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Thursday, November 20, 2008

LaLaLaLaLa Everything's Wonderful

This FAZ article (in German) covers the new IFO projections. In this case, a graph overcomes the language barrier:

This is the world economic conditions barometer, rather than just those in Germany.

We're still in the first half of this, too. That line is going to sag further. Just for Europe:

Putin is the latest into the "whatever it takes" camp:
Russian Prime Minister Vladimir Putin vowed tax cuts, defense of the ruble and ``everything'' needed to prevent the kind of financial crises that shook the country after the collapse of the Soviet Union.

Among the measures unveiled by Putin today to counter the effects of the global economic crunch are corporate tax cuts, higher welfare payments and increased government spending.
Russia's foreign reserves are supposed to have dropped about 20% already.

China has been facing higher unemployment in their manufacturing centers for a while. China's official unemployment has not changed, but China's official unemployment has nothing to do with real unemployment. The official unemployment rate is just the people who have residency permits for the area in which they are unemployed, and most of the unemployed workers don't have residency permits for the urban areas; thus they are not eligible for unemployment benefits.

Lenders in the Gulf area are beginning to show the strain. Amlak suspended mortgage loans yesterday! There are talks of a merger:
Amlak is in talks with Tamweel PJSC, the second-largest mortgage provider, to merge operations as they seek access to retail deposits. Tamweel dropped 5.7 percent to 99 fils, bringing the decline this year to 86 percent.

``Even with Tamweel, there are rumors in the market that they have bought some big apartments that they are not able to sell,'' Dwaikat said.

Amlak and Tamweel's ``business plans are not sustainable and have to be changed,'' Nasser bin Hassan Al Shaikh, Amlak's chairman, said at a bankers' lunch yesterday. ``These companies need to have access to retail deposits. They don't have to become banks but something similar to the savings and loans model in other countries.''
Sound familiar?

According to the Canadian Real Estate Association, the average Canadian home price has fallen almost 10%, but if you look at the weighted average, the drop is only 5%. So the price drops are really concentrated in the previous "hot" zones. These are not the sort of correlations that one likes to see.

Overnight the Swiss National Bank cut its 3 month Libor target to 1%. That's the third cut since the beginning of October. ECB is going to go down at least 50 basis points before the end of the year. It ought to be more like 200 bps, but I don't think Trichet has quite figured it out yet.

British Land cut its valuation on its Canary Wharf share by 40%. This should be interesting for other firms who also hold stakes.

The leading edge of of the financial wave is now in central Asia. Turkey cut its rate in a surprise move even as it seeks another IMF loan, and places like Kazakhstan are waking up to find their concrete economies softening by the minute. Picture melting banks. The diffusion effect across other central Asian economies from Russia, Turkey and Kazakhstan is very real.

There is another wave of pain in store for a bunch of European banks who have lent heavily to eastern European and other emerging markets. This is their subprime, and it's going to be very, very large. Austrian banks are going to take a fearful whack. US banks have relatively little exposure here.

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