TORONTO (Reuters) - The woes in the U.S. financial sector are “poetic justice” for bankers who designed and sold complex investments that have since gone sour, billionaire investor Warren Buffett said on Wednesday.
The head of the Berkshire Hathaway Inc group of companies also played down worries about a credit crunch by saying that recent interest rate cuts mean low-cost funds are readily available.
But he warned that the U.S. dollar will continue to slide unless the country can rein in its yawning trade deficit -- the “biggest factor” behind the decline. Still, he said, the U.S. economy will “do very well over time.”
Buffett, one of the world’s wealthiest people, appeared to see irony in the fact that many of the banks who marketed complex investments which have now crashed are bearing much of the fallout.
“It’s sort of a little poetic justice, in that the people that brewed this toxic Kool-Aid found themselves drinking a lot of it in the end,” he said.
Buffett, a legendary investor who has amassed a huge fortune through plays in a wide range of industries, has bet against the U.S. dollar in the past.
In 2005, Berkshire had made a $21.8 billion bet that the U.S. dollar would fall. It later unwound that successful position as it found other non-U.S. investments.
Buffett said on Wednesday in Toronto that the turmoil that has rocked the U.S. economy in recent months has imbued the markets with a healthy degree of caution, while the rate-cutting response from central bankers has ensured that cheap money remains available for borrowing.
“I wouldn’t quite call it a credit crunch. Funds are available,” Buffett said during a question and answer session at a business event. “Money is available, and it’s really quite cheap because of the lowering of rates that has taken place.”
He added: “What has happened is a repricing of risk and an unavailability of what I might call ‘dumb money,’ of which there was plenty around a year ago.”
Buffet was in Toronto for the Canadian launch of corporate-news firm Business Wire, which Berkshire bought in 2006.
Buffett tends to favour companies with relatively simple businesses, strong management, consistent earnings, good returns on equity, and little debt.
As of late last year, Berkshire’s businesses employed about 220,000 people and the number is growing as the group continues to expand its portfolio of companies. The units generated a $10.27 billion profit on revenue of $90.2 billion from January to September.
A fall in US inventories of wheat to a 60-year low drove prices of the grain sharply higher on Friday to a fresh record, intensifying fears of rising global food price inflation.
US wheat futures – global benchmarks for the grain – have jumped by their daily trading limit each day this week. Prices for Minneapolis wheat, the US variety most suitable for making flour, rose 10.7 per cent on the week, extending its price surge since the beginning of the year to 50 per cent.
“We are in uncharted territory,” said James Bower of Bower Trading. “The market is desperately trying to tell global producers that we need more acres for wheat production.”
The price gains came after the latest update from the US Department of Agriculture fuelled concerns over low inventory levels. The USDA reduced its estimates for wheat stocks at the end of the 2007/08 marketing year to 272m bushels, compared with its January estimate of 292m bushels.
“The US has sold too much wheat and will have to import, probably from Canada, to satisfy its domestic requirements,” said a hedge fund manager. “This will have a major impact on the rest of the world if consuming countries can’t buy US wheat and Europe becomes the global supplier.”
Global stocks of wheat are expected to fall to a 30-year low as consuming countries have scrambled to ensure they have enough supplies for domestic consumption.
“With global inventories at very tight levels, we expect to see further upward pressure across grains prices,” said Sudakshina Unnikrishnan of Barclays Capital. “The question for the market is how these high prices will influence US farmers’ decisions to allocate land to crops this year.”
Record wheat and soyabean prices mean these crops are expected to win land at the expense of corn cultivation in 2008. The USDA will update the market on farmers’ planting intentions in March.
Analysts say India and China should allow domestic wheat prices to rise to attract land away from cotton. India says it expects to produce 74.81m tonnes of wheat in 2008, down from 75.81m tonnes last year.
India, the world’s second-largest wheat consumer, has imported wheat for the past two years but it says it might not need to import this year if favourable weather boosted production.
But Mark Samson of US Wheat Associates, the wheat marketing group, said India might have to buy 3m tonnes of wheat in the year starting in April, a 68 per cent rise on the previous year.
