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BREAKING NEWS: HEDGE FUND MUST GIVE UP CONTROL OF CHRYSLER

HEDGE FUND DOWN

PAPER: Cerberus Capital Management will lose its equity stake in Chrysler LLC’s struggling automotive company as a condition of the Treasury Department’s bailout deal with the U.S. auto maker, according to several people familiar with the matter.

The New York private-equity firm purchased an 80% stake in Chrysler in 2007, promising to bolster the auto maker’s performance by operating as an independent company. The plan, however, collapsed due to an unprecedented slowdown in the U.S. auto industry and a lack of capital at the auto maker to weather the storm…

OBAMA: LET THEM GO BANKRUPT…

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Filed under: Politics, , , , , , , , , , , , , , , , , , , , , , ,

Stocks Give Back Yesterday’s Gains as Troubled Mortgages Rise to Nearly 12%

US Session Key Developments

  • JPMorgan Credit Outlook Slashed By Moody’s
  • Troubled Mortgages Jump to Nearly 12%
  • FDIC Chief Says Funds May Dry Up
  • Citibank Shares Trade Under $1

Stocks Give Back Yesterday’s Gains As Troubled Mortgages Rise to Nearly 12%

Stocks were pummeled today with Financials continuing their slide after President Obama’s mortgage bailout plan was revealed to benefit only those whose home loans were owned by Fannie Mae or Freddie Mac. Banks like Wells Fargo, which owns 16% of the mortgage market, will likely not directly benefit as a result. As such, any confidence that Obama’s plan would help stabilize the banks went down the drain. If that wasn’t enough to bring down the financial sector, JPMorgan’s credit outlook was slashed by Moody’s yesterday in after-hours trading. Indeed, the bank which was first hailed as a beacon of financial stability may now be in danger. The credit rating agency stated that JPMorgan’s health was at risk due to its direct exposure to bad loans and credit defaults.

Housing data continued to plague the industry. Data showed that Mortgage Delinquencies jumped 7.88% in the final quarter of 2008. Overall, nearly 12% of all mortgages are either late, delinquent, or are in foreclosure.

Sheila Blair, the Chairman of the Federal Deposit Insurance Corp. (FDIC) said that the pool of money that it holds to insure consumer banking accounts for up to $100,000 could dry up by the end of the year. In response to a swarm of letter that the corp. received as a result of FDIC fee increases she stated “without these assessments, the deposit insurance fund could become insolvent this year.” All this inertia led Citigroup, which was once the largest bank by market capitalization, to trade under $1 per share for about 40 minutes today. Shares of the embattled bank reached a low of 97 cents. Citigroup ended the day down -9.73% at $1.02 per share with JPMorgan finishing down -13.99% at $16.60.

Dow 30                   6594.44                      -281.40                      -4.09%
Every sector in the Dow Jones Industrial Average took a beating with Financials seeing the worst of the storm. The sector dove -12.90% with Materials tanking -9.08% with it.

NASDAQ               1299.59                       -54.15                          -4.00%
NASDAQ sector performance was more evenly distributed with Financials dipping -6.68% and Information Technology falling -3.58%. Microsoft and Cisco were the most actively traded stocks, declining -5.27% and -4.59%, respectively.

S&P 500                682.55                         -30.32                        -4.25%
The S&P plummeted as much as 4.9% on the day before profit-taking forced the index to close the day down -4.25%. The most active stock was JPMorgan which saw 33.61 million stocks traded as it fell -13.99%. The VIX volatility index jumped to 50.17 or by 5.49%.

Filed under: Economics, Obama, Stocks, , , , , , , , , , , , , , , , , , , , ,

Australian Retail Sales Unexpectedly Jumped in January

Australian retail sales rose unexpectedly in the month of January. At 0.2%, the rise in sales aggressively overshot expectations of a -0.5% decline in the figure. Spending was bolstered by the government’s distribution of A$8.9 billion ($5.6 billion) in cash grants to families as a result of the stimulus package passed in late January. Prime Minister Kevin Rudd announced that they would continue distributing more cash. In fact, another A$12.7 billion will be sent to lower and middle-income families and individuals.

The greatest gains in spending came in the form of eating out at cafes and restaurants. This sector of the overall metric rose 2.3%, but hasn’t shrunken since October. On the contrary, spending on household goods fell a substantial 4.0%, lending clues as to the underlying sentiment being felt among the public. That is, spending on durable (big-ticket) goods like washers, refrigerators, and television has probably also fallen. Furthermore, this could imply that people are reluctant to purchase such items because of the fear they may have over losing their house due to delinquencies in mortgage payments.

– LG

Filed under: Global Economics, World, , , , , , , , , , , , ,

Australian Wages Unexpectedly Accelerate, Largest Growth Rate in 11 Years

Australian wages accelerated unexpectedly, by the largest amount in at least 11 years in the final quarter of 2008. Economists had forecast the data to come out 25% lower, at 0.9%. On a yearly basis, wages grew 4.3% from the end of 2007 after economists had expected them to rise only 3.8%. With hourly wage costs rising 1.2% in the last three months of 2008, inflation expectations may be on the rise. This would reduce the pressure on the Reserve Bank of Australia to slash rates. The Australian Dollar jumped 13 pips in the minutes following the data release. – LG

Filed under: Global Economics, World, , , , , , , , , , , ,