About my blog : Financial News !

Over the past years as advancing in my studies at European Business School in London I came into contact and gained a deeper interest in the banking industry. For a long time a job in banking was an insurance policy and a ticket to success for young graduate like myself . With the upcoming of the financial crisis and the worsening of the situation over the past months the belief that a career in banking would last , changed not only from my point of view but also that of my friends.

The banking institutions described in my blog were once the crown jewels of the financial and banking industry. Today, job losses, default and uncertainty affect them in a way no one ever thought possible. Even the brightest minds of the investment world, such as Warren Buffet and Prince Sultan Al Waleed Bin Talal were not able to foresee the impact of the crisis on institutions such as Goldman and Citigroup, respectively.

Investment advisors, private bankers, wealth managers and hedge fund managers who used to talk about the euro hitting the 2USD barrier, or the barrel of oil at 200USD; are nowhere to be seen. The world has become so complicated, and the economic system has expanded beyond our understanding, that few people are able to look at what is happening now and give a proper explanation or analysis. In fact, my blog aims at presenting a fresh, easy to understand and dynamic approach to the financial crisis.

This word “crisis” is what determines our behaviour these days. I recently came across a very good joke which defined optimism as “a private banker ironing five shirts on a Sunday evening”. Some of my friends, and friends of friends, and many more strangers in the city of London, and all over the world, have lost this optimism. When there is a lack of confidence in the market, then the game is paused, if not over. Problems expand, and what started as a virus in the financial market becomes a contagious disease affecting other industries, as the automobile.

Another example of how things can change, and how fast this change happens is seen with the American and European car manufacturing companies. More and more, as people reduce their spending, as the credit crunch forces Americans and Europeans to wake up from a dream of cheap credit and high liquidity; manufacturers bear the pain, orders are reduced and people loose their jobs. My family has been directly affected by this situation, and I have seen the difficulties with suppliers and a immediate reduction of sales. With the plans being drafted in both sides of the Atlantic and a change of Government in the US, things may well start to change.

Our world has changed, as fast as in the 20s, as strong as in the 40s and as dynamic as in the 80s. This time, the system is pushed to the limits of our understanding, and the phrase written in the dollar “in God we trust” becomes something of a premonition. To say what awaits us is to look into the future, and I will not attempt to do that; better know what is going on today, and what better way than using the internet.

By Jim Kohn

CITIGROUP TO SHED MASSES OF JOBS

Bursting prime mortgage bubbles, high lending interest rates, outstanding residential credit card and real estate/mortgage debt, escalating defaults and a weakened economy have all contributed to the collapse of Citigroup. Citigroup Services has had to cut a colossal 77,000 jobs!

Its shares have taken a nose dive and keep on plummeting. Doubts and fears are growing as uncertainties linger in all markets. In a swift move of damage control, it is raising the concern and doing everything in its capacity to minimize its losses and cut its costs, utilising all or a combination of various workable solutions to alleviate the impact of its collapse.

The company has since been in talks with the U.S. congress seeking to be rescued. The U.S. government, however, has already planned the investment of $25 billion in Citigroup as part of its £700 billion financial bailout package. Citigroup has also considered a fire sale in light of the financial crisis that has crippled the company. Merging with Goldman Sachs or nationalization are two other options on the table. The company is also considering selling off its risky assets to trim down its portfolio in the ailing economy. Its main single investor, Prince Waleed Bin Talal has offered to increase his stake in the bank by 1%, from 4% to 5%.

In these times of deep financial crisis, many industries and companies lay in the balance, at the mercy of the sometimes unforgiving nature of economics. Are these the times of profound American financial change? Have both New York and Detroit’s life cycles reached their death? Are they even fit to survive?

BRITISH AEROSPACE (BAE) SYSTEMS FEELS THE PINCH

Anxiously waiting on government orders for the past one and a half years and facing the grim realities of the world and local economies, British Aerospace (BAE) Systems has decided that it would have to shed 200 lucrative jobs in the north of England in order to slash costs and stay competitive. Both the aviation and war shipbuilding industries are facing the impact of the colossal financial crisis, seeing orders dwindle from the Ministry of Defence, MOD.

The peak of the Iraq war was ironically a good time for business at BAE Systems when orders were ripe. Now that Britain’s involvement in Iraq and elsewhere has declined, orders are reasonably down. Many factors have contributed to the slowing down of orders at BAE Systems, for example, the decrease in world travel and the effects of the financial crisis on the travel and tourism industry has affected BAE Systems as orders from airline companies have decreased.

