Meet the 29-Year-Old Retiree
by Laura Rowley
Posted on Wednesday, October 29, 2008, 12:00AM
Madison DuPaix has been meeting a lot of new people since she left her full-time job at a Fortune 500 insurance firm in February. When new acquaintances ask what she does for a living, she's a little tongue-tied. "At first I would stare blankly, then I would say I'm on a leave of absence from work, or I'm a stay-at-home mom," she says. "When I feel comfortable with them I tell them what's really going on."
That's because it's kind of hard to explain how she managed to stash away enough to retire from her full-time job at age 29 -- without ever earning more than six figures. "To me, the freedom was always more important -- if I had to choose between spending money on something and saving, I would save," says DuPaix, who lives with her spouse and two young sons in Wisconsin.
Dual Values
DuPaix is characteristic of her freewheeling generation -- striving for the ultimate work-life balance -- and at the same time a throwback to the post-Depression era, when socking money away for the future was both a core value and a way of life. She offers an intriguing model for a new generation of savers as the golden era of leveraged living comes to a crashing halt.
"To be honest, it was a little bit of a mathematical game," DuPaix says. "You only need so much money [to retire], so why not get it over with and get on with your life?"
DuPaix got hooked on saving at age 16. "My mom, an accountant, did my taxes from my first job working in retail, and I ended up losing a lot of the money I made to taxes," she says. "I was really upset, and my mom explained that if you open an Individual Retirement Account you would be able to get most of your money back. I saw it as a choice between getting the money after a long time and never getting it at all."
A Frugal Hobby
DuPaix put away $600 that year. "That piqued my interest; it was this world that I didn't understand, and I realized you could play around with things and make things happen. That started to intrigue me."
Later, she got a full scholarship to the University of Wisconsin, where she double-majored in finance, investments, and banking, and risk management and insurance. While her college roommates were taking out student loans, she was investing her part-time earnings in low-cost index funds. (She switched her retirement savings to a Roth IRA when that vehicle became available.)
DuPaix worked for a year after graduation before going back for a master's degree. She then took a full-time position in 2002, saving half of her take-home pay. "I started maxing out my retirement accounts right away and investing outside of retirement accounts in index funds," she says. "Personal finance was my hobby."
A Clear Path
DuPaix frequented online forums about early retirement, and read books such as "Cashing In On the American Dream" by Paul Terhorst (who retired at 35 to travel the world). Part of her success was good timing: She and her spouse rented for a few years, then bought a condo with an adjustable-rate mortgage at 3.625 percent. They sold at the top of the market and rolled the profits into a new home.
Another key to success was her decision to super-save in her 20s before she had children; DuPaix says she simply extended the frugal habits of her college years. "I've always saved for something first before I buy it -- it makes everything cheaper in the long run," she says. "I never spent a lot on things people typically spend money on, like dressing great or coffee every day. When we went on vacation, we used frequent-flyer miles and hotel points. I always tried to work whatever system was available. My family teases me because they know I'll find best bargain to do something or I won't do it."
But most important, DuPaix suggests, was setting clear goals: "I knew I wanted to retire early and thought 34 would be a good age. That was a fluid working number, but it gave me something to aim for. I reached it early because I realized I didn't need as much."
Good Provider
That's because after crunching the numbers, she discovered that two-thirds of her salary was going to daycare, taxes, and retirement savings. She now achieves the same annual cash flow by drawing down 2 percent of her savings. In February and March, she pulled out two- to three-year's worth of living expenses and put them in cash; the rest is in stocks. (She says her stock portfolio is down 17 percent this year.)
The family has enough savings for DuPaix's spouse to retire as well, but after testing it out on a three-month paternity leave, he decided he likes his full-time gig. His job also provides health insurance, a key to making early retirement affordable over the long haul.
Decisions, Decisions
After "sending off the same email 100 times" to family and friends who asked for advice, DuPaix started a blog last year called My Dollar Plan, in which she explains her roadmap to early retirement, and offers personal finance tips. "That wasn't supposed to be a business, it was supposed to be a hobby," says DuPaix, who nevertheless created an income stream with advertising.
Some of her methods aren't for the faint of heart or the financially disorganized. For instance, DuPaix makes several thousand dollars a year doing credit card arbitrage. She sets aside the money in advance for a purchase, but rather than spending the cash, puts it into an interest-bearing account, while continually revolving a gigantic balance onto zero-percent-interest credit cards every 12 months. (She says it hasn't affected her credit score.)
"On the blog I say, ‘Here's what I did' -- not, ‘You could do it, too,'" DuPaix says. "Because I don't want people to believe that all you have to do is start early and make a bunch of money. It's the way you make decisions on things, and operate your whole lifestyle."
Free Time
DuPaix says she enjoyed her old job, but she loves her new schedule more -- hanging out with her kids, meeting family and friends for lunch, blogging three mornings a week, and writing the Kids and Money section for About.com (she still has a part-time nanny).
"Retirement doesn't mean no more income," says DuPaix. "It means doing what I love, and knowing when I wake up every day I can do whatever I want."
Thursday, October 30, 2008
Nobel laureate says worst of economic crisis is over
Channel News Asia
Nobel laureate says worst of economic crisis is over
Posted: 30 October 2008 1701 hrs
SEOUL - Nobel economics laureate Robert Mundell said Thursday the worst of the world economic crisis is over and the US economy is in the recovery phase.
The winner of the 1999 Nobel Prize in economics also said there was a need to consider the possibilities of an Asian currency or an Asian Monetary Fund.
"The world economy is not in as bad shape as it appears from the news," he said in his keynote presentation at the World Leaders Forum held here to commemorate the 60th anniversary of the founding of South Korea.
"The real economy has not collapsed. The worst is behind us," he was quoted as saying by Yonhap news agency.
"The US growth was superb in the first three quarters of 2007. Then there were two quarters of nearly zero growth -- a severe growth recession," said the professor of economics at Columbia University in New York.
Then during second quarter of 2008, the US growth rate shot up to 3.3 per cent, he said, adding growth in the third quarter to September this year will "probably turn out to be about two per cent."
Mundell pointed out that the pattern of the recent economic slowdowns in the US and European economies was similar to that in 2002.
"At that time, the US went first, then Europe followed it about eight months later," he said.
"The same pattern is with us now. The US is now in the recovery phase while Europe is retreating, giving rise to the huge swing of exchange rates," Yonhap quoted him as saying.
And regarding the need to think about an Asian currency or monetary fund, he said: "My view is that it is best for Asia to pursue both a regional approach or an international approach in response to the Europe-led increased regionalisation of the international monetary system." - AFP/vm
Nobel laureate says worst of economic crisis is over
Posted: 30 October 2008 1701 hrs
SEOUL - Nobel economics laureate Robert Mundell said Thursday the worst of the world economic crisis is over and the US economy is in the recovery phase.
The winner of the 1999 Nobel Prize in economics also said there was a need to consider the possibilities of an Asian currency or an Asian Monetary Fund.
"The world economy is not in as bad shape as it appears from the news," he said in his keynote presentation at the World Leaders Forum held here to commemorate the 60th anniversary of the founding of South Korea.
"The real economy has not collapsed. The worst is behind us," he was quoted as saying by Yonhap news agency.
"The US growth was superb in the first three quarters of 2007. Then there were two quarters of nearly zero growth -- a severe growth recession," said the professor of economics at Columbia University in New York.
Then during second quarter of 2008, the US growth rate shot up to 3.3 per cent, he said, adding growth in the third quarter to September this year will "probably turn out to be about two per cent."
Mundell pointed out that the pattern of the recent economic slowdowns in the US and European economies was similar to that in 2002.
"At that time, the US went first, then Europe followed it about eight months later," he said.
"The same pattern is with us now. The US is now in the recovery phase while Europe is retreating, giving rise to the huge swing of exchange rates," Yonhap quoted him as saying.
And regarding the need to think about an Asian currency or monetary fund, he said: "My view is that it is best for Asia to pursue both a regional approach or an international approach in response to the Europe-led increased regionalisation of the international monetary system." - AFP/vm
Financial crisis affecting US credit cards industry
As the financial crisis worsens, the US credit cards industry have also been affected. The number of default payments are on the rise and the credit card issuers are taking measures to tighten their business.