As a result of the price pressure, the Minneapolis Grain Exchange will remove the daily price limit on the spot-month hard red spring wheat contract for trading on February 25, the first time it has done so.
Biofuels Are Bad for Feeding People and Combating Climate Change
By displacing agriculture for food—and causing more land clearing—biofuels are bad for hungry people and the environment
By David Biello February 7, 2008
Converting corn to ethanol in Iowa not only leads to clearing more of the Amazonian rainforest, researchers report in a pair of new studies in Science, but also would do little to slow global warming—and often make it worse.
"Prior analyses made an accounting error," says one study's lead author, Tim Searchinger, an agricultural expert at Princeton University. "There is a huge imbalance between the carbon lost by plowing up a hectare [2.47 acres] of forest or grassland from the benefit you get from biofuels."
Growing plants store carbon in their roots, shoots and leaves. As a result, the world's plants and the soil in which they grow contain nearly three times as much carbon as the entire atmosphere. "I know when I look at a tree that half the dry weight of it is carbon," says ecologist David Tilman of the University of Minnesota, coauthor of the other study which examined the "carbon debt" embedded in any biofuel. "That's going to end up as carbon dioxide in the atmosphere when you cut it down."
By turning crops such as corn, sugarcane and palm oil into biofuels—whether ethanol, biodiesel, or something else—proponents hope to reap the benefits of the carbon soaked up as the plants grow to offset the carbon dioxide (CO2) emitted when the resulting fuel is burned. But whether biofuels emit more or less CO2 than gasoline depends on what the land they were grown on was previously used for, both studies show.
Tilman and his colleagues examined the overall CO2 released when land use changes occur. Converting the grasslands of the U.S. to grow corn results in excess greenhouse gas emissions of 134 metric tons of CO2 per hectare—a debt that would take 93 years to repay by replacing gasoline with corn-based ethanol. And converting jungles to palm plantations or tropical rainforest to soy fields would take centuries to pay back their carbon debts. "Any biofuel that causes land clearing is likely to increase global warming," says ecologist Joseph Fargione of The Nature Conservancy, lead author of the second study. "It takes decades to centuries to repay the carbon debt that is created from clearing land."
Diverting food crops into fuel production leads to ever more land clearing as well. Ethanol demand in the U.S., for example, has caused some farmers to plant more corn and less soy. This has driven up soy prices causing farmers in Brazil to clear more Amazon rainforest land to plant valuable soy, Searchinger's study notes. Because a soy field contains far less carbon than a rainforest, the greenhouse gas benefit of the original ethanol is wiped out. "Corn-based ethanol, instead of producing a 20 percent savings [in greenhouse gas emissions], nearly doubles greenhouse emissions over 30 years and increases greenhouse gases for 167 years," the researchers write. "We can't get to a result with corn ethanol where we can generate greenhouse gas benefits," Searchinger adds.
Turning food into fuel also has the unintended consequence of driving up food prices, reducing the access of the neediest populations to grains and meat. "It's equivalent to saying we will try to reduce greenhouse gases by reducing food consumption," Searchinger says. "Unfortunately, a lot of that comes from the world's poorest people."
"We are converting their food into our fuel," Tilman notes. " The typical driver of an SUV spends as much on fuel in a month as the poorer third of the world spend on food."
The studies do find some benefit from biofuels but only when planted on agricultural land too dry or degraded for food production or significant tree or plant growth and only when derived from native plants, such as a mix of prairie grasses in the U.S. Midwest. Or such fuels can be made from waste: corn stalks, leftover wood from timber production or even city garbage.
But that will not slake a significant portion of the growing thirst for transportation fuels. "If we convert every corn kernel grown today in the U.S. to ethanol we offset just 12 percent of our gasoline use," notes ecologist Jason Hill of the University of Minnesota. "The real benefit to these advanced biofuels may not be in displacement of fossil fuels but in the building up of carbon stores in the soil."
