Aug. 20 (Bloomberg) -- Indian stocks will avoid a sell-off that drove China into a bear market yesterday as the South Asian nation is poised to topple its neighbor as the world’s fastest growing economy, ICICI Prudential Life Insurance Co. said.
“India’s economy will grow faster than China’s next year,” Puneet Nanda, executive vice president at ICICI Prudential, the country’s largest private insurer with $6 billion in equities, said in an interview in Mumbai yesterday. “Industrial and services sectors will grow far more rapidly than expected.”
India’s economy may expand this year at a faster pace than earlier forecast as business confidence rebounds, buoyed by government stimulus measures and record low borrowing costs, the central bank said July 27. China’s main stock index yesterday fell into a bear market, denoted by a 20 percent decline from its peak this year on Aug. 4, on concern economic growth will falter as banks rein in lending.
India’s benchmark Sensitive Index has slid 5.3 percent from its Aug. 3 peak. The measure is still up 56 percent this year, the ninth-best performer among 89 global indexes tracked by Bloomberg. The gauge gained 1.6 percent to 15,051.4 at 1:32 p.m. in Mumbai trading today.
“People are underestimating how good the second half will be,” Nanda said. “We are betting on a strong recovery.”
China’s Shanghai Composite Index today rose 4.5 percent, the most since March and erasing yesterday’s 4.3 percent slide. Still, the gauge is 16 percent below its Aug. 4 high.
Accelerating Production
India’s industrial production increased at the fastest pace in 16 months in June, adding to signs that Asia’s third-largest economy has escaped the worst of the global recession as low interest rates have encouraged consumers to borrow to buy cars, motorbikes and other factory-made goods.
India’s economic growth may exceed 7 percent in the fiscal year to March 31, and as much as 10 percent in the following year, Nanda said. China’s gross domestic product may expand 7.2 percent this year and 7.7 percent in 2010, the World Bank forecast on June 22.
Concern that insufficient rainfall will trigger a decline in India’s stocks is “over-rated,” Puneet said. “Agriculture’s contribution to the economy is just 17 percent.”
Drought Fears
Indian stocks may slide as much as 15 percent on concern that lower monsoon rainfall will slash farm output and cut consumer spending, Bank of America Merrill Lynch said on Aug. 17, saying it expects the nation’s economy to expand 5.8 percent this year. Citigroup Inc. on Aug. 18 cut its forecast for economic growth to the same pace, citing the drought.
The seasonal monsoon, which delivers about three-quarters of the nation’s annual rainfall, may be the driest in seven years, Ajit Tyagi, director general at the India Meteorological Department, said on Aug. 13, adding that may curb farm output in the world’s second-biggest producer of rice, wheat and sugar.
“India remains very attractive for equity opportunities,” Nanda said. He prefers shares in companies that will benefit from economic growth by building power plants, roads and automobiles and providing services including banking and engineering. He declined to name specific stocks.
Spending
Teera Chanpongsang, the Hong Kong-based manager of Fidelity International’s $2.3 billion India Focus Fund shares Nanda’s optimism that an economic recovery in the South Asian nation will buoy its stocks, saying government spending in rural areas will mitigate the effect of diminished monsoon rains.
India’s Sensitive Index is valued at 17.7 times estimated earnings while the Shanghai Composite Index trades at 22 times earnings and the MSCI Asia Pacific Index is valued at 24 times.
The nation’s insurance companies will probably buy more than the $12 billion of stocks this year than they bought in the Indian stock market last fiscal year, Nanda said.
“Indian equities could provide returns in the mid-teens over the next five to 10 years,” Nanda said.
Thursday, August 20, 2009
Gold demand drops to 5½-year low
Demand for gold sank to a 5½-year low in the second quarter of 2009 after jewellery consumption dropped by more than one fifth and investment interest slowed as the threat of meltdown in the global financial system receded.
Total identifiable gold demand, at 719.5 tonnes in the second quarter, was down 8.6 per cent compared with same period in 2008, with jewellery consumption down 22 per cent to 404.1 tonnes.
EDITOR’S CHOICE
Q&A: Gold on hold: what will move bullion? - Aug-18
Test of metal - Dec-16
Goldbugs undeterred by price volatility - Apr-12
Investment demand, which includes buying of bars and coins as well as inflows into exchange-traded funds, reached 222.4 tonnes in the second quarter, a rise of 46.4 per cent from the same period a year ago.
However, the second quarter was the weakest three-month period for investment demand since before the implosion of Lehman Brothers in September 2008.
“The global economic downturn has certainly had a major impact on the purchasing power of gold consumers, as have the high local prices and dollar volatility,” said Aram Shishmanian, chief executive of the World Gold Council which on Wednesday released its Gold Demand Trends report for the second quarter.
Mr Shishmanian said that although total demand had failed to match the exceptional levels seen when the economic and financial crisis was at its peak, investment demand had enjoyed a strong quarter, underlining a growing recognition of gold as an important and independent asset class.
Inflows into gold exchange-traded products reached 56.7 tonnes in the second quarter, up by 1,317.5 per cent compared with the same period in 2008, but down 87.8 per cent with the 465.1 tonnes that went into ETFs in the first quarter of this year.
The extraordinary rush to buy gold coins by investors in the developed world that was seen following the collapse of Lehman Brothers continued to slow. Coin buying by western retail investors, at 38.7 tonnes in the second quarter, remained substantially above its historic average but was well down on the record 137.9 tonnes and 92.7 tonnes acquired in the fourth quarter of last year and first quarter of 2009 respectively.
In the jewellery market, high local prices in India, the world’s largest jewellery market, weighed on demand, which fell 31 per cent to 88 tonnes while demand in Turkey dropped by 54 per cent 19.2 tonnes.
Japan’s jewellery market was one of the weakest performers with demand dropping 29 per cent to just 5.2 tonnes but there also were big falls in Thailand (down 30 per cent), Indonesia (down 21 per cent) and Vietnam (down 17 per cent).
Suki Cooper of Barclays said that although jewellery demand historically had provided a floor for prices, consumption had been hit by a cocktail of negative factors including high and volatile prices, economic weakness and concerns that India’s monsoon would be poor (affecting rural incomes).
Ms Cooper said Indian jewellery demand was likely to improve in the run up to the wedding season and Diwali, the key gold buying festival, year-on-year comparison would remain weak as buying was strong last August when prices dropped sharply.
China’s gold market exhibited a “unique resilience” according to the World Gold Council in the face of the pressures of the global economic recession. Mainland China’s jewellery demand rose 6 per cent year on year in the second quarter, the only major jewellery buying nation to record a positive rate of growth in volume, while investment demand remained relatively stable.
Retail price controls in China’s jewellery sector were only abolished in 2001 and on the investment side, although the Shanghai Gold Exchange was established in 2002, the investment market opened up as recently as 2005.
Rozanna Wozniak, the WGC’s investment research manager, said most Chinese consumers were still in the process of accumulating gold holdings and relatively low levels of ownership reflected the long period of government price and import controls.
Ms Wozniak said the potential for China’s jewellery demand to grow was significant as average per capita consumption in the past five years was less than half of that of India and just over one fifth of that in the US.
“China’s cultural affinity to gold may not be quite as strong as it is in India, but gold ownership is nevertheless a key part of the wedding season, gifting season and process of wealth protection and accumulation,” said Ms Wozniak.
The WGC said China could overtake India as the world’s largest gold consumer within the next 10 years, or even as early as within the next five years.
Gold only accounts for 2 per cent of the total reserves held by China’s central bank. If China’s reserves continue to grow rapidly, more gold would be required just to maintain a constant proportion.
China is the largest holder of US government bonds and therefore the outlook for the dollar is of paramount importance to the Chinese central bank. Some Chinese policymakers have called for the adoption of the IMF special drawing rights as a global currency, reflecting concerns about the impact on the dollar of the huge increase in US government debt required to counter the financial crisis.
The WGC said that it was possible that China could follow through on its concerns regarding the outlook for the US dollar by further diversifying its reserves into gold.
Gold traded at $934.30 a troy ounce on Wednesday, down 0.3 per cent. Gold has risen 6.4 per cent this year but remains 9.4 per cent below the record $1,030.80 a troy ounce reached in March 2008.
“Clearly demand is being hurt by high prices and globally weaker economic conditions,” said John Meyer of Fairfax: “We expect prices to remain at elevated levels but are cautious on gold’s potential to go past the $1,000 an ounce level any time soon.”
Total identifiable gold demand, at 719.5 tonnes in the second quarter, was down 8.6 per cent compared with same period in 2008, with jewellery consumption down 22 per cent to 404.1 tonnes.
EDITOR’S CHOICE
Q&A: Gold on hold: what will move bullion? - Aug-18
Test of metal - Dec-16
Goldbugs undeterred by price volatility - Apr-12
Investment demand, which includes buying of bars and coins as well as inflows into exchange-traded funds, reached 222.4 tonnes in the second quarter, a rise of 46.4 per cent from the same period a year ago.
However, the second quarter was the weakest three-month period for investment demand since before the implosion of Lehman Brothers in September 2008.
“The global economic downturn has certainly had a major impact on the purchasing power of gold consumers, as have the high local prices and dollar volatility,” said Aram Shishmanian, chief executive of the World Gold Council which on Wednesday released its Gold Demand Trends report for the second quarter.
Mr Shishmanian said that although total demand had failed to match the exceptional levels seen when the economic and financial crisis was at its peak, investment demand had enjoyed a strong quarter, underlining a growing recognition of gold as an important and independent asset class.
Inflows into gold exchange-traded products reached 56.7 tonnes in the second quarter, up by 1,317.5 per cent compared with the same period in 2008, but down 87.8 per cent with the 465.1 tonnes that went into ETFs in the first quarter of this year.
The extraordinary rush to buy gold coins by investors in the developed world that was seen following the collapse of Lehman Brothers continued to slow. Coin buying by western retail investors, at 38.7 tonnes in the second quarter, remained substantially above its historic average but was well down on the record 137.9 tonnes and 92.7 tonnes acquired in the fourth quarter of last year and first quarter of 2009 respectively.
In the jewellery market, high local prices in India, the world’s largest jewellery market, weighed on demand, which fell 31 per cent to 88 tonnes while demand in Turkey dropped by 54 per cent 19.2 tonnes.
Japan’s jewellery market was one of the weakest performers with demand dropping 29 per cent to just 5.2 tonnes but there also were big falls in Thailand (down 30 per cent), Indonesia (down 21 per cent) and Vietnam (down 17 per cent).
Suki Cooper of Barclays said that although jewellery demand historically had provided a floor for prices, consumption had been hit by a cocktail of negative factors including high and volatile prices, economic weakness and concerns that India’s monsoon would be poor (affecting rural incomes).