According to report from The New York Times, because the number of default payments are on the rise, credit issuers in the first half of the year have been forced to write off about 21 billion US dollars of bad debts. The report quotes analyst estimation that in the coming one and half years, the US credit cards industry on the whole can see about a loss of about 55 billion US dollars.
In the report, currently US credit cards industry default payment losses are at about 5.5% of the total unpaid debts. The prediction is that this ratio will increase and cross over the 7.9% mark made after the 2001 internet bubble burst.
The report also points out that the reason for the increase in number of credit card payment defaults is because of the worsening of the financial crisis and its effect on the real economy. The US unemployment rate is also on the rise which adds more financial pressure on credit card holders.
To prevent further losses, the US credit cards industry have taken measures to tighten their business which includes increasing credit card applicants qualifying standards and decrease of credit cards issuance.
According to report from The New York Times, because the number of default payments are on the rise, credit issuers in the first half of the year have been forced to write off about 21 billion US dollars of bad debts. The report quotes analyst estimation that in the coming one and half years, the US credit cards industry on the whole can see about a loss of about 55 billion US dollars.
In the report, currently US credit cards industry default payment losses are at about 5.5% of the total unpaid debts. The prediction is that this ratio will increase and cross over the 7.9% mark made after the 2001 internet bubble burst.
The report also points out that the reason for the increase in number of credit card payment defaults is because of the worsening of the financial crisis and its effect on the real economy. The US unemployment rate is also on the rise which adds more financial pressure on credit card holders.
To prevent further losses, the US credit cards industry have taken measures to tighten their business which includes increasing credit card applicants qualifying standards and decrease of credit cards issuance.
Wednesday, October 29, 2008
ECB unveils new market measures
Oct 29, 2008
The Straits Times
ECB unveils new market measures
FRANKFURT - THE European Central Bank published details on Wednesday of four operations aimed at keeping commercial banks supplied with euros and dollars in a bid to ease tension on crucial money markets.
The ECB said it would lend 103.1 billion euros (S$195 billion) to banks for three months starting on Thursday at its benchmark rate of 3.75 per cent.
A total of 223 banks had requested funds, the ECB said.
In a now regular weekly loan of dollars, meanwhile, the ECB said it had provided US$92.13 billion to 70 banks on Wednesday at a fixed rate of 1.91 per cent.
On Thursday, the ECB will make an unlimited amount of dollars available, again in the form of one-week loans, in two operations that will accept collateral in exchange for the funds in one case and euro cash in the other.
A fixed rate of 3.75 per cent would apply in the former case, while the latter would be carried out at a rate of US$0.000303 to the euro.
In what is called a foreign currency swap, the ECB will sell dollars for euros on Thursday at the rate of US$1.2090 per euro, and buy them back a week later at a rate of US$1.208697 per euro.
The difference, also called 3.03 swap points, is what commercial banks will pay for access to the US currency.
Central banks have essentially replaced interbank markets for now by providing unlimited amounts of liquidity, or cash, to ensure banks can meet minimum reserve requirements which underpin lending to the economy at large.
Money markets determine the availability of credit for vast numbers of people around the globe, from managers trying to fund their businesses to families and students seeking mortgages and personal loans. -- AFP
The Straits Times
ECB unveils new market measures
FRANKFURT - THE European Central Bank published details on Wednesday of four operations aimed at keeping commercial banks supplied with euros and dollars in a bid to ease tension on crucial money markets.
The ECB said it would lend 103.1 billion euros (S$195 billion) to banks for three months starting on Thursday at its benchmark rate of 3.75 per cent.
A total of 223 banks had requested funds, the ECB said.
In a now regular weekly loan of dollars, meanwhile, the ECB said it had provided US$92.13 billion to 70 banks on Wednesday at a fixed rate of 1.91 per cent.
On Thursday, the ECB will make an unlimited amount of dollars available, again in the form of one-week loans, in two operations that will accept collateral in exchange for the funds in one case and euro cash in the other.
A fixed rate of 3.75 per cent would apply in the former case, while the latter would be carried out at a rate of US$0.000303 to the euro.
In what is called a foreign currency swap, the ECB will sell dollars for euros on Thursday at the rate of US$1.2090 per euro, and buy them back a week later at a rate of US$1.208697 per euro.
The difference, also called 3.03 swap points, is what commercial banks will pay for access to the US currency.
Central banks have essentially replaced interbank markets for now by providing unlimited amounts of liquidity, or cash, to ensure banks can meet minimum reserve requirements which underpin lending to the economy at large.
Money markets determine the availability of credit for vast numbers of people around the globe, from managers trying to fund their businesses to families and students seeking mortgages and personal loans. -- AFP
Japan central bank may cut interest rates
In order to stabilize the financial market, prevent the real economy from further sliding, stop the strong appreciation of the Japanese Yen and to stop the strong decline of the stock market, the Japan central bank is studying the possibility of an interest rate cut and may announce on the 31 October 2008 that it will reduce the inter-bank overnight unsecured call rate from the current 0.5% down to 0.25%.
According to Japanese media reports, the Japan central bank will see how are the market conditions and will decide by 31 October 2008. If there is really a rate cut, it will be the first rate cut by the Japanese central bank since March 2001.
According to reports, the Japan government will announce on the 30 October 2008 further measures to counter the financial crisis. Also, the US government will announce on the 29 October 2008 on their interest rate movement. The EU central bank will announce on the 6 November 2008. Japan central bank usually act in tandem with the other big central banks.
Macquarie Research economist Richard Jerram in his analyst report mentions that if the Japan central bank were to cut its interest rate as reported by the media by 25 basis points, the effect on the Yen is limited unless the Japan government has some other measures to announce together.
In the report, if the Japan central bank during the announcement of the interet rate cut were to promise not to tighten policies before stabalizing the situation (ie, core CPI to approximately 1%), then the effect of the 25 basis point interest rate cut would be prominent. But the report also hints that the Japan central bank has past history of breaking promises.
According to Japanese media reports, the Japan central bank will see how are the market conditions and will decide by 31 October 2008. If there is really a rate cut, it will be the first rate cut by the Japanese central bank since March 2001.
According to reports, the Japan government will announce on the 30 October 2008 further measures to counter the financial crisis. Also, the US government will announce on the 29 October 2008 on their interest rate movement. The EU central bank will announce on the 6 November 2008. Japan central bank usually act in tandem with the other big central banks.
Macquarie Research economist Richard Jerram in his analyst report mentions that if the Japan central bank were to cut its interest rate as reported by the media by 25 basis points, the effect on the Yen is limited unless the Japan government has some other measures to announce together.
In the report, if the Japan central bank during the announcement of the interet rate cut were to promise not to tighten policies before stabalizing the situation (ie, core CPI to approximately 1%), then the effect of the 25 basis point interest rate cut would be prominent. But the report also hints that the Japan central bank has past history of breaking promises.
Wall St rally won't hold
Oct 29, 2008
The Straits Times
Wall St rally won't hold
WASHINGTON - WALL Street's best day in two weeks - and one of its best ever - brought little real reason to celebrate.
Even the manic, final-hour stampede of buying that sent the Dow Jones industrials soaring almost 900 points did nothing to dispel the feeling that the market could turn on investors in an instant.
The extraordinary, lurching volatility that has gripped Wall Street since the financial meltdown began in mid-September meant there were no guarantees the rally would hold, not even for a few days.
Investors are expecting a cut in interest rates when the Federal Reserve announces its decision on Wednesday. But they're also staring into an economic abyss, bracing for a recession of a depth no one knows for sure.
Any other day like this - the Dow and the Standard and Poor's 500 both rose almost 11 per cent - might have ended with boisterous cheers and paper tossed into the air. On Tuesday, the closing bell came with meagre applause.
'I don't think it will be a sustained move,' said Mr Matt King, chief investment officer at Bell Investment Advisors.
The Dow finished 889 points higher to close at 9,065. On Oct 13, the Dow rose 936 points, its best ever; no other single-day rally has come close in terms of points to what happened on Tuesday.