Of course, there is another reason for biofuels: energy independence. "Biofuels like ethanol are the only tool readily available that can begin to address the challenge of energy security," Bob Dinneen, president of industry group the Renewable Fuels Association said in a statement. "The alternative is to continue to exploit increasingly costlier fossil fuels for which the environmental price tag will be great."
But the environmental price tag of biofuels now joins the ranks of other, cheaper domestic fuel sources—such as coal-to-liquid fuel—as major sources of globe-warming pollution as well as unintended social consequences. As a result, 10 prominent scientists have written a letter to President Bush and other government leaders urging them to "shape policies to assure that government incentives for biofuels do not increase global warming."
"We shouldn't abandon biofuels," Searchinger says. But "you don't solve global warming by going in the wrong direction."
In broad strokes, the parallels are alarming. After a long boom, the Japanese economy in the 1990s, as America’s today, was jolted by a sharp plunge in the real estate market.
In Tokyo, the government bankers and policy makers were slow to recognize the scope of the problem. Bad loans piled up. The financial troubles rippled through the economy as consumer spending and job growth fell.
The Japanese slump proved extraordinarily long-lived, ending only a few years ago, a stretch of stagnation known as Japan’s lost decade. It was a humbling and lasting setback for a nation once feared and admired as a model of economic dynamism.
The shadow of Japan hangs over the American economy these days. The United States is sliding into a housing-driven downturn, economists say, just as it also appears to be losing some of its global edge from the productivity-enhancing gains driven by the technology investments of recent decades. For Japan, experts point out, the housing bubble burst just as the rise of China as an export power hurt Japanese manufacturers.
A lengthy slowdown, they say, could alter the economic psychology of America, echoing the Japanese pattern, as the nation enters a period of diminished confidence that restrains consumer spending and business investment.
“I think there are a lot more similarities than people are willing to admit,” said Clyde V. Prestowitz, president of the Economic Strategy Institute, a Washington-based policy research organization that has long promoted American industry.
“The American economy is very fragile now,” said Mr. Prestowitz, who was a trade negotiator with Japan in the Reagan administration.
But the extreme Japanese experience, most analysts agree, stands less as a prediction of America’s fate than as a cautionary example. A Japan-style quagmire, they say, is an outcome that can be avoided in the United States with sound economic policy.
Japan’s central bank and finance ministry, economists say, waited far too long — years — before taking steps to revive Japan’s economy in the 1990s.
The Federal Reserve, while slow to see the credit crisis spilling into the broader economy last year, has acted much more decisively in recent weeks. The Fed has twice cut short-term interest rates sharply, lowering its benchmark rate to 3 percent, reflecting both the central bank’s anxiety and its determination to try to lift the economy despite serious concerns about the risk of higher inflation.
Ben S. Bernanke, the Fed chairman, is a former professor at Princeton University and a student of Japan’s policy missteps. And while a number of experts fault Mr. Bernanke for what they see as the Fed’s poor communications with both Main Street and Wall Street, the central bank’s recent moves suggest that he has taken those lessons to heart.
His past comments, however, indicate that Mr. Bernanke thinks that low interest rates alone are not enough to revive an ailing economy. In a 2003 speech in Tokyo, for example, he offered a prescription for Japan’s malaise: a more aggressive monetary policy and “explicit, though temporary, cooperation between the monetary and fiscal authorities” to stimulate the economy.
Washington understands that message. Congress — America’s fiscal authority — moved unexpectedly rapidly to approve a $168 billion stimulus plan that includes household tax rebates, temporary tax cuts and incentives for business investment.
“The United States is moving faster than the Japanese did,” said Charles Yuji Horioka, a professor of economics at Osaka University. “So far, so good. But American policy makers have to be ready to take further steps as needed.”
The American economy, many economists predict, will deteriorate further before things turn around. The government’s report last week that employment fell in January, the first decline in more than four years, was the latest sign of trouble. The depth and duration of the downturn, economists say, will largely depend on how much more bad news is coming from banks and other financial institutions.
Nouriel Roubini, an economics professor at the Stern School of Business at New York University, warned that the roughly $100 billion in bad loans reported by banks to date could increase nearly tenfold, as the defaults spread beyond the subprime mortgage loans to consumer loans, credit cards and corporate lending.