Ms Cooper said Indian jewellery demand was likely to improve in the run up to the wedding season and Diwali, the key gold buying festival, year-on-year comparison would remain weak as buying was strong last August when prices dropped sharply.
China’s gold market exhibited a “unique resilience” according to the World Gold Council in the face of the pressures of the global economic recession. Mainland China’s jewellery demand rose 6 per cent year on year in the second quarter, the only major jewellery buying nation to record a positive rate of growth in volume, while investment demand remained relatively stable.
Retail price controls in China’s jewellery sector were only abolished in 2001 and on the investment side, although the Shanghai Gold Exchange was established in 2002, the investment market opened up as recently as 2005.
Rozanna Wozniak, the WGC’s investment research manager, said most Chinese consumers were still in the process of accumulating gold holdings and relatively low levels of ownership reflected the long period of government price and import controls.
Ms Wozniak said the potential for China’s jewellery demand to grow was significant as average per capita consumption in the past five years was less than half of that of India and just over one fifth of that in the US.
“China’s cultural affinity to gold may not be quite as strong as it is in India, but gold ownership is nevertheless a key part of the wedding season, gifting season and process of wealth protection and accumulation,” said Ms Wozniak.
The WGC said China could overtake India as the world’s largest gold consumer within the next 10 years, or even as early as within the next five years.
Gold only accounts for 2 per cent of the total reserves held by China’s central bank. If China’s reserves continue to grow rapidly, more gold would be required just to maintain a constant proportion.
China is the largest holder of US government bonds and therefore the outlook for the dollar is of paramount importance to the Chinese central bank. Some Chinese policymakers have called for the adoption of the IMF special drawing rights as a global currency, reflecting concerns about the impact on the dollar of the huge increase in US government debt required to counter the financial crisis.
The WGC said that it was possible that China could follow through on its concerns regarding the outlook for the US dollar by further diversifying its reserves into gold.
Gold traded at $934.30 a troy ounce on Wednesday, down 0.3 per cent. Gold has risen 6.4 per cent this year but remains 9.4 per cent below the record $1,030.80 a troy ounce reached in March 2008.
“Clearly demand is being hurt by high prices and globally weaker economic conditions,” said John Meyer of Fairfax: “We expect prices to remain at elevated levels but are cautious on gold’s potential to go past the $1,000 an ounce level any time soon.”
India’s Benchmark Stock Index Rises; Tata Steel Leads Gains
Aug. 20 (Bloomberg) -- India’s benchmark stock index rose as metal prices rallied after equities rebounded in Asia, easing doubts about a global economic recovery.
Tata Steel Ltd., the biggest producer of the alloy, rose 2.3 percent. Hindalco Industries Ltd., the biggest aluminum producer, gained 3.5 percent.
“All indicators are showing that the Indian economy is recovering,” said Krish Shanbhag, the head of research at Antique Stock Broking Ltd. in Mumbai. “Investors should look at the long term and keep investing in the markets.”
The Bombay Stock Exchange’s Sensitive Index, or Sensex, rose 255.92, or 1.7 percent, to 15,065.56 at 10:36 a.m. The S&P CNX Nifty Index on the National Stock Exchange gained 1.8 percent to 4,471.55. The BSE 200 Index advanced 1.6 percent to 1,844.58.
Tata Steel rose 2.3 percent to 443.8 rupees. Hindalco Industries gained 3.5 percent to 106.3 rupees. Infosys Technologies Ltd., the second-largest software services provider, added 2 percent to 1,990.15 rupees after it said it is pursuing 10 to 12 government projects to raise its revenue from India.
Three-month delivery copper climbed as much as 2 percent to $6,101 a metric ton on the London Metal Exchange and traded at $6,068 a ton in Singapore. The contract dropped to the lowest since Aug. 3 yesterday.
Among other LME-traded metals, aluminum added 0.6 percent to $1,962 a ton, zinc rose 1.2 percent to $1,830 a ton, lead increased 0.7 percent to $1,825 and nickel climbed 2 percent to $19,220 a ton.
Asia, Metals
Asian stocks gained, led by energy and finance companies, as oil prices rallied.
The MSCI Asia Pacific Index added 0.6 percent to 110.99 in Tokyo. The gauge has advanced 57 percent from a more than five- year low on March 9 amid speculation the global economy is recovering. A measure of energy stocks on the index rose 2.4 percent, the best performer among 10 industry groups. The finance sub-index rose 1.4 percent, the second-placed grouping.
Japan’s Nikkei 225 Stock Average advanced 0.7 percent to 10,279.19. Australia’s S&P/ASX 200 Index gained 0.4 percent, while South Korea’s Kospi Index added 0.7 percent.
Adani Power advanced 2.1 percent to 102.05 rupees on its first day of trading after raising 30.3 billion rupees ($622 million) in an initial public offering.
“The response to the recent initial public offerings shows the risk appetite of investors is back,” said Shanbhag.
Avoiding Sell-Off
Utilities including Tata Power Co. and Indiabulls Power Ltd. plan to tap appetite for power shares after the Sensex headed for its best year in six, gaining 56 percent. Investors are betting energy demand will continue to climb as the government invests in electricity generation in a nation where the peak power deficit may rise to 12.6 percent.
Indian stocks will avoid a sell-off that briefly pushed China into a bear market as the South Asian nation is poised to topple its neighbor as the world’s fastest growing economy, according to ICICI Prudential Life Insurance Co.
“India’s economy will grow faster than China’s next year,” Puneet Nanda, executive vice president at ICICI Prudential, the country’s largest private insurer with $6 billion in equities, said in an interview in Mumbai yesterday. “Industrial and services sectors will grow far more rapidly than expected.”
India’s economy may expand this year at a faster pace than earlier forecast as business confidence rebounds, buoyed by government stimulus and record low borrowing costs, the central bank said July 27. China’s benchmark stock index yesterday briefly entered into a so-called bear market from its high this year on concern economic growth will falter as banks rein in lending. A decline of 20 percent signals a bear market.
Tata Steel Ltd., the biggest producer of the alloy, rose 2.3 percent. Hindalco Industries Ltd., the biggest aluminum producer, gained 3.5 percent.
“All indicators are showing that the Indian economy is recovering,” said Krish Shanbhag, the head of research at Antique Stock Broking Ltd. in Mumbai. “Investors should look at the long term and keep investing in the markets.”
The Bombay Stock Exchange’s Sensitive Index, or Sensex, rose 255.92, or 1.7 percent, to 15,065.56 at 10:36 a.m. The S&P CNX Nifty Index on the National Stock Exchange gained 1.8 percent to 4,471.55. The BSE 200 Index advanced 1.6 percent to 1,844.58.
Tata Steel rose 2.3 percent to 443.8 rupees. Hindalco Industries gained 3.5 percent to 106.3 rupees. Infosys Technologies Ltd., the second-largest software services provider, added 2 percent to 1,990.15 rupees after it said it is pursuing 10 to 12 government projects to raise its revenue from India.
Three-month delivery copper climbed as much as 2 percent to $6,101 a metric ton on the London Metal Exchange and traded at $6,068 a ton in Singapore. The contract dropped to the lowest since Aug. 3 yesterday.
Among other LME-traded metals, aluminum added 0.6 percent to $1,962 a ton, zinc rose 1.2 percent to $1,830 a ton, lead increased 0.7 percent to $1,825 and nickel climbed 2 percent to $19,220 a ton.
Asia, Metals
Asian stocks gained, led by energy and finance companies, as oil prices rallied.
The MSCI Asia Pacific Index added 0.6 percent to 110.99 in Tokyo. The gauge has advanced 57 percent from a more than five- year low on March 9 amid speculation the global economy is recovering. A measure of energy stocks on the index rose 2.4 percent, the best performer among 10 industry groups. The finance sub-index rose 1.4 percent, the second-placed grouping.
Japan’s Nikkei 225 Stock Average advanced 0.7 percent to 10,279.19. Australia’s S&P/ASX 200 Index gained 0.4 percent, while South Korea’s Kospi Index added 0.7 percent.
Adani Power advanced 2.1 percent to 102.05 rupees on its first day of trading after raising 30.3 billion rupees ($622 million) in an initial public offering.
“The response to the recent initial public offerings shows the risk appetite of investors is back,” said Shanbhag.
Avoiding Sell-Off
Utilities including Tata Power Co. and Indiabulls Power Ltd. plan to tap appetite for power shares after the Sensex headed for its best year in six, gaining 56 percent. Investors are betting energy demand will continue to climb as the government invests in electricity generation in a nation where the peak power deficit may rise to 12.6 percent.
Indian stocks will avoid a sell-off that briefly pushed China into a bear market as the South Asian nation is poised to topple its neighbor as the world’s fastest growing economy, according to ICICI Prudential Life Insurance Co.
“India’s economy will grow faster than China’s next year,” Puneet Nanda, executive vice president at ICICI Prudential, the country’s largest private insurer with $6 billion in equities, said in an interview in Mumbai yesterday. “Industrial and services sectors will grow far more rapidly than expected.”
India’s economy may expand this year at a faster pace than earlier forecast as business confidence rebounds, buoyed by government stimulus and record low borrowing costs, the central bank said July 27. China’s benchmark stock index yesterday briefly entered into a so-called bear market from its high this year on concern economic growth will falter as banks rein in lending. A decline of 20 percent signals a bear market.
Bernanke, a Hero to His Own, Can’t Shake Critics
WASHINGTON — Ben S. Bernanke, chairman of the Federal Reserve, no longer looks sleep-deprived.
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He still works seven days a week, but earlier this month he took two days off — for the first time in two years — to attend his son’s wedding. And he often gets home for dinner and even out to baseball games every few weeks.
As central bankers and economists from around the world gather on Thursday for the Fed’s annual retreat in Jackson Hole, Wyo., most are likely to welcome Mr. Bernanke as a conquering hero. In Washington and on Wall Street, it would be a surprise if President Obama did not nominate Mr. Bernanke for a second term, even though he is a Republican and was appointed by President George W. Bush.
But the White House has remained silent. And despite Mr. Bernanke’s credibility in financial circles, both he and the Fed as an institution have come under political fire from lawmakers in both parties over the handling of particular bailouts and the scope of the Fed’s power.
He has been frustrated that many in Congress do not give the Fed what he believes is enough credit for what it has accomplished. Indeed, Mr. Bernanke has met privately with hundreds of lawmakers in recent months to explain the Fed’s strategy.
Fellow economists, however, are heaping praise on Mr. Bernanke for his bold actions and steady hand in pulling the economy out of its worst crisis since the 1930s. Tossing out the Fed’s standard playbook, Mr. Bernanke orchestrated a long list of colossal rescue programs: Wall Street bailouts, shotgun weddings, emergency loan programs, vast amounts of newly printed money and the lowest interest rates in American history.