Analysts ventured a number of explanations for the sudden rally - including coming interest rate cuts, bargain hunting, a market desperate to find a bottom and the expectation that banks, at the urging of the White House, will quit hoarding money and start making loans.
'There is nothing fundamental that came out today or yesterday that would take it up or down. We're all groping for something meaningful to talk about,' said Mr Bob Andres, chief investment strategist at Portfolio Management Consultants. 'The market is exhausted from going down.'
The mood on Main Street is decidedly more pessimistic, and new data on Tuesday showed Americans are more depressed than market analysts had expected.
The Conference Board's consumer confidence index plunged to the lowest level in its 41-year history in the wake of this month's financial meltdown, the sharp drop in home prices and increasing job losses.
The index fell to 38, down from a September reading of about 61 - the third-steepest monthly decline since the board started the measure in 1967. Analysts, way off the mark, had expected 52.
'It's the worst consumer environment since the 1981-1982 recession,' said Mr Adam York, an economist at Wachovia. Americans believe 'there's a very dire situation in the US economy right now, and they're not far from being right,' he added.
Financial market turmoil and falling housing prices have wiped out trillions of dollars of household wealth in recent months. The S&P 500 had fallen 27 per cent in October, and 40 per cent for the year, before Tuesday's jump.
In addition, companies cut 760,000 jobs in the first nine months this year, sending the unemployment rate to 6.1 per cent last month.
Many economists expect layoffs to continue and the unemployment rate to rise to 8 per cent or higher in 2009.
After the last recession, in 2001, the unemployment rate rose as high as 6.3 per cent in June 2003.
On Tuesday, Whirlpool said it will cut 5,000 jobs. That's on top of other recent layoffs of thousands of workers by Xerox, drugmaker Merck and financial services firm National City.
'The collapse in confidence is directly tied to perceptions about economic conditions and that is likely to mean that households will keep their wallets closed,' said Mr Joel Naroff, an economist with Naroff Economic Advisors.
If they do, it'll happen at a bad time. The holiday season is just weeks away, and it's expected to be anaemic.
'I don't know how long this is going to last,' said Mr Johnny Hunt, 50, a carpenter in Deltona, Florida, who says he is cutting back on a lot of things. 'So I got to save money. You've got to hold onto what you do have.'
S&P said in a report earlier this week that holiday retail sales would probably fall 2 per cent to US$250 billion (S$373 billion) this year, 'the most difficult holiday season in memory for US retailers'. Holiday sales have increased an average of 4.4 per cent a year in the past decade, the report said.
Meanwhile, the housing slump, which set off the mortgage crisis that has consumed Wall Street for more than a year, shows no sign of abating. A closely watched index of home prices fell on Tuesday by its steepest ever annual rate in August.
The Standard & Poor's/Case-Shiller 20-city housing index dropped a record 16.6 per cent from August last year, the largest drop since its inception in 2000.
In addition, the Census Bureau reported that 2.8 per cent of US homes - excluding rental properties - were vacant and for sale in the third quarter, unchanged from the second quarter. That works out to 2.22 million properties, the second-highest quarterly number in records going back to 1956.
The first quarter clocked in at a 2.9 per cent vacancy rate. In a normal market, it's about 1.7 per cent, said Mr Patrick Newport, an economist at IHS Global Insight. That means there's more than 800,000 excess vacant homes on the market.
Exacerbating the pricing environment is a rash of foreclosures, especially in once-hot markets like California, Nevada, Florida and Arizona. Home prices are falling fastest there, according to Case-Shiller - dropping as much as 30 per cent in August.
To move foreclosed properties off their books, lenders are sharply discounting prices, which is weighing down median prices.
On Thursday, the Commerce Department will provide its first estimate of the economy's third quarter performance, and many economists think the economy shrank. Economic contraction for the third and fourth quarters consecutively would meet the classic definition of recession. -- AP
The Straits Times
Wall St rally won't hold
WASHINGTON - WALL Street's best day in two weeks - and one of its best ever - brought little real reason to celebrate.
Even the manic, final-hour stampede of buying that sent the Dow Jones industrials soaring almost 900 points did nothing to dispel the feeling that the market could turn on investors in an instant.
The extraordinary, lurching volatility that has gripped Wall Street since the financial meltdown began in mid-September meant there were no guarantees the rally would hold, not even for a few days.
Investors are expecting a cut in interest rates when the Federal Reserve announces its decision on Wednesday. But they're also staring into an economic abyss, bracing for a recession of a depth no one knows for sure.
Any other day like this - the Dow and the Standard and Poor's 500 both rose almost 11 per cent - might have ended with boisterous cheers and paper tossed into the air. On Tuesday, the closing bell came with meagre applause.
'I don't think it will be a sustained move,' said Mr Matt King, chief investment officer at Bell Investment Advisors.
The Dow finished 889 points higher to close at 9,065. On Oct 13, the Dow rose 936 points, its best ever; no other single-day rally has come close in terms of points to what happened on Tuesday.
Analysts ventured a number of explanations for the sudden rally - including coming interest rate cuts, bargain hunting, a market desperate to find a bottom and the expectation that banks, at the urging of the White House, will quit hoarding money and start making loans.
'There is nothing fundamental that came out today or yesterday that would take it up or down. We're all groping for something meaningful to talk about,' said Mr Bob Andres, chief investment strategist at Portfolio Management Consultants. 'The market is exhausted from going down.'
The mood on Main Street is decidedly more pessimistic, and new data on Tuesday showed Americans are more depressed than market analysts had expected.
The Conference Board's consumer confidence index plunged to the lowest level in its 41-year history in the wake of this month's financial meltdown, the sharp drop in home prices and increasing job losses.
The index fell to 38, down from a September reading of about 61 - the third-steepest monthly decline since the board started the measure in 1967. Analysts, way off the mark, had expected 52.
'It's the worst consumer environment since the 1981-1982 recession,' said Mr Adam York, an economist at Wachovia. Americans believe 'there's a very dire situation in the US economy right now, and they're not far from being right,' he added.
Financial market turmoil and falling housing prices have wiped out trillions of dollars of household wealth in recent months. The S&P 500 had fallen 27 per cent in October, and 40 per cent for the year, before Tuesday's jump.
In addition, companies cut 760,000 jobs in the first nine months this year, sending the unemployment rate to 6.1 per cent last month.
Many economists expect layoffs to continue and the unemployment rate to rise to 8 per cent or higher in 2009.
After the last recession, in 2001, the unemployment rate rose as high as 6.3 per cent in June 2003.
On Tuesday, Whirlpool said it will cut 5,000 jobs. That's on top of other recent layoffs of thousands of workers by Xerox, drugmaker Merck and financial services firm National City.
'The collapse in confidence is directly tied to perceptions about economic conditions and that is likely to mean that households will keep their wallets closed,' said Mr Joel Naroff, an economist with Naroff Economic Advisors.
If they do, it'll happen at a bad time. The holiday season is just weeks away, and it's expected to be anaemic.
'I don't know how long this is going to last,' said Mr Johnny Hunt, 50, a carpenter in Deltona, Florida, who says he is cutting back on a lot of things. 'So I got to save money. You've got to hold onto what you do have.'
S&P said in a report earlier this week that holiday retail sales would probably fall 2 per cent to US$250 billion (S$373 billion) this year, 'the most difficult holiday season in memory for US retailers'. Holiday sales have increased an average of 4.4 per cent a year in the past decade, the report said.
Meanwhile, the housing slump, which set off the mortgage crisis that has consumed Wall Street for more than a year, shows no sign of abating. A closely watched index of home prices fell on Tuesday by its steepest ever annual rate in August.
The Standard & Poor's/Case-Shiller 20-city housing index dropped a record 16.6 per cent from August last year, the largest drop since its inception in 2000.
In addition, the Census Bureau reported that 2.8 per cent of US homes - excluding rental properties - were vacant and for sale in the third quarter, unchanged from the second quarter. That works out to 2.22 million properties, the second-highest quarterly number in records going back to 1956.
