End of Wall Street: What Happened

US steel industry in collapse, eyes government aid

The US steel industry is in collapse and looking for a massive government investment program of up to one trillion dollars to stimulate demand for the key commodity, a report said Friday.

Output of steel has plunged 50 percent since September after posting record profits as construction and auto production have fallen sharply amid a US recession and the global credit crunch, The New York Times reported.

Industry executives are pleading for a huge public infrastructure investment program -- of up to one trillion dollars over two years -- under president-elect Barack Obama's proposed stimulus plan, the newspaper said.

"What we are asking," said Daniel DiMicco, chairman and chief executive of the Nucor Corporation, a giant steel maker, "is that our government deal with the worst economic slowdown in our lifetime through a recovery program that has in every provision a buy America' clause," the newspaper quoted him as saying.

Economists in the Obama camp have said that the president-elect will propose to lawmakers a stimulus plan that will include significant infrastructure spending that draws on heavy industry.

The steel industry can spring back to life through construction of highways, bridges, electric power grids, schools, hospitals, water treatment plants and rapid transit, industry executives told the New York Times.

"We are sharing with the president-elect's transition team our thoughts in terms of the industry's policy priorities," Nancy Gravatt, a spokeswoman for the American Iron and Steel Institute, was quoted saying.

The industry decline accelerated in November and December.

By late December, output was down to 1.02 million tonnes a week from 2.1 million tonnes on August 30, according to American Iron and Steel Institute figures cited by the newspaper.

The price of a tonne of steel has fallen by half in recent months.

VIX Market fear gauge below 40 for first time since October 2008

The VIX, otherwise known as the market's fear gauge, slumped back below 40 on Wednesday, the final trading day of the year, for the first time since early October.

The VIX , short for the Chicago Board Options Exchange Volatility Index, reached a low of 39.61 on Wednesday, a level unseen since Oct. 2. The VIX, based on a number of index options, shows the market's expectations for volatility over a 30 day period.

According to FactSet Research, it spiked to record highs of between 81 and 96 in late October, as panic gripped markets worldwide. Since 2003, readings below 20 were the norm.

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Four mistakes even the big names made with investment manager Madoff

Bernard Madoff, a 70-year-old, well-respected money manager, handled the investments of people including Wilpon, filmmaker Steven Spielberg, real estate and media magnate Morton Zuckerman, Bed, Bath & Beyond , co-founder Leonard Feinstein, and major financial institutions such as Britain's HSBC Banco Santander of Spain and France's BNP Paribas

Big names, right? But not too big that they couldn't get swindled: Madoff engaged in a typical Ponzi scheme, letting people think they were getting good returns. All the while, the red flags went unnoticed.

Now, some $50 billion of these investors' money has vanished, and whether the families and institutions that had their money with Madoff will even get it back is hardly clear.

So how could this have happened to these people? If it can happen to them, it can surely happen to you. Here are four big mistakes that people make in handing over their money:

If it's good for him, it must be good for me. Same as saying, "I don't need to ask any tough questions because my buddy over there says it's good." You simply can't assume that someone else has asked all the tough questions of an adviser, nor can you assume that they're asking questions about your personal situation.

Believing good actors. Madoff was apparently a great actor. He always played down his businesses and shrouded his business and "magic formula" in secrecy, creating an aura of exclusivity. The bottom line: Don't assume that what you see is what you get.

Failing to mind the store. I can't blame people for failing to keep their finger on the pulse when they've hired "experts" to manage their money. Especially when the "experts" have "experts" like accountants to ensure the books are clean. Still, it's up to you to look at your investment statements, question them and have the confidence to ask about items you don't understand. And watch out for advisers who can't be reached when the markets go south -- that's a big red flag.

Giving up personal responsibility. Too often, people simply wash their hands of their own finances. This latest scandal -- coupled with the multibillion-dollar bailout of the financial industry -- is just another testament to the fact that consumers must take control. By coming together, at places like WeSeed, America can share what they know, get smarter about the financial products they use and steer clear of scandals.

