Breaking News from The Globe and Mail

Gold surges past $800
Associated Press


Wednesday, October 31, 2007

Gold barreled above $800 (U.S.) an ounce Wednesday for the first time since 1980 as investors cheered the Federal Reserve's decision to lower its benchmark interest rate by a quarter point.

The Fed lowered its federal funds rate to 4.5 per cent, as the markets had widely expected. Lower interest rates tend to undermine the U.S. dollar and raise the allure of precious metals as an investment alternative. The dollar stumbled to another low against the euro and other currencies following the Fed's decision on Wednesday, helping drive gold higher.

Although the regular trading sessions of most commodities markets were closed before the Fed released its decision, gold prices continued to climb in aftermarket trading. An ounce of gold settled at $795.30 an ounce on the New York Mercantile Exchange, then rose to a high of $800.80 ounce in later electronic activity.

Gold last topped $800 an ounce in 1980, when prices reached as high as $875 an ounce in January. Adjusted for inflation, an $800 ounce of gold in 1980 would be worth more than $2,000 today.

The euro, which hit a high for the fourth straight trading day, bought a record over $1.45 in afternoon trading.

In the energy market, light, sweet crude for December delivery gained $4.13 to $94.51 in electronic trading on the Nymex.

India: Bad marks, yet Ist division
4 Nov 2007, 0400 hrs IST,Swaminathan S Anklesaria Aiyar

SMS NEWS to 58888 for latest updates
Even as Mukesh Ambani is reported (probably inaccurately) to have become the richest man in the world, the World Hunger Index of IFPRI has ranked India 94th out of 118 countries, just above Ethiopia and worse than any country in the subcontinent save Bangladesh. The contrast between rich and poor is stark.

India's social record has long been bad. It ranks a lowly 126th in the Human Development Index of the UN. World Bank data show that India has among the highest rates of child malnutrition and maternal mortality in the world.

Predictably, the left says that India's neo-liberal economic policies fatten the rich and neglect the hungry. But that is comically wrong. India fares very poorly in global indices of economic liberalisation, no less than of human development. It is not the case that India is world class in economic reforms but poor in social reform. Rather, India gets terrible scores on pretty well everything.

Leftists claim that India's neo-liberal policies have lifted almost all controls. Really? How could our esteemed netas and babus extract bribes ad nauseum if there were no controls and permits? The Corruption Perception Index of Transparency International ranks India a lowly 72nd, below many African countries.

A survey of the Centre for Media Studies shows that 80% of all Indians pay petty bribes totaling a whopping $4.8 billion for services they are entitled to. A quarter of the bribes are for admission into supposedly free schools and hospitals. So if the poor are deprived, blame not the Ambanis or Narayana Murthys but the neta-babu raj, which remains intact and venal as ever despite some limited liberalisation.

Is bribery just a small wart on a healthy liberalised system? Hardly. India ranks only 104th in the Index of Economic Freedom, published annually by the Heritage Foundation and Wall Street Journal. In economic freedom, no less than in corruption or hunger, India ranks well behind several African countries.

The Index of Economic Freedom rates India as mostly unfree. India ranks below the world average on six out of 10 criteria. It gets overall marks of 56%. Its marks are much worse in regard to corruption (29%). It gets only 30% marks for financial freedom — government banks still dominate 70% of banking, stringent licensing prevents new Indian and foreign players from entering this sector, and two-fifths of bank loans have to be given to sectors decreed by the government. India gets 40% marks for investment freedom — foreign investment is still restricted or banned in a number of sectors, capital controls limit rupee convertibility, and NRIs and foreigners face several restrictions on investing in India.

The World Bank's annual series on Doing Business ranks countries on the ease of doing business. In the latest report, India ranks just 120th out of 180 countries. It is the worst in South Asia: better are Maldives (60th), Pakistan (76th), Bangladesh (107th) and even Maoist-hit Nepal (111st). China (83rd) is better than India but worse than Pakistan, highlighting the fact that red tape still inhibits some of the most fast-growing economies.
Among the various doing business indicators, India is virtually at the bottom in enforcement of contracts (177th). This means, in effect, that contracts are pretty meaningless, the rule of law does not prevail, and property rights are insecure.

Almost as bad is India's performance in demanding payment of multiple taxes (165th out of 180 countries). On the ease of hiring and firing workers, it ranks 85th, which is poor but actually much better than India's scores on some other criteria. It seems that businessmen can find ways round inflexible labour laws. India scores badly in ease of opening a business (111th) and even worse in closing a business (137th).