The first quarter clocked in at a 2.9 per cent vacancy rate. In a normal market, it's about 1.7 per cent, said Mr Patrick Newport, an economist at IHS Global Insight. That means there's more than 800,000 excess vacant homes on the market.
Exacerbating the pricing environment is a rash of foreclosures, especially in once-hot markets like California, Nevada, Florida and Arizona. Home prices are falling fastest there, according to Case-Shiller - dropping as much as 30 per cent in August.
To move foreclosed properties off their books, lenders are sharply discounting prices, which is weighing down median prices.
On Thursday, the Commerce Department will provide its first estimate of the economy's third quarter performance, and many economists think the economy shrank. Economic contraction for the third and fourth quarters consecutively would meet the classic definition of recession. -- AP
Fed set to cut rate to 1%
Oct 29, 2008
The Straits Times
Fed set to cut rate to 1%
FOMC expected to announce its decsion at around 2.15 am on Thursday (S'pore time).
WASHINGTON - THE Federal Reserve is widely expected to cut interest rates by at least a half-percentage point on Wednesday in yet another move to turn around the credit crisis that is threatening the United States with a deep and prolonged recession.
The Federal Open Market Committee (FOMC), the policy-setting arm of the US central bank, is expected to announce its decision at around 2.15pm (3.15am Singapore time) at the conclusion of a two-day meeting.
Ten out of 14 big bond firms polled by wires agencies on Monday forecast that the Federal Reserve would lower the overnight federal funds rate target a half point to 1 per cent.
That would be the lowest since June 2004 when the Fed was fighting a perceived risk of deflation, which some fear is about to re emerge.
Financial futures markets were gloomier on Tuesday, implying a 44 per cent likelihood the Fed would lower borrowing costs by three-quarters of a point, which would take them to territory not visited since July 1958.
'With confidence flat on its back, the labour market weak, and credit markets still under intense strain, we expect the FOMC to announce a 50-75 basis point rate cut tomorrow,' said Mr Michael Darda, chief economist at MKM Partners in Greenwich, Connecticut. A basis point is one one hundredth of a per cent.
The US stock market staged a rally on Tuesday as investors bet lower interest rates would help save the economy from weakening further, even though data showed US consumer confidence sliding to a record low.
A report that Japan was set to reduce rates helped lift spirits.
HOW LOW WILL THEY GO?The Fed has cut rates to 1.5 per cent from 5.25 per cent in eight steps over the past 13 months to counter a credit crisis that started with the collapse of the US mortgage market and spread around the world. The most recent move was a surprise half-point cut between regular meetings on Oct 8 coordinated with a number of other central banks.
Some market participants think the Fed may be on the way to cutting rates to zero, just as Japan was forced to do to counter deflation in the 1990s. A more-forceful three-quarter point cut would be insurance against the risk of deflation.
But some analysts said that the lack of a clear deflationary threat at this point in time may lead the Fed to opt for the more-incremental half-point move.
'Given that deflationary forces from the collapse of the credit cycle have still not been seen, the FOMC may be reluctant to deliver a larger rate cut,' said Mr Marc Chandler, chief global currency strategist at Brown Brothers Harriman.
The statement the Fed will issue announcing its rate decision may also contain important hints on future policy.
Investors have already had a preview in the form of the statement issued on Oct 8, saying market strain would crimp spending while inflation was fading as a risk due to weaker commodity prices and mounting U.S. economic slack.
Steep declines in the price of crude oil and other commodities are likely to drag the US consumer price index down sharply in coming months. Many analysts expect year-on-year readings of the CPI to fall into negative territory.
While this may not mean that broad deflation is setting in, it is likely to keep the Fed on high alert.
'Even if deflation is unlikely, officials will want to counter any increase in real interest rates as inflation tumbles,' Morgan Stanley economists told clients on Monday, adding that a half-point rate cut was 'virtually certain.'
Real interest rates rise as inflation falls, tightening monetary conditions faced by borrowers even if policy remains steady. -- THOMSON REUTERS
The Straits Times
Fed set to cut rate to 1%
FOMC expected to announce its decsion at around 2.15 am on Thursday (S'pore time).
WASHINGTON - THE Federal Reserve is widely expected to cut interest rates by at least a half-percentage point on Wednesday in yet another move to turn around the credit crisis that is threatening the United States with a deep and prolonged recession.
The Federal Open Market Committee (FOMC), the policy-setting arm of the US central bank, is expected to announce its decision at around 2.15pm (3.15am Singapore time) at the conclusion of a two-day meeting.
Ten out of 14 big bond firms polled by wires agencies on Monday forecast that the Federal Reserve would lower the overnight federal funds rate target a half point to 1 per cent.
That would be the lowest since June 2004 when the Fed was fighting a perceived risk of deflation, which some fear is about to re emerge.
Financial futures markets were gloomier on Tuesday, implying a 44 per cent likelihood the Fed would lower borrowing costs by three-quarters of a point, which would take them to territory not visited since July 1958.
'With confidence flat on its back, the labour market weak, and credit markets still under intense strain, we expect the FOMC to announce a 50-75 basis point rate cut tomorrow,' said Mr Michael Darda, chief economist at MKM Partners in Greenwich, Connecticut. A basis point is one one hundredth of a per cent.
The US stock market staged a rally on Tuesday as investors bet lower interest rates would help save the economy from weakening further, even though data showed US consumer confidence sliding to a record low.
A report that Japan was set to reduce rates helped lift spirits.
HOW LOW WILL THEY GO?The Fed has cut rates to 1.5 per cent from 5.25 per cent in eight steps over the past 13 months to counter a credit crisis that started with the collapse of the US mortgage market and spread around the world. The most recent move was a surprise half-point cut between regular meetings on Oct 8 coordinated with a number of other central banks.
Some market participants think the Fed may be on the way to cutting rates to zero, just as Japan was forced to do to counter deflation in the 1990s. A more-forceful three-quarter point cut would be insurance against the risk of deflation.
But some analysts said that the lack of a clear deflationary threat at this point in time may lead the Fed to opt for the more-incremental half-point move.
'Given that deflationary forces from the collapse of the credit cycle have still not been seen, the FOMC may be reluctant to deliver a larger rate cut,' said Mr Marc Chandler, chief global currency strategist at Brown Brothers Harriman.
The statement the Fed will issue announcing its rate decision may also contain important hints on future policy.
Investors have already had a preview in the form of the statement issued on Oct 8, saying market strain would crimp spending while inflation was fading as a risk due to weaker commodity prices and mounting U.S. economic slack.
Steep declines in the price of crude oil and other commodities are likely to drag the US consumer price index down sharply in coming months. Many analysts expect year-on-year readings of the CPI to fall into negative territory.
While this may not mean that broad deflation is setting in, it is likely to keep the Fed on high alert.
'Even if deflation is unlikely, officials will want to counter any increase in real interest rates as inflation tumbles,' Morgan Stanley economists told clients on Monday, adding that a half-point rate cut was 'virtually certain.'
Real interest rates rise as inflation falls, tightening monetary conditions faced by borrowers even if policy remains steady. -- THOMSON REUTERS
Tuesday, October 28, 2008
US govt bailout begins
Oct 28, 2008
The Straits Times
US govt bailout begins
WASHINGTON - THE government has cleared the way to ship out $125 billion (S$188.4 billion) this week to the country's largest banks, beginning the biggest government bailout in history.
'The money will go out the door for those institutions early this week,' predicts Assistant Treasury Secretary David Nason, one of the chief architects of the rescue plan.
Not only is the money ready to be sent to nine major financial institutions, including Bank of America, Citigroup Inc and JPMorgan Chase, but the government is reaching preliminary agreements with a group of more than a dozen major regional banks, who will share a part of an additional $125 billion the government hopes to pump into the banking system.
Before the end of the year, Treasury Secretary Henry Paulson intends to have spent $250 billion (S$376.6 billion) of the $700 billion bailout package buying ownership stakes in US banks.
The goal is to improve their balance sheets so that they will resume more normal lending practices and prevent the country from sliding into a deep recession.