In his view, the American economy is already in recession and faces a lengthy downturn of a year or more, before growth recovers.
Still, even Mr. Roubini sees scant chance of the United States following Japan’s path. “I’m very pessimistic, but I don’t think it will be anything like Japan,” he said.
Compared with the boom-bust cycle in Japan, the American housing market looks positively sedate. In the major metropolitan regions of the United States, house prices rose 82 percent from the end of the last recession in November 2001 to their peak in June 2006, according to the Standard & Poor’s Case-Shiller home price index. Since the peak, house prices have declined about 10 percent, and most economists expect a further decline of 10 to 15 percent.
In Japan, housing prices in the major metropolitan regions nearly tripled from 1985 to 1991, then proceeded to lose two-thirds of their value over the next 14 years. Today, prices have risen slightly, according to Japanese government statistics. Still, Japanese house prices last year were only slightly higher than the level before the boom, more than two decades ago.
In Japan, government officials not only tolerated the housing price bubble, economists say, they actively encouraged it. Fearful that a strengthening yen was hurting Japanese exporters, the Ministry of Finance urged banks to lend to real estate developers so that a building boom and increased consumer spending would lift the economy.
Japan’s post-bubble recession should have lasted from 1992 to 1994, according to Adam S. Posen, a senior fellow at the Peterson Institute for International Economics in Washington. But Japanese officials were too conservative and too protective of failing banks, he said, and thus prone to policy steps that were counterproductive, like the decision in 1997 to raise Japan’s sales tax to 5 percent, from 3 percent.
“What kept Japan down was repeated macroeconomic policy mistakes,” Mr. Posen observed.
Japan’s close-knit business and government culture, economists say, slowed its response to the crisis and prolonged the slump. The industrial groups, or keiretsu, had tight links with banks, so when a bank got in trouble it was often quietly bailed out temporarily with loans or investments from other members of the corporate group. Japanese bank regulators, economists note, tended to be friendly and permissive.
Eventually, Japan experts say, banking regulation and disclosure rules were tightened up.
“In America, we force the bad news out faster than the Japanese did, and we deal with it faster,” said Edward J. Lincoln, an economist and director of the Japan-U.S. Center for Business and Economic Studies at New York University. “That should limit the damage from the economic shock instead of drag it out, as they did in Japan.”
Though not expected to reach the proportions it reached in Japan, the economic pain in America could be considerable, some analysts warn. They see disturbing parallels with Japan in that the depths of the financial troubles in United States are still not known, and the shock of the housing market slump may bring a lasting recalibration of the national mood, lowering expectations and confidence.
In Japan, the slump lasted longer than expected not just because of policy mistakes, notes Kenneth S. Rogoff, a professor of economics at Harvard University, but also because of some underlying global economic shifts. Starting in the 1990s, he said, Japan’s exporters began facing stiffer competition from other nations in Asia, particularly China.
Mr. Rogoff sees a similar drag on the American economy from the slowdown in the rapid growth in productivity that began in the mid-1990s, often attributed to technology-driven gains. Last year, he said, the government revised its estimate of the productivity growth rate since 2003 down to about 1.6 percent a year, far lower than 2.5 percent average in the years before.
“It certainly appears that the U.S. productivity miracle is over,” Mr. Rogoff said. “Our resilience as an economy is way down. So it looks like the United States will experience a milder version of the Japanese disease.”
Company Default Risk Soars to Record on CDO Selloff Speculation
By Abigail Moses
Feb. 8 (Bloomberg) -- The risk of companies defaulting soared to a record on speculation collateralized debt obligations packaging credit derivatives are being unwound, according to traders of credit-default swaps.
Contracts on the benchmark Markit CDX North America Investment-Grade Index jumped 6.5 basis points to 130 in New York, according to Phoenix Partners Group. That's the highest since the index started in 2004. The Markit iTraxx Europe index rose to a record 97.75, according to JPMorgan Chase & Co. and closed at 95.5 at 5 p.m. in London.
