Coming To Grips With A Harsh Year In 2009

I wish all readers of Jeflin’s Investment Blog a Happy New Year in 2009.

The past year has been sobering for taxpayers, retail investors and fund managers, what with severe declines in housing, mortgages, banking, stock markets, commodities, retail, automotive, shipping industry, etc. The extreme volatility in 2008 may be over but more of the same challenges await us.

Personally, I have made a new year’s resolution to be a more careful reader of financial reports, and by that, I mean reading with an inquisitive mind. Of course, if a management wants to get creative with their financial statements and the auditors are in a collusive mood (remember, the person who pays the piper calls the tune), our money is fair game for the predators.

Read the full article here.

Citigroup Layoffs 10000 Employees

The tangible effects of recession has hit home. According to the Wall Street Journal, Citigroup will begin distributing 10,000 pink slips to its employees (not only in the United States, but worldwide). The large scale Citigroup layoffs underscore that it is not just Americans who are suffering from large scale job losses.

I am not surprised with these layoffs as troubles rocking the financial sector have not ended yet. After the mortgage mess, financial institutions still need to purge their credit card and auto loans as part of the deleveraging process and it will be a while before we see healthy balance sheets.

The economy is also in a recession with lower consumption and production, so banks can expect lower interest earnings.

For those who are not employees of Citigroup, you may be less perturbed by the retrenchments. However, if you are a Citigroup credit card holder, you have to beware that your credit card interest rate may take a hike.

Up to 20% of Citigroup customers could face a rate hike of up to 3 percentage points. I think it is really poor timing for retailers as these people may just need to use credit cards for gift buying during the upcoming holiday season. Now they could change their mind with the rate hike.

A Ray Of Hope For Stock Investors

Red October, one of the worst month in Wall Street history, ended on a sweet note on Friday as stocks rallied to cap a week of impressive gains. For the week, the Dow Jones was up 10.1%, S&P 500 was up 9.5% and the Nasdaq had gained 9.8%.

There are storm clouds gathering but at the moment, investors are caught up in the euphoria and unmoved by grim economic indicators. Read the full article here.

Global Stock Markets Pricing In Recession

Stock markets are now entering a period of painful decline as countries around the world face up to the prospect of recession. While interbank lending has eased tentatively as central banks’ measures to inject cash loans to banks unblocked the credit crunch, investors have little time to absorb the good news.

Read the full article here.

Prudence Is The Way To Go

Let us look at the below comic strip:

Don’t you just love CEOs who talk about issuing options to align their interests with shareholders? They conveniently omitted that that they are aligned on the upside but without money committed like shareholders, they have virtually no risk and little downside.

Read the full article here.

Investors Uncertain As Bailout Plan Stalled

Since Monday, the “Paulson Plan” has been thrust into intense debates at Senate hearings as Democrats and Republicans unite in their dislike of this mind-numbing $700 billion bailout of the nation’s
financial system.

I find such actions amusing, if not hypocritical. Read the full article here.

Will Wall Street Learn From Lehman Brothers Bankruptcy?

Already, a Lehman Brothers bankruptcy implies a fire sales of its assets (stock, bonds, property and mortgage securities), depressing prices and forcing more write-downs by other banks and investment banks. In the coming months, we can expect tsunamis to test the foundations of the financial sector again.

Why was Lehman, a 158-year old financial institution, which survived world wars, scandals, in-fighting, loss of its independence, finally shuttered? Read the full article here.

Plunge In Oil Prices Claims Another Casualty

The US dollar, inspired largely by plunging oil prices and growing pessimism over the economic health of the EU and the U.K, is going gangbusters of late.

It traded at $1.4455 Wednesday, a seven-month high against the euro.

Coupled with the US government’s release of 250,000 barrels of oil… Read the full article here.

Housing Mortgage Crisis – No Nation Spared

While I still have substantial investments in blue-chips, I am less concerned about their performance than the poor outlook for Singapore private properties.

Such a trend does not bode well for the economy.

Read the full article here.

IndyMac Collapses From Bank Run

Last Friday, Indymac became the largest regulated thrift and second largest financial institution in U.S. history (with $32 billion in assets) to be seized by federal regulators after succumbing to pressures of crashing home prices, tighter credit and foreclosures. This marks the fifth FDIC-insured failure of the year.

Read the full article at http://jeflin.net