Another $100 billion (S$150 billion) is earmarked to be spent buying troubled assets from banks such as bad mortgage loans as another way to spur banks to resume lending.
However, a long line of other industries are hoping the government will decide to help them as well. Insurance companies, automakers, hedge funds and foreign-owned banks are all making appeals to be included in the rescue package, contending that they need assistance as well.
Treasury and White House officials signalled on Monday that their cases are being reviewed. That review is coming in the closing days of a heated election campaign when the country will be electing a new president and a new Congress for next year.
The beleaguered auto industry is making its appeals to both presidential candidates and lawmakers running for re-election and their are indications those pleas are being heard.
Presidential press secretary Dana Perino told reporters Monday that officials at the 'highest levels' of the Treasury, Energy and Commerce departments have listened to automakers make their cases.
She said the administration is 'working as quickly as we possibly can' to finalize the rules needed for automakers to start tapping a $25 billion loan fund that Congress approved last month.
The fund is designed to help automakers develop new energy-efficient technology but is seen as a way to help keep the companies afloat during hard times. The expectation is that an initial $5 billion could be freed up soon.
Ms Perino said Treasury was also trying to determine whether the financing arms of the automakers might be eligible for federal help under the bank stock-purchasing programme of the rescue package.
The rescue programme is just one of the efforts the government is making to combat the worst financial crisis to hit the country since the 1930s.
The Federal Reserve began a programme on Monday to purchase the short-term debt of businesses, known as commercial paper. This market has been frozen since the collapse of Lehman Brothers spooked credit markets last month.
Fed officials were also scheduled to begin a two-day meeting on interest rates on Tuesday with economists widely forecasting that the Fed will cut a key interest, the federal funds rate, to 1 per cent in an effort to boost borrowing demand as a way to deal with the economy's current troubles.
So far, the efforts to battle the severe credit squeeze have shown little in the way of results. Libor, the London Interbank Offered Rate, a key goalpost for international lending, edged down only marginally on Monday and still remains at elevated levels.
'All these efforts are doing some good, but the question is whether they will do enough,' said Mr David Wyss, chief economist for Standard & Poor's in New York. 'The credit markets are still pretty locked up.'
Stocks tumbled again on Wall Street on Monday. The Dow Jones industrials finished the day down 203 points, or 2.4 per cent, closing at 8,176, the lowest close of the year.
Remarkably, it was the 28th time in the 31 trading sessions since the financial meltdown began in mid-September that the Dow has moved triple digits for the day.
The carnage was worse elsewhere as worries about a looming worldwide recession intensified.
Treasury announced that Mr Paulson, who is the administration's point person on the bailout effort, will not make a scheduled speech to Wall Street executives on Tuesday, sending an aide in his place, so that he could remain in Washington to work on the details of the rescue program.
That programme has undergone a major change in emphasis since it was passed by Congress. After global markets imploded, forcing other countries to rush to the aid of their banks, Mr Paulson decided that it was urgent to get assistance to US banks more quickly.
As a result, he earmarked $250 billion for the stock purchase plan and only $100 billion for what had originally been the centerpiece of the proposal, the purchase of troubled bank assets.
Treasury has given the go-ahead for stronger banks to use the money it receives in the rescue programme to acquire troubled banks.
That has prompted criticism the government could be getting into the position of picking winners and losers.
Ms Karen Thomas, the executive vice-president for the Independent Community Bankers of America, which represents the country's 8,000 smaller banks, said her group supported efforts to consolidate troubled banks with stronger ones but did not believe it was proper to pick winners among healthy banks.
'We believe that government money should not be used to facilitate consolidation of healthy institutions,' she said. -- AP
The Straits Times
US govt bailout begins
WASHINGTON - THE government has cleared the way to ship out $125 billion (S$188.4 billion) this week to the country's largest banks, beginning the biggest government bailout in history.
'The money will go out the door for those institutions early this week,' predicts Assistant Treasury Secretary David Nason, one of the chief architects of the rescue plan.
Not only is the money ready to be sent to nine major financial institutions, including Bank of America, Citigroup Inc and JPMorgan Chase, but the government is reaching preliminary agreements with a group of more than a dozen major regional banks, who will share a part of an additional $125 billion the government hopes to pump into the banking system.
Before the end of the year, Treasury Secretary Henry Paulson intends to have spent $250 billion (S$376.6 billion) of the $700 billion bailout package buying ownership stakes in US banks.
The goal is to improve their balance sheets so that they will resume more normal lending practices and prevent the country from sliding into a deep recession.
Another $100 billion (S$150 billion) is earmarked to be spent buying troubled assets from banks such as bad mortgage loans as another way to spur banks to resume lending.
However, a long line of other industries are hoping the government will decide to help them as well. Insurance companies, automakers, hedge funds and foreign-owned banks are all making appeals to be included in the rescue package, contending that they need assistance as well.
Treasury and White House officials signalled on Monday that their cases are being reviewed. That review is coming in the closing days of a heated election campaign when the country will be electing a new president and a new Congress for next year.
The beleaguered auto industry is making its appeals to both presidential candidates and lawmakers running for re-election and their are indications those pleas are being heard.
Presidential press secretary Dana Perino told reporters Monday that officials at the 'highest levels' of the Treasury, Energy and Commerce departments have listened to automakers make their cases.
She said the administration is 'working as quickly as we possibly can' to finalize the rules needed for automakers to start tapping a $25 billion loan fund that Congress approved last month.
The fund is designed to help automakers develop new energy-efficient technology but is seen as a way to help keep the companies afloat during hard times. The expectation is that an initial $5 billion could be freed up soon.
Ms Perino said Treasury was also trying to determine whether the financing arms of the automakers might be eligible for federal help under the bank stock-purchasing programme of the rescue package.
The rescue programme is just one of the efforts the government is making to combat the worst financial crisis to hit the country since the 1930s.
The Federal Reserve began a programme on Monday to purchase the short-term debt of businesses, known as commercial paper. This market has been frozen since the collapse of Lehman Brothers spooked credit markets last month.
Fed officials were also scheduled to begin a two-day meeting on interest rates on Tuesday with economists widely forecasting that the Fed will cut a key interest, the federal funds rate, to 1 per cent in an effort to boost borrowing demand as a way to deal with the economy's current troubles.
So far, the efforts to battle the severe credit squeeze have shown little in the way of results. Libor, the London Interbank Offered Rate, a key goalpost for international lending, edged down only marginally on Monday and still remains at elevated levels.
'All these efforts are doing some good, but the question is whether they will do enough,' said Mr David Wyss, chief economist for Standard & Poor's in New York. 'The credit markets are still pretty locked up.'
Stocks tumbled again on Wall Street on Monday. The Dow Jones industrials finished the day down 203 points, or 2.4 per cent, closing at 8,176, the lowest close of the year.
Remarkably, it was the 28th time in the 31 trading sessions since the financial meltdown began in mid-September that the Dow has moved triple digits for the day.
The carnage was worse elsewhere as worries about a looming worldwide recession intensified.
Treasury announced that Mr Paulson, who is the administration's point person on the bailout effort, will not make a scheduled speech to Wall Street executives on Tuesday, sending an aide in his place, so that he could remain in Washington to work on the details of the rescue program.
That programme has undergone a major change in emphasis since it was passed by Congress. After global markets imploded, forcing other countries to rush to the aid of their banks, Mr Paulson decided that it was urgent to get assistance to US banks more quickly.
As a result, he earmarked $250 billion for the stock purchase plan and only $100 billion for what had originally been the centerpiece of the proposal, the purchase of troubled bank assets.
Treasury has given the go-ahead for stronger banks to use the money it receives in the rescue programme to acquire troubled banks.
That has prompted criticism the government could be getting into the position of picking winners and losers.
Ms Karen Thomas, the executive vice-president for the Independent Community Bankers of America, which represents the country's 8,000 smaller banks, said her group supported efforts to consolidate troubled banks with stronger ones but did not believe it was proper to pick winners among healthy banks.
'We believe that government money should not be used to facilitate consolidation of healthy institutions,' she said. -- AP
Expecting the Japan govt to save the market, Asia markets show strong rebound
Expecting that the Japan government will take actions to save the market, stock markets in Asia have risen much.
