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Business, Finance & Investment
Top 10 Financial Reasons Blessings This Year
Nov 28th
provided by 
Yep, it’s been a tough year. There’s still much to lament, such as decades-high unemployment, rising budget deficits and shaky financial institutions, but considering the abyss we were staring squarely into at this time last year, we’ve also come a long way and made great strides toward a healthier economy. So, as we enter the traditional Thanksgiving period, let’s take a few moments to give thanks for the modest financial gifts we’ve received this year – and maybe more importantly, give thanks that in many cases, our worst financial fears failed to materialize.
1. Major Stock Indexes Rise
Good tidings! Major stock indexes are up 60% since their March lows. The rebound in our equity markets has been critical on several fronts. First, it has helped stem the losses seen in retirement accounts like 401(k)s and IRAs. These retirement accounts are increasingly the No.1 funding vehicle for retirees, so recouping any losses here is a big help, especially to the baby boomer demographic.
There’s also a confidence issue at play, and our stock markets – for better or worse – are a de facto barometer, an economic "feel-good" factor. Fortunately, stock markets look forward, not back. Right now, they’re telling us they anticipate better times down the road.
2. GDP Growth Returns
Gross domestic product growth is the engine that makes everything go in our economy. GDP growth leads to stock market growth contributes to job and wage growth, and increases tax revenues for state and local governments to help balance their budgets. We obviously need all of these things, and the GDP growth of 3.5% in the third quarter was a good start.
We still need consistent GDP growth over several quarters to claim economic victory, and we need it to be more organic, not artificially spurred by government stimulus and one-time fiscal measures. As we look forward to 2010, this will be the biggest catalyst to getting us out of this recession and bringing down our nosebleed unemployment level.
3. Banks Repay Their TARP Loans
Ten of the banks that received Troubled Asset Relief Program (TARP) funds were allowed to repay $68 billion to taxpayers in June, and most of the major recipients have committed to fully repaying their TARP loans over the next 24 months. Also, as the stock prices of major banks rise, the chances of the government earning a good return on its TARP loans and direct investments only increases.
Even the much-maligned auto makers are starting to make good on their promises to pay. General Motors even announced that it would start repaying its $15+ billion in federal loans.
4. Home Prices Are Stabilizing
While home prices are still down 30% from their peak, prices in many geographic areas ticked upward in August, September and October according to the benchmark Case-Shiller Index.
If home prices can stabilize and even (gasp!) begin to rise in 2010, the hundreds of billions in mortgage-backed securities (MBS) can begin to improve the balance sheets of our battered financial institutions rather than deteriorate them, as has happened for the past two years. There’s still much progress that needs to be made, however, as mortgage delinquencies are still on the rise, and the threat of higher interest rates looms on the horizon. But hey, it could be worse – a lot worse.
5. First-Time Homebuyer Tax Credit Is Extended
The $8,000 tax credit for first-time homebuyers was scheduled to end on December 1, but those who didn’t get on board in time have plenty of reason to be grateful. President Obama recently extended the credit until June 2010 in an effort to help to spur the housing market further. It was a smart move by Congress, as new housing starts remain at multi-decade lows, and inventory levels are still high across the housing market. The tax credit was also expanded to include income levels of up to $125,000 for individuals and $225,000 for joint filers.
6. Corporate Profitability Is Getting Stronger
Profit margins have been strong at corporations over the past few quarters as inventories have been depleted and costs wrung out of business models. We still need to see more demand in the form of revenue growth, but stabilization and earnings per share (EPS) growth is good and companies should come out of this whole mess stronger, smarter and looking to hire if conditions continue to improve. Higher EPS numbers also mean more tax revenues, which are sorely needed.
7. The Rest of the World Is Resilient and Growing
Another good sign: Many foreign markets are doing quite well. GDP growth in China and India is tracking above 7% for the year, Brazil is growing and will begin its mega infrastructure roll-out to prepare for the Olympics in 2016, and smaller emerging economies in South America and Asia are holding steady and/or growing.
