) - Wall Street's favorite measure of investor fear, the Chicago Board Options Exchange Volatility Index .VIX, set record highs once again on Wednesday as traders clamored for insurance after a coordinated worldwide cut in interest rates failed to bolster confidence in the battered markets.

The index, known as the VIX, rose 7.17 percent to 57.53, marking its third straight close at a record high. It earlier climbed to 59.06, above Monday's historic intraday high, using the modern VIX format that goes back only to 1990.

The VIX is up 178 percent since the end of August.

It has been at elevated levels during this week's steep sell-off in a stock market hammered by fears about the world's worst financial crisis in nearly 80 years.

"The VIX remains high as traders are still not convinced that the crazy intraday moves in the stock benchmarks are over," said Joe Kinahan, chief derivatives strategist at online brokerage thinkorswim Group in Chicago.

"Fear remains high despite news of the rate cuts because investors are more focused on the here and now rather than possible benefits of lower rates, which will take time to work its way through the economic system," said Frederic Ruffy, options strategist at Web site WhatsTrading.com in New York.

[LBO troubles]

Thursday, October 9, 2008

Troubled LBO Loans Nearly Triple

The other shoe, as in real economy symptoms of the credit crunch, are starting to show up. One that was widely anticipated was rising default rates in private equity loans. This last cycle was particularly overheated, with not only the predictable peak-of-cycle high prices, which therefore implies high debt levels to make the private equity return calculus work, but also unprecedented lax terms, the poster child being "cov light" deals. Corporate bonds and loan agreements typically contain covenants, which require the company to meet certain requirements, such as a minimum net worth, a certain interest coverage (ie earnings as a multiple of interest charges), restrictions on taking on more debt. Thus if a company's condition deteriorates, the bank can use the violation of covenants to force a restructuring of the loan.

Because many companies took on heavy debt loads, and more than half the companies are rated junk (in the vast majority of cases not due to downgrades as much as high levels of debt at the time of a private equity deal). Many observers wondered how things would play out in these cov light deals when companies started to run aground, Looks like we are about to find out. And Nouriel Roubini anticipates that junk bond defaults will reach an all time high. Leveraged loans ought to track that performance closely.