``There is speculation structured products are being unwound,'' said Jim Reid, head of fundamental credit strategy at Deutsche Bank AG in London.
CDOs package credit-default swaps, bonds or loans and use the income from that debt to pay investors in the CDOs. The value of assets held by CDOs has dropped as losses on mortgage-linked securities increased. Managers are now having to buy protection to offset losses, driving credit-default swap indexes higher.
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates worsening perceptions of credit quality; a decline, the opposite.
CPDO Unwind
Structured debt securities are being liquidated as losses on subprime securities mount. A constant proportion debt obligation sold by Zurich-based UBS AG collapsed after a drop to 10 percent of net asset value forced the fund to sell its holdings, Moody's Investors Service said in November. CPDOs are securities that pay investors from income earned by selling credit-default swaps.
Barclays Capital was scheduled to liquidate a $430 million collateralized loan obligation managed by Aladdin Capital Management LLC this week, according to Fitch Ratings. CLOs with about $1.7 billion in loans managed by Hartford Investment Management Co. and arranged by Citigroup Inc. may also be wound down, Fitch said. Citigroup said yesterday it doesn't plan to liquidate the debt. CLOs buy high-yield, high-risk loans and package them into new securities.
Credit-default swaps on Alcatel-Lucent SA, the world's largest maker of telecommunications equipment, rose 28 basis points to 596 basis points today, according to CMA Datavision, after the Paris-based company reported the biggest quarterly loss since its creation in 2006.
Insurance Cost
A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
Contracts on Merrill Lynch & Co., the world's largest brokerage, rose 10 basis points to 170, according to Phoenix Partners Group in New York. U.S. prosecutors in Manhattan want to check information collected by the Securities and Exchange Commission in an investigation of Merrill Lynch's mortgage bonds, the Wall Street Journal reported, citing people familiar with the matter.
Capital One Financial Corp., the credit-card issuer in McLean, Virginia, rose 15 basis points to 410, according to Phoenix Partners. Credit card delinquencies are rising, the Wall Street Journal reported, citing data from research firm RiskMetrics Group.
Contracts tied to HSBC Finance, the U.S. consumer finance unit of HSBC Holdings Plc., Europe's biggest bank by market value, rose 20 basis points to 205 basis points, according to Phoenix Partners prices show.
SLM Corp. the biggest U.S. student lender, rose 35 basis points to 485 basis points, according to Phoenix Partners.
In Europe, the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings increased 5 basis points to a record 530 today, JPMorgan prices show.
Sugar Supply Signals Bear Market as UBS Sees 18% Drop
By Shruti Date Singh and Marianne Stigset
Feb. 5 (Bloomberg) -- Sugar inventories that rose 19 percent last year will reach a record within months as farmers from Brazil to India contribute to a growing glut.
Sugar probably will fall 18 percent to 10 cents a pound by yearend in New York, according to UBS AG, Westpac Banking Corp. and Judy Ganes-Chase, a former Merrill Lynch & Co. analyst who runs a consulting firm. Brazil's production has surged, and the ethanol made from the commodity may lose appeal as crude oil drops further from its Jan. 3 record high.
``It's hard to imagine an environment where energy prices drop and sugar prices outperform,'' said Christoph Eibl, who manages $1.4 billion in commodities as co-founder of Tiberius Asset Management in Zug, Switzerland.
A decline in sugar would threaten export revenue from Brazil and India, the world's biggest growers, while easing costs for importers Italy and Iran. The sweetener gained 14 percent last month, its biggest advance in two years on the ICE Futures U.S. exchange, before $100-a-barrel oil proved fleeting.
High prices are ``going to encourage producers to not cut back,'' said Ganes-Chase, who runs J. Ganes Consulting LLC from Katonah, New York. ``You are going to wind up with more sugar than expected.''
World sugar supply will exceed consumption by 11.139 million metric tons during the 12 months through September, or 7 percent of demand and up from the record surplus of 11.045 million in the previous marketing season, the London-based International Sugar Organization said in a Jan. 10 report.
Sugