Vilasrao Deshmukh Passed Away

Union Minister Vilasrao Deshmukh, who was struggling with a life threatening liver ailment, died at Global Hospitals in Chennai on Tuesday afternoon. He was 67.

Deshmukh experienced improvement but turned crucial and died due to multiple organ failure at 2 pm. His family members, including his three sons, were by his side when he breathed his last.

He was  in the process of treatment at Breach Candy medical center in Mumbai for around last a week and needed to be shifted to super-speciality Global hospitals on August 6 as a result of deterioration in his condition.

A team of doctors, which includes famous liver transplantation surgeon Dr Mohamed Rela, had devoted their best to save him. Deshmukh was on life-support devices.

Attempts to save Vilasrao Deshmukh suffered a major setback after a  man in coma, whose liver and kidney were to be harvested and transplanted in Deshmukh, died hours before the operation yesterday night.

Manmohan Singh said "Mr Deshmukh was a trusted colleague and an able administrator who worked at panchayat, state and central levels with admirable dedication," Singh said in his message.

Congress president Sonia Gandhi called Deshmukh’s passing away as a great loss to the party.

The national flag will fly at half-mast.

Weak Independence Day Celebrations due to Faltering Indian Economy

India is getting ready to enjoy its 66th Independence Day August 15, it looks like to be not a moment to celebrate with its economy declining as a result of the global economic downturn and poor governance.

The economic growth worsened greatly to 5.3 % in the first quarter, which was 9.2 percent in the corresponding period last year. D. Subbarao, Governor of the Reserve Bank of India, mentioned clearly in a conversation at an event recently in Thiruvananthapuram last week that the we should concentrate more on controlling  inflation rather than aiming substantial growth. The RBI believes that decrease in interest rates would do very little to improve growth. In fact, it concludes that even more decline of the interest rate at this time, instead of encouraging growth,could worsen inflationary pressures.

Last month the RBI cut its growth prediction for this financial year (April-March) from 7.3 %to 6.5 %. This year's discouraging monsoon might negatively effect on the production, inflation and budget. The less monsoon this year will add to problems regarding inflation and sharpened economic slowdown which has been there since late last year. Farming output remains to be more crucial for India than for many other emerging economies.

Looking ahead, the RBI's more aggressive tone indicates that there is a increasing likelihood that the central bank will keep rates unaffected this year.

Issuance of Non-Convertible Debentures- Reserve Bank of India Directions August 2, 2010

The Reserve Bank of India (RBI) has issued directions for the agencies dealing in securities. These directions would come into effect from August 2, 2010 & would apply to Non Convertible Debentures issued by Corporates.

For the purpose of these directions a Non Convertible Debenture would include the Debentures issued with the maturity date up to one year through Private Placement.

Appointment of Debenture Trustee:

As per these RBI directions every Company issuing such NCDs should appoint a qualified Debenture Trustee (DT). A qualified DT is any entity registered with Securities & Exchange Board of India (SEBI) under SEBI (Debenture Trustees) Regulations, 1993. The DT should comply with the directions issued for Issuance of NCDs with effect from August, 2 2010. Under these directions, RBI may ask for any information as required from time to time & the DT is under obligation to provide the same.

Who Can Invest in NCDs:

As per these directions following types of Investors are allowed to invest in NCDs:

·        Any Individuals

·        Banks

·        Primary Dealers

·        Corporate bodies

·        Insurance Companies

·        Mutual Funds incorporated in India

·        Unincorporated entities

·        Non Resident Indians (NRIs)

·        Foreign Institutional Investors (FIIs, Subject to such limits as prescribed by SEBI)

The Companies issuing Non Convertible Debentures with a maturity period of upto one year should follow the Disclosure Document as prescribed by the Fixed Income

Money Market and Derivatives Association of India (FIMMDA).

Eligibility for issuing Non Convertible Debentures:

A Company can issue NCDs in it fulfills following conditions:

· The tangible Net Worth of the Company as per the latest audited Balance Sheet should be at least INR  

4crore;

· The borrower account of the issuing Company in the books of the financing banks should be classified as a  standard asset ( and not a Non Performing Asset)

· The issuing Company has been sanctioned a working Capital limit or tern loan by any bank or financial institution in India.

· The issuing Company should obtain a credit rating from credit rating agencies & the credit rating should be minimum P-2 of CRISIL or equivalent credit rating by other rating agencies

Conditions for Maturity Date of the NCD:

· The maturity date of the NCD should not be of less than 90 days from the date of issue

· The exercise dates of any Options issued with NCDs being an underlying should not fall within the 90 days   of the issue of the NCD.

South Korean Fund Managers increasing Equity Holding in Korean Stocks

The largest investors of South Korea’s stock market, the pension funds have increased their Equity holding in the market as the foreign investors sold out around 400 billion South Korean won.
The bullish move by the pension funds has helped the Kospi index to gain. The domestic investors started buying shares as the economic growth in South Korea surpassed the forecast of 2 percent.
According to sources the Korean Pension funds have bought equity shares valuing around 3.8 trillion till date in year 2010.

European Central Bank to Lend Euro 111 Billion to Banks for Six Days

The European Central Bank has confirmed that it would lend € 111 billion to banks for six days to help them to honor the expiry of their 12-month loans. As per sources more than 75 banks have approached the European Central Bank asking for short term funds as they need to repay Euro 442 billion of 12 month loans. Apart from this banks have also asked for additional 3 months loan from ECB. The ECB funding is at benchmark interest rate of 1 percent. The markets in Europe reacted & the European Banking Stocks fell across the board.

China's Manufacturing Growth Slows down

Stocks in Asia declined due to concerns over the growth of China as the manufacturing growth in China is less than what was anticipated for the month of May. 

 

The Purchasing Managers’ Index (PMI) fell to 53.9 from 55.7 in April. The Purchasing Managers’ Index is an indicator of economic activity. A PMI above 50 is an indicator of economic growth whereas a PMI below 50 is an indicator of reduction in economic activity.