If there's one thing this fiasco has underscored, it's to take charge, be wary of things you don't understand and, if you are getting other people's help, make sure you understand what's behind it. It also reminds us that "experts" like accountants and even mortgage lenders aren't infallible. Anyone can claim to be a financial adviser, so be careful. Do your homework.

World Financial in the dark ages to come

International finance leaders delivered a grim forecast for 2009 on Sunday, warning next year could be even worse than this one despite a slew of government stimulus plans.

International Monetary Fund chief Dominique Strauss-Kahn predicted a "very dark" 2009 which could be worse than expected if states failed to take sufficient action to fight the crisis, facing economies big and small.

"Our forecasts are already very dark, but they will be even darker if not enough fiscal stimulus is implemented," he told BBC radio in London, predicting recession for advanced economies and decreasing growth for emerging ones.

"I can see that some measures have been announced, but I'm afraid it won't go far enough," he said.

The IMF has called for global fiscal stimulus of about two percent of GDP, equivalent to roughly 1.2 trillion dollars.

The governor of the Bank of Spain was even more pessimistic, warning the world faced a "total" financial meltdown unseen since the Great Depression of the 1930s.

"The lack of confidence is total," Miguel Angel Fernandez Ordonez said in an interview with Spain's El Pais newspaper.

He noted that the inter-bank lending market was not functioning, spawning "vicious" cycles with economic activity among consumers, businesses, investors and banks essentially frozen.

"There is almost total paralysis from which no-one is escaping," he added.

Still, there was fresh movement to stop the meltdown, with a decision by US president-elect Barack Obama to boost by 500,000 jobs a three-million-job creation goal to kickstart the world's biggest and ailing economy.

Vice president-elect Joseph Biden also confirmed the Obama team was working on a second economic stimulus package which could top a trillion dollars according to some media reports.

"What we're doing is putting together what we think will be the economic package that will do two things. One, stem the haemorrhaging of the loss of jobs, and begin to create new jobs," Biden told ABC television's This Week programme.

"At the same time, we provide continuing liquidity for the financial markets."

Biden put no firm figure to the package that would follow the 700-billion-dollar Wall Street rescue deal inked by President George W. Bush in October -- and which has failed to reverse the plummetting US economy.

"There's going to be real significant investment, whether it's 600 billion dollars or more, or 700 billion dollars. The clear notion is, it's a number no-one thought about a year ago," he said.

Japan, too, took another step to jumpstart its moribund economy, drafting a record 88.55-trillion-yen (1.01-trillion-dollar) budget for fiscal year 2009 -- up 6.6 percent from the initial budget for this fiscal year.

The increase reflects an emergency economic package that Prime Minister Taro Aso announced earlier this month in a fresh bid to stave off a prolonged recession in the world's second-largest economy.

In Europe, the Irish government said it was injecting 5.5 billion euros (7.6 billion dollars) to recapitalise three major banks: Anglo Irish Bank, Bank of Ireland and Allied Irish Banks.

The government's move follows revelations last week that Anglo Irish's chairman and former chief executive, Sean FitzPatrick, failed to disclose an 87-million-euro loan from the bank. He resigned on Thursday.

The Luxembourg subsidiary of embattled Icelandic bank Kaupthing got a rescue offer from a group of Arab investors, the Luxembourg government has confirmed.

"Besides the signature of the Belgian state, this agreement needs the acceptance of the creditor banks," the government said in a statement Saturday about the offer.

Kaupthing Luxembourg was placed in suspension of payments in October following the near collapse of Iceland's once-booming financial sector under the weight of the worldwide credit crunch. Deposits in both Luxembourg and Belgium have been frozen ever since.

At least one German banker, however, thinks the doom-and-gloom forecasts are overblown.