Even one of his harshest critics now praises him.
“He realized that the great recession could turn into the Great Depression 2.0, and he was very aggressive about taking the actions that needed to be taken,” said Nouriel Roubini, chairman of Roubini Global Economics, who had long criticized Fed officials for ignoring the dangers of the housing bubble.
But Mr. Bernanke is hardly breathing easy. Unemployment is still at 9.4 percent, and the central bank’s own forecasts assume that it will remain that high through the end of next year. Even if all goes according to plan, Fed officials said, Mr. Bernanke’s current popularity could sink if the recovery proves slower than many people expect.
While the White House keeps mum about Mr. Bernanke’s future, the leading Democratic candidates to replace him include Lawrence H. Summers, director of the National Economic Council; Janet L. Yellen, president of the Federal Reserve Bank of San Francisco; Alan S. Blinder, a Princeton economist and former Fed vice chairman; and Roger Ferguson, another former Fed vice chairman.
Mr. Bernanke faces two major challenges. On the economic front, the Fed has to decide when and how it will reverse all its emergency measures and raise interest rates back to normal without either stalling the economy or igniting inflation.
On the political front, Mr. Bernanke is trying to defend the Fed’s power and independence as the White House and Congress debate plans to overhaul the system of financial regulation.
Democrats like Senator Christopher J. Dodd of Connecticut, chairman of the Senate Banking Committee, contend that the Fed was too cozy with banks and Wall Street firms as the mortgage crisis was building. House Republicans, and some Democrats, complain that the Fed already has too much power.
“Why does the Fed deserve more authority when institutionally it seemed to have failed to prevent the current crisis?” asked Senator Dodd last month.
The political battle over President Obama’s plan to overhaul financial regulation has put Mr. Bernanke in an awkward position.
Fed officials support the administration’s proposals to put them in charge of systemic risk like the growth of reckless mortgage lending or the misuse of financial derivatives. But they chafe at the plan to shift the Fed’s consumer-protection functions, which protect people from deceptive and unfair lending practices, to a new agency.
Mr. Bernanke has avoided publicly criticizing the White House’s call for an independent consumer regulatory agency. While acknowledging that the Federal Reserve did nothing to stop mortgage practices during the housing bubble, Mr. Bernanke has argued that the Fed has since written tough new protections for both mortgage borrowers and credit card customers.
“We think the Fed can play a constructive role in protecting consumers,” he told the House Financial Services Committee last month.
Mr. Bernanke and other Fed officials now concede they failed to anticipate the full danger posed by the explosion of subprime mortgage lending. As recently as the spring of 2007, Mr. Bernanke still contended that the problems of the housing market were largely “contained” to subprime mortgages. When panic over mortgage-backed securities began spreading through the broader credit markets in late July 2007, Fed officials initially refused to cut interest rates.
By December 2007, Mr. Bernanke became increasingly convinced that the economy itself was in trouble but policy makers were unable to reach agreement and decided not to reduce interest rates.
At a meeting on Jan. 21, 2008, the Fed slashed the benchmark federal funds rate by 0.75 percent, to 3.5 percent, the biggest one-time reduction in decades. Nine days later, officials cut the rate again, down to 3 percent.
As the credit crisis deepened, Mr. Bernanke urged Fed officials to devise proposals that had never been tried before. They responded with a kaleidoscope of emergency loan programs to a wide array of industries.
“He has had tremendous courage throughout this episode,” said Frederic S. Mishkin, a professor at Columbia University’s business school and a former Fed governor.
Amid the chaos, Fed and Treasury officials made numerous mistakes. Their original idea for the $700 billion to buy up bad mortgage assets held by banks has yet to get off the ground.
But economists say Mr. Bernanke’s most important accomplishment was to create staggering amounts of money out of thin air.
All told, the Federal Reserve has expanded its balance sheet to $1.9 trillion today, from about $900 billion a year ago. Analysts now caution that Mr. Bernanke’s job is only half complete. He will eventually have to reel all that money back. He has already laid out elements of the Fed’s “exit strategy,” but Fed officials have been careful to say it is still too early to pull back any time soon.
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Times Topics: Ben S. Bernanke | Federal Reserve System
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Should President Obama nominate Ben S. Bernanke to a second term as chairman of the Federal Reserve?
* Post a Comment »
He still works seven days a week, but earlier this month he took two days off — for the first time in two years — to attend his son’s wedding. And he often gets home for dinner and even out to baseball games every few weeks.
As central bankers and economists from around the world gather on Thursday for the Fed’s annual retreat in Jackson Hole, Wyo., most are likely to welcome Mr. Bernanke as a conquering hero. In Washington and on Wall Street, it would be a surprise if President Obama did not nominate Mr. Bernanke for a second term, even though he is a Republican and was appointed by President George W. Bush.
But the White House has remained silent. And despite Mr. Bernanke’s credibility in financial circles, both he and the Fed as an institution have come under political fire from lawmakers in both parties over the handling of particular bailouts and the scope of the Fed’s power.
He has been frustrated that many in Congress do not give the Fed what he believes is enough credit for what it has accomplished. Indeed, Mr. Bernanke has met privately with hundreds of lawmakers in recent months to explain the Fed’s strategy.
Fellow economists, however, are heaping praise on Mr. Bernanke for his bold actions and steady hand in pulling the economy out of its worst crisis since the 1930s. Tossing out the Fed’s standard playbook, Mr. Bernanke orchestrated a long list of colossal rescue programs: Wall Street bailouts, shotgun weddings, emergency loan programs, vast amounts of newly printed money and the lowest interest rates in American history.
Even one of his harshest critics now praises him.
“He realized that the great recession could turn into the Great Depression 2.0, and he was very aggressive about taking the actions that needed to be taken,” said Nouriel Roubini, chairman of Roubini Global Economics, who had long criticized Fed officials for ignoring the dangers of the housing bubble.
But Mr. Bernanke is hardly breathing easy. Unemployment is still at 9.4 percent, and the central bank’s own forecasts assume that it will remain that high through the end of next year. Even if all goes according to plan, Fed officials said, Mr. Bernanke’s current popularity could sink if the recovery proves slower than many people expect.
While the White House keeps mum about Mr. Bernanke’s future, the leading Democratic candidates to replace him include Lawrence H. Summers, director of the National Economic Council; Janet L. Yellen, president of the Federal Reserve Bank of San Francisco; Alan S. Blinder, a Princeton economist and former Fed vice chairman; and Roger Ferguson, another former Fed vice chairman.
Mr. Bernanke faces two major challenges. On the economic front, the Fed has to decide when and how it will reverse all its emergency measures and raise interest rates back to normal without either stalling the economy or igniting inflation.
On the political front, Mr. Bernanke is trying to defend the Fed’s power and independence as the White House and Congress debate plans to overhaul the system of financial regulation.
Democrats like Senator Christopher J. Dodd of Connecticut, chairman of the Senate Banking Committee, contend that the Fed was too cozy with banks and Wall Street firms as the mortgage crisis was building. House Republicans, and some Democrats, complain that the Fed already has too much power.
“Why does the Fed deserve more authority when institutionally it seemed to have failed to prevent the current crisis?” asked Senator Dodd last month.
The political battle over President Obama’s plan to overhaul financial regulation has put Mr. Bernanke in an awkward position.
Fed officials support the administration’s proposals to put them in charge of systemic risk like the growth of reckless mortgage lending or the misuse of financial derivatives. But they chafe at the plan to shift the Fed’s consumer-protection functions, which protect people from deceptive and unfair lending practices, to a new agency.
Mr. Bernanke has avoided publicly criticizing the White House’s call for an independent consumer regulatory agency. While acknowledging that the Federal Reserve did nothing to stop mortgage practices during the housing bubble, Mr. Bernanke has argued that the Fed has since written tough new protections for both mortgage borrowers and credit card customers.
“We think the Fed can play a constructive role in protecting consumers,” he told the House Financial Services Committee last month.
Mr. Bernanke and other Fed officials now concede they failed to anticipate the full danger posed by the explosion of subprime mortgage lending. As recently as the spring of 2007, Mr. Bernanke still contended that the problems of the housing market were largely “contained” to subprime mortgages. When panic over mortgage-backed securities began spreading through the broader credit markets in late July 2007, Fed officials initially refused to cut interest rates.
By December 2007, Mr. Bernanke became increasingly convinced that the economy itself was in trouble but policy makers were unable to reach agreement and decided not to reduce interest rates.
At a meeting on Jan. 21, 2008, the Fed slashed the benchmark federal funds rate by 0.75 percent, to 3.5 percent, the biggest one-time reduction in decades. Nine days later, officials cut the rate again, down to 3 percent.
As the credit crisis deepened, Mr. Bernanke urged Fed officials to devise proposals that had never been tried before. They responded with a kaleidoscope of emergency loan programs to a wide array of industries.
“He has had tremendous courage throughout this episode,” said Frederic S. Mishkin, a professor at Columbia University’s business school and a former Fed governor.
Amid the chaos, Fed and Treasury officials made numerous mistakes. Their original idea for the $700 billion to buy up bad mortgage assets held by banks has yet to get off the ground.
But economists say Mr. Bernanke’s most important accomplishment was to create staggering amounts of money out of thin air.
All told, the Federal Reserve has expanded its balance sheet to $1.9 trillion today, from about $900 billion a year ago. Analysts now caution that Mr. Bernanke’s job is only half complete. He will eventually have to reel all that money back. He has already laid out elements of the Fed’s “exit strategy,” but Fed officials have been careful to say it is still too early to pull back any time soon.
Wednesday, August 19, 2009
In Appraisal Shift, Lenders Gain Power and Critics
Mike Kennedy, a real estate appraiser in Monroe, N.Y., was examining a suburban house a few years ago when he discovered five feet of water in the basement. The mortgage broker arranging the owner’s refinancing asked him to pretend it was not there.
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Kevin Moloney for The New York Times
Terry Hartlieb on his way to a home appraisal in Fort Collins, Colo. This year, lenders began controlling the appraisal process.
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Brokers, real estate agents and banks asked appraisers to do a lot of pretending during the housing boom, pumping up values while ignoring defects. While Mr. Kennedy says he never complied, many appraisers did, some of them thinking they had no choice if they wanted work. A profession that should have been a brake on the spiral in home prices instead became a big contributor.
On May 1, a sweeping change took effect that was meant to reduce the conflicts of interest in home appraisals while safeguarding the independence of the people who do them.
Brokers and real estate agents can no longer order appraisals. Lenders now control the entire process.