The internal, domestic economic strength of these foreign markets will help U.S. exporters to sell more goods, which represent over half the earnings of S&P 500 companies.
8. Inflation Is at Bay
Inflation has yet to appear, which is keeping interest rates low. This is helping the U.S., as it must borrow heavily to fund its growing budget deficits. Most economists do agree that inflation is inevitable down the road given all the money being sloshed around Washington and Wall Street, but there seems to be enough slack in the economy that we may have a few more quarters before inflation creeps up on us. By then, hopefully the economy is on better footing, which will allow the Federal Reserve to raise rates slowly, without stifling the recovery.
9. Regulatory Scrutiny Has Increased
The Securities and Exchange Commission (SEC) has been near the top of a long list of entities that deserve a good finger-wagging for errors of submission or omission leading up to the financial crisis. But new measures are being put into place to protect investors from fraud and negligence by their financial advisors and corporate CEOs.
Whether the SEC is up to the task remains to be seen, but you can bet that they are embarrassed and bruised, and will be on the warpath to find the next problem before it blows up in their face. Any increased diligence by the SEC, or by groups like the credit ratings agencies (who are also quite red in the face) can only help investors in 2010 and beyond.
10. We’re Still Standing!
Last year at this time, many wondered if our financial system would even survive at all. It did (thank goodness), and that may be the best blessing of all.
8 Investing Lessons From John Paulson
Nov 23rd
Even as the financial system collapsed last year, and millions of investors lost billions of dollars, one unlikely investor was racking up historic profits: John Paulson, a hedge-fund manager in New York.
His firm made $20 billion between 2007 and early 2009 by betting against the housing market and big financial companies. Mr. Paulson’s personal cut would amount to nearly $4 billion, or more than $10 million a day. That was more than the 2007 earnings of J.K. Rowling, Oprah Winfrey and Tiger Woods combined.
How did he do it? Believing that a housing-market collapse was coming, Mr. Paulson spent over $1 billion in 2006 to buy insurance on what he then saw as risky mortgage investments. When the housing market cracked and the mortgages tumbled, the value of Mr. Paulson’s insurance soared. One of his funds rose more than 500% that year. Then in 2008, he shorted financial shares, or wagered that they would fall in price, profiting again when these companies collapsed.
And are there any investing skills that average investors can learn from his success? Yes. There are no guarantees, of course, but the success of Mr. Paulson and a few other underdog investors lends encouragement to individuals trying to compete with Wall Street’s pros.
Here are eight investing lessons of Mr. Paulson’s $20 billion gamble, the greatest trade in financial history:
1. Don’t Rely on the Experts
Many investors lost big in 2007 and 2008 as housing crumbled and the stock market tumbled. But no one lost more than commercial and investment banks caught with toxic mortgage-related securities. These bankers were the very same ones who created these investments, and Wall Street’s top analysts had vouched for their safety, even as Mr. Paulson and others bet against the investments.
Lesson: When Wall Street is wheeling out its latest can’t-miss product, be skeptical.
2. Bubble Trouble
Some academics argue that financial markets have become more efficient. But a rash of financial bubbles in recent years — including housing, energy, technology and Asian currencies — suggests that markets are becoming harder to navigate, and are more prone to overshooting. Today, investors of all sizes read the same articles, watch the same business-television programs and chase the same hot tips. They invariably head for the exits at the same time.
Lesson: Have an exit strategy — and cash to cushion any tumble.
3. Focus on Debt Markets
Most investors track the ups and downs of the stock market but have only a vague sense of moves in debt markets. That’s a mistake. Early signs of trouble were seen in sophisticated markets that don’t get much limelight, like the subprime-mortgage bond market. These problems eventually felled the housing and stock markets, and the overall economy, a set of falling dominos that Mr. Paulson and his team correctly anticipated.
Lesson: Debt markets can do a better job predicting problems than stock markets.