Analysts say that the Japan government will take actions to save market after many years. Such expectations injected hope into the Japan, Hong Kong, China and other Asia stock markets who performed well. The Nikkei in the afternoon has risen 459.02 points or 6.41% to 7,621.92 points.
China A shares after lunch has risen by quite some bit going near 1,800 points with the financial stocks leading the rise. The Chinese government has setup a special team to tackle the financial crisis and more measure to help the economy may come later.
Hong Kong Hang Seng Index at afternoon close has risen by 6.1%. Premier Wen JiaBao has mentioned that China will support Hong Kong fully to deal with the current financial difficulties. This brings some warmth to the Hong Kong market. Stocks beaten yesterday such as the China bank stocks, insurance blue chips has seen some strong rebound.
For the Taiwan stock market, it has risen 33.1 points or 0.76% to 4,399.97 points.
For Korea, it has risen 5.57% to 991.16 points close to 1000 points.
According to reports, Japan's Kaoru Yosano mentioned on Sunday (26 Oct) that the Japanese government is preparing to inject funds into 'problemetic' banks. The upper limit will be raised from the current 2 trillion yen to 10 trillion yen.
According to reports, the Japan government will also request that the Japan central bank to buy bank stocks and at the same time introduce a more stock stock trading mandate to create more flexible and fair valued accounting standards and so on. The most effective move is announcement by the Japan government Finance Minister Shoichi Nakagawa that Japan will impose a ban Tuesday on naked short selling of stocks.
Yesterday G7 also gave an emegency announcement that the big fluctuation of the Japanese yen recently is causing great concern to the global financial and economic systems and mentioned that there is a need to act together on the problem. But the announcement was not able to stop the yen's strong appreciation and at the same time the Japan government also called for an emergency meeting to discuss measures to save the market.
The announcement by the G7 has investors thinking that the Japanese yen may be intervened again since 4 yers ago. But the announcement does not mentioned any details and the market reactions were normal.
Analysts say that the Japan government will take actions to save market after many years. Such expectations injected hope into the Japan, Hong Kong, China and other Asia stock markets who performed well. The Nikkei in the afternoon has risen 459.02 points or 6.41% to 7,621.92 points.
China A shares after lunch has risen by quite some bit going near 1,800 points with the financial stocks leading the rise. The Chinese government has setup a special team to tackle the financial crisis and more measure to help the economy may come later.
Hong Kong Hang Seng Index at afternoon close has risen by 6.1%. Premier Wen JiaBao has mentioned that China will support Hong Kong fully to deal with the current financial difficulties. This brings some warmth to the Hong Kong market. Stocks beaten yesterday such as the China bank stocks, insurance blue chips has seen some strong rebound.
For the Taiwan stock market, it has risen 33.1 points or 0.76% to 4,399.97 points.
For Korea, it has risen 5.57% to 991.16 points close to 1000 points.
According to reports, Japan's Kaoru Yosano mentioned on Sunday (26 Oct) that the Japanese government is preparing to inject funds into 'problemetic' banks. The upper limit will be raised from the current 2 trillion yen to 10 trillion yen.
According to reports, the Japan government will also request that the Japan central bank to buy bank stocks and at the same time introduce a more stock stock trading mandate to create more flexible and fair valued accounting standards and so on. The most effective move is announcement by the Japan government Finance Minister Shoichi Nakagawa that Japan will impose a ban Tuesday on naked short selling of stocks.
Yesterday G7 also gave an emegency announcement that the big fluctuation of the Japanese yen recently is causing great concern to the global financial and economic systems and mentioned that there is a need to act together on the problem. But the announcement was not able to stop the yen's strong appreciation and at the same time the Japan government also called for an emergency meeting to discuss measures to save the market.
The announcement by the G7 has investors thinking that the Japanese yen may be intervened again since 4 yers ago. But the announcement does not mentioned any details and the market reactions were normal.
Monday, October 27, 2008
Best China can do in crisis is to "run its own affairs well"
Best China can do in crisis is to "run its own affairs well"
2008-10-24 20:04:49
BEIJING, Oct. 24 (Xinhua) -- With industrialized countries mired in the current financial woes, many are hanging on emerging economies such as China in the hope of bolstering the teetering world economy.
Undoubtedly, China's steady growth can play a role in fighting the crisis and the recovery of the global economy for the following reasons.
China has been on a track of robust growth for years to become the world's fourth largest economy, and the momentum is expected to continue, though in an abated way.
Its financial sector is largely insulated from the credit crunch due to limited exposure as a result of a relatively closed market.
With its huge 1.9 trillion U.S. dollar foreign exchange reserves, China has strong capabilities to withstand risk and will be able to assist other crisis-plagued countries crying for cash injections.
But the domestic economy could never get away from the crisis unharmed in today's highly globalized world, though limited as for its immediate exposure.
Chinese exporters, which fueled the country's growth in past decades, had already felt the pinch of slackened external demand amid a probable global recession, as reflected in the third quarter's 9 percent growth -- its lowest increase in more than five years.
The crisis had caused difficulties and uncertainties to the Chinese economy, and prompted the country's decision makers to stimulate it with a series of moves.
It's true China's strong footing in the current crisis would prevent many trading partners from further shocks, as the country has grown into an important market for many nations.
But "Is China able to rescue the world?," as some Western media ventured to ponder.
The bold proposition more mirrored desperation for hope and support in a sweeping crisis than true faith in China's strength to lead the world out of crisis. It was already rebutted by sensible Western analysts.
The Wall Street Journal wrote on Oct. 21 "the slowdown (of the Chinese economy) highlights ... how China has yet to achieve the kind of scale needed to single-handedly drive the global economy."
The New York-based newspaper said China ranked only 100th in the world in terms of per-capita income, and actually accounted for 6 percent of the global economy at market-exchange rates, or about 10 percent after adjusting for purchasing-power parity.
"(The Chinese economy) can be something of a driver, but what happens in the other 90 percent is going to matter more," Nicholas Lardy of the Peterson Institute of International Economics made crystal clear.
Chinese leaders were also dealing with the crisis in a practical manner. They said several times the country's sound economic growth was in itself a major contribution to global financial stability and economic growth.
President Hu Jintao on Friday reiterated the stance before leaders of 45 Asian and European nations and organizations who gathered here at the opening ceremony of the Seventh Asia-Europe Meeting. "China must first and foremost run its own affairs well," he stressed.
And the country is already on the move. Interest rates were lowered twice over the past two months following the rate cuts by other major central banks and in a coordinated global effort to stem the crisis; tax rebates for certain exports were raised to help producers cope with smaller profit margins.
The government also announced an array of policies, including tax exemptions and mortgage deposit reductions, to boost the falling real estate sector, and scrapped the stamp tax on share purchase to boost the bearish stock market.
Such moves reflected the government's resolution and confidence to achieve stable economic growth. "Confidence is even more precious than gold or any currencies," Premier Wen Jiabao had emphasized repeatedly.
Thus, one thing is for sure: China is not only the victim of the current global crisis, but will also be an active participant in resolving it, as it did in withstanding the 1997 Asian financial meltdown.
But it's unrealistic either to deny the positive China factor, or hope for too much from the country to deal with the crisis.
Editor: Lin Liyu
2008-10-24 20:04:49
BEIJING, Oct. 24 (Xinhua) -- With industrialized countries mired in the current financial woes, many are hanging on emerging economies such as China in the hope of bolstering the teetering world economy.
Undoubtedly, China's steady growth can play a role in fighting the crisis and the recovery of the global economy for the following reasons.
China has been on a track of robust growth for years to become the world's fourth largest economy, and the momentum is expected to continue, though in an abated way.
Its financial sector is largely insulated from the credit crunch due to limited exposure as a result of a relatively closed market.
With its huge 1.9 trillion U.S. dollar foreign exchange reserves, China has strong capabilities to withstand risk and will be able to assist other crisis-plagued countries crying for cash injections.
But the domestic economy could never get away from the crisis unharmed in today's highly globalized world, though limited as for its immediate exposure.
