...the main business headlines..........
Staggering trillions
How did we get into a situation when derivatives, an instrument that few people understand (even bankers), were worth $283tr, seven times more than the entire world produces in a year? It's the numbers that are staggering - so much so as to be incomprehensible, says Rory Bremner. When Barings went bust in 1995 (the year after its chairman Peter Baring told a director of the Bank of England that "it's not actually terribly difficult to make money in the securities business") its loss was £862m. Today that seems almost laughably small. When announcing its $700bn bailout plan this month, a US Treasury spokeswoman admitted the amount of money involved was "not based on any particular datapoint. We just wanted a really big number." Rory Bremner The Times
Full article: This banking crisis is no laughing matter... 
How did we get into a situation when derivatives, an instrument that few people understand (even bankers), were worth $283tr, seven times more than the entire world produces in a year? It's the numbers that are staggering - so much so as to be incomprehensible, says Rory Bremner. When Barings went bust in 1995 (the year after its chairman Peter Baring told a director of the Bank of England that "it's not actually terribly difficult to make money in the securities business") its loss was £862m. Today that seems almost laughably small. When announcing its $700bn bailout plan this month, a US Treasury spokeswoman admitted the amount of money involved was "not based on any particular datapoint. We just wanted a really big number." Rory Bremner The Times
Full article: This banking crisis is no laughing matter...
Asian markets extend global rally
The Dow Jones index soared 11 per cent yesterday and markets in Asia responded with gains across the board. In the UK the FTSE 100 opened five per cent higher. Investors were cheered by rock-bottom valuations and the prospect of further interest rate cuts across the globe. The US Federal Reserve meets later today and is expected to cut rates, while in Japan there is speculation that the central bank will reduce rates, even from current low levels, to boost its economy and reduce the attractiveness of its currency. The MSCI Asia Pacific Index added 2.3 per cent.
Economy: a trillion reasons to be gloomy
Hungary in IMF rescue
Hungary is to receive a $15.7bn loan from the International Monetary Fund in the latest move in the global bail-out, reported Bloomberg.com. Emerging economies are being forced to go to the IMF as investors “stung by losses” elsewhere sell risky assets indiscriminately. Ukraine and Iceland have already agreed packages with the IMF, while Pakistan and Belarus are in discussions with the organisation. Hungary has been hit by a combination of foreign-currency loans, slower growth and bigger debt than its neighbours.
Hungary is counting the cost of capitalism
What happens when a Western economy dies
US consumer confidence hits low
US consumer confidence fell to a record low in October, as global financial turmoil led to deepening pessimism, said the Financial Times. The Conference Board index slumped to 38 in October, from 61.4 in September – the lowest level since the index was started 40 years ago. Analysts had predicted that it would come in at 52. The number of people saying jobs were “hard to get” rose from 32.2 per cent to 37.2 per cent. The report came in the wake of housing data indicating that US house prices dropped 16.6 per cent in the year to August.
America enters a new Depression
Porsche makes share killing
Sports car maker Porsche has succeeded in one of the “greatest share killings of all time” in its takeover of rival Volkswagen, reported the Independent. Porsche built a “secret stake” of 74 per cent in VW, while hedge funds had bet that the latter's share price would fall. On realising their mistake the funds were forced to buy back at high levels, leading to a jump of 400 per cent in the shares over two days, leaving Porsche with a huge profit and the hedge funds with equally large losses. At yesterday's peak of 1,005 euros, VW was the world’s largest company.
Business failures jump sharply
Business failures have increased by 28 per cent in the last three months, as banks force more companies to the wall, reported the Daily Telegraph. Financial information group Experian said that estate agents, banking and financial companies and media agencies have been “among the hardest hit”, as 16,591 businesses failed in the first nine months of the year. In the last quarter 6,000 businesses ceased trading and accountants warned that the rate of business failure is “set to jump further” during the course of the coming year.
Oil output declines more quickly than thought
Output from global oilfields is “declining faster than previously thought”, reported the Financial Times. In the International Energy Agency’s report, the World Energy Outlook, it says that without gains in production the natural rate of output decline is 9.1 per cent. This suggests that it will be a struggle to make up the shortfall in declining fields like the North Sea, Russia and Alaska, especially if a global recession reduces investment. Even with added investment, the report says that the annual rate of output decline is 6.4 per cent.
Cuba could have America over a barrel
...in brief..................
Deutsche Bank to post loss and Persimmon reports huge writedown
Deutsche Bank is likely to post its biggest loss in the last five years after writedowns and losses on trading, said Bloomberg.com. It may post a third quarter loss of 154m euros, according to analysts, the “largest deficit since the first quarter of 2003”. The bank has so far not raised additional capital…………
The fall in house prices is now hitting some of London’s wealthier postcodes, said the Financial Times. The “full impact of the property slump” is affecting houses in upmarket Kensington & Chelsea, with a two per cent drop in September and Islington with a one per cent decline…………
Insurer Aviva has been forced to issue a statement that its recent shareprice performance does not reflect the state of the company’s financial health. The company needs a buffer of £10.6bn to meet regulatory requirements and had £1.9bn of capital above this at the end of September…………
Lloyds TSB “came under fire” yesterday as it emerged that it was preventing borrowers from switching from repayment mortgages to interest only deals, said the Times. The news came as figures showed repossessions “surged” by 71 per cent in the quarter ending in June…………
Prime Minister Gordon Brown called yesterday for cheaper petrol on Britain’s forecourts. He said he was “determined” that petrol prices should fall after BP announced a record quarterly profit, and he told reporters that he wanted the current lower price of oil to be reflected in petrol stations…………
Beleagured housebuilder Persimmon warned yesterday that it was having to write down the value of its land bank by £600m. The decision came as the company suffered further declines in selling prices. Earlier in the year it took a £40m writedown on its land bank after a five per cent fall in prices…………
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