4. Master New Investments
Mr. Paulson scored huge profits by buying credit-default swaps, a derivative investment that serves as insurance on debt. When risky mortgage bonds tumbled in value, Mr. Paulson’s insurance soared. But many experts were flummoxed by CDS contracts or shied away from educating themselves about these relatively new investments.
Mr. Paulson and his team had no experience with CDS contracts. But they put the time into learning about them.
Lesson: Educate yourself about the range of exchange-traded funds being introduced, some of which can play a valuable role in a portfolio.
5. Insurance Pays
A number of investors worried about a bursting of the housing market, but few did much about it, even though insurance, such as CDS contracts, at the time were selling at dirt-cheap prices. Out-of-the-money put contracts — options that pay off only if the market tumbles — also were trading at reasonable levels. As cheap as this insurance was, many pros ignored it.
Lesson: Don’t underestimate the value of a safety net, such as put options.
6. Experience Counts
Some of the biggest winners in the meltdown were middle-aged investors dismissed by some as past their prime. But they had experienced past market downturns, while some of the bankers and analysts caught flat-footed knew only good times.
Lesson: A historical perspective can be a valuable tool.
7. Don’t Fall in Love
With an Investment. In early 2009, Mr. Paulson became more bullish about the banks and financial companies that he had wagered against in 2008, after determining that these companies had improved their balance sheets. The moves resulted in profits this year.
Lesson: Even the greatest trade doesn’t last forever.
8. Luck Helps
In early 2006, Mr. Paulson determined that housing was in trouble and set out to profit from the impending fall. But some housing experts already had determined that real estate was overpriced; others had wagered against housing but could no longer stomach their losses. Just months after Mr. Paulson placed his historic trade, U.S. housing prices began to fall.
Lesson: Don’t risk too much in any one trade, even one that seems like a sure thing.
Bank Fees You Don’t Know You’re Paying
Nov 19th
by David K. Randall
Friday, September 25, 2009provided by
Banks are cutting overdraft fees, but there are other hidden charges.
In the wake of the uproar over bank fees charged to debit card holders–and the looming threat of congressional action–banking giants Bank of America, JPMorgan Chase, and Wells Fargo have announced drastic changes to their overdraft policies.
What banking customers might be missing is that debit card overdraft fees are the tip of the iceberg. Banks nickel and dime their customers in numerous other ways that can easily cost the average person $100 or more per year. Adding insult, many of the fees are poorly disclosed and levied regardless of any action the customer does–or doesn’t–take.
"There is a long list of fees that people pay that doesn’t require any type of acknowledgment on the part of the consumer," said Greg McBride, a senior financial analyst at Bankrate.com. Here are five major areas of hidden bank revenues.
Balance Transfer Fees
Banks commonly mail out ads pitching low interest rates for customers willing to transfer credit card balances from another institution. What many don’t advertise is that there is often a balance transfer fee of between 3% and 5% hidden in the fine print.
"If you’re transferring a balance from a card with a rate of 15% to a card with a rate or 13%, but you’re paying a 3% admission fee, you’re not saving any money," McBride said. Moving a balance of $5,000 from one credit card to another with a slightly lower interest rate could result in a $150 charge being added to the balance that you owe and pay interest on.
If you’re thinking about switching to a card with a lower interest rate, ask the bank what type of transfer fees it charges. These fees are separate from the annual interest rate that you pay.
Cash Advances
Consumers who take cash advances from their credit cards will also be hit with a transaction fee that they might not have been expecting. As with balance transfers, cash advances often come with a fee that ranges between 3% and 5%. That’s not all.
"If cash advances weren’t costly enough with interest rates in the high teens, there’s no grace period, and the interest clock starts ticking right away," McBride said.
Foreign Currency Surcharges
Using a debit or credit card while traveling overseas is wonderfully convenient. Perhaps too convenient. Over the past few years, banks have commonly started charging a 3% fee for any purchases made in foreign currencies. That means if you go to Paris on vacation and buy presents in euros, the charges will show up on your statement in dollars–with the 3% fees built in.