Foreign Earned Income Exclusion (FEIE) -Best Alternative to Expatriation

If you are living outside the U.S. for more than two years, then there is good news for you.

I’m referring to the “Foreign Earned Income Exclusion” (FEIE) program. Through the program, U.S. citizens living abroad are exempted up to $91,400 in earned income each year from their taxable income. For married couple it is $182,800 per year..

Please note that this is not a deduction from the taxable income but the amount of $91,400 or $182,800 as the case might be would not be considered to be income at all.

Bank of Ireland to Sell 3 Flagship Businesses

As per sources the Bank of Ireland may sell of three of its major businesses as a part of bailout agreement for receiving state aid. The bank has around 17 % owned by public & is negotiating the bail out deal with the European Union regulators.

As per the sources in Bank of Ireland it may be forced to sell following three major businesses.

Goldman Sachs CDO ( Collateralized Debt Obligation) Case

The US Securities & Exchange Commission, has filed a complaint against Goldman Sachs on April 16 alleging that the investors of Collateralized Debt Obligation issued by Goldman Sachs have been cheated by not disclosing the involvement of Paulson & Co, a Hedge Fund in creating the underlying securities.

The Securities and Exchange Commission wants to prove that the Goldman Sachs has cheated its investors by not disclosing the fact that a hedge-fund firm betting against them has a role in creating the underlying securities on which the CDO is based.

BRIC Countries: An Overview

The term BRIC is a short form of Brazil, Russia, India & China. There is so much being discussed about BRIC countries that I thought we should take an overview of what BRIC countries signify in the world of Investments.

World economies have seen many bumps & turbulence over a recent past. That is the main reason why BRIC countries have gained importance in the eyes of world wide investors.  Reducing rates of internal economical growth, reduction in domestic demand, falling markets have created major threats to the survival of Global Investors & they are searching for new avenues for investing their funds to ensure a good return on capital & also the safety for their capital.

U.K. Banks Win Supreme Court Ruling on Overdraft Fees

HSBC Holdings Plc, Royal Bank of Scotland Group Plc and six other U.K. lenders won a court bid to
halt an antitrust regulator’s challenge to fees that lenders charge customers who exceed overdraft limits.

The Supreme Court, the highest court in Britain, reversed two earlier rulings that said overdraft fees are subject to laws regulating unfair terms in consumer contracts. The ruling may block the Office of Fair Trading from challenging whether the specific terms used by the bank are unlawful.

UCB Seeks 2 Billion-Euro Loan to Refinance Schwarz Pharma Debt

UCB SA, Belgium’s biggest drugmaker by sales, plans to get 2 billion euros ($3 billion) of loans to
refinance debt used to buy Germany’s Schwarz Pharma AG.

It’s arranging a 500 million-euro 364-day term loan and 1.5 billion euros of three-year revolving credit with a one-year extension option, the Brussels-based company said in an e-mailed statement. BNP Paribas Fortis, Commerzbank AG, and Mizuho Financial Group Inc. are arranging the deal.

German Bonds Little Changed as ECB Discusses Rates for Loans

German government bonds were little changed amid speculation the European Central Bank may increase the interest banks pay for some loans, even as data showed the economy is still suffering the after-effects of the recession.

The yield on the 10-year bund traded within one basis point of its lowest level since Nov. 3 after German consumer confidence unexpectedly declined for a second month and Italian retail sales dropped. People familiar with the ECB discussions said officials are debating whether to put an adjustable interest rate on December’s 12-month loans. Germany and Italy sold 6.6 billion euros ($9.9 billion) of securities today.

U.S. Economy: Home Prices Increase by Most Since 2005

Home values in 20 U.S. cities climbed in July by the most in almost four years, helping stem the record plunge in household wealth that’s depressed spending.

The S&P/Case-Shiller home-price index rose 1.2 percent in July from the prior month, the biggest gain since October 2005, the group said today in New York. Another report showed consumer confidence unexpectedly fell in September, while holding above the record low reached earlier this year.

Home values are rebounding as low borrowing costs and government tax credits lift home sales. Combined with rising stock prices, the gains will begin to restore the $13 trillion plunge in net worth caused by the worst financial crisis since the Great Depression, a process that economists such as Brian Bethune say will take years to complete.

Home prices are “a major, major turning point for the economy,” said Bethune, chief financial economist at HIS Global Insight in Lexington, Massachusetts. “We are eating away at the problem of household balance sheets.”

The New York-based Conference Board’s consumer confidence index fell to 53.1 in September from 54.5 the prior month, the private research group said today, amid growing concern over the lack of jobs. The gauge sank to 25.3 in February, the lowest level in data going back to 1967.

The Standard & Poor’s 500 Index dropped after the confidence report, erasing earlier gains, and closed down 0.2 percent at 1,060.61 in New York. The yield on the benchmark 10- year Treasury note was little changed at 5:15 p.m. in New York from 3.28 percent late yesterday.

                         Decline Slows

From a year earlier, the S&P/Case Shiller index was down 13.3 percent, less than economists anticipated and the smallest decrease in 17 months.

The measure was forecast to fall 14.2 percent, according to the median projection of 36 economists surveyed by Bloomberg News. Estimates ranged from declines of 12.5 percent to 15 percent. It was down 15.4 percent in the 12 months ended in June.

Compared with the prior month, 17 of the 20 cities covered showed an increase, led by a 3.1 percent jump in Minneapolis and a 2.9 percent increase in San Francisco. Las Vegas suffered the biggest one-month decrease at 1.9 percent.

                         Sales Rising

Combined sales of new and existing homes have risen for four out of the last five months, signaling the worst of the housing crisis is over.

The Obama administration’s $8,000 tax credit for first- time buyers, which is due to expire at the end of November, combined with lower prices as foreclosures soared, have helped lift sales this year. The National Association of Realtors and the National Association of Home Builders have lobbied to extend the credit on concern demand will wane after it lapses.

Karl Case, co-creator of the S&P/Case-Shiller index, said the U.S. residential property market is improving enough to end the tax credit for first-time buyers.