Chinese exporters, which fueled the country's growth in past decades, had already felt the pinch of slackened external demand amid a probable global recession, as reflected in the third quarter's 9 percent growth -- its lowest increase in more than five years.
The crisis had caused difficulties and uncertainties to the Chinese economy, and prompted the country's decision makers to stimulate it with a series of moves.
It's true China's strong footing in the current crisis would prevent many trading partners from further shocks, as the country has grown into an important market for many nations.
But "Is China able to rescue the world?," as some Western media ventured to ponder.
The bold proposition more mirrored desperation for hope and support in a sweeping crisis than true faith in China's strength to lead the world out of crisis. It was already rebutted by sensible Western analysts.
The Wall Street Journal wrote on Oct. 21 "the slowdown (of the Chinese economy) highlights ... how China has yet to achieve the kind of scale needed to single-handedly drive the global economy."
The New York-based newspaper said China ranked only 100th in the world in terms of per-capita income, and actually accounted for 6 percent of the global economy at market-exchange rates, or about 10 percent after adjusting for purchasing-power parity.
"(The Chinese economy) can be something of a driver, but what happens in the other 90 percent is going to matter more," Nicholas Lardy of the Peterson Institute of International Economics made crystal clear.
Chinese leaders were also dealing with the crisis in a practical manner. They said several times the country's sound economic growth was in itself a major contribution to global financial stability and economic growth.
President Hu Jintao on Friday reiterated the stance before leaders of 45 Asian and European nations and organizations who gathered here at the opening ceremony of the Seventh Asia-Europe Meeting. "China must first and foremost run its own affairs well," he stressed.
And the country is already on the move. Interest rates were lowered twice over the past two months following the rate cuts by other major central banks and in a coordinated global effort to stem the crisis; tax rebates for certain exports were raised to help producers cope with smaller profit margins.
The government also announced an array of policies, including tax exemptions and mortgage deposit reductions, to boost the falling real estate sector, and scrapped the stamp tax on share purchase to boost the bearish stock market.
Such moves reflected the government's resolution and confidence to achieve stable economic growth. "Confidence is even more precious than gold or any currencies," Premier Wen Jiabao had emphasized repeatedly.
Thus, one thing is for sure: China is not only the victim of the current global crisis, but will also be an active participant in resolving it, as it did in withstanding the 1997 Asian financial meltdown.
But it's unrealistic either to deny the positive China factor, or hope for too much from the country to deal with the crisis.
Editor: Lin Liyu
Tech spending recession-proof?
Serene Luo
Mon, Oct 27, 2008
The Straits Times
Tech spending recession-proof
THERE is no end to the love affair Singaporeans have with gadgets, judging by the way they continue to spend their cash on cellphones, flat-screen television sets and notebook computers.
Electronic stores have reported strong sales, buoyed, they said, by falling prices which made items that much more attractive.
And at the recently concluded electronics show Comex, shoppers spent $56 million over four days, compared to $48 million last year.
LCD screens and cameras flew off the shelves at the Comex show, said Mr Melvin Koh, general manager of event organiser Eastern Directories.
Computer sales at electronics retailer Courts are up compared to the same period last year, said its country director James Friel.
At Best Denki, sales of flat-screen TVs are also strong, said its operations and marketing director C.J. Raj.
The electronics retailer recently started putting in corners for Apple products in its stores because 'we felt the IT industry was growing rapidly'.
One reason for the continued spending: the same gadget costs much less now compared to a few years ago. For instance, prices of flat-screen TVs have come down from about $6,000 for a 42-inch screen three years ago to $2,000 or less today.
Mr Alvin Lee, managing director of electronics store Audio House, said: 'When prices are very attractive, people will continue to buy the items even if they don't need them straightaway.'
Also, people would buy multiples of the same item, like a flat-screen TV, 'one each for their parents, and for the children', said Mr Koh.
Healthy crowds have also been seen at telco shops on weekends.
'It is still largely business as usual and we have not seen the problems in the financial markets making an impact yet,' said M1 spokesman Chua Swee-Kiat.
StarHub said that 'take-up of our suite of info-communications services and devices remained healthy', and reported a 'surge in uptake' for its Digital Voice Home service while SingTel said there was 'no noticeable change' in the number of patrons and number of transactions at its stores.
Worldwide, sales of computers are still going at full speed, said two big market research firms IDC and Gartner.
IDC on Monday reported that 20.2 million PCs were sold in the Asian-Pacific region in the third quarter, a 12 per cent jump over the same period last year.
The Consumer Electronics Association in the United States also expected spending on video games, cameras, music players and other gadgets to grow 3.5 per cent in the fourth quarter - though that is half the rate of the same period last year.
While they will not quit buying gadgets during the downturn, shoppers told The Straits Times they would search to get the best bang for their buck.
National serviceman Stephen Gong said he shopped around Sim Lim Square for the best price for a Halo 3 game for his recently purchased Xbox 360 game console.
The 19-year-old said he paid $49 for the game, instead of the recommended retail price of $74.90, a saving of about $25.
Technical officer Toh Thye Hwee, 39, said he chose a cheaper LCD monitor for a computer for his children.
'I have no choice. I have to buy one,' he said in Mandarin. 'My children need one to use, because they want to surf the Internet.'
Mon, Oct 27, 2008
The Straits Times
Tech spending recession-proof
THERE is no end to the love affair Singaporeans have with gadgets, judging by the way they continue to spend their cash on cellphones, flat-screen television sets and notebook computers.
Electronic stores have reported strong sales, buoyed, they said, by falling prices which made items that much more attractive.
And at the recently concluded electronics show Comex, shoppers spent $56 million over four days, compared to $48 million last year.
LCD screens and cameras flew off the shelves at the Comex show, said Mr Melvin Koh, general manager of event organiser Eastern Directories.
Computer sales at electronics retailer Courts are up compared to the same period last year, said its country director James Friel.
At Best Denki, sales of flat-screen TVs are also strong, said its operations and marketing director C.J. Raj.
The electronics retailer recently started putting in corners for Apple products in its stores because 'we felt the IT industry was growing rapidly'.
One reason for the continued spending: the same gadget costs much less now compared to a few years ago. For instance, prices of flat-screen TVs have come down from about $6,000 for a 42-inch screen three years ago to $2,000 or less today.
Mr Alvin Lee, managing director of electronics store Audio House, said: 'When prices are very attractive, people will continue to buy the items even if they don't need them straightaway.'
Also, people would buy multiples of the same item, like a flat-screen TV, 'one each for their parents, and for the children', said Mr Koh.
Healthy crowds have also been seen at telco shops on weekends.
'It is still largely business as usual and we have not seen the problems in the financial markets making an impact yet,' said M1 spokesman Chua Swee-Kiat.
StarHub said that 'take-up of our suite of info-communications services and devices remained healthy', and reported a 'surge in uptake' for its Digital Voice Home service while SingTel said there was 'no noticeable change' in the number of patrons and number of transactions at its stores.
Worldwide, sales of computers are still going at full speed, said two big market research firms IDC and Gartner.
IDC on Monday reported that 20.2 million PCs were sold in the Asian-Pacific region in the third quarter, a 12 per cent jump over the same period last year.
The Consumer Electronics Association in the United States also expected spending on video games, cameras, music players and other gadgets to grow 3.5 per cent in the fourth quarter - though that is half the rate of the same period last year.
While they will not quit buying gadgets during the downturn, shoppers told The Straits Times they would search to get the best bang for their buck.
National serviceman Stephen Gong said he shopped around Sim Lim Square for the best price for a Halo 3 game for his recently purchased Xbox 360 game console.
The 19-year-old said he paid $49 for the game, instead of the recommended retail price of $74.90, a saving of about $25.
Technical officer Toh Thye Hwee, 39, said he chose a cheaper LCD monitor for a computer for his children.
'I have no choice. I have to buy one,' he said in Mandarin. 'My children need one to use, because they want to surf the Internet.'
Crisis? Not yet, say expats in China
Erik Nilsson
Mon, Oct 27, 2008
China Daily, ANN
Crisis? Not yet, say expats in China
As the global financial crisis threatens to poison lives around the globe, many expatriates in China are finding they are largely immune to its toxicity.