India fares badly on several policy and governance indicators. Its fiscal deficit remains over 6% of GDP, which is a crisis level in most countries historically. Subsidies are still 14% of GDP, of which half are non-merit subsidies without redeeming social virtues. The quality of public services is pathetic. Legal delays make a mockery of justice. Legislatures and cabinets are full of criminals. And Maoist violence affects 157 of our 600 districts. Despite scoring so poorly on economic, social and governance indicators, India nevertheless boasts record 9% economic growth. It boasts some social successes too. Life expectancy has increased from 31 years at independence to 64 in 2005, a huge jump.

NSSO surveys show that people saying they don't get enough to eat for part or all of the year have fallen from around 15% of the population in 1983 to 5.5% in rural and 1.9% in urban areas in 1994-94, and to just 2.6% in rural and 0.6% in urban areas in 2004-05. IFPRI may rank Indians as very hungry, but Indians themselves say that hunger has largely ended.

Not all international indicators are as off-target as IFPRIs. Many seem accurate. This deepens the mystery of how India is succeeding despite horrible flaws in dozens of areas. It is like a student who gets poor marks in most papers, yet ends up with a first division.

http://www.youtube.com/watch?v=SJ_qK4g6ntM

If you guys got 8 minutes tune in for a joke on the sub-prime crisis.

Real High grade enhanced material!

Some "high grade structured and enhanced" stuff.

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Well, looks like Australia has raised its rate and its dollar is at 93-95 cents US, which is incentive enough for the currency traders to want to take it higher to parity. Also since the interest on it is higher , people will dump the USD to buy AUSD.


Note the comment on the housing industry towards the end. Push your imagination a little further.

_________________________________________________

SYDNEY — The Reserve Bank of Australia lifted a key interest rate to an 11-year high of 6.75 per cent Wednesday, a move analysts say could hurt Prime Minister John Howard's shot at re-election later this month.

After meeting Tuesday, the bank said it chose to lift the benchmark cash rate from 6.5 per cent after recent data showed underlying inflation surging above the bank's two to three per cent target range.

A 33-year low in unemployment, strong commodity prices and strong growth in nonagricultural sectors of the economy added to the case for a hike.

In a statement, Reserve Bank governor Glenn Stevens said the pace of economic growth had increased and that both the consumer price index and underlying inflation were likely to be above 3 per cent in the first three months of next year.

Wednesday's decision, which was widely predicted by economists, is the 10th interest rate rise since May 2002 and falls just shy of the 7.5 per cent rate in place when Howard's government first took power in 1996.

The rate increase is the first ever during an election campaign and is the sixth consecutive rise since Howard was re-elected in October 2004 on a promise of keeping interest rates low.

Australians are due to vote Nov. 24, and polls indicate that the main opposition Labour Party will defeat the 11-year-old coalition government.

Many economists predict the Reserve Bank will lift rates again, possibly as early as December, given the strength of the economy and the rising pace of inflation.

The Housing Industry Association's chief economist, Harley Dale, said around 100,000 Australian households would fall into financial stress as a result of the latest interest rate rise.

New home buyers were devoting, on average, 25 per cent of their household incomes to their mortgages after the last election, Mr. Dale said. That figure would jump to around 33 per cent on the back of the latest hike.

© The Globe and Mail


http://www.globeinvestor.com/servlet/story/RTGAM.20071106.wozrate1106/GIStory/

GM posts its biggest quarterly loss ever: $39-billion
Associated Press


Wednesday, November 07, 2007

DETROIT — General Motors Corp. posted a company record $39-billion loss in the third quarter, as a charge involving unused tax credits brought an abrupt end to string of three profitable quarters for America's largest auto maker.

The loss reported Wednesday was one of the biggest quarterly corporate deficits ever and it sent GM's shares down more than 8 per cent in pre-market trading.

The loss was attributed to a $38.6-billion non-cash charge largely related to establishing a valuation allowance against deferred tax assets in the U.S., Canada and Germany, as well as mortgage losses at GM's former financial arm, GMAC Financial Services.

Accounting rules require that companies expecting to keep losing money cannot keep carrying deferred tax credits indefinitely and must write down the value of these benefits.

The net loss amounted to $68.85 per share, compared with a net loss of $147-million, or 26 cents per share, in the third quarter of last year.

The results included a $3.5-billion after-tax gain on the $5.4-billion sale of Allison Transmission in August.

Without special items, the company reported a loss of $1.6-billion, or $2.80 per share.

GM had record third-quarter automotive revenue of $43.1-billion and record global sales volume of 2.39 million cars and trucks.

But it continued to lose money in its home market. It reported a net loss from continuing operations in North America of $38.2-billion for the quarter including the non-cash charge. That compares with a net loss of $667-million in the year-ago period.