“We’ve got to phase back incentives and this may be a good time to do that,” Case said in an interview on Bloomberg Radio. “I believe in some cities you’ll see the beginning of recovery.”

                        Pending Profit

Lennar Corp., the third-largest U.S. homebuilder, is among companies that see demand improving, even as losses mount. The Miami-based company said last week it expects to turn a profit in fiscal 2010.

“In the third quarter we started to see some real signs that the housing market is in fact starting to stabilize,” Stuart Miller, Lennar’s chief executive officer, said on a Sept. 21 conference call. “The sense that now is the time to buy is starting to gain momentum.”

The Conference Board’s confidence gauge was projected to increase to 57, according to the median estimate of economists surveyed by Bloomberg News.

The decline was caused by growing pessimism over jobs. The share of consumers who said jobs are plentiful fell to 3.4 percent this month from 4.3 percent. The proportion of people who said jobs are hard to get increased to 47 percent from 44.3 percent.

“It’s a little hard for households to look at their paychecks, or the lack thereof, and feel more confident,” Ellen Zentner, a senior economist at Bank of Tokyo-Mitsubishi UFJ Ltd. in New York, said in a Bloomberg Television interview.

Even so, “we should continue to see consumer confidence turn around,” because the recession is over and hiring eventually will rebound, she said.

                       Fewer Job Losses

The pace of job losses is easing as the economy shows signs of accelerating. Payrolls fell by 216,000 in August, the smallest decline in a year, according to the Labor Department.

Employers probably cut another 180,000 workers this month, economists project a Labor Department report later this week will show. 

Economists say the Conference Board’s index tends to be more influenced by attitudes about the labor market. Confidence may improve in future months as balance sheets rebound. Net worth for households and non-profit groups climbed by $2 trillion in the second quarter, marking the first gain since the third quarter of 2007, according to figures from the Federal Reserve.

Fed policy makers last week said they would keep the benchmark lending rate near zero “for an extended period,” and noted that sluggish income growth and tight credit are curbing household spending and slowing the pace of the economic recovery.

(Source: Bloomberg)

Economy in U.S. Shrank at a 0.7% Annual Rate in Second Quarter

The worst U.S. recession since the Great Depression eased more than anticipated in the second quarter, setting the stage for a recovery to take hold in the last half of 2009.The world’s largest economy shrank at a 0.7 percent annual rate from April through June, the best performance in more than a year, revised figures from the Commerce Department showed today in Washington. Gross domestic product contracted at a 6.4 percent pace in the first three months of 2009.
 

Government stimulus plans such as “cash for clunkers” and first-time home buyer credits are giving manufacturing and housing, the two areas at the center of the economic slump, a boost this quarter. Federal Reserve policy makers are among those concerned that gains in consumer spending will not be sustained as unemployment climbs and incomes stagnate.

“It’s a much better picture than a few months ago,” Lindsey Piegza, an economist at FTN Financial in New York, said before the report. “Inventories and government programs will drive growth in the second half. We’re expecting a mild recovery as the job market is still very weak.”

The drop in GDP, the sum of all goods and services produced, was less than the 1.2 percent median forecast in a Bloomberg survey of 78 economists. Estimates ranged from declines of 1 percent to 1.5 percent. The government previously calculated the pace of contraction at 1 percent last quarter.

This is the last of three estimates the government issues on economic growth.

                       Deepest Recession

The drop in GDP was the fourth in a row, the longest contraction since quarterly records began in 1947. The world’s largest economy shrank 3.8 percent since last year’s second quarter, making this the deepest recession since the 1930s.

Consumer spending, which accounts for about 70 percent of the economy, fell at a 0.9 percent pace last quarter, less than the government previously estimated. The median forecast of economists surveyed projected spending would be unrevised at a 1 percent drop.

Purchases are recovering this quarter. Sales at retailers surged in August by the most in three years, boosted by demand for automobiles as Americans rushed to take advantage of the “cash for clunkers” plan, figures from the Commerce Department showed earlier this month.

A smaller decline in business investment on equipment and software than previously estimated also contributed to the improved reading on GDP, the report said. Such spending fell at a 4.9 percent annual pace, compared with the 8.4 percent decline announced last month.

                       Inventories Plunge

Today’s report showed the record drop in stockpiles in the second quarter was even larger than previously estimated, paving the way for gains in manufacturing in the second half of the year. Automakers General Motors Co. and Ford Motor Co. are among firms boosting production in coming months.

Government spending climbed at a 6.7 percent pace last quarter, more than previously estimated and the biggest gain in more than seven years. The Obama administration’s $787 billion stimulus plan means such expenditures will keep rising in coming quarters.

The Fed’s preferred measure of inflation, which is tied to consumer spending and strips out food and energy costs, rose at a 2 percent annual rate, the same as the government previously estimated and matching economists’ forecasts.
Fed policy makers last week said they would keep the benchmark lending rate near zero “for an extended period,” and noted that household spending, while showing signs of stabilizing, was still being constrained by “job losses, sluggish income growth, lower housing wealth, and tight credit.”


                        ‘Slow’ Recovery

The economic recovery is “slow but certain,” FedEx Corp. Chief Executive Officer Fred Smith said this week, adding he has “guarded confidence” about an improving global outlook.“Recovery is not a straight line up, but a zig-zag with a few steps forward and backward,” Smith, the founder of the second-largest U.S. package-shipping company, said at FedEx’s annual meeting in its hometown of Memphis, Tennessee.

The drag from residential construction, which subtracted 0.7 percentage point from growth last quarter, is dissipating, economists said. Sales of new homes rose in August to the highest level in almost a year, and a report yesterday from S&P/Case-Shiller showed house values in 20 cities climbed in July from the prior month by the most since 2005.
 

The economy will expand at an average 2.6 percent pace in the second half of the year, according to the median estimate of economists surveyed by Bloomberg earlier this month.

The jobs report in two days may show payrolls declined by 180,000 in September after a 216,000 drop the prior month, and the unemployment rate climbed to 9.8 percent from 9.7 percent,the survey median shows. Economists surveyed by Bloomberg predict unemployment may reach 10 percent by year-end, the highest level since 1983.