If you plan to use a debit or credit card abroad, consider opening an account with Capital One or Charles Schwab, whose foreign currency exchange fees run as low as 1%. If you are going to be taking money out of an ATM in another country (another place where banks ring up additional charges), Wells Fargo and PNC offer some of the lowest fees.
Balance Requirements
Many banks offer to waive monthly service fees on checking or savings accounts if customers maintain a collective balance above a set minimum. Dip below it, and you could be hit with a charge of $8 or more every time your balance falls below the minimum.
"These requirements are really a lose-lose proposition," McBride says. "If you don’t maintain the balance, you get socked with a fee. If you do maintain it, you have the opportunity costs of stranding money in a low-yielding account when you could be earning a more competitive return in an online savings account."
ATM Fees
Bank of America and other banks now charge customers from other banks $3 to withdraw money from its ATMs. But at least you have to agree to pay the fee at the terminal. What some customers may not realize that is that their own bank often levies a $2 fee every time they use a competitor’s ATM as well. Adding up all the bank fees, it may cost $5 to take out $20 of your own money. That’s a 25% commission, and the bank didn’t have to do a thing.
Copyrighted, Forbes.com. All rights reserved.
Are Chinese exports good for U.S. economy?
Nov 18th
By Chris Isidore, CNNMoney.com senior writer
On 5:04 pm EST, Tuesday November 17, 2009
As President Obama completes his trip to China, it’s a natural time to ask if trade with the greatest source of U.S. imports is a good thing or bad thing for the still battered U.S. economy
Obama said he spoke to Chinese President Hu Jintao about the need for more balanced trade between the two major trading partners. He also urged China to allow the Chinese yuan to gain value against the dollar.
But he also told an audience of students in Shanghai this week that increased trade between the two nations is good for both countries, despite some friction between the two governments. And Obama said he hoped that trade will continue to grow.
"This trade could create even more jobs on both sides of the Pacific, while allowing our people to enjoy a better quality of life," Obama said.
But there are plenty of critics who believe that nothing good comes out of the U.S. trade gap with China, which so far this year has dwarfed the combined gap with the rest of the world by more than a third.
"I think the U.S.-China relationship was the worst economic policy mistake of the last generation," said Scott Paul, executive director of Alliance for American Manufacturing, a coalition of small-to-mid-size manufacturers and some unions which has been a long-time critic of U.S. trade policy.
Paul and other critics argue currency manipulation by the Chinese to undervalue their currency, government subsidies to Chinese manufacturers and low wages paid to Chinese workers have put U.S. workers at an unfair disadvantage.
The Economic Policy Institute, a liberal think tank, estimates that 2.3 million U.S. jobs were lost between 2001 and 2007 due to the Chinese trade gap.
University of Maryland professor Peter Morici has written that this trade gap "threatens to torpedo the economic recovery and keep unemployment above 10 percent for the foreseeable future."
But others argue that even if there needs to be some changes in U.S.-China trade policy, the U.S. economy benefits more than it is damaged by the relationship.
Gary Hufbauer, senior fellow at the Peterson Institute for International Economics, said that there is little evidence to support that trade gaps lead to big increases in job losses.
"If it was a cause of unemployment, why wasn’t unemployment rising from the late 90’s all the way through to today as Chinese imports rose," he said.
Jay Bryson, global economist with Wells Fargo Securities, added that even though the growing trade gap has caused some harm to the U.S. economy, there are plusses that should not be overlooked.
"It doesn’t mean that every person in the United States benefits, but from a national perspective it’s a positive," said Bryson.
Bryson and Hufbauer both said that lower priced Chinese goods reduces the cost of living for American consumers, giving them more money to spend on other goods and services.
Bryson said limiting Chinese imports through tariffs or other barriers would raise the price of those goods.
"While it would protect the jobs of some people making toys or shirts here, it would cost other jobs because we wouldn’t have the money to spend on other goods and services," Bryson said. "If I’m spending more on toys for my kids or my shirts, I have less money to go to the movies or go out to a restaurant."
Hufbauer conceded that the Chinese yuan is grossly undervalued. But he said there is reason to hope for some change on that front.
China has pegged its yuan to the dollar, rather than letting it trade freely like other currencies. So it has been declining as the dollar has lost value in recent months.
The decline in the yuan means that other countries in Asia and Europe are starting to pressure Chinese leaders to allow their currency to trade more freely. And strong economic growth in China, coupled with the declining dollar, is creating inflation risks for China.
So the Chinese may start to relent on the yuan due to their own self interest, rather than American pressure.
"Once there is some evidence the global recovery is more sustainable, the Chinese worries about inflation are likely to mean they’ll allow [the yuan] to appreciate versus the dollar," said Bryson.
Warren Buffett investments: businessman extraordinaire
Nov 18th
By Charlie Carter 11/04/09 – 17:32
Yesterday, American investor and business mogul Warren Buffett announced that his conglomerate holding company Berkshire Hathaway will pay $34 billion to buy out Burlington Northern Santa Fe Corp – his biggest-ever acquisition.
The move is based on a bet by Buffett that BNSF – the US’s largest rail company – will see massive benefits from a recovering US economy.
Meanwhile, reports are beginning to surface that the massive deal may lead Buffett to sell some of his prior investments, which include a number of insurance and financial firms – such as M&T Bank and American Express – as well as food and beverage giant the Coca-Cola Co. and newspaper publishing firms including the Washington Post.
Life at the top
The history of Warren Buffet investments are long and complex and to call Buffett a seasoned-investor is something of an understatement. As company chairman and CEO of Berkshire Hathaway, Buffett has long used the "float" provided by his firm’s insurance operations to finance his own investments.
In the early days of his career at Berkshire, Buffett tended to focus on long-term investments in publicly quoted stocks, but has more recently turned his attention to buying whole companies out – like BNSF – that have subsequently provided the elusive investor with a plethora business ventures, included outlets in candy production and jewelry sales.
Earlier this month, British economist and television presenter Evan Davis met with Buffett for a BBC television documentary, The World’s Greatest Money Maker. The honorary title is clearly warranted.
In short, Buffett manages to make more money than other investors by essentially being less ambitious. While Wall Street’s "Up-and-Coming" set their sights on high returns, using leverage, Buffett’s steady annual compounding of increases, avoiding debt, has always worked better.
Warren Buffett, one of the world’s best-known business people, is clearly different from the rest of the super-rich. At cut above, you could argue. As his biographer, Alice Schroeder, explains, Buffett’s method is "simple, but it’s not easy."
And, with yet another massive investment now under his belt, there is definitely more to this captivating financial services tycoon than meets the eye. Warren Buffett, we salute you!
6 Simple Steps to $1 Million
Nov 16th
Glenn Curtis
Monday, October 26, 2009
This article is part of a series related to being Financially Fit
provided by
Let’s face it; we all don’t make millions of dollars a year, and the odds are that most of us won’t receive a large windfall inheritance either. However, that doesn’t mean that we can’t build sizeable wealth – it’ll just take some time. If you’re young, time is on your side and retiring a millionaire is achievable. Read on for some tips on how to increase your savings and work toward this goal.
Stop Senseless Spending
Unfortunately, people have a habit of spending their hard-earned cash on goods and services that they don’t need. Even relatively small expenses, such as indulging in a gourmet coffee from a premium coffee shop every morning, can really add up – and decrease the amount of money you can save. Larger expenses on luxury items also prevent many people from putting money into savings each month.
That said, it’s important to realize that it’s usually not just one item or one habit that must be cut out in order to accumulate sizable wealth (although it may be). Usually, in order to become wealthy one must adopt a disciplined lifestyle and budget. This means that people who are looking to build their nest eggs need to make sacrifices somewhere – this may mean eating out less frequently, using public transportation to get to work and/or cutting back on extra, unnecessary expenses.
This doesn’t mean that you shouldn’t go out and have fun, but you should try to do things in moderation – and set a budget if you hope to save money. Fortunately, particularly if you start saving young, saving up a sizeable nest egg only requires a few minor (and relatively painless) adjustments to your spending habits.
Fund Retirement Plans ASAP
When individuals earn money, their first responsibility is to pay current expenses such as the rent or mortgage expenses, food and other necessities. Once these expenses have been covered, the next step should be to fund a retirement plan or some other tax-advantaged vehicle.
Unfortunately, retirement planning is an afterthought for many young people. Here’s why it shouldn’t be: funding a IRA early on in life means you can contribute less money overall and actually end up with significantly more in the end than someone who put in much more money but started later.
How much difference will funding a vehicle such as a Roth IRA early on in life make?
If you’re 23 years old and deposit $3,000 per year (that’s only $250 each month!) in a Roth IRA earning and 8% average annual return, you will have saved $985,749 by the time you are 65 years old due to the power of compounding. If you make a few extra contributions, it’s clear that a $1 million goal is well within reach. Also keep in mind that this is mostly interest – your $3,000 contributions only add up to $126,000.
Now, suppose that you wait an additional 10 years to start contributing. You have a better job and you know you’ve lost some time, so you contribute $5,000 per year. You get the same 8% return and you aim to retire at 65. When you reach age 65, you will have saved $724,753. That’s still a sizeable fund, but you had to contribute $160,000 just to get there – and it’s no where near the $985,749 you could’ve had for paying much less.
Improve Tax Awareness
Sometimes, individuals think that doing their own taxes will save them money. In some cases, they might be right. However, in other cases it may actually end up costing them money because they fail to take advantage of the many deductions available to them.
Try to become more educated as far as what types of items are deductible. You should also understand when it makes sense to move away from the standard deduction and start itemizing your return.
However, if you’re not willing or able to become very well educated filing your own income tax, it may actually pay to hire some help, particularly if you are self employed, own a business or have other circumstances that complicate your tax return.
Own Your Home
At some point in our lives, many of us rent a home or an apartment because we cannot afford to purchase a home, or because we aren’t sure where we want to live for the longer term. And that’s fine. However, renting is often not a good long-term investment because buying a home is a good way to build equity.
Unless you intend to move in a short period of time, it generally makes sense to consider putting a down payment on a home. (At least you would likely build up some equity over time and the foundation for a nest egg.)
Avoid Luxury Wheels
There’s nothing wrong with purchasing a luxury vehicle. However, individuals who spend an inordinate amount of their incomes on a vehicle are doing themselves a disservice – especially since this asset depreciates in value so rapidly.
How rapidly does a car depreciate?
Obviously, this depends on the make, model, year and demand for the vehicle, but a general rule is that a new car loses 15-20% of its value per year. So, a two-year old car will be worth 80-85% of its purchase price; a three-year old car will be worth 80-85% of its two-year-old value.
In short, especially when you are young, consider buying something practical and dependable that has low monthly payments – or that you can pay for in cash. In the long run, this will mean you’ll have more money to put toward your savings – an asset that will appreciate, rather than depreciate like your car.
Don’t Sell Yourself Short
Some individuals are extremely loyal to their employers and will stay with them for years without seeing their incomes take a jump. This can be a mistake, as increasing your income is an excellent way to boost your rate of saving.
Always keep your eye out for other opportunities and try not to sell yourself short. Work hard and find an employer who will compensate you for your work ethic, skills and experience.
Bottom Line
You don’t have to win the lottery to see seven figures in your bank account. For most people, the only way to achieve this is to save it. You don’t have to live like a pauper to build an adequate nest egg and retire comfortably. If you start early, spend wisely and save diligently, your million-dollar dreams are well within reach.
Is Warren Buffett’s Railway Buy a Billion Dollar Bet on Big Coal?