Airplane sales are on the decrease and hence BAE’s orders, in turn, are on a steady decline.
However, the news is not all bad, for just recently, BAE Systems was awarded a new $1.6 Billion U.S. Army contract for a 10,000 additional family of Medium Tactical Vehicles order. America’s long term presence in Iraq and Afghanistan has helped BAE Systems during tough times.

Also this news just recently in, BAE Systems has received an order for three aircraft from Air Congo. These orders will also help BAE Systems through the current unpredictable and turbulent economic times.

GM, CHRYSLER AND FORD MOTORS have run out of control !!

About 250,000 jobs in the United States as well as in Britain are at serious risk due to the financial difficulties felt by Detroit city’s General Motors, Chrysler and Ford, as consumers face the credit crunch and are not purchasing cars. The credit crunch is a sudden reduction in the general availability of loans (or credit), or a sudden increase in the cost of obtaining loans from banks. Thus, consumers are directly affected and their purchasing power diminishes, and with this tumbling demand, U.S. automakers are feeling fragile with stagnant sales.

Simply put, financing a car for consumers has become harder in the current stagnant economic climate, where, for automakers, inventories begin to stock up and become tougher to shift.

The companies have had to slash manufacturing production across factories globally due to the current worldwide recession. All three companies have appealed for a modest $25 billion bailout by the U.S. congress. In an effort of damage control, the company has got rid of two of its luxury jets. GM was also forced to sell its stake in Suzuki due to this financial meltdown and the lagging consumer demand for its cars.

U.S. president elect, Mr. Obama has repeatedly stressed the need to help the sector, since winning the presidential election, and has urged President Bush to take immediate action to save America’s home-grown automakers. He has described it as the "backbone of American manufacturing." Considering that Detroit city, home to GM, Chrysler and Ford, is the spine to America’s auto-making industry, it seems that the government will be more than likely and happy to offer a helping hand. The question is when and how. Or should they ride out the current tides independently? Would it make sense for the U.S. congress to turn a blind eye on such a crucial American industry and allow it to collapse? I think not.

GOLDMAN SACHS RECEEDING

More saving and costs cutting, more prudence and more financial discipline are the order of the day. Goldman Sachs has been humbled by the current worldwide financial crisis and the tumbling of their stock price. The largest U.S. securities organisation has since become a bank holding company. Drastically scaling back on investment banking activities and shedding thousands of staff in the wake of the present economic difficulties, gripping it and other large banks, is the usual initial outcome for early remedy. Goldman Sachs executive have also given up their bonuses to help the ailing company. At this very moment, every single cent counts and even a little help, surely, cannot hurt. The focus is to cut costs and promote real recovery. It should also be receiving a $10 billion bailout package from the U.S. congress, but will that be enough to keep matters in check?

Analysts at Goldman Sachs predict the U.S. recession to deepen even further and unemployment to hit around 9% at the end of 2009. This gloomy outlook has prompted financial companies to re-evaluate their positions and exercise caution. With the markets in chaos and the domino effect of bank woes, banks are returning to traditional and more clients focussed financial methods. Have Goldman Sachs and the other financial giants, such as JP Morgan and Citigroup Services, reaped what they have sewed? Sewing the seeds of greed has led them to their ultimate collapse and demise.

The objective is to learn from previous mistakes and try not to repeat them.

TOYOTA GETS RID OF JOBS IN THE MIDST OF ECONOMIC FEARS

Toyota has revealed, today (21.11.08), that it will axe 3,000 factory jobs in Japan due to the severe decline in demand and the recession the world economy is struggling to cope with. It will also cut jobs in the U.S and scale down its operations in Thailand as well as elsewhere.

Other Japanese automakers such as Nissan, Mazda and Isuzu have also all announced that they will do the same. The company, amongst many other mammoth rivals globally, has experienced solid growth for over sixteen years, however, now, because times have changed, the right decisions need to be made in order to cope with the current financial situation facing global auto industries and markets. One could argue that during these growth years, Toyota was overproducing cars.

With consumers putting their car purchasing decisions on hold, downsizing and cutting costs for these auto makers has become an important, practical and logical necessity, taking into account the scope of the situation and the future livelihood of these conglomerates. Selling off stakes or factories/plants to keep a healthier cash flow is also another option. There are no immediate or easy solutions, however, making the most logical and sensible financial decisions and exercising sound economic policies are imperative in order to avoid failure and rise above the crunch. However, with all said, for consumers, it remains the best time to actually buy cars as carmakers and dealers start slashing prices to spur on demand and move inventory, that’s if you have the money. Brighter horizons are on the way though and I think Toyota will learn from this experience and come out stronger.