Finally, today’s report showed corporate profits climbed 3.7 percent in the second quarter, the second consecutive gain. 

(Source: Bloomberg News)

World Economy: Nobel Winner Krugman Says -End of World Postponed

The global economic downturn has probably hit bottom though the recovery will be “slow and painful,” said Paul Krugman, the Nobel Prize winning economist.

“The end of the world appears to have been postponed,” 

Krugman, a professor at Princeton University, said at a seminar in Helsinki today. The world economy “does not appear to be falling into an abyss but is still” in trouble.

The outlook is “very fuzzy’ and a W-shaped recovery may become U-shaped.Germany, France and Japan emerged from recession last Quarter, adding to evidence some of the world’s biggest Economies are over the worst. The U.S. recession probably endedin late July or August, Krugman said, after gross domesticProduct fell 1 percent in the second quarter from the prior

three months.

The Nobel Laureate said ‘‘the truly extraordinary thing”has been “the collapse of world trade,” the subject for whichhe was awarded the prize last year, and he cast doubt on the potential for exports to lead the global recovery. He also said China’s economy isn’t big enough to serve as a growth engine.

“The problem is that this is a global financial crisis,”he said. “How can we have an export-led recovery unless we find another planet to export to?”

                          No Locomotive

 Krugman questioned whether China’s economy is large enough to be a locomotive of recovery.

“One of the reasons it’s so difficult to tell a story about a fast recovery is the large surpluses in Asia,” he said.

“If they can find a serious increase in consumer demand, that would help. We don’t really understand why the Chinese savings rate is so high, but it’s probably due to” large precautionary savings.

He warned that any decision by China to diversify its Currency reserves away from the dollar would “hurt Europe and Japan the most.”

While budget deficits “saved the world” in the short term, “for most people things are going to get worse,” he
said. “Governments can help us cope with the crisis, but they have levels of debt that are sufficiently high to be a source of concern.”

Even so, the recovery remains too frail to warrant scaling back support measures, he said. “Exit from stimulus should certainly wait until we have clear signs that we’re closing the output gap. This is no time to start exiting stimulus.”

                          ‘Don’t Panic’

Economies can “suffer” more than necessary if governments introduce austerity measures prematurely, Krugman said.

“Obviously deficits are building up, but to respond with severe cuts increases the human and the economic cost right away. You do not want to inflict upon yourself the equivalent of an IMF program. You want to avoid doing that if you can. You have to keep an eye on the debt numbers but not panic over them
if you can avoid it.”

While, last quarter’s drop in U.S. GDP was the fourth in a row, the longest contraction since quarterly records began in 1947, Krugman said the U.S. has $1.1 trillion in annual capacity “staying idle.” T he U.S. consumer “that’s been such an important driver of the global economy, is exhausted,” he said, forecasting U.S. unemployment may rise until early 2011.

                        Reason to Invest

 Leading the recovery will be business investment, he said, “but what’s going to drive business investment? It would be very helpful if someone could” make a discovery that would lead us out of this recession. “If we can introduce effective climate change policies, particularly the cost of carbon emissions,” that “would be a reason to invest.”

A “good” agreement at the forthcoming international climate change summit in Denmark “wouldn’t just be good for the planet, it would be good for the recovery,” Krugman said.The crisis has hurt the euro in its ‘competition’ with the dollar, he said. “The international role of the euro is that it has suffered a setback. The crisis has not been good for the euro and its competition with the dollar as the international
reserve currency.”
Krugman said he was concerned global efforts to emerge from the crisis “could just drag on and on for a long, long time.”

“The consequences of that are that you start to have problems with financing the debt and you start to have social and political problems,” he said. My great concern is that this just drags on and on with severe consequences for political and social stability.’’

History is no guide to a path to recovery, he said. “The trouble is, we really have no road maps. The only
model is the Great Depression itself.” That “was ended by a very large spending program known as World War II and we don’t Really want to repeat that.”
(source: Bloomberg News)

U.S. economy still wobbly; France, Germany show Growth

Fresh data on Thursday dented hopes the U.S. economy is on the verge of a strong rebound, even as Western Europe's two largest economies reported a surprising return to growth in the second quarter.

Many pundits had expected the United States to lead the global economy out of recession, but the world's largest economy was soundly beaten to the punch as its retail sector struggled to lure skittish consumers.

Massive job losses and sharp declines in the housing market have prompted many Americans to pare back spending.

U.S. households are "in no position to drive a decent economic recovery," said Paul Dales, economist at Capital Economics in Toronto.

An unexpected rise in second-quarter GDP in Germany and France, pillars of the euro zone economy, boosted financial markets, which are still fretting over the potential for a global economic pickup.

German Economy Minister Karl-Theodor zu Guttenberg was cautious about the figures. Europe's recovery will likely be patchy at best, with Britain, Italy and the Netherlands still weak and parts of eastern Europe, which rely heavily on exporting to the wealthier western nations, reporting a far gloomier outlook.

GDP in the euro zone fell in the second quarter, albeit by a marginal 0.1 percent.
Germany and France emerged from lengthy recessions in April-June, with their gross domestic product rising 0.3 percent quarter-on-quarter [ID:nLD331672]. The much smaller Portuguese and Greek economies matched that growth.

The country's jobless rate fell in July for the first time in nine months.
We're entering a phase of stabilization and slow growth," Christian Dreger at the DIW Institute. "The main risk for Germany is a sharp rise in unemployment."

U.S. CONSUMERS NOT SPENDING

Retail sales excluding automobiles and gasoline, a popular measure with analysts, fell by 0.4 percent. Headline retail sales fell by only 0.1 percent as the government's "cash for clunkers" auto subsidy program drove more traffic to car dealerships. But new car sales may have drawn demand from other parts of the retail universe.

"While vehicle sales have rebounded, core retail sales have floundered after severe declines in late 2008," said Steven Wieting, economist at Citigroup.

The latest reading on continued claims, or those staying on the unemployment rolls, fell to 6.2 million from 6.3 million, a decline that suggested more long-term unemployed workers are exhausting their benefits.

Taken together, the data dulled hopes for a consumer-led U.S. recovery are elusive. Following a two-day policy meeting it said the economy is "leveling out," the first time in a year that its post-meeting guidance did not characterize the economy as contracting, weakening, or slowing.

WAL-MART EARNINGS BEAT STREET, DESPITE SOFT SALES

Wal-Mart Stores Inc. the world's largest retailer, reported on Thursday unexpectedly better earnings, but it warned that the economy remained a challenge.
The key metric for the giant discounter -- sales at stores open at least a year -- unexpectedly fell by 1.2 percent. Wall Street had looked for a gain of 0.85 percent.

Wal-Mart has benefited from "trade-down" from pricier retail chains, as many American consumers attempt to save cash, especially on staple items such as groceries and household products. Department store operator Kohl's Corp gave a grim outlook for the rest of the year, looking for same-store sales at its 1,000-plus outlets to fall as much as 5 percent.

STOCKS, EURO, INDUSTRIAL METALS RISE

Stocks, commodities and the euro rose due to the GDP surprise, while the dollar dipped. World stocks as measured by MSCI were up 1.1 percent, with U.S. markets rising despite the soft economic data. Wal-Mart surged by 2.8 percent to a four-month high.
Major U.S. stock indices are bumping their 2009 highs. Paulson's disclosure late on Wednesday that he bought large stakes in several banks, including Bank of America Corp., lifted financial stocks and helped sustain the rally.
Paulson of the eponymous Paulson & Co is credited for anticipating the looming credit crisis in 2007.

Meanwhile, copper led advances among industrial metals, reaching a 10-month high of $6,450 a ton on the London Metal Exchange. Lead, zinc and aluminum prices also rose.
"The German numbers are very helpful, the French numbers are very helpful, and that's supporting the copper market," said Sterling Smith, analyst for Country Hedging in Inner Grove Heights, Minnesota.

Barack Obama's Speech on 21st Century Financial Regulatory Reform

Speaker: Barack Obama

President Obama gave these remarks on financial regulatory reform on June 17, 2009.

THE PRESIDENT: Thank you very much.

Since taking office, my administration has mounted what I think has to be acknowledged as an extraordinary response to a historic economic crisis. But even as we take decisive action to repair the damage to our economy, we're working hard to build a new foundation for sustained economic growth. This will not be easy. We know that this recession is not the result of one failure, but of many. And many of the toughest challenges we face are the product of a cascade of mistakes and missed opportunities which took place over the course of decades.

That's why, as part of this new foundation, we're seeking to build an energy economy that creates new jobs and new businesses to free us from our dependence on foreign oil. We want to foster an education system that instills in each generation the capacity to turn ideas into innovations, and innovations into industries and jobs. And as I discussed on Monday at the American Medical Association, we want to reform our health care system so that we can remain healthy and competitive.

This new foundation also requires strong, vibrant financial markets, operating under transparent, fairly-administered rules of the road that protect America's consumers and our economy from the devastating breakdown that we've witnessed in recent years.

It is an indisputable fact that one of the most significant contributors to our economic downturn was a unraveling of major financial institutions and the lack of adequate regulatory structures to prevent abuse and excess. A culture of irresponsibility took root from Wall Street to Washington to Main Street. And a regulatory regime basically crafted in the wake of a 20th century economic crisis -- the Great Depression -- was overwhelmed by the speed, scope, and sophistication of a 21st century global economy.

In recent years, financial innovators, seeking an edge in the marketplace, produced a huge variety of new and complex financial instruments. And these products, such as asset-based securities, were designed to spread risk, but unfortunately ended up concentrating risk. Loans were sold to banks, banks packaged these loans into securities, investors bought these securities often with little insight into the risks to which they were exposed. And it was easy money -- while it lasted. But these schemes were built on a pile of sand. And as the appetite for these products grew, lenders lowered standards to attract new borrowers. Many Americans bought homes and borrowed money without being adequately informed of the terms, and often without accepting the responsibilities.

Meanwhile, executive compensation -- unmoored from long-term performance or even reality -- rewarded recklessness rather than responsibility. And this wasn't just the failure of individuals; this was a failure of the entire system. The actions of many firms escaped scrutiny. In some cases, the dealings of these institutions were so complex and opaque that few inside or outside these companies understood what was happening. Where there were gaps in the rules, regulators lacked the authority to take action. Where there were overlaps, regulators lacked accountability for their inaction.

An absence of oversight engendered systematic, and systemic, abuse. Instead of reducing risk, the markets actually magnified risks that were being taken by ordinary families and large firms alike. There was far too much debt and not nearly enough capital in the system. And a growing economy bred complacency.

Now, we all know the result: the bursting of a debt-based bubble; the failure of several of the world's largest financial institutions; the sudden decline in available credit; the deterioration of the economy; the unprecedented intervention of the federal government to stabilize the financial markets and prevent a wider collapse; and most importantly, the terrible pain in the lives of ordinary Americans. And there are retirees who've lost much of their life savings, families devastated by job losses, small businesses forced to shut their doors.

Millions of Americans who've worked hard and behaved responsibly have seen their life dreams eroded by the irresponsibility of others and by the failure of their government to provide adequate oversight. Our entire economy has been undermined by that failure.

So the question is, what do we do now? We did not choose how this crisis began, but we do have a choice in the legacy this crisis leaves behind. So today, my administration is proposing a sweeping overhaul of the financial regulatory system, a transformation on a scale not seen since the reforms that followed the Great Depression.

These proposals reflect intensive consultation with leaders in Congress, including those who are here today: Chairman Dodd and Chairman Frank, who, along with Senator Shelby and Representative Bachus, will be meeting with me throughout this process. They met with me earlier this year to jumpstart the discussion of reform. These reforms are also drawing on conversations with regulators, including those I met with this morning, as well as consumer advocates and business leaders, academic experts, and the broader public.