The Home Valuation Code of Conduct is setting off a bitter battle. Mortgage brokers, lenders, real estate agents, regulators and appraisers are all arguing over whether an effort to fix one problem has created many new ones.
The agents, maintaining that the changes are effectively blocking home sales by encouraging the use of inexperienced appraisers, are asking Washington to suspend the code until 2011. For their part, appraisers acknowledge that the change may have been well intentioned but contend that it has no teeth and is undermining the economics of their profession.
“We’ve been begging for years for enforcement of existing state and federal laws regulating appraising,” said Mr. Kennedy, a leader in the appraisal community. “We thought we were finally going to get that. But the code is doing nothing except putting ethical appraisers out of business.”
Financial change is one of the most contentious issues in Washington, and efforts to fix even widely acknowledged problems seem stalled. The attempt to change the appraisal system is an example of how difficult it can be to adopt changes that are good in theory and also work in practice — while simultaneously winning support from warring interest groups.
“The real estate industry is incredibly complex,” said Josh Denney, a lobbyist with the Mortgage Bankers Association. “If you take one piece and tinker with it, it causes friction throughout the process.”
The Home Valuation Code of Conduct had an unusual origin. It was developed by the New York attorney general, Andrew M. Cuomo, who persuaded the big federal mortgage agencies, Fannie Mae and Freddie Mac, to adopt it. That has effectively made it national policy.
Putting appraisals completely in the hands of lenders may sound like a good idea in principle, because it is supposed to be lenders who are putting their money at risk in a home loan.
But the reality is that many companies that write home loans these days do not have much incentive to worry about the accuracy of appraisals. That is because the companies do not keep the loans on their own books, instead selling them to Fannie Mae or Freddie Mac.
“The code is a formula for continued problems with fraud,” said David Callahan, a senior fellow with the public policy group Demos who has studied appraisals. “Appraisers have been asking for a long time for a reliable firewall between themselves and lenders, and are further from it than ever.”
Appraisers Pressured
Before real estate prices went out of control, appraisal work was straightforward. The appraiser examined a property inside and out, judging it against the prices that similar properties in the neighborhood were fetching. If the appraisal value matched the sales price, the lender financed the loan.
As lending standards collapsed during the housing boom, appraisers were pressured from all sides. When the appraiser did not deliver a satisfactory price, the deal did not get done, and the broker, agent and lender did not get their fees. Homeowners also loved inflated appraisals, using them to take out as much as possible when they refinanced.
“I got daily calls from lenders and brokers saying, ‘Here’s the address. Can you get me $400,000?’ ” said Mr. Kennedy, who has been in the business since 1993.
Skip to next paragraph
Back to Business
New Rules, New Risk
This series examines the battles taking place to reshape the financial industry.
Previous Articles in the Series »
Enlarge This Image
Kevin Moloney for The New York Times
Terry Hartlieb on his way to a home appraisal in Fort Collins, Colo. This year, lenders began controlling the appraisal process.
Readers' Comments
Share your thoughts.
* Post a Comment »
* Read All Comments (2) »
Brokers, real estate agents and banks asked appraisers to do a lot of pretending during the housing boom, pumping up values while ignoring defects. While Mr. Kennedy says he never complied, many appraisers did, some of them thinking they had no choice if they wanted work. A profession that should have been a brake on the spiral in home prices instead became a big contributor.
On May 1, a sweeping change took effect that was meant to reduce the conflicts of interest in home appraisals while safeguarding the independence of the people who do them.
Brokers and real estate agents can no longer order appraisals. Lenders now control the entire process.
The Home Valuation Code of Conduct is setting off a bitter battle. Mortgage brokers, lenders, real estate agents, regulators and appraisers are all arguing over whether an effort to fix one problem has created many new ones.
The agents, maintaining that the changes are effectively blocking home sales by encouraging the use of inexperienced appraisers, are asking Washington to suspend the code until 2011. For their part, appraisers acknowledge that the change may have been well intentioned but contend that it has no teeth and is undermining the economics of their profession.
“We’ve been begging for years for enforcement of existing state and federal laws regulating appraising,” said Mr. Kennedy, a leader in the appraisal community. “We thought we were finally going to get that. But the code is doing nothing except putting ethical appraisers out of business.”
Financial change is one of the most contentious issues in Washington, and efforts to fix even widely acknowledged problems seem stalled. The attempt to change the appraisal system is an example of how difficult it can be to adopt changes that are good in theory and also work in practice — while simultaneously winning support from warring interest groups.
“The real estate industry is incredibly complex,” said Josh Denney, a lobbyist with the Mortgage Bankers Association. “If you take one piece and tinker with it, it causes friction throughout the process.”
The Home Valuation Code of Conduct had an unusual origin. It was developed by the New York attorney general, Andrew M. Cuomo, who persuaded the big federal mortgage agencies, Fannie Mae and Freddie Mac, to adopt it. That has effectively made it national policy.
Putting appraisals completely in the hands of lenders may sound like a good idea in principle, because it is supposed to be lenders who are putting their money at risk in a home loan.
But the reality is that many companies that write home loans these days do not have much incentive to worry about the accuracy of appraisals. That is because the companies do not keep the loans on their own books, instead selling them to Fannie Mae or Freddie Mac.
“The code is a formula for continued problems with fraud,” said David Callahan, a senior fellow with the public policy group Demos who has studied appraisals. “Appraisers have been asking for a long time for a reliable firewall between themselves and lenders, and are further from it than ever.”
Appraisers Pressured
Before real estate prices went out of control, appraisal work was straightforward. The appraiser examined a property inside and out, judging it against the prices that similar properties in the neighborhood were fetching. If the appraisal value matched the sales price, the lender financed the loan.
As lending standards collapsed during the housing boom, appraisers were pressured from all sides. When the appraiser did not deliver a satisfactory price, the deal did not get done, and the broker, agent and lender did not get their fees. Homeowners also loved inflated appraisals, using them to take out as much as possible when they refinanced.
“I got daily calls from lenders and brokers saying, ‘Here’s the address. Can you get me $400,000?’ ” said Mr. Kennedy, who has been in the business since 1993.
Indian Stocks Fall After Minister Says Rice Yields May Drop
Aug. 19 (Bloomberg) -- India’s benchmark stock index fell to its lowest in more than a month after the nation’s agriculture minister said farm output may decline because of weak monsoon rains.
Mahindra & Mahindra Ltd., India’s largest tractor maker, led the drop after Farm Minister Sharad Pawar today said monsoon-sown rice production may decline by 10 million metric tons this year as a result of drought in a third of the country’s 626 districts. Growers harvested 84.6 million tons of the seasonally planted crop in the year ended June.
“There is uncertainty in the minds of investors how the government will overcome the drought situation,” said A.N. Sridhar, a fund manager at Sahara Asset Management Co. in Mumbai.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 338.77, or 2.25 percent, to 14,696.49 at 12:18 p.m. in Mumbai. The measure has lost 6.2 percent so far this year on monsoon concerns. The S&P CNX Nifty Index on the National Stock Exchange lost 1.5 percent to 4,392.95. The BSE 200 Index declined 1.4 percent to 1,818.45.
Mahindra lost 2.1 percent to 752.9 rupees. Jaiprakash Associates Ltd., the nation’s biggest maker of dams, slid 2.5 percent to 207 rupees.
The monsoon season, which brings about three-quarters of India’s annual rainfall, may be the driest in seven years, the weather bureau said last week. More than a third of the nation’s 626 districts have declared drought, hurting farm output in the world’s second-biggest producer of rice, sugar and wheat.
Rain in the June-September season will be 87 percent of the 50-year average, compared with 93 percent forecast in June, the India Meteorological Department said last week.
Oils Subsidy
Production of oilseeds and sugar cane may also drop, Pawar said, without providing a forecast. Monsoon-sown oilseeds were planted in 15.2 million hectares compared with 16.4 million hectares a year earlier, the farm ministry said.
The government will extend a 15 rupees-a-liter subsidy on imported edible oils until March 2010, Pawar said.
Overseas funds sold a net 9.74 billion rupees ($200.1 million) of Indian stocks on Aug. 17, the Securities & Exchange Board of India said on its Web site. The funds have bought 366.3 billion rupees of Indian stocks this year to date, compared with record net sales of 530 billion rupees for the whole of 2008.
Glenmark Pharmaceuticals Ltd., an Indian pharmaceutical company, fell the most in two months after saying its drug for lung disease wasn’t effective in a patient study. The stock sank 10 percent to 235 rupees.
Mahindra & Mahindra Ltd., India’s largest tractor maker, led the drop after Farm Minister Sharad Pawar today said monsoon-sown rice production may decline by 10 million metric tons this year as a result of drought in a third of the country’s 626 districts. Growers harvested 84.6 million tons of the seasonally planted crop in the year ended June.
“There is uncertainty in the minds of investors how the government will overcome the drought situation,” said A.N. Sridhar, a fund manager at Sahara Asset Management Co. in Mumbai.
The Bombay Stock Exchange’s Sensitive Index, or Sensex, fell 338.77, or 2.25 percent, to 14,696.49 at 12:18 p.m. in Mumbai. The measure has lost 6.2 percent so far this year on monsoon concerns. The S&P CNX Nifty Index on the National Stock Exchange lost 1.5 percent to 4,392.95. The BSE 200 Index declined 1.4 percent to 1,818.45.
Mahindra lost 2.1 percent to 752.9 rupees. Jaiprakash Associates Ltd., the nation’s biggest maker of dams, slid 2.5 percent to 207 rupees.
The monsoon season, which brings about three-quarters of India’s annual rainfall, may be the driest in seven years, the weather bureau said last week. More than a third of the nation’s 626 districts have declared drought, hurting farm output in the world’s second-biggest producer of rice, sugar and wheat.
Rain in the June-September season will be 87 percent of the 50-year average, compared with 93 percent forecast in June, the India Meteorological Department said last week.
Oils Subsidy
Production of oilseeds and sugar cane may also drop, Pawar said, without providing a forecast. Monsoon-sown oilseeds were planted in 15.2 million hectares compared with 16.4 million hectares a year earlier, the farm ministry said.
The government will extend a 15 rupees-a-liter subsidy on imported edible oils until March 2010, Pawar said.
Overseas funds sold a net 9.74 billion rupees ($200.1 million) of Indian stocks on Aug. 17, the Securities & Exchange Board of India said on its Web site. The funds have bought 366.3 billion rupees of Indian stocks this year to date, compared with record net sales of 530 billion rupees for the whole of 2008.
Glenmark Pharmaceuticals Ltd., an Indian pharmaceutical company, fell the most in two months after saying its drug for lung disease wasn’t effective in a patient study. The stock sank 10 percent to 235 rupees.