And generally speaking, the fewer economic ties they have to back home, the safer they are, says renowned economist Liu Baocheng, director of the Center for International Business Ethics, a nongovernmental organization hosted by the University of International Business and Economics in Beijing.
Liu reckons that "most foreigners have good reason to be confident about their lives in China" but that there are often differences between "full expats" - those sent by multinationals - and "local expats" - those who work for Chinese employers.
"If they work for a Chinese company or organization and earn RMB, they're better off," he explains.
"The other category - those paid from home and sent as expats - may feel a more negative impact."
Still, the pain felt by full expats is usually softer than if they were working for the same firms back home. "For many US companies, their China operations are enjoying greater success than their headquarters," he says.
He cites Lehman Brothers as an example. The company's China operation has chugged along as a revenue engine during its infamous crash, boding well for expats here.
Nigel Clark, chairman of the British Chamber of Commerce in China, says the impact of the crisis on his compatriots in China varies but "on balance the effect is likely to be less for those living here".
"Most expatriates living in China are enjoying working in a vibrant economy," says Clark, "but the effect will vary by individual and family, depending on their age group and how they have positioned themselves regarding past and future financial arrangements, particularly retirement".
Furthermore, while several overseas currencies have wobbled of late, the RMB has been appreciating.
This is of great relief to Australian Daniel Sanderson, who has lived in China for five years and works for his homeland's embassy in Beijing.
"The only way it (the crisis) would affect me is if the Australian dollar goes down. I get paid in RMB, so I'm actually making more money," he says.
In addition, China's Consumer Price Index (CPI) remains stable and generally low, while expat wages remain relatively high, says Liu.
"Expats on average earn three to five times more than their Chinese colleagues and enjoy the same low prices for commodities and services," he says.
As American Jarrod Wolf puts it: "A hundred kuai goes a long way here."
However, the 20-year-old university student says he's saving cash, because he doesn't know what will happen after he returns home in three months.
"It's not that my purchasing power has decreased, but I'm more (careful) about how I spend my money," he says.
"I would go out and do a lot more things in Beijing but I don't know how long or how deep the recession will be back home."
Some who repatriate might even find the economic bust could boost their opportunities in their native economies.
"One good thing is that house prices are going down in Australia and if I'd stayed, I might have gotten into something that I couldn't afford," Sanderson says. "But that didn't happen."
Instead, the price plunge means he's better positioned to buy a home when he repatriates next year.
As a demographic, Liu says expats like Sanderson are likely to have few or no investments, debts or properties in their home countries.
While American business instructor Paul Cokeley does own mutual funds in the US, he says he feels "separated from the issues back home", adding: "They're not affecting the money I need to survive right now."
Cokeley says he hasn't checked on how the funds are doing since July. "I know it's bad but there's not much I can do about it," he says.
"I just hope things bounce back before I move back to the US. Maybe I could use that money on the down-payment for a house."
American Jim Spear, co-owner of China Bound Ltd, says his business has yet to feel the brunt of the global economic downturn. However, the company based in Beijing's suburban Mutianyu area is bracing itself for what might come.
"I work in the hospitality and tourism field where spending is discretionary," he says. "So we are concerned that the global economic downturn could impact our business from overseas while the situation sorts itself out and people get their confidence back.
"But we hope and expect that in the meantime our customers from inside China will find nearby destinations like ours even more attractive when they think of how to get away from it all. So the world will doubtlessly go on."
Spear says China Bound's lodging and tour business is "booming" but expects to take fewer bookings for corporate meetings next year.
"When times are tough and they need to control their budgets a little, they're still going to have meetings but they're more likely to have them closer to home," he says.
Still, he remains optimistic.
"The world's been through this before," he says, "and I'm confident we can make it through again."
Liu says the way expats in China react to the financial crisis should go beyond the fiscal to the psychological.
"Live smart and get informed about developments on both ends of the market," he advises.
"Don't overreact and always see the bottle as half full, because the quality of life is subjective."
Mon, Oct 27, 2008
China Daily, ANN
Crisis? Not yet, say expats in China
As the global financial crisis threatens to poison lives around the globe, many expatriates in China are finding they are largely immune to its toxicity.
And generally speaking, the fewer economic ties they have to back home, the safer they are, says renowned economist Liu Baocheng, director of the Center for International Business Ethics, a nongovernmental organization hosted by the University of International Business and Economics in Beijing.
Liu reckons that "most foreigners have good reason to be confident about their lives in China" but that there are often differences between "full expats" - those sent by multinationals - and "local expats" - those who work for Chinese employers.
"If they work for a Chinese company or organization and earn RMB, they're better off," he explains.
"The other category - those paid from home and sent as expats - may feel a more negative impact."
Still, the pain felt by full expats is usually softer than if they were working for the same firms back home. "For many US companies, their China operations are enjoying greater success than their headquarters," he says.
He cites Lehman Brothers as an example. The company's China operation has chugged along as a revenue engine during its infamous crash, boding well for expats here.
Nigel Clark, chairman of the British Chamber of Commerce in China, says the impact of the crisis on his compatriots in China varies but "on balance the effect is likely to be less for those living here".
"Most expatriates living in China are enjoying working in a vibrant economy," says Clark, "but the effect will vary by individual and family, depending on their age group and how they have positioned themselves regarding past and future financial arrangements, particularly retirement".
Furthermore, while several overseas currencies have wobbled of late, the RMB has been appreciating.
This is of great relief to Australian Daniel Sanderson, who has lived in China for five years and works for his homeland's embassy in Beijing.
"The only way it (the crisis) would affect me is if the Australian dollar goes down. I get paid in RMB, so I'm actually making more money," he says.
In addition, China's Consumer Price Index (CPI) remains stable and generally low, while expat wages remain relatively high, says Liu.
"Expats on average earn three to five times more than their Chinese colleagues and enjoy the same low prices for commodities and services," he says.
As American Jarrod Wolf puts it: "A hundred kuai goes a long way here."
However, the 20-year-old university student says he's saving cash, because he doesn't know what will happen after he returns home in three months.
"It's not that my purchasing power has decreased, but I'm more (careful) about how I spend my money," he says.
"I would go out and do a lot more things in Beijing but I don't know how long or how deep the recession will be back home."
Some who repatriate might even find the economic bust could boost their opportunities in their native economies.
"One good thing is that house prices are going down in Australia and if I'd stayed, I might have gotten into something that I couldn't afford," Sanderson says. "But that didn't happen."
Instead, the price plunge means he's better positioned to buy a home when he repatriates next year.
As a demographic, Liu says expats like Sanderson are likely to have few or no investments, debts or properties in their home countries.
While American business instructor Paul Cokeley does own mutual funds in the US, he says he feels "separated from the issues back home", adding: "They're not affecting the money I need to survive right now."
Cokeley says he hasn't checked on how the funds are doing since July. "I know it's bad but there's not much I can do about it," he says.
"I just hope things bounce back before I move back to the US. Maybe I could use that money on the down-payment for a house."
American Jim Spear, co-owner of China Bound Ltd, says his business has yet to feel the brunt of the global economic downturn. However, the company based in Beijing's suburban Mutianyu area is bracing itself for what might come.
"I work in the hospitality and tourism field where spending is discretionary," he says. "So we are concerned that the global economic downturn could impact our business from overseas while the situation sorts itself out and people get their confidence back.
"But we hope and expect that in the meantime our customers from inside China will find nearby destinations like ours even more attractive when they think of how to get away from it all. So the world will doubtlessly go on."
Spear says China Bound's lodging and tour business is "booming" but expects to take fewer bookings for corporate meetings next year.
"When times are tough and they need to control their budgets a little, they're still going to have meetings but they're more likely to have them closer to home," he says.
Still, he remains optimistic.
"The world's been through this before," he says, "and I'm confident we can make it through again."
Liu says the way expats in China react to the financial crisis should go beyond the fiscal to the psychological.
"Live smart and get informed about developments on both ends of the market," he advises.
"Don't overreact and always see the bottle as half full, because the quality of life is subjective."
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