In these efforts, we seek a careful balance. I've always been a strong believer in the power of the free market. It has been and will remain the engine of America's progress -- the source of prosperity that's unrivaled in history. I believe that jobs are best created not by government, but by businesses and entrepreneurs who are willing to take a risk on a good idea. I believe that our role is not to disparage wealth, but to expand its reach; not to stifle the market, but to strengthen its ability to unleash the creativity and innovation that still make this nation the envy of the world.

That's our goal -- to restore markets in which we reward hard work and responsibility and innovation, not recklessness and greed; in which honest, vigorous competition is the system -- in the system is prized, and those who game the system are thwarted.

With the reforms we're proposing today, we seek to put in place rules that will allow our markets to promote innovation while discouraging abuse. We seek to create a framework in which markets can function freely and fairly, without the fragility in which normal business cycles suddenly bring the risk of financial collapse; we want a system that works for businesses and consumers.

There are those who will say that we do not go far enough, that we should have scrapped the system altogether and started all over again. I think that would be a mistake. Instead, we've crafted reforms to pinpoint the structural weaknesses that allowed for this crisis and to make sure that these problems are dealt with so that we're preventing crises in the future.

There are also those who say that we are going too far. But the events of the past few years offer ample testimony for the need to make significant changes. The absence of a working regulatory regime over many parts of the financial system -- and over the system as a whole -- led us to near catastrophe. We shouldn't forget that. We don't want to stifle innovation. But I'm convinced that by setting out clear rules of the road and ensuring transparency and fair dealing, we will actually promote a more vibrant market. This principle is at the heart of the changes we're proposing, so let me list them for you.

First, we're proposing a set of reforms to require regulators to look not only at the safety and soundness of individual institutions, but also -- for the first time -- at the stability of the financial system as a whole.

One of the reasons this crisis could take place is that while many agencies and regulators were responsible for overseeing individual financial firms and their subsidiaries, no one was responsible for protecting the whole system from the kinds of risks that tied these firms to one another. Regulators were charged with seeing the trees, but not the forest. And even then, some firms that posed a so-called "systemic risk" were not regulated as strongly as others; they behaved like banks but chose to be regulated as insurance companies, or investment firms, or other entities that were under less scrutiny.

As a result, the failure of one firm threatened the viability of many others. The effect multiplied. There was no system in place that was prepared for this kind of outcome. And more importantly, no one has been charged with preventing it. We were facing one of the largest financial crises in history -- and those responsible for oversight were mostly caught off guard and without the authority needed to address the problem.

It's time for that to change. I am proposing that the Federal Reserve be granted new authority -- and accountability -- for regulating bank holding companies and other large firms that pose a risk to the entire economy in the event of failure. We'll also raise the standard to which these kinds of firms are held. If you can pose a great risk, that means you have a great responsibility. We will require these firms to meet stronger capital and liquidity requirements so that they're more resilient and less likely to fail.

And even as we place the authority to regulate these large firms in the hands of the Federal Reserve -- so that lines of responsibility and accountability are clear -- we will also create an oversight council to bring together regulators from across markets to coordinate and share information, to identify gaps in regulation, and to tackle issues that don't fit neatly into an organizational chart. We're going to bring everyone together to take a broader view -- and a longer view -- to solve problems in oversight before they can become crises.

As part of this effort we're proposing the creation of what's called "resolution authority" for large and interconnected financial firms so that we're not only putting in place safeguards to prevent the failure of these firms, but also a set of orderly procedures that will allow us to protect the economy if such a firm does in fact go underwater.

Think about this: If a bank fails, we have a process through the FDIC that protects depositors and maintains confidence in the banking system. This process was created during the Great Depression when the failure of one bank led to runs on other banks, which in turn threatened wider turmoil. And it works. Yet we don't have any effective system in place to contain the failure of an AIG, or the largest and most interconnected financial firms in our country.

And that's why, when this crisis began, crucial decisions about what would happen to some of the world's biggest companies -- companies employing tens of thousands of people and holding trillions of dollars in assets -- took place in emergency meetings in the middle of the night. And that's why we've had to rely on taxpayer dollars. We should not be forced to choose between allowing a company to fall into a rapid and chaotic dissolution, or to support the company with taxpayer money. That's an unacceptable choice. There's too much at stake, and we're going to change it.

Second, we're proposing a new and powerful agency charged with just one job: looking out for ordinary consumers. And this is essential, for this crisis was not just the result of decisions made by the mightiest of financial firms; it was also the result of decisions made by ordinary Americans to open credit cards and take out home loans and take on other financial obligations. We know that there were many who took out loans they knew they couldn't afford, but there were also millions of Americans who signed contracts they didn't always understand offered by lenders who didn't always tell the truth. Even today, folks sign up for mortgages or student loans or credit cards and face a bewildering array of incomprehensible options. Companies compete not by offering better products, but more complicated ones, with more fine print and more hidden terms.

So this new agency will change that, building on credit card reforms I signed into law a few weeks ago with the help of many of the members of Congress who are here today. This agency will have the power to set standards so that companies compete by offering innovative products that consumers actually want -- and actually understand. Consumers will be provided information that is simple, transparent, and accurate. You'll be able to compare products and see what's best for you. The most unfair practices will be banned. Those ridiculous contracts with pages of fine print that no one can figure out -- those things will be a thing of the past. And enforcement will be the rule, not the exception.

For example, this agency will be empowered to set new rules for home mortgage lending, so that the bad practices that led to the home mortgage crisis will be stamped out. Mortgage brokers will be held to higher standards. Exotic mortgages that hide exploding costs will no longer be the norm. Home mortgage disclosures will be reasonable, clearly written, and concise. And we're going to level the playing field so that non-banks that offer home loans are held to the same standards as banks that offer similar services, so that lenders aren't competing to lower standards, but rather are competing to meet a higher bar on behalf of consumers.

The mission of this new agency must also be reflected in the work we do throughout the government. There are other agencies, like the Federal Trade Commission, charged with protecting consumers, and we must ensure that those agencies have the resources and the state-of-the-art tools to stop unfair and deceptive practices as well.

