We are having some grey dank weather at the moment leaving us wondering where the next ray of sunshine will come from. As I pour over more drab economic data where is it all going? Are we headed for a recession in the United States? Will the Fed cut interest rates again in October?
The banks are finally reporting the losses from the sub-prime fall out but I believe they are only telling us what we want to hear. USB AG announced write downs of $3.4bn from sub-prime loans and will post losses of about $690 million but the real problem facing banks will be job losses as the fancy debt packages they hold cannot be sold on furthermore they have dropped in value. USB AG will probably shed 1500 jobs worldwide by January 2008.
Citigroup announced write downs of $1.4bn and a 60% decline in profits for the third quarter losses will be around $600 million. Job losses are also expected at the bank along with Bear Stearns and Merrill Lynch. The centre for Economics and Business research warned up to 5,000 jobs will be shed in the Banking sector due to sub-prime losses. As banks write down these losses it will mean less in bonuses.
The consumer slow down has gathered pace with Ford reporting a sales drop of 21% for the month of September, Toyota slipped slightly as Honda saw gains with the Accord and CR-V. GM said sales were flat but had encouraging figures from the new Cadillac CTS.
Will the Fed cut interest rates in October? I think not Remember the technology crash in 2000? The Fed cut interest rates on 13 separate occasions from 6% right down to 1% this time with rising commodity prices and a strong Chinese economy; they can’t be that aggressive they risk fast rising inflation and an ongoing dollar collapse.
Where to investors run to in times like this? Gold it is at a 28 year high with a ounce costing $ 745.50 demand is rising very fast and I see it going higher, probably I should look at adding it to my pension fund, those of you in the US should consider adding Gold to your 401k plans.
On closing, I read that 317 young women become insolvent everyday in the UK it’s no laughing matter credit cards+ store cards+ women don’t mix who’s to blame? Discuss…………
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2 comments:
I'm not quite sure what to make off the economy right now. The stock market rallied today after the Fed strongly indicated that another rate cut is on the cards.
At their Sept. 18 meeting, there was no dissent to the central bank's decision to trim interest rates by half a percentage point, with Fed officials viewing the move as "the most prudent course of action.
My question is if there is a rate cut in the month of October, what impact will it have on Asia, who as we know holds a heap of US paper.
Could this be the begining of a huge sell off.
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