Without the charge, the company's North American loss was $247-million in the third quarter of 2007.

“We continue to implement the key elements of our North America turnaround strategy, and these initiatives are driving steady improvement in our financial results, despite challenging North America market conditions,” chairman and CEO Rick Wagoner stated.

The huge charge, announced after financial markets closed Tuesday, surprised Wall Street analysts who had expected a relatively small loss excluding special items. Seventeen analysts polled by Thomson Financial expected GM to lose 25 cents per share excluding one-time items.

© The Globe and Mail


http://www.globeinvestor.com/servlet/story/RTGAM.20071107.wgm1107/GIStory/

This is from Friedman, author of "The World is Flat" and who is quoted in the signature of a CD contributor.




Friedman: The dawn of E2K in India

Remember Y2K? That was the "millennium bug," the software glitch that
threatened to
melt down millions of computers when their internal clocks tried to
roll over on Jan. 1, 2000,
because they were not designed to handle that new date.

And remember that the only country that had enough software programmers
to adjust
all these computers so they wouldn't go haywire, and do it at a
reasonable price, was India.
And remember that it was this huge operation that launched the Indian
outsourcing industry
- which is why I have long felt that Y2K should be a national holiday
in India.

Well, remember this: There is an even bigger opportunity for India than
Y2K waiting around
the corner. I call it "E2K."

E2K stands, in my mind, for all the energy programming and monitoring
that thousands of
global companies are going to be undertaking in the early 21st century
to either become
carbon neutral or far more energy efficient than they are today. India
is poised to get a lot
of this work. I first started thinking about this when I heard Michael
Dell declare that Dell Inc.
would become "carbon neutral" in its operations by the end of 2008. He
said Dell would take
inventory of its total greenhouse gas outputs and then develop plans to
reduce, eliminate or
offset those emissions. With a carbon tax or cap-and-trade legislation
looming, every day you
are going to see more and more companies doing the same thing. It is
going to be the next
big global business transformation. And it's going to require tons of
software, programming and
back-room management to measure each company's carbon footprint and
then monitor the
various emissions-reduction and offsetting measures on an ongoing
basis. Guess who's got
the low-cost brainpower to do all that?

Some of the smartest Indian outsourcing companies are already
positioning themselves for
the E2K market. "What did Y2K do?" asked Nandan Nilekani, the
co-chairman of
Infosys Technologies, one of India's premier outsourcing companies. "It
was a deadline
imposed by the calendar, and therefore it had a huge ability to
concentrate the mind. It
became a drop-dead date for everyone. Making your company carbon
neutral is not a date,
but it is an inevitability." When Y2K came along, some companies
responded tactically, doing
only the minimum reprogramming to keep their computers operational
after Jan. 1, 2000. Others
approached it more strategically, saying: "Since we're going to have to
go through all our software
anyway, why not just retire all the old stuff and upgrade to the newer,
simpler systems that will
make us more efficient."

These companies went from seeing IT, or information technology, as a
cost to looking for ways
to make money from it - through data mining and using better
information to cross-sell products,
reduce cycle times for introducing new services and to manage
inventories more efficiently.
The key to winning E2K business for the Indian outsourcing firms, said
Nilekani, will be showing
big global companies, like a Dell, how becoming more energy efficient
or carbon neutral doesn't
just have to be a new cost they assume to improve their brand or
satisfy regulators, but can
actually be a strategic move that makes money and gives them an edge on
the competition.
"The strategic companies will say: 'We are stuck with this problem -
why not take advantage
of it and use it to revolutionize and rejigger our whole energy
infrastructure?"' added Nilekani.
They will use ET - energy technology - "to reduce material costs,
simplify logistics, drive down
electricity charges and shorten supply chains." As they start to do
this, it will require a lot of
data management, which companies will want to do as cheaply as
possible.

Hello, India. Hello, E2K.


"My impression is that there is certainly a significant opportunity for
Indian outsourcing
companies," said B. Ramalinga Raju, chairman of Satyam Computer
Services, another top
Indian outsourcing company, adding that the precise size of that
business will depend on "the
speed and scale at which the carbon neutral policies are adopted by the
global companies."
To better compete for such business, Nilekani is installing solar
systems and other efficiency
technologies at Infosys' Bangalore campus. Satyam is planning to do
similar things with its
verdant Hyderabad complex, which already has its own zoo. IBM seems to
be moving into this
space, too. Big Blue knows that even if Indian companies do a lot of
the back-room work,
there will be lots of front-end jobs nearer the customers.

So, mom, dad, tell your kids: If they're looking for a good
stable-growth career - green consultants,
green designers, green builders are all going to be in huge demand. And
if they can speak a
little Hindi - all the better.