Nov 10th
by Brian Merchant, Brooklyn, New York 
on 11. 3.09
Photo via DOE
The initial reaction to news that the Oracle from Omaha was investing billions of dollars in BNSF railway was positive–Mike noted that it could lead to a number of positive developments: potentially more passenger rail lines, a higher profile for railroad transportation in general, and further investment in other rail lines from other finance big guns. But there’s a downside to his purchase as well–the rail Buffett bought transports some 1/5th of America’s coal. Is Buffett’s investment therefore a bet that coal will need to be shipped into the foreseeable future?
That’s The New Republic’s Bradford Plumer’s take:
the BNSF railway serves a lot of coal fields in the West, including Wyoming’s vast Powder River Basin, and hauls enough coal on its routes to supply about 10 percent of the electricity in the United States. So Buffett’s essentially betting that coal’s going to remain a major part of the U.S. energy mix for quite some time, even as the country moves to cut carbon emissions.
Does that mean Buffett doesn’t think climate legislation would put a damper on one of the main economic drivers of his new railway? Essentially, yes–if and when the bill passes, it will come loaded with enough protections to ensure that coal will be around a while yet. As Plumer writes:
Is it crazy to bet on coal in the face of looming climate legislation? Eh, not really. As a new Greenpeace report points out, the House climate bill actually does quite a bit to ensure that coal has a bright future. There’s $10 billion for research into capturing carbon emissions from coal-fired plants, plus billions more for deployment. And the bill … will enable utilities to keep some of their older, dirtier plants chugging along for years to come. Environmentalists have been lobbying to change some of these provisions in the Senate, but Buffett seems awfully confident that won’t happen.
Suddenly that $44 billion investment isn’t looking so inspiring anymore . . .
Source: http://www.treehugger.com/files/2009/11/warren-buffett-railway-bet-big-coal.php
Chinese premier pledges funds, aid to Africa
Nov 8th
Chinese premier pledged $10 billion in loans, debt forgiveness to African nations
AP – Chinese Primer Wen Jiabao, left, and Egyptian President Hosni Mubarak chair the opening of the 4th Ministerial Conference …
By Tarek El-Tablawy, AP Business Writer
SHARM EL-SHEIK, Egypt (AP) — China’s premier on Sunday pledged $10 billion in low interest loans to African nations over the next three years and said Beijing would cancel the government debts of some of the poorest of those countries.
The announcement by Wen Jiabao looked to deflect criticism that China’s investments in the continent were motivated purely by greed. China is one of the largest investors in Africa, along with the United States and Europe.
At a two-day China-Africa summit, Wen Jiabao also said China would build 100 new clean energy projects for Africa over the same period as part of an effort to help the continent deal with climate change issues.
"We will help Africa build up financing capacity," Wen said at the start of the two-day Forum on China-Africa Cooperation summit. "We will provide $10 billion in concessional loans to African countries."
Concessional loans are ones that offer generous terms — better than market rates — to poorer countries.
China’s inroads into Africa have come at a price for Beijing. The country has been accused by some in the West of ignoring Africa’s needs and the dismal rights records of some of its countries while looking only to sate its hunger for the fuel it needs to drive its bustling economy.
China has, for example, been a key force in developing Sudan’s vital oil sector even as the Arab-dominated government in Khartoum is accused of atrocities in the Darfur region. More recently, a $7 billion mining deal was signed between a little known Chinese company and Guinea’s government — an agreement that came weeks after soldiers there opened fire on demonstrators and raped women in the streets.
But Wen said while many in the world have only now begun to take note of China’s role in Africa, it was a relationship that dates back five decades and included helping the countries throw off the yoke of colonialism.
"The Chinese people cherish sincere friendship toward the African people, and China’s support to Africa’s development is concrete and real," Wen said at a forum that attracted leaders such as Sudan’s Omar el-Bashir and Zimbabwe’s Robert Mugabe — heads of state out-of-favor with the West.
"Whatever change that may take place in the world, our friendship with African people will not change," Wen said. "Our commitment to deepening mutually beneficial cooperation … will not change, and our policy of supporting Africa’s economic and social development will not change."
Wen said that as part of its support for Africa and growing trade ties with China, Beijing would take eight new measures over the next three years, including helping Africa build up its financing capacity.