Oil Industry Backs Protests of Emissions Bill
HOUSTON — Hard on the heels of the health care protests, another citizen movement seems to have sprung up, this one to oppose Washington’s attempts to tackle climate change. But behind the scenes, an industry with much at stake — Big Oil — is pulling the strings.
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Karen Warren/Houston Chronicle, via Associated Press
Gaylene Reier, center, at the rally. Workers at her company, Anadarko Petroleum, were provided with buses to get there.
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Green Inc.
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Hundreds of people packed a downtown theater here on Tuesday for a lunchtime rally that was as much a celebration of oil’s traditional role in the Texas way of life as it was a political protest against Washington’s energy policies, which many here fear will raise energy prices.
“Something we hold dear is in danger, and that’s our future,” said Bill Bailey, a rodeo announcer and local celebrity, who was the master of ceremonies at the hourlong rally.
The event on Tuesday was organized by a group called Energy Citizens, which is backed by the American Petroleum Institute, the oil industry’s main trade group. Many of the people attending the demonstration were employees of oil companies who work in Houston and were bused from their workplaces.
This was the first of a series of about 20 rallies planned for Southern and oil-producing states to organize resistance to proposed legislation that would set a limit on emissions of heat-trapping gases, requiring many companies to buy emission permits. Participants described the system as an energy tax that would undermine the economy of Houston, the nation’s energy capital.
Mentions of the legislation, which narrowly passed the House in June, drew boos, but most of the rally was festive. A high school marching band played, hot dogs and hamburgers were served, a video featuring the country star Trace Adkins was shown, and hundreds of people wore yellow T-shirts with slogans like “Create American Jobs Don’t Export Them” and “I’ll Pass on $4 Gas.”
The buoyant atmosphere belied the billions of dollars at stake for the petroleum industry. Since the House passed the bill, oil executives have repeatedly complained that their industry would incur sharply higher costs, while federal subsidies would flow to coal-fired utilities and renewable energy programs.
“It’s just a sense of outrage and disappointment with the bill passed by the House,” said James T. Hackett, chief executive of Anadarko Petroleum, who attended the rally. He defended, as an environmental measure, the use of buses financed by oil companies and Energy Citizens to carry employees to the rally. “If we all drove in cars, it wouldn’t look good,” he said.
While polls show that a majority of Americans support efforts to tackle climate change, opposition to the climate bill from energy-intensive industries has become more vigorous in recent weeks. The Senate is expected to consider its own version of the bill at the end of September.
A public relations company hired by a pro-coal industry group, the American Coalition for Clean Coal Electricity, recently sent at least 58 fake letters opposing new climate laws to members of Congress. The letters, forged by the public relations company Bonner & Associates, purported to be from groups like the National Association for the Advancement of Colored People and Hispanic organizations.
Bonner & Associates has acknowledged the forgeries, blaming them on a temporary employee who was subsequently fired. The coal coalition has apologized for the fake letters and said it was cooperating with an investigation of the matter by a Congressional committee.
For its part, the oil industry plans to raise the pressure in coming weeks through its public rallies so that it can negotiate more favorable terms in the Senate than it got in the House. The strategy was outlined by the American Petroleum Institute in a memorandum sent to its members, which include Exxon Mobil, Chevron and ConocoPhillips. The memorandum, not meant for the public, was obtained by the environmental group Greenpeace last week.
“It’s a clear political hit campaign,” said Kert Davies, the research director at Greenpeace.
In the memorandum, the president and chief executive of the American Petroleum Institute, Jack N. Gerard, said that the aim of the rallies was to send a “loud message” to the Senate. He said the rallies should focus on higher energy costs and jobs. “It’s important that our views be heard,” Mr. Gerard wrote.
Cathy Landry, a spokeswoman for the American Petroleum Institute, confirmed the contents of the memorandum, but said that the rally was not strictly an institute event and that Energy Citizens included other organizations representing farm and other business interests.
The House bill seeks to reduce greenhouse gases in the United States by 83 percent by 2050 through a mechanism known as cap and trade, which would create carbon permits that could be bought and sold. President Obama initially wanted these permits to be entirely auctioned off, so that all industries would be on the same footing, but the sponsors of the bill agreed to hand out 85 percent of the permits free to ensure passage of the legislation.
The power sector, which accounts for about a third of the nation’s emissions, got 35.5 percent of the free allowances. Petroleum refiners, meanwhile, got 2.25 percent of these allowances, although the transportation sector accounts for about 40 percent of emissions. That means oil companies would have to buy many of their permits on the open market, and they contend that they would have to raise gasoline prices to do so.
But Daniel J. Weiss, a senior fellow at the Center for American Progress, a research and advocacy organization, said that refiners would be allowed to keep the value of the free allowances they received, while public utilities would be required to return the value of their permits to customers.
“There is a myth out there that this is a giveaway to utilities,” Mr. Weiss said. “It’s not true. The oil industry’s goal is to block or weaken efforts to tackle global warming.”
The rallies have opened a rift within the industry. Royal Dutch Shell, an initial supporter of climate legislation, said that it had told the institute that it would not participate in the rallies, although its employees would be free to attend if they wanted to. ConocoPhillips, meanwhile, has opposed the bill since its passage and, in a note on its Web site, encouraged employees to attend the rallies.
Since Mr. Obama’s election, the oil industry has lost some clout in Washington. The rally on Tuesday gave voice to the feeling among employees of oil companies that their industry was being battered.
“I experienced Carter’s war against the industry, and I’m tired of being pushed around,” said David H. Leland, a geological map maker for NFR Energy. “We provide a product for a reasonable price, and we’re going to be punished for doing a damn good job.”
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Related
More Fake Letters to Congress on Energy Bill (August 19, 2009)
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* Anadarko Petroleum Corporation
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Enlarge This Image
Karen Warren/Houston Chronicle, via Associated Press
Gaylene Reier, center, at the rally. Workers at her company, Anadarko Petroleum, were provided with buses to get there.
green inc.
Green Inc.
A blog about energy, the environment and the bottom line.
Go to Blog »
Hundreds of people packed a downtown theater here on Tuesday for a lunchtime rally that was as much a celebration of oil’s traditional role in the Texas way of life as it was a political protest against Washington’s energy policies, which many here fear will raise energy prices.
“Something we hold dear is in danger, and that’s our future,” said Bill Bailey, a rodeo announcer and local celebrity, who was the master of ceremonies at the hourlong rally.
The event on Tuesday was organized by a group called Energy Citizens, which is backed by the American Petroleum Institute, the oil industry’s main trade group. Many of the people attending the demonstration were employees of oil companies who work in Houston and were bused from their workplaces.
This was the first of a series of about 20 rallies planned for Southern and oil-producing states to organize resistance to proposed legislation that would set a limit on emissions of heat-trapping gases, requiring many companies to buy emission permits. Participants described the system as an energy tax that would undermine the economy of Houston, the nation’s energy capital.
Mentions of the legislation, which narrowly passed the House in June, drew boos, but most of the rally was festive. A high school marching band played, hot dogs and hamburgers were served, a video featuring the country star Trace Adkins was shown, and hundreds of people wore yellow T-shirts with slogans like “Create American Jobs Don’t Export Them” and “I’ll Pass on $4 Gas.”
The buoyant atmosphere belied the billions of dollars at stake for the petroleum industry. Since the House passed the bill, oil executives have repeatedly complained that their industry would incur sharply higher costs, while federal subsidies would flow to coal-fired utilities and renewable energy programs.
“It’s just a sense of outrage and disappointment with the bill passed by the House,” said James T. Hackett, chief executive of Anadarko Petroleum, who attended the rally. He defended, as an environmental measure, the use of buses financed by oil companies and Energy Citizens to carry employees to the rally. “If we all drove in cars, it wouldn’t look good,” he said.
While polls show that a majority of Americans support efforts to tackle climate change, opposition to the climate bill from energy-intensive industries has become more vigorous in recent weeks. The Senate is expected to consider its own version of the bill at the end of September.
A public relations company hired by a pro-coal industry group, the American Coalition for Clean Coal Electricity, recently sent at least 58 fake letters opposing new climate laws to members of Congress. The letters, forged by the public relations company Bonner & Associates, purported to be from groups like the National Association for the Advancement of Colored People and Hispanic organizations.
Bonner & Associates has acknowledged the forgeries, blaming them on a temporary employee who was subsequently fired. The coal coalition has apologized for the fake letters and said it was cooperating with an investigation of the matter by a Congressional committee.
For its part, the oil industry plans to raise the pressure in coming weeks through its public rallies so that it can negotiate more favorable terms in the Senate than it got in the House. The strategy was outlined by the American Petroleum Institute in a memorandum sent to its members, which include Exxon Mobil, Chevron and ConocoPhillips. The memorandum, not meant for the public, was obtained by the environmental group Greenpeace last week.
“It’s a clear political hit campaign,” said Kert Davies, the research director at Greenpeace.
In the memorandum, the president and chief executive of the American Petroleum Institute, Jack N. Gerard, said that the aim of the rallies was to send a “loud message” to the Senate. He said the rallies should focus on higher energy costs and jobs. “It’s important that our views be heard,” Mr. Gerard wrote.
Cathy Landry, a spokeswoman for the American Petroleum Institute, confirmed the contents of the memorandum, but said that the rally was not strictly an institute event and that Energy Citizens included other organizations representing farm and other business interests.
The House bill seeks to reduce greenhouse gases in the United States by 83 percent by 2050 through a mechanism known as cap and trade, which would create carbon permits that could be bought and sold. President Obama initially wanted these permits to be entirely auctioned off, so that all industries would be on the same footing, but the sponsors of the bill agreed to hand out 85 percent of the permits free to ensure passage of the legislation.
The power sector, which accounts for about a third of the nation’s emissions, got 35.5 percent of the free allowances. Petroleum refiners, meanwhile, got 2.25 percent of these allowances, although the transportation sector accounts for about 40 percent of emissions. That means oil companies would have to buy many of their permits on the open market, and they contend that they would have to raise gasoline prices to do so.
But Daniel J. Weiss, a senior fellow at the Center for American Progress, a research and advocacy organization, said that refiners would be allowed to keep the value of the free allowances they received, while public utilities would be required to return the value of their permits to customers.
“There is a myth out there that this is a giveaway to utilities,” Mr. Weiss said. “It’s not true. The oil industry’s goal is to block or weaken efforts to tackle global warming.”
The rallies have opened a rift within the industry. Royal Dutch Shell, an initial supporter of climate legislation, said that it had told the institute that it would not participate in the rallies, although its employees would be free to attend if they wanted to. ConocoPhillips, meanwhile, has opposed the bill since its passage and, in a note on its Web site, encouraged employees to attend the rallies.