Third, we're proposing a series of changes designed to promote free and fair markets by closing gaps and overlaps in our regulatory system -- including gaps that exist not just within but between nations.

We've seen that structural deficiencies allow some companies to shop for the regulator of their choice -- and others, like hedge funds, to operate outside of the regulatory system altogether. We've seen the development of financial instruments, like many derivatives, that are so complex as to defy efforts to assess their actual value. And we've seen a system that allowed lenders to profit by providing loans to borrowers who would never repay, because the lender offloaded the loan and the consequences to somebody else.

And that's why, as part of these reforms, we will dismantle the Office of Thrift Supervision and close loopholes that have allowed important institutions to cherry-pick among banking rules. We will offer only one federal banking charter, regulated by a strengthened federal supervisor. We'll raise capital requirements for all depository institutions. Hedge fund advisors will be required to register with the SEC.

We're also proposing comprehensive regulation of credit default swaps and other derivatives that have threatened the entire financial system. And we will require the originator of a loan to retain an economic interest in that loan, so that the lender -- and not just the holder of a security, for example -- has an interest in ensuring that a loan is actually paid back. By setting common-sense rules, these kinds of financial instruments can play a constructive, rather than destructive role.

Over the past two decades, we've seen time and again, cycles of precipitous booms and busts. In each case, millions of people have had their lives profoundly disrupted by developments in the financial system, most severely in our recent crisis. These aren't just numbers on a ledger. This is a child's chance to get an education. This is a family's ability to pay their bills or stay in their homes. This is the right of our seniors to retire with dignity and security and respect. These are American dreams, and we should not accept a system that consistently puts them in danger.

Financial institutions have an obligation to themselves and to the public to manage risks carefully. And as President, I have a responsibility to ensure that our financial system works for the economy as a whole.

There's always been a tension between those who place their faith in the invisible hand of the marketplace and those who place more trust in the guiding hand of the government -- and that tension isn't a bad thing. It gives rise to healthy debates and creates a dynamism that makes it possible for us to adapt and grow. For we know that markets are not an unalloyed force for either good or for ill. In many ways, our financial system reflects us. In the aggregate of countless independent decisions, we see the potential for creativity -- and the potential for abuse. We see the capacity for innovations that make our economy stronger -- and for innovations that exploit our economy's weaknesses.

We are called upon to put in place those reforms that allow our best qualities to flourish -- while keeping those worst traits in check. We're called upon to recognize that the free market is the most powerful generative force for our prosperity -- but it is not a free license to ignore the consequences of our actions.

This is a difficult time for our nation. But from this period of challenge, we can once again tap those values and ideals that have allowed us to lead the global economy, and will allow us to lead once again. That's how we'll help more Americans live their own dreams. That's why these reforms are so important. And I look forward to working with leaders in Congress and all of you to see these proposals put to work so that we can overcome this crisis and build a lasting foundation for prosperity.

Thank you very much, everybody. Thank you. (Applause.)

Michael Jackson's Estate Has Piles of Assets but Loads of Debt

As Hollywood reacted with sadness and shock to the death of Michael Jackson, Sony executives in New York were on the phone all night Thursday with advisers to Mr. Jackson trying to understand the financial morass the pop star is leaving behind.

“It’s all a mess,” said one executive involved in Mr. Jackson’s financial affairs who spoke on the condition of anonymity out of respect for the entertainer’s family. “No one really knows what is going on, but these are early days.”

Mr. Jackson’s business life, like his public life, was a perplexing mass of contradictions. Unlike many performers, he was a keen negotiator and shrewd investor — in 1985 he pulled off one of the great deals in music business history when he bought the publishing rights to the Beatles for $47.5 million. Today it is part of a larger collection of songs worth more than $1 billion, and owned in partnership with Sony.

But his personal finances, at least in recent years, were perpetually in tatters, as he burned through millions of dollars to maintain his Neverland ranch, go on art-buying sprees and indulge in whimsies like traveling with a pet chimpanzee named Bubbles. And he burned through financial advisers almost as swiftly, with a revolving door of characters coming in and out of his life.

“Michael never thought his personal finances were out of control,” said Alvin Malnik, a former adviser to Mr. Jackson who is the godfather of Prince Michael II, the youngest of his three children. “He never kept track of what he was spending. He would indiscriminately charter jets. He would buy paintings for $1.5 million. You couldn’t do that every other week and expect your books to balance.”

The big question now is what happens to his assets. So far, that is unclear even to Mr. Jackson’s closest representatives, several of whom were hired only weeks ago, in Mr. Jackson’s latest round of managerial housecleaning. They say it could take years to sort through the financial and legal mess left after the singer’s death, not to mention millions of dollars worth of tickets sold for a series of 50 concerts Mr. Jackson had planned in London.

Mr. Malnik, for example, said that in 2004 he agreed to be the executor of Mr. Jackson’s estate. “I said yes, but I never inquired further, and I don’t know what’s happened since then,” he said. Mr. Malnik said there was still a chance that he was an executor, but had not heard anything since the death. Other advisers said that Mr. Jackson left behind at least two wills.

It is also unclear how much would be left for any heirs. It has been estimated that Mr. Jackson earned about $700 million as a performer and songwriter from the 1980s on, much of it spent. And his debts have been estimated at $400 million to $500 million.

His single biggest asset is a 50 percent share in Sony/ATV Music Publishing — which owns the rights to more than 200 Beatles songs, along with thousands of others — valued at more than $500 million, but he has about $300 million of debt against it held by Barclays, Mr. Jackson’s biggest creditor. He also owns his own publishing catalog, called Mijac, which is estimated to be worth $50 million to $100 million, and has an unknown amount of debt attached.

In late 2005, while Mr. Jackson was living in the Middle East after being acquitted of child molestation, his finances were particularly precarious. Sony then negotiated a deal with the singer that resulted in Mr. Jackson paying a lower interest rate on his debt in return for Sony gaining more authority to operate Sony/ATV and the option to buy half of Mr. Jackson’s share.