RELATED VIDEO by Reuters

http://uk.reuters.com/news/video?videoId=93409

JP Morgan Stanley chases axes jobs

As figured out through newspapaper articles and the ft.com that the New York based banking conglomerate plans to cut 3,000 jobs in their investment banking unit and freeze base salaries as well; in addition, Morgan Stanley is scaling their securities operations by 10% and up to 10% of its management division. In a move to reform and adjust its risky mortgages, in this harsh economic period, JP Morgan aims to reorganize its portfolios, sell off some assets and cut costs to withstand the brunt of this unforgiving recession.

The turbulent economic environment looks to be getting murkier; Citigroup Services and Goldman Sachs have also announced that they will reduce their workforces by 10%. Indicators point to the fact that things are likely to get even worse than better, in the short-run. With hundreds of thousands of borrowers unable to pay back their personal and business loans, credit card debts and/or mortgages, JP Morgan is looking at becoming leaner in this financial crisis in order to cope with the current crippling economics.

To re-forge a sustainable financial business model and return to ‘normal times’ the financial industry may need a lot of re-engineering and ‘bailing out’.

But what ever happened to responsible and self-governing contingency planning, recovery plans and sound financial mechanisms and policies?

Who is to be held accountable? And, does the government always have to bail out these financial giants in recessionary times due to their own inefficiencies?

When will they ever learn to get their act together and become fully self-sufficient?

I think it is time for federal banks like these to learn from these hard lessons and always have responsible, adaptable and responsive back up plans for worst case scenarios, like the current scenario taking the financial industry by storm.

ECONOMIC GLOOM SHRINKS HONDA’S MANUFACTURING OUTPUT

Honda Motors has announced today (21.11.08), that it plans to close down its car production operations in Swindon, UK for two months next year, thus halting production and affecting 6,000 of its factory workers.

It also planes to scale back US operations. This news comes fresh in the midst of the current economic downturn where Honda seeks to gradually restructure in order to strategically reposition itself responsively to be able to adapt to the current hard times shocking the industry. Falling worldwide demand has crippled the exportation of Japanese cars, especially to the United States which is Japan’s number one Japanese car importer.

The story is very much the same in different places in and around Europe and the rest of the world. In Sweden for example, Volvo has laid off 5,000 workers and cut production, German automaker BMW has sliced production by over 20,000 vehicles in its German plants; French Renault is laying off 6,000 staff while PSA Peugeot Citroën is decreasing production at three of its plants.

The motor industry globally faces extreme financial difficulties bearing in mind the high price of crude oil coupled with the lack of consumer disposable spending. Almost all major automakers have already announced their current struggle. Consumer price confidence in general and within the auto trade has dramatically tumbled due to fears of financial uncertainty and the fact that financial lenders are tightening the noose on borrowing.

Consumers are also more sensitive in these times and feel that spending their income on the absolute necessities is the only essential matter right now and for a time to come. Creating jobs and implementing a coordinated set of fiscal policies or a stimulus package to decrease taxes, in order to spur on spending again, would be welcomed.

Daimler has to stop production due to finacial crisis .

Daimler Chrysler , Second largest car producer in the world will stop its production due to financial crisis. The German automaker will stop its production from 11 th of dec til beginning of January due to weak financial conditions.

Mercedes reported that they issued a profit warning on full years earning after posting a profit of 275 million dollars in the third quarter, reversing net loss of 1.9 billion dollars last year in the same quarter.

As well the German car producer based in Stuttgart, Germany reported that its revenue declined by 7 % to 30.5 billion in the quarter on declining sales in north America, compared to revenue of 32 billion dollars posted in the same period a year ago.

It is enormous how the financial crisis will effect others industries . This example shows that Mercedes has to stop its production for one months because there is no more demand for such a exclusive car. Its very difficult to invest in a new car in this kind of stressful financial period. Mercedes had to get rid of 10 000 part time workers in order to stay stabile.

This example shows that not only banks suffer from this, as well as any other company in any other industry company.

ROLLS ROYCE REDUCES JOBS AMID AVIATION INDUSTRY TURNDOWN

In addition to the big 2,300 job reduction this year, aircraft engine maker Rolls Royce has recently revealed that it will be cutting more jobs through the remainder of 2008 and up to 2,000 jobs throughout 2009 in the wake of the current economic slowdown.

As the crisis in the global economy deepens, worldwide travel is on a downward spiral and the aviation industry faces a steep upward slope to climb; airplane sales are on the decrease and hence Rolls Royce’s orders from Boeing and Airbus, in turn, are on a steady decline.