Since Mr. Obama’s election, the oil industry has lost some clout in Washington. The rally on Tuesday gave voice to the feeling among employees of oil companies that their industry was being battered.
“I experienced Carter’s war against the industry, and I’m tired of being pushed around,” said David H. Leland, a geological map maker for NFR Energy. “We provide a product for a reasonable price, and we’re going to be punished for doing a damn good job.”
Asian Stocks Fall as China Enters Bear Market; Sony Declines
Aug. 19 (Bloomberg) -- Asian stocks fell, briefly dragging China’s key index into a so-called bear market, as Maanshan Iron & Steel Co. reported losses and shipping rates slumped.
Maanshan Steel, China’s No. 4 listed steelmaker, lost 7.5 percent, while China Cosco Holdings Ltd., the world’s largest operator of dry-bulk ships, slumped 7.4 percent in Shanghai. Tokio Marine Holdings Inc. dropped 2 percent after Japanese regulators said new guidelines will hurt insurers’ solvency ratios. Sony Corp. sank 3.9 percent after cutting the price of its PlayStation 3 game player.
The MSCI Asia Pacific Index fell 0.7 percent to 109.89 as of 5:33 p.m. in Tokyo, erasing an earlier gain of 0.6 percent. The gauge has rallied 56 percent from a more than five-year low on March 9 amid speculation the global economy is recovering.
“We may need to see a healthy pullback,” said Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $14 billion. “Investors are still waiting for better entry levels.”
Japan’s Nikkei 225 Stock Average lost 0.8 percent to 10,204, while Hong Kong’s Hang Seng Index sank 1.7 percent. China’s Shanghai Composite Index dropped 4.3 percent, taking its drop from this year’s high on Aug. 4 to 19.8 percent. That’s just short of the 20 percent level that signals a bear market.
Among stocks that rose today, Honda Motor Co. added 2 percent after Nomura Holdings Inc. upgraded Japan’s auto industry. Qantas Airways Ltd., Australia’s biggest airline, advanced 3.5 percent as it signaled improving passenger volumes.
Home Depot, Target
Futures on the Standard & Poor’s 500 Index lost 1 percent. The U.S. gauge rose 1.1 percent yesterday, aided by better-than- estimated earnings at Home Depot Inc. and Target Corp.
A third of the 508 companies in the MSCI Asia Pacific Index that have reported results since early July have beaten analysts’ profit estimates, while 18 percent have missed, according to data compiled by Bloomberg.
“The earnings season has been surprising,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $95 billion. “It’s given investors confidence the recovery is coming through and that valuations will be supported by strong earnings. Still, markets have rallied a long way and are vulnerable to bad news.”
Maanshan Steel dropped 7.5 percent to 4.81 yuan in Shanghai. The company posted a half-year loss for the second consecutive period as the global recession crimped demand from homebuilders and automakers.
Declines in China
China Everbright Securities Co., which started trading yesterday and posted the smallest first-day gain of any new stock in Shanghai this year, slumped 10 percent to 24.66 yuan.
The Shanghai Composite has dropped this month as a plunge in bank loans, disappointing earnings and concern the government will seek to damp property speculation hurt confidence.
“It’s irrational selling that has shattered market confidence,” said Larry Wan, Shanghai-based deputy chief investment officer at KBC-Goldstate Fund Management Co., which oversees about $583 million in assets. “Some mutual funds have been reducing their stock holdings as they are pessimistic about the economic outlook.”
Shipping stocks declined after the Baltic Dry Index, which measures the cost of shipping commodities, sank 2.5 percent in London yesterday, the biggest drop in a week
China Cosco Holdings slumped 7.4 percent to 13.82 yuan. STX Pan Ocean Co. Ltd., South Korea’s biggest bulk carrier, dipped 4.5 percent to 11,750 won in Seoul. Mitsui O.S.K. Lines Ltd., the world’s largest operator of iron-ore vessels, slipped 2.2 percent to 568 yen in Tokyo.
Solvency Ratios
Finance companies were the biggest drag on the MSCI Asia Pacific Index. Tokio Marine, Japan’s largest publicly traded insurer, lost 2 percent to 2,650 yen. T&D Holdings Inc., the second-biggest, dropped 1.2 percent to 2,845 yen.
Japan’s financial regulator said yesterday that solvency ratios at almost all insurers will probably fall once a new standard takes effect. The measure, which will affect how companies calculate their ability to pay claims, is under review and expected to be released by June.
Sony sank 3.9 percent to 2,500 yen. The company cut the price of its PlayStation 3 console by 25 percent, bowing to demands from game publishers and increasing the pressure on industry leader Nintendo Co. to follow. Nintendo lost 0.5 percent to 24,480 yen.
Japanese automakers rose after Shotaro Noguchi, an analyst at Nomura in Tokyo raised his stance on the industry to “bullish” from “neutral.” The companies are likely to see a recovery in demand in developed nations due to government subsidies, which may lead them to raise their forecasts, Noguchi wrote in a report.
Valuation Concern
Honda Motor Co., which makes 51 percent of its revenue in North America, climbed 2 percent to 3,070 yen. Nissan Motor Co., Japan’s No. 3 automaker, added 0.7 percent to 706 yen.
The MSCI Asia Pacific Index rally since March has lifted the average valuation of shares in the gauge to 24 times estimated earnings, compared with 17 times for the S&P 500 and 14 times for the Dow Jones Stoxx 600 Index in Europe.
Signs the economic recovery may fall short of expectations have triggered valuation concerns. Reports last week showed Chinese exports dropped in July and investment growth slowed, while Australia’s statistics bureau said wage growth stalled last quarter as the worst global slump since the Great Depression drove up unemployment.
Qantas surged 3.5 percent to A$2.69. The company said there are signs passenger volumes are improving and yields are stabilizing after reporting its first loss in six years.
Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, gained 3.7 percent to A$44.28. The company said first-half profit fell 12 percent to A$898 million ($743 million) from a year earlier on lower oil prices. That compares with the market consensus of A$878 million cited by UBS AG.
Maanshan Steel, China’s No. 4 listed steelmaker, lost 7.5 percent, while China Cosco Holdings Ltd., the world’s largest operator of dry-bulk ships, slumped 7.4 percent in Shanghai. Tokio Marine Holdings Inc. dropped 2 percent after Japanese regulators said new guidelines will hurt insurers’ solvency ratios. Sony Corp. sank 3.9 percent after cutting the price of its PlayStation 3 game player.
The MSCI Asia Pacific Index fell 0.7 percent to 109.89 as of 5:33 p.m. in Tokyo, erasing an earlier gain of 0.6 percent. The gauge has rallied 56 percent from a more than five-year low on March 9 amid speculation the global economy is recovering.
“We may need to see a healthy pullback,” said Daphne Roth, Singapore-based head of Asian equity research at ABN Amro Private Banking, which oversees about $14 billion. “Investors are still waiting for better entry levels.”
Japan’s Nikkei 225 Stock Average lost 0.8 percent to 10,204, while Hong Kong’s Hang Seng Index sank 1.7 percent. China’s Shanghai Composite Index dropped 4.3 percent, taking its drop from this year’s high on Aug. 4 to 19.8 percent. That’s just short of the 20 percent level that signals a bear market.
Among stocks that rose today, Honda Motor Co. added 2 percent after Nomura Holdings Inc. upgraded Japan’s auto industry. Qantas Airways Ltd., Australia’s biggest airline, advanced 3.5 percent as it signaled improving passenger volumes.
Home Depot, Target
Futures on the Standard & Poor’s 500 Index lost 1 percent. The U.S. gauge rose 1.1 percent yesterday, aided by better-than- estimated earnings at Home Depot Inc. and Target Corp.
A third of the 508 companies in the MSCI Asia Pacific Index that have reported results since early July have beaten analysts’ profit estimates, while 18 percent have missed, according to data compiled by Bloomberg.
“The earnings season has been surprising,” said Nader Naeimi, a Sydney-based strategist at AMP Capital Investors, which manages about $95 billion. “It’s given investors confidence the recovery is coming through and that valuations will be supported by strong earnings. Still, markets have rallied a long way and are vulnerable to bad news.”
Maanshan Steel dropped 7.5 percent to 4.81 yuan in Shanghai. The company posted a half-year loss for the second consecutive period as the global recession crimped demand from homebuilders and automakers.
Declines in China
China Everbright Securities Co., which started trading yesterday and posted the smallest first-day gain of any new stock in Shanghai this year, slumped 10 percent to 24.66 yuan.
The Shanghai Composite has dropped this month as a plunge in bank loans, disappointing earnings and concern the government will seek to damp property speculation hurt confidence.
“It’s irrational selling that has shattered market confidence,” said Larry Wan, Shanghai-based deputy chief investment officer at KBC-Goldstate Fund Management Co., which oversees about $583 million in assets. “Some mutual funds have been reducing their stock holdings as they are pessimistic about the economic outlook.”
Shipping stocks declined after the Baltic Dry Index, which measures the cost of shipping commodities, sank 2.5 percent in London yesterday, the biggest drop in a week
China Cosco Holdings slumped 7.4 percent to 13.82 yuan. STX Pan Ocean Co. Ltd., South Korea’s biggest bulk carrier, dipped 4.5 percent to 11,750 won in Seoul. Mitsui O.S.K. Lines Ltd., the world’s largest operator of iron-ore vessels, slipped 2.2 percent to 568 yen in Tokyo.
Solvency Ratios
Finance companies were the biggest drag on the MSCI Asia Pacific Index. Tokio Marine, Japan’s largest publicly traded insurer, lost 2 percent to 2,650 yen. T&D Holdings Inc., the second-biggest, dropped 1.2 percent to 2,845 yen.
Japan’s financial regulator said yesterday that solvency ratios at almost all insurers will probably fall once a new standard takes effect. The measure, which will affect how companies calculate their ability to pay claims, is under review and expected to be released by June.
Sony sank 3.9 percent to 2,500 yen. The company cut the price of its PlayStation 3 console by 25 percent, bowing to demands from game publishers and increasing the pressure on industry leader Nintendo Co. to follow. Nintendo lost 0.5 percent to 24,480 yen.
Japanese automakers rose after Shotaro Noguchi, an analyst at Nomura in Tokyo raised his stance on the industry to “bullish” from “neutral.” The companies are likely to see a recovery in demand in developed nations due to government subsidies, which may lead them to raise their forecasts, Noguchi wrote in a report.
Valuation Concern
Honda Motor Co., which makes 51 percent of its revenue in North America, climbed 2 percent to 3,070 yen. Nissan Motor Co., Japan’s No. 3 automaker, added 0.7 percent to 706 yen.