Along with the loans — double the amount pledged two years earlier at a similar summit in Beijing — Wen also said that for the most heavily indebted and least developed African nations, China would cancel their debts associated with interest free government loans set to mature at the end of this year.
The caveat was that the debt forgiveness was restricted to those nations that have diplomatic relations with China — a condition likely to rankle critics who argue that China has made its support conditional on countries backing it fully, including by renouncing ties with Taiwan. The overwhelming majority of African nations have diplomatic ties with China.
Wen said that China would also build energy projects that cover solar power, biogas and small hydro plants. Other initiatives under the plan include boosting training of African professional, new schools, and phasing in zero tariff treatment for 95 percent of the products from the least developed countries that have relations with Beijing.
The steps are the latest in a growing trade relationship between China and Africa — a push that has seen trade grow tenfold in the past eight years to reach almost $107 billion by the end of 2008.
The latest pledge for loans builds on $5 billion that China had pledged to the continent during the 2006 Sina-African summit. That gathering in Beijing was widely seen as a catalyst fueling growth in Africa, a continent ravaged by some of the world’s highest poverty rates, a battle against the AIDS epidemic and chronic internal conflicts.
Oil prices tumble after US unemployment report
Nov 6th
By CHRIS KAHN, AP Energy Writer Chris Kahn, Ap Energy Writer – Fri Nov 6, 2:15 pm ET
NEW YORK – Oil prices tumbled Friday after the government said the U.S. unemployment rate topped 10 percent for the first time since 1983.
Benchmark crude for December delivery gave up $2.74 to trade at $76.88 a barrel on the New York Mercantile Exchange. In London, Brent crude for December delivery shed $2.63 at $75.36 on the ICE Futures exchange.
America’s thirst for petroleum has slumped all year. With nearly 16 million people now out of work, traders found few reasons to expect it will return anytime soon. Crude prices shed most of their gains from earlier in the week, when financial reports showed consumers were spending more, and companies were squeezing more productivity out of their workers.
Prices slumped even after weather forecasters said tropical storms would sweep through the Gulf of Mexico over the weekend, likely disrupting oil production.
"There’s some shock value that comes with double-digit unemployment," said Phil Flynn, an analyst with PFGBest. "It’s worse than expected. If the job market isn’t strong, then the economy isn’t strong."
For most of the year, oil prices shrugged off growing unemployment and steadily climbed above $80 a barrel as investors bet that American energy demand would return with an economic recovery. The weak U.S. dollar also pushed oil higher since crude contracts are priced in dollars, and a drop in U.S. currency gives investors with foreign money more buying power.
But oil hasn’t been able to push past $82 a barrel as U.S. oil consumption dropped well below average for this time of year. With millions of people giving up the morning commute, gasoline demand has plunged.
"I’m glad that it’s finally being talked about," trader Stephen Schork said. "We have way too much oil."
Still, Francisco Blanch, head of global commodities research with Bank of America-Merill Lynch, believes that crude prices will continue to march to $100 a barrel by 2011. The weak dollar will continue to boost oil prices next year, he said, though it’s hard to tell how much more the market will bear.
"What we know is at $150 (a barrel last year), the world economy blew up. So it will be somewhere in that range," Blanch said.
At the pump, retail gasoline prices slid throughout the week, giving up less than a penny overnight to a new national average of $2.679 a gallon, according to auto club AAA, Wright Express and Oil Price Information Service. A gallon of gas is 21.4 cents more expensive than last month and 33.9 cents more expensive than the same time last year.
In other Nymex trading, heating oil fell 7.52 cents to $1.9824 a gallon. Gasoline for December delivery lost 8.15 cents at $1.9062 a gallon. Natural gas for December delivery plunged 15.7 cents to $4.625 per 1,000 cubic feet.
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Associated Press writers Pablo Gorondi in Budapest, Hungary, Alex Kennedy in Singapore and Christopher S. Rugaber in Washington contributed to this report.
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