Obama can fix economy

In this trying times, investors should follow this ...

Eye Of The Tiger

Risin' up -- back on the street,
Did my time, took my chances
Went the distance now I'm back on my feet
Just a man and his will to survive
So many times, it happens too fast,
You trade your passion for glory,
Don't lose your grip on the dreams of the past,
You must fight just to keep them alive

It's the Eye of the Tiger ,
It's the thrill of the fight,
Rising up to the challenge of our rival,
And the last known survivor
Stalks his prey in the night,
And he's watching us all
With the Eye of the Tiger

Face to face -- out in the heat,
Hangin' tough, stayin' hungry
They stack the odds still we take to the street
For the kill, with the skill to survive

It's the Eye of the Tiger ,
It's the thrill of the fight,
Rising up to the challenge of our rival,
And the last known survivor
Stalks his prey in the night,
And he's watching us all
With the Eye of the Tiger

Risin' up -- straight to the top,
Had the guts, got the glory
Went the distance, now I'm not gonna stop
Just a man and his will to survive

It's the Eye of the Tiger ,
It's the thrill of the fight,
Rising up to the challenge of our rival,
And the last known survivor
Stalks his prey in the night,
And he's watching us all
With the Eye of the Tiger

US govt rescue dilutes GIC's Citi stake

SINGAPORE Business Times - 25 Nov 2008

However, GIC's rights and dividends from preferred shares still unclear

The US government's massive capital injection into Citigroup will dilute the Government of Singapore Investment Corp's earlier investment in the bank, although it was unclear yesterday whether the bailout would trigger any changes in GIC's rights or a cut in the dividend that it receives. When contacted, GIC declined to comment.

GIC, which manages Singapore's foreign reserves, bought US$6.88 billion worth of convertible preferred shares in Citi in January.

GIC said at the time that the preferred shares, if converted to ordinary equity, would increase its stake in Citi to about 4 per cent from an existing 0.3 per cent.

The preferred shares pay quarterly dividends at a rate of 7 per cent a year, and the dividends on the preferred stock must be paid before any dividends can be paid to Citi's ordinary shareholders.

But now that the US government has forced the bank to slash its dividend to ordinary shareholders to no more than one US cent each quarter, it is not clear if the dividend payments to Citi's existing preferred shareholders such as GIC could be reduced.

According to a stock exchange filing by Citi in January describing the preferred shares that it sold to GIC and other investors, 'dividends on shares of the convertible preferred stock will not be mandatory', but if Citi does not pay dividends on the preferred stock, it cannot then pay dividends to its ordinary shareholders.

That agreement also allows Citi to issue additional preferred shares ranking equally with or junior to the shares that it issued GIC and other investors who bought Citi preferred stock at the time, without seeking their consent.

The US government said on Monday that it would insure up to US$306 billion of Citi's troubled assets and inject US$20 billion in capital into the bank.

In exchange for the bailout, Citi will issue US$27 billion worth of preferred shares that pay a quarterly dividend at a rate of 8 per cent a year.

The government will also receive warrants for US$2.7 billion of ordinary shares.

The preferred shares issued to the US government are superior to those that GIC bought in January in at least two respects - the dividend is higher and it is cumulative, which means that any unpaid dividends will accumulate each quarter until they are paid.

The preferred shares that GIC bought are non-cumulative, which means that Citi has no obligation to make good on any missed dividend payments if it chooses not to pay them in a given quarter.

Malaysia's Bank Negara 1st overnite policy rate cut in 5 years

Rate reduction to affect mainly banking and consumer-related sectors

PETALING JAYA: Bank Negara has cut its benchmark Overnight Policy Rate (OPR) by 25 basis points to 3.25% from 3.50%, and signalled it was ready to cut the rate further.

This was the first rate cut in over five years. The move, which can be considered well-timed as the economy slows, will result in a lower cost of funds for banks. This, in turn, brings down the cost of borrowing for consumers.

To inject more liquidity into the banking system, Bank Negara also cut the statutory reserve requirement (SRR) for banking institutions for the first time in a decade - from 4% to 3.5% - effective Dec 1.

“Given the heightened downside risks to growth and the diminishing inflationary pressures, the reduction in OPR is a pre-emptive measure aimed at providing a more accommodative monetary environment,’’ Bank Negara said.

“To further reduce the cost of intermediation, the monetary policy committee also decided” to reduce the SRR, which is the amount of reserve capital that banking institutions place with the central bank, as a percentage of their deposits and other eligible liabilities.

“Bank Negara will monitor closely the evolving developments and will undertake the appropriate policy response to avoid a severe economic downturn.

“The global economic and international financial conditions are expected to continue to be volatile and uncertain,” it said.

Aseambankers’ chief economist, Suhaimi Illias, told StarBiz the sectors most affected by the rate cut would be banking and consumer-related sectors, such as auto and property.

Malaysian Automotive Association president Datuk Aishah Ahmad told StarBiz the rate cut would “definitely help the industry by lowering repayments from car buyers.”

Real Estate and Housing Developers’ Association Malaysia president Datuk Ng Seing Liong welcomed the OPR reduction but said the association had been hoping for an even steeper cut of 50 basis points.

CIMB Economic Research head Lee Heng Guie said Bank Negara’s rate cut showed policy makers were concerned about “potential downside to growth,” given volatile external forces as well as weakening domestic demand.

Lee has forecast another 25-basis point cut by the central bank within the first quarter of 2009, especially with “the diminishing threat of inflation going forward.”

The 50-basis point cut in the SRR to 3.5%, Lee noted, would inject liquidity into the banking system, lower the cost of funds and free up capital for lending.

The last time the SRR was cut was in the midst of the Asian financial crisis, on Sept 16, 1998 when it was reduced to 4% from 6%.

How Bank's market cap have shrunk