The MSCI Asia Pacific Index rally since March has lifted the average valuation of shares in the gauge to 24 times estimated earnings, compared with 17 times for the S&P 500 and 14 times for the Dow Jones Stoxx 600 Index in Europe.
Signs the economic recovery may fall short of expectations have triggered valuation concerns. Reports last week showed Chinese exports dropped in July and investment growth slowed, while Australia’s statistics bureau said wage growth stalled last quarter as the worst global slump since the Great Depression drove up unemployment.
Qantas surged 3.5 percent to A$2.69. The company said there are signs passenger volumes are improving and yields are stabilizing after reporting its first loss in six years.
Woodside Petroleum Ltd., Australia’s second-biggest oil and gas producer, gained 3.7 percent to A$44.28. The company said first-half profit fell 12 percent to A$898 million ($743 million) from a year earlier on lower oil prices. That compares with the market consensus of A$878 million cited by UBS AG.
Tuesday, August 18, 2009
India Plans ‘Simpler’ Mining Law to Boost Investment
Aug. 18 (Bloomberg) -- India aims to cut permit delays and attract overseas capital through “simpler” resource investment laws to help double mining’s contribution to the nation’s $1.2 trillion economy to at least 4 percent.
“We hope to increase it to 5 percent but expect it to increase to at least 4 percent in five years,” Mines Minister B.K. Handique said in an interview in New Delhi yesterday. The legislation will be presented to parliament in the winter session this year, he said.
Delays in securing mining licenses have undermined India’s efforts to win more investment, holding up construction of $32 billion projects announced ArcelorMittal and Posco, the world’s largest and sixth-largest steelmakers. The new law will develop the changes to the mineral policy last year that have so far failed to unlock development.
“It will be great if the government is able to cut down the long-winded procedure,” Niraj Shah, an analyst at Centrum Capital Ltd., said today. It will help companies who are serious about building operations in India, he said.
India, which holds the world’s fourth-largest bauxite deposits and the fifth-largest iron ore reserves according to McKinsey & Co., currently regulates mining through the five- decade old Mines & Minerals (Development & Regulation) Act.
“We will introduce a legal framework that ensures sustainable development and includes environment concerns,” Handique said. “We have to ensure it’s more broad-based as if there is resistance from people it will not be possible to translate the act into reality.”
Posco, ArcelorMittal
Land disputes and delays in allocating mining licenses have stopped South Korea-based Posco from proceeding with potentially the biggest overseas investment in India. The company is yet to begin building a $12 billion, 12 million metric ton steel plant in eastern Orissa state, planned for more than five years.
“The policy is aimed to make the rules more transparent and simpler,” Handique said. “Posco is a bad precedent but we know that overseas companies want to invest in India and transparent policy will help that,” he said, adding that he also expects the law changes to spark investment from domestic companies.
“We hope the government approves the mine license soon, then we would like to secure land and start the project as soon as possible,” Choi Doo Jin, a spokesman at Posco, said by phone from Seoul today.
ArcelorMittal has proposed setting up two mills in India, one in Orissa and another in Jharkhand -- with a total capacity of 24 million tons. It signed an accord for the Jharkhand mill in mid- 2005, followed by the one in Orissa.
Besides companies, countries including South Africa, Namibia and Colombia have shown interest in investing in the mining sector, Handique said.
“We hope to increase it to 5 percent but expect it to increase to at least 4 percent in five years,” Mines Minister B.K. Handique said in an interview in New Delhi yesterday. The legislation will be presented to parliament in the winter session this year, he said.
Delays in securing mining licenses have undermined India’s efforts to win more investment, holding up construction of $32 billion projects announced ArcelorMittal and Posco, the world’s largest and sixth-largest steelmakers. The new law will develop the changes to the mineral policy last year that have so far failed to unlock development.
“It will be great if the government is able to cut down the long-winded procedure,” Niraj Shah, an analyst at Centrum Capital Ltd., said today. It will help companies who are serious about building operations in India, he said.
India, which holds the world’s fourth-largest bauxite deposits and the fifth-largest iron ore reserves according to McKinsey & Co., currently regulates mining through the five- decade old Mines & Minerals (Development & Regulation) Act.
“We will introduce a legal framework that ensures sustainable development and includes environment concerns,” Handique said. “We have to ensure it’s more broad-based as if there is resistance from people it will not be possible to translate the act into reality.”
Posco, ArcelorMittal
Land disputes and delays in allocating mining licenses have stopped South Korea-based Posco from proceeding with potentially the biggest overseas investment in India. The company is yet to begin building a $12 billion, 12 million metric ton steel plant in eastern Orissa state, planned for more than five years.
“The policy is aimed to make the rules more transparent and simpler,” Handique said. “Posco is a bad precedent but we know that overseas companies want to invest in India and transparent policy will help that,” he said, adding that he also expects the law changes to spark investment from domestic companies.
“We hope the government approves the mine license soon, then we would like to secure land and start the project as soon as possible,” Choi Doo Jin, a spokesman at Posco, said by phone from Seoul today.
ArcelorMittal has proposed setting up two mills in India, one in Orissa and another in Jharkhand -- with a total capacity of 24 million tons. It signed an accord for the Jharkhand mill in mid- 2005, followed by the one in Orissa.
Besides companies, countries including South Africa, Namibia and Colombia have shown interest in investing in the mining sector, Handique said.
Sugar’s 86% Price Jump May Spur Surplus, LMC Says
Aug. 18 (Bloomberg) -- The 86 percent surge in sugar prices this year will encourage farmers worldwide to increase plantings, potentially leading to a large surplus in two years, said Martin Todd, managing director of LMC International Ltd.
“We will see a very healthy response,” said Todd from LMC, an Oxford, England-based advisory company for agricultural commodities. “We’ll be looking at production surpluses again,” he said in an interview in Bangkok.
Sugar has soared to a 28-year high as India, the biggest user, had its driest June in 83 years and parts of Brazil, the largest exporter, had rainfall four times more than normal, making the cane too wet for milling. World demand may exceed supply by 5 million tons in 2009-2010 after a record deficit of 7.8 million tons in the current year, said Peter Baron, executive director of the International Sugar Organization.
The market may show signs of “substantially cooling off” early next year with the first forecasts for India’s 2010-2011 crop, said John Reeve, director for agricultural commodities at Standard Chartered Bank in Singapore. Any price spike above 15 cents a pound has usually been followed by “a big sell-off within 18 months,” Reeve said in an interview.
The most active futures contract in New York has stayed above 15 cents a pound since early June, reaching a peak of 23.33 cents Aug. 12. Sugar for delivery in October 2011 now costs almost 5 cents a pound less than October 2009, showing traders expect a price decline.
Supply Response
Not all traders are betting on a price drop. The number of options to buy the commodity for March at 40 cents a pound in New York has jumped six-fold in less than five months, according to data compiled by Bloomberg. A call option gives the right, not the obligation, to buy a commodity at a set price.
The sweetener may climb a further 80 percent to as high as 40 cents a pound, Singapore-based hedge fund manager Michael Coleman said in a Bloomberg Television interview Aug. 14.
“Sugar is caught in a perfect storm,” said Coleman, 49, managing director of Aisling Analytics, which runs a $1.4 billion fund invested in energy and agricultural commodities. There’s “a big hole” in supply and no obvious solution in the next six to nine months, he said.
“Is there a possibility of reaching 40 cents a pound? Certainly,” said Coleman, whose fund returned 24 percent in 2008. “From this point on, it depends how price affects demand.”
The rally may prompt farmers in Brazil, the biggest producer, to harvest a “bumper” crop as cane output jumps by as much as 35 million tons in the year starting May from 600 million tons this year, ISO economist Leonardo Bichara Rocha said in Bangkok.
Indian Harvest
Sugar production in India, the second-largest grower, may be as high as 18 million tons in the year from October after rains, S.L. Jain, director general of the Indian Sugar Mills Association, said today. That’s more than a 16.5 million ton prediction last week from the Maharashtra State Cooperative Sugar Factories Federation Ltd.
In two years time, Indian output may jump as much as 52 percent to 25 million tons, according to Prakash Naiknavare, managing director of the federation.
Thailand, the second-biggest exporter, could boost production by 6.3 percent to 7.64 million tons in the year from December, and by 10 percent in the following year, according to Prasert Tapaneeyangkul, the secretary-general of the Office of the Cane and Sugar Board. Exports may climb to 5.74 million tons in 2010 from 5.29 million tons this year, he said.
Australian Growth
Australia, the third-largest exporter, may increase production by as much as 250,000 tons from 4.5 million tons in the year beginning July 2010, Ian Ballantyne, chief executive officer of Brisbane-based Canegrowers, said Aug. 13.
Still, heavy rain or drought may hamper growers’ ability to increase production, LMC’s Todd said yesterday.
Brazil’s sugar mills have been processing “34, 35, 36 million tons” of cane every two weeks, said Todd. “They should be able to do 40 million tons.” Delays in the cane harvest limit the capacity of mills to produce more sugar and set back planting of the next crop, he said.
At 18 cents a pound or more, consumption will slow, according to Jonathan Kingsman, the chairman of broker and researcher Kingsman SA in Lausanne, Switzerland.
The most active contract in New York has dropped 4.5 percent in the past four trading days to 21.93 cents today.
“We will see a very healthy response,” said Todd from LMC, an Oxford, England-based advisory company for agricultural commodities. “We’ll be looking at production surpluses again,” he said in an interview in Bangkok.
Sugar has soared to a 28-year high as India, the biggest user, had its driest June in 83 years and parts of Brazil, the largest exporter, had rainfall four times more than normal, making the cane too wet for milling. World demand may exceed supply by 5 million tons in 2009-2010 after a record deficit of 7.8 million tons in the current year, said Peter Baron, executive director of the International Sugar Organization.
The market may show signs of “substantially cooling off” early next year with the first forecasts for India’s 2010-2011 crop, said John Reeve, director for agricultural commodities at Standard Chartered Bank in Singapore. Any price spike above 15 cents a pound has usually been followed by “a big sell-off within 18 months,” Reeve said in an interview.
The most active futures contract in New York has stayed above 15 cents a pound since early June, reaching a peak of 23.33 cents Aug. 12. Sugar for delivery in October 2011 now costs almost 5 cents a pound less than October 2009, showing traders expect a price decline.
Supply Response
Not all traders are betting on a price drop. The number of options to buy the commodity for March at 40 cents a pound in New York has jumped six-fold in less than five months, according to data compiled by Bloomberg. A call option gives the right, not the obligation, to buy a commodity at a set price.