This job cut plan, however, will help to reduce costs for Rolls Royce and trim production output in order to manage and manoeuvre through these difficult times, as well as remain competitive and maintain innovation. The idea is to save cash in 2009 due to uncertainties. Cash flow always allows for flexibility and in these times, flexibility can be a luxury.

Rolls Royce is not alone and it seems evident that all industries are and will be affected by the present world financial crisis. British giant Aerospace (BAE) Systems is facing the same issues as Rolls Royce is up against as well. The root of the problem just may be a ‘greedy’ Anglo-Saxon model.

It is purely down to Keynesian demand side economics now. But history states that recession has to come and go and that it has a purpose, and that is to readjust inflation and interest rates in order for growth to kick off again. I predict that Rolls Royce’s engines will, once again, fly the friendly skies in style!

Hypo Real had to be rescued by other banks

Germany’s financial sector was in big crisis on Monday after Hyper Real Estate one of its biggest lenders, had to be rescued by other banks and the government to solve a €50bn liquidity crisis.
Shares in HRE dropped more than 70 per cent and other banking stocks went down after the intervention, the most serious sign of strain in Germany’s financial sector since the collapse of Lehman Brothers aggravated the global credit crisis this month.

The Hypo Real Estate Holding AG (is a holding company based in Munich, Germany which comprises a number of real estate financing banks. The company's activities span three sectors of the real estate market: commercial property, infrastructure and public finance, and capital markets and asset management.

HRE, one of Europe’s biggest commercial property and public sector lenders, was handed a €35bn liquidity lifeline by other German private sector banks, the Bundesbank and the European Central Bank. The lender is also selling €15bn of assets to cover its liquidity shortfall.
The urgent bail-out was agreed in the early hours of yesterday with Mr Steinbrück and Angela Merkel, German chancellor, in telephone contact with bankers and officials meeting in Frankfurt.

Related video :

http://video.aol.com/video-detail/hypos-deal-to-avoid-finance-squeeze/964169166

American Internatioal Group has to repay emergency aid

AIG, the stricken US insurer, is considering selling more than 15 businesses, including its aircraft leasing unit, a stake in a large US reinsurer and billions of dollars in properties in an effort to repay a $85bn government loan and secure its future as an independent company.

The board of AIG, which was de facto nationalised this month when the US administration stepped in with an emergency loan, was meeting in New York on Sunday night to discuss a radical plan for asset disposals. People close to the situation said AIG , led by its new chief executive Edward Liddy, wanted crucial businesses such as its international life insurance unit and its US pension businesses to be at the core of the “new AIG”. But apart from those, AIG was prepared to consider selling most other operations.

AIG and its advisers, led by Blackstone and JPMorgan, are believed to have drawn up a list of about 15-20 large businesses that could be sold. AIG has to move fast because it has short window to repay the emergency governemt aid .

The governemtn extended the loan , gives itright to buy a majority stake in the company , after AIG collapsed under the weight of billions of dollars in credit related losses .

Lehman brothers is probably the largest bank failure in the U.S. history. A german bank calles KfW did one of their worste deals ever in their history and ceo’s of the bank get punished fot that mistake .

After the transfer margin of the state bank KfW, two executives mangers had to leave their job . The Board of Directors of KfW decided the immediate termination of the boards Detlef Leinberger and Peter Fleischer.
This news got published by the Finance ministers Peer Steinbrueck (SPD) and German Economics Minister Michael Glos (CSU). Apparently it was the fault of the two boards that they borrowed 350 million Euros to Lehman brothers before they got bankrupt.

KfW decided to do a deal with the U.S. investment bank Lehman Brothers to set up a business of 350 million euros, although the institute was already insolvent.
Fleischer and Leinberger got immediately removed from their offices. The existing service contracts would be terminated.

There are certain mistakes that just can't be allowed to happen at a bank. Transferring 350 million to Lehman Brothers an institution that had already shown itself to be a candidate for bankruptcy the night before is one of those mistakes. The state owned lending bank KfW will now have to provide a detailed account of how it could have made such a misstep. What's more important, though, is that it needs to take a really close look at its in house risk management department and make the changes needed to make sure something like this can never happen again. KfW has undergone immense growth over the past few years.

It has grown more entwined in the capital market and thereby diversified its own refinancing. But now is the time for Germany's ninth-largest bank (in total assets) to ask itself whether the growth of its internal structures has kept sufficient pace with the bank's other growth and whether it still has all of its other functions under complete control