"Some compare the situation to that of 1929, others talk about the worst crisis in near memory," said Wolfgang Sprissler, head of the German bank HypoVereinsbank (HVB) in an interview with the Sueddeutsche Zeitung to appear Monday.

"It bothers me that the institutes in their studies try to outdo each other with more pessimistic scenarios," he said, adding that what is needed are signs of "optimism."

Obama's Music Video - "Yes We Can"

Watch the music video produced by will.i.am, "Yes We Can". Video courtesy of Barackobama.com.

Hang in there, sell out means you are out of the game

Don't sell out, hold on in there.

The crisis today has many similarities with the Great Depression. We have forgotten our lessons from the past

THE past month must have been one of the toughest periods for investors and advisers. Equities markets collapsed like a pack of stacked cards. Many are saying the world has never seen anything like it before. But is this true? I took a quick trip back to 1929 to find out.

Real estate was the speculative favourite in 1920s America. The mantra was 'leverage up, buy a bigger house, even if you can't afford it'. Interest-only mortgages were already the standard. Then on black Monday, Oct 28, 1929, the stock market crashed.

Americans rushed to withdraw their money. Banks cut lending or closed their doors.

The economy collapsed. Greed, over-borrowing and bad loans led to the world's worst financial crisis - The Great Depression. Seeing similarities between the crises of 1929 and of today, I realised that when it comes to money, history tends to repeat itself. People are cyclical creatures who are generally greedy and cannot help but make the same mistakes.

The current plunge in stock markets has left investors so fearful that many have claimed this is the worst stock market crash in history. I wasn't sure, so I took another trip - all the way back to 1900. Looking at the top 10 stock market crashes since then, things became a lot clearer. The grand-daddy of all crashes was in 1930.

The market went down 86 per cent. Together with the 1929 crash, the Great Depression lasted 34 months and took 89 per cent from the market. The current crisis has brought the Dow down about 39 per cent so far. Although it is not the worst crash and the world has seen worse times than this, the question every investor is asking is whether today's crisis will be prolonged.

In my trip to 1929, I found out that just before Black Monday, everyone - from governments and experts to the newspapers - was bullish about the economy. Soon after the first crash on Oct 28, they quickly became positive again, predicting a quick recovery. Then on April 17, 1930, the market sank even further. Throughout the next two years there were plenty of recovery forecasts. But by the time the carnage was over, three years had passed. No one, not even financial experts or governments, knew how long the bear would last.

I also learned from the past century that no matter how deep and long crises were, markets always recover. The key question is whether you have time to wait for a recovery.

In the summer of 1929, John J Raskob, a senior executive of GM, claimed that US was on the verge of a tremendous industrial expansion. He maintained that by putting just US$15 a month into good common stocks, investors could expect their wealth to grow steadily to US$80,000 over the next 20 years. When the stock market crashed, Mr Raskob's advice was ridiculed and denounced for years to come. But was that fair? If one had followed Mr Raskob's advice and put US$15 a month into the market, after 20 years, the average annual return would have been 7.86 per cent, and after 30 years 12.72 per cent. Far from Mr Raskob's estimate, but not too bad, I must say.

The lesson is this: even in the worst crises, markets still recover with a respectable return. But if you want to shorten the time of your recovery, don't sell out. Keep investing but invest in the right things. If you sell, you are out of the game with no hope of recovery at all.

My trip to the past has taught me that all crises stem from the same cause - greed. Today's crisis is not new. It's just that we have forgotten our lessons. Don't try to time the markets. Michael J Mauboussin, chief investment strategist at Legg Mason Capital Management, found out that if you are able to accurately avoid the worst 50 days of the market, your returns jump to 18.2 per cent per annum. But if you miss the best 50 days, your returns dropped to a mere 1 per cent per annum.

Investors, be strong and courageous. You may be fearful. I am too. But history is behind us and for us. If you stop investing, you will perish. The crisis will surely pass. Don't ever give up.