The sweetener may climb a further 80 percent to as high as 40 cents a pound, Singapore-based hedge fund manager Michael Coleman said in a Bloomberg Television interview Aug. 14.
“Sugar is caught in a perfect storm,” said Coleman, 49, managing director of Aisling Analytics, which runs a $1.4 billion fund invested in energy and agricultural commodities. There’s “a big hole” in supply and no obvious solution in the next six to nine months, he said.
“Is there a possibility of reaching 40 cents a pound? Certainly,” said Coleman, whose fund returned 24 percent in 2008. “From this point on, it depends how price affects demand.”
The rally may prompt farmers in Brazil, the biggest producer, to harvest a “bumper” crop as cane output jumps by as much as 35 million tons in the year starting May from 600 million tons this year, ISO economist Leonardo Bichara Rocha said in Bangkok.
Indian Harvest
Sugar production in India, the second-largest grower, may be as high as 18 million tons in the year from October after rains, S.L. Jain, director general of the Indian Sugar Mills Association, said today. That’s more than a 16.5 million ton prediction last week from the Maharashtra State Cooperative Sugar Factories Federation Ltd.
In two years time, Indian output may jump as much as 52 percent to 25 million tons, according to Prakash Naiknavare, managing director of the federation.
Thailand, the second-biggest exporter, could boost production by 6.3 percent to 7.64 million tons in the year from December, and by 10 percent in the following year, according to Prasert Tapaneeyangkul, the secretary-general of the Office of the Cane and Sugar Board. Exports may climb to 5.74 million tons in 2010 from 5.29 million tons this year, he said.
Australian Growth
Australia, the third-largest exporter, may increase production by as much as 250,000 tons from 4.5 million tons in the year beginning July 2010, Ian Ballantyne, chief executive officer of Brisbane-based Canegrowers, said Aug. 13.
Still, heavy rain or drought may hamper growers’ ability to increase production, LMC’s Todd said yesterday.
Brazil’s sugar mills have been processing “34, 35, 36 million tons” of cane every two weeks, said Todd. “They should be able to do 40 million tons.” Delays in the cane harvest limit the capacity of mills to produce more sugar and set back planting of the next crop, he said.
At 18 cents a pound or more, consumption will slow, according to Jonathan Kingsman, the chairman of broker and researcher Kingsman SA in Lausanne, Switzerland.
The most active contract in New York has dropped 4.5 percent in the past four trading days to 21.93 cents today.
New Chief at A.I.G. to Be Paid at Least $7 Million a Year
How much will it cost the American International Group to keep its chief executive to help stabilize the troubled insurer? At least $7 million a year.
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Hiroko Masuike for The New York Times
Robert Benmosche will earn far more than his predecessor.
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A.I.G. disclosed Monday in a regulatory filing that it would pay Robert H. Benmosche, 65, the former head of MetLife, $3 million a year in cash and $4 million in stock.
Mr. Benmosche will also be eligible for up to $3.5 million in stock as part of an incentive plan, A.I.G. said in a regulatory filing.
The pay package has received preliminary approval by Kenneth R. Feinberg, the administration official in charge of overseeing compensation for top executives at seven large firms bailed out by the federal government, according to the regulatory filing.
Mr. Benmosche will receive significantly more than the dollar a year earned by his predecessor, Edward M. Liddy, a former head of Allstate who came out of retirement to try to turn A.I.G. around after it received $182 billion in government aid. The government now owns nearly 80 percent of the company. (Mr. Liddy, however, received about $460,000 to compensate for air travel, housing and other expenses.)
Mr. Liddy, who unlike Mr. Benmosche also held the title of chairman, described his job at A.I.G. as public service, one where he was charged with reshaping the company after its near-collapse last fall. Under him, the company began exploring deals to sell assets in hopes of repaying some of the hundreds of billions of dollars it received from the government.
This month, A.I.G. reported its first quarterly profit since 2007, though Mr. Liddy warned that the insurance businesses “remain challenged.”
But Mr. Liddy was criticized by Congress for paying retention bonuses to people in its financial products unit, the division that sold the credit-default swaps that nearly brought A.I.G. to financial ruin. He was not in charge when those contracts were struck. He has said that A.I.G. would need to pay his successor significantly more in order to retain a well-qualified individual.
The last A.I.G. chief executive to work a full year, Martin J. Sullivan, was paid $14.3 million in 2007. (Robert B. Willumstad, who succeeded Mr. Sullivan in 2008, worked for only three months before he was ousted as part of the first government bailout.)
A.I.G. said in its letter formally offering Mr. Benmosche the job that his compensation would be subject to “clawbacks” by Mr. Feinberg’s office, meaning that at least some of the money could be recovered if the bonuses were paid based on financially misleading data. Mr. Benmosche will also not receive a severance package if he is dismissed from the company, according to the regulatory filing.
Because Mr. Benmosche still retains some holdings in MetLife — about 500,000 shares and 2.1 million options — he will be excluded from any deals between his old employer and A.I.G., the company said in its filing. Instead, a special committee of directors will oversee the handling of any such sale. Any transaction involving MetLife would not be factored into consideration for bonuses to Mr. Benmosche.
Skip to next paragraph
Hiroko Masuike for The New York Times
Robert Benmosche will earn far more than his predecessor.
Add to Portfolio
* American International Group
Go to your Portfolio »
A.I.G. disclosed Monday in a regulatory filing that it would pay Robert H. Benmosche, 65, the former head of MetLife, $3 million a year in cash and $4 million in stock.
Mr. Benmosche will also be eligible for up to $3.5 million in stock as part of an incentive plan, A.I.G. said in a regulatory filing.
The pay package has received preliminary approval by Kenneth R. Feinberg, the administration official in charge of overseeing compensation for top executives at seven large firms bailed out by the federal government, according to the regulatory filing.
Mr. Benmosche will receive significantly more than the dollar a year earned by his predecessor, Edward M. Liddy, a former head of Allstate who came out of retirement to try to turn A.I.G. around after it received $182 billion in government aid. The government now owns nearly 80 percent of the company. (Mr. Liddy, however, received about $460,000 to compensate for air travel, housing and other expenses.)
Mr. Liddy, who unlike Mr. Benmosche also held the title of chairman, described his job at A.I.G. as public service, one where he was charged with reshaping the company after its near-collapse last fall. Under him, the company began exploring deals to sell assets in hopes of repaying some of the hundreds of billions of dollars it received from the government.
This month, A.I.G. reported its first quarterly profit since 2007, though Mr. Liddy warned that the insurance businesses “remain challenged.”
But Mr. Liddy was criticized by Congress for paying retention bonuses to people in its financial products unit, the division that sold the credit-default swaps that nearly brought A.I.G. to financial ruin. He was not in charge when those contracts were struck. He has said that A.I.G. would need to pay his successor significantly more in order to retain a well-qualified individual.
The last A.I.G. chief executive to work a full year, Martin J. Sullivan, was paid $14.3 million in 2007. (Robert B. Willumstad, who succeeded Mr. Sullivan in 2008, worked for only three months before he was ousted as part of the first government bailout.)
A.I.G. said in its letter formally offering Mr. Benmosche the job that his compensation would be subject to “clawbacks” by Mr. Feinberg’s office, meaning that at least some of the money could be recovered if the bonuses were paid based on financially misleading data. Mr. Benmosche will also not receive a severance package if he is dismissed from the company, according to the regulatory filing.
Because Mr. Benmosche still retains some holdings in MetLife — about 500,000 shares and 2.1 million options — he will be excluded from any deals between his old employer and A.I.G., the company said in its filing. Instead, a special committee of directors will oversee the handling of any such sale. Any transaction involving MetLife would not be factored into consideration for bonuses to Mr. Benmosche.
Japan opposition ahead as campaign starts
TOKYO, Aug 18 – Japan’s main opposition party holds a wide lead over prime minister Taro Aso’s long-ruling Liberal Democratic party in voter polls as official campaigning kicks off for an August 30 election, newspaper reports showed on Tuesday.
A victory for the opposition Democratic party, which has vowed to pay more heed to consumers than companies and to break bureaucrats’ grip on policy-making, would put Mr Aso’s conservative LDP out of power after an almost unbroken reign of more than 50 years.
EDITOR’S CHOICE
Editorial Comment: Japan’s recovery is not all it seems - Aug-17
Japan growth returns but fears remain - Aug-17
Lex: Japanese economy - Aug-17
DPJ pins hope on next generation - Aug-16
Interactive graphic: The LDP’s half century in power - Aug-13
No relief in sight for Japan’s most vulnerable - Aug-17
In a voter survey by the daily Asahi newspaper, 40 per cent of respondents said they would vote for the Democrats in proportional representation districts for the election, up slightly from the previous survey in early August.
Of the 1,011 voters surveyed, 21 per cent opted for the LDP. Another poll by the daily Tokyo Shimbun showed similar results.
The LDP has suffered from voter frustration over the sluggish economy, which data showed on Monday returned to growth in the second quarter, and longer-term concerns such as rising social security costs.
The Democrats have vowed to boost domestic demand by putting money directly in the hands of households through steps such as child allowances, but critics say the party needs a more credible plan to finance its policy proposals.
The business-friendly LDP has pledged to achieve annualised economic growth of 2 percent by the second half of fiscal 2010, which starts next April, and says it would raise the 5 percent consumption tax to fund growing social welfare costs once the economy recovers.
A victory for the opposition Democratic party, which has vowed to pay more heed to consumers than companies and to break bureaucrats’ grip on policy-making, would put Mr Aso’s conservative LDP out of power after an almost unbroken reign of more than 50 years.
EDITOR’S CHOICE
Editorial Comment: Japan’s recovery is not all it seems - Aug-17
Japan growth returns but fears remain - Aug-17
Lex: Japanese economy - Aug-17
DPJ pins hope on next generation - Aug-16
Interactive graphic: The LDP’s half century in power - Aug-13
No relief in sight for Japan’s most vulnerable - Aug-17
In a voter survey by the daily Asahi newspaper, 40 per cent of respondents said they would vote for the Democrats in proportional representation districts for the election, up slightly from the previous survey in early August.
Of the 1,011 voters surveyed, 21 per cent opted for the LDP. Another poll by the daily Tokyo Shimbun showed similar results.
The LDP has suffered from voter frustration over the sluggish economy, which data showed on Monday returned to growth in the second quarter, and longer-term concerns such as rising social security costs.
The Democrats have vowed to boost domestic demand by putting money directly in the hands of households through steps such as child allowances, but critics say the party needs a more credible plan to finance its policy proposals.
The business-friendly LDP has pledged to achieve annualised economic growth of 2 percent by the second half of fiscal 2010, which starts next April, and says it would raise the 5 percent consumption tax to fund growing social welfare costs once the economy recovers.
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