One question Sony executives have now is with whom they will negotiate. Mr. Jackson’s share is owned by a trust that he set up around the time of his molestation trial in 2005; people close to the situation say that his mother, Katherine, now controls it.

Mr. Jackson’s investment in song catalogs was no accident. Contrary to his popular image as a naïf, he took an active interest in the wider music business, associates say, with a shrewdness he inherited from his father, who shaped the careers of Michael and his brothers.

Martin Bandier, chairman and chief executive of Sony/ATV, said that Michael Jackson “had a keen sense of the value of music copyrights” and was a highly effective dealmaker.

“There was nobody better to close a deal,” Mr. Bandier said. “Michael called Jerry Leiber and Mike Stoller a few years back to tell them that he wanted to buy their copyrights and that they would have a safe home at Sony/ATV.”

Mr. Jackson also negotiated a favorable royalty rate with Sony for his recordings; according to some estimates, he earned at least $300 million in record royalties since the early 1980s. And since Sony’s rights to his master recordings are set to expire in the next several years and would become owned by Mr. Jackson, according to one of his advisers, his estate would stand to earn even more from sales and from the licensing of music to film, television and any other media.

On the other side of the ledger, however, was Mr. Jackson’s biggest liability: his exorbitant lifestyle. His large Neverland estate in California, which contained a zoo and an amusement park and at its peak had as many as 150 employees, cost millions of dollars each year to maintain. He nearly lost it last year when he defaulted on a $24.5 million loan.

Neverland was saved by a real estate company, Colony Capital, and according to court papers, Mr. Jackson then contracted for an auction of memorabilia from the ranch. About 2,000 items — like statues of E. T. and 13 of Mr. Jackson’s trademark glittering gloves — were to be put up for sale in April 2009, and the value of the auction was estimated at up to $20 million.

But with only weeks before the sale was to begin, Mr. Jackson sued to prevent it, saying that he had never been given an opportunity to review the contents. In a settlement, the auctioneer, Julien’s Auctions of Los Angeles, returned all of the property to him.

Another big question left by his death is his deal with AEG Live, the big concert promoter behind the London shows. The company invested at least $20 million to produce the concerts and might have to refund more than $80 million in tickets, according to industry estimates. Randy Phillips, the chief executive of AEG Live, said in a telephone interview on Friday that that the concerts were insured, but that the company needed to wait for the coroner’s report before filing a claim.

“Over the weekend we’re all going to be working late trying to figure out what the basis of our insurance claim might be,” Mr. Phillips said. “It’s very, very critical for us that we get the toxicology report from the coroner so we know what the cause of death is.”

Perversely, the fortunes of Mr. Jackson’s estate could benefit from his death. First, there will undoubtedly be an influx of revenue from music sales after the entertainer’s death. Together, the sales from his own recordings, plus income from Sony/ATV and his own catalog would be worth $30 million a year, according to one of his business associates. And the amounts he spent on his lifestyle would be gone.

The winners in all of this could be his family.

“I’m of the view that Michael’s passing, as untimely as it is, is the one opportunity his family and his children have to preserve his asset legacy,” said Charles Koppelman, who is chairman of Martha Stewart Living Omnimedia, and a former music industry executive who several years ago was a financial adviser to Mr. Jackson. “They will earn a tremendous amount of money over the next 12 to 18 months given the outpouring, and he won’t be spending.”

Bill Werde, the editorial director of Billboard, compared Mr. Jackson with Elvis Presley as a star whose very likeness would remain a valuable asset for decades to come.

“If this estate finds smart management, his image and likeness is going to be very easy to exploit,” he said. “There’s a fan base that is hungry for seemingly as much Michael as they can ever get.”

Just how much the outside world learns about the details of Mr. Jackson’s finances may well turn on whether he set up a trust intended to distribute his assets privately, limiting the role of a court. If there is not enough money left behind to satisfy his creditors, the ensuing battle could make the details public, according to lawyers interviewed on Friday.

“If there’s going to be litigation by creditors against these assets, that’s what would happen,” said Andrew S. Garb, a lawyer at Loeb & Loeb in Santa Monica, Calif. Creditors could essentially demand an accounting of the assets left in the trust by Mr. Jackson to satisfy claims, he said.

If instead Mr. Jackson relied on a will, and advisers think there are at least two, then personal financial information would be revealed through probate proceedings. (In the case of multiple wills, generally the most recent valid document prevails.)

Regardless of how Mr. Jackson structured his financial affairs, someone could try to challenge the validity of the documents. For example, someone might argue that he signed a document under duress or that he did not understand the import of signing.

“If, for example, he left everything to some unrelated person and did not provide for his children, that may be another basis to indicate he didn’t know what he was doing,” said Lawrence Heller, a partner in the Los Angeles office of the law firm Bryan Cave.

Mr. Koppelman says he believes the delays, even with the costs of litigation, could ultimately benefit the estate. “I think it’s going to be so confusing that they’ll be able to pile up a lot of money. There’s a real opportunity to save his financial empire.”

“He was a fantastic visionary on the business front,” Mr. Koppelman added. “He just couldn’t deal with his personal finances.”

NY Times

Breaking News in Finance:Live London shows now financial disaster after Michael Jackson's death

It was a huge risk, with a potentially huge reward:Michael Jackson's 50 sold-out London shows.

And now it's a huge financial disaster.

Concert promoter AEG LIVE must return $85 million in ticket sales for the eerily billed "This Is It" dates, the first Jackson live shows in a dozen years.

It's already spent more than $20 million on production costs for the shows, billed as the most expensive arena gigs ever.

AEG is out millions more in lost merchandise sales, and perhaps another $10 million in upfront money paid to Jackson.

AEG won't say if insurance covered its outlay for the mega-deal with the notoriously unpredictable Jackson. The first date was set for July 13.

"We're still dealing with all our financial people," said AEG spokesman Michael Roth. "There are a lot of numbers out there, everybody has it wrong so far. It's too early."