ML: John Thain, the current CEO of the New York Stock Exchange and former president at Goldman Sachs was hired as the next CEO of Merrill Lynch, effective December 1st.
Afternoon Tumble: (from the WSJ)
Investors' mood has soured again, leaving the prospects for the economy and the stock market perhaps just as sketchy as they were before Tuesday's delirious rally.
On Wednesday, the market again rose in early trading, but it stumbled as the day wore on, culminating in a late round of selling that left major market measures squarely in the red. Traders and analysts attributed the decline to profit taking, especially in the high-flying technology sector, and a resumption of crude oil's yearlong march upward after a two-day respite.
Bad News for HSBC: (from FT.com)
HSBC on Wednesday issued a gloomy outlook for the banking sector as it reported a sharp rise in US bad debt charges while indicating that emerging markets would not escape the credit squeeze.
In a trading update, the world's second largest bank by market value said it had set aside $3.4bn (€2.3bn) for bad debts in its US consumer finance business, as problems in the subprime mortgage market spilled over into its consumer lending arm.
HSBC is under scrutiny from investors and rivals looking for signs of a worsening US crisis. It was one of the first large institutions to signal problems with subprime mortgages last year.
Stephen Green, chairman, said that problems with bad debts were spreading from the mortgage business to other loans, such as credit cards, as consumers found it harder to get credit and delinquency rose. But he said that while delinquency rates were up, they were lower than those of previous downturns.
Economists See Long Road Ahead for Credit Markets: (from WSJ)
The credit crisis weighing on markets still has some time to play out and consumers may have a tough slog ahead, according to economists in the latest WSJ.com forecasting survey. But confidence in the Federal Reserve's ability to navigate the rough economic waters remains high.
When asked about the credit crisis and related market turmoil, more than half of the economists said it was about half over, while 25% said it still is in its early stages. Just 15% said the credit troubles are over or mostly overDeals Unraveling: (from WSJ)
United Rentals Inc. indicated its $7 billion buyout offer from Cerberus Capital Management LP is beginning to unravel, in a sign of continued trouble in the leveraged-buyout debt market. The LBO boom contributed much of the strength of the markets in the last few years
The Federal Reserve on Wednesday unveiled far-reaching plans to increase its transparency, adopting many of the features of an inflation targeting regime without actually stating a formal inflation target.
The announcement came as the Bank of England indicated that two interest rate cuts would be needed to stem an economic slowdown in the UK.
The forecasts, which will be published quarterly and span a three year period, will continue to be made by Fed policymakers individually. However, the "central tendency" of the inflation forecasts for the third year will constitute a de facto medium term inflation target.
Mr Bernanke said the forecasts would "provide a more timely insight into the committee's outlook," help households and businesses "better understand and anticipate how our policy decisions respond to incoming information" and "enhance our accountability."
Michael Feroli, an economist at JPMorgan Chase, said the changes "amount to a regime of inflation targeting-lite".
Long Term Outlook for Gold:
Gold is likely to see a significant correction before the end of the year but prices are forecast to reach a new record early in 2008, according to the Royal Bank of Canada, which hosts its annual gold conference in London on Thursday.
RBC said the metal could fall to the $725-to-$750 range before rising to $900 a troy ounce, above the record high of $850 set in January 1980.
RBC says a period of seasonal demand weakness can be expected before the year-end, largely driven by India, the world's largest gold consumer. Buying there tends to fall significantly when the Diwali festival, which started this month, begins.
Prices could also be hit by profit-taking by speculators. They have amassed record long positions, which RBC views as unsustainable.
However, RBC says the gold market will sustain its positive momentum over the remainder of this decade, driven by favourable supply-and-demand fundamentals and concerns over the future global role of the dollar after its recent sell-off. RBC sees a likelihood of currency re-alignments if the dollar loses its position as the de facto anchor to which many countries in Asia, Latin America and the Middle East link their currencies.
"Increasing geopolitical risk combined with rising economic uncertainty should continue to provide incentives for investors to increase their exposure to gold as a safe haven," said Stephen Walker, director of global mining research at RBC Capital Markets.
Patrick J. Pierce
Bowdoin College '08
Cell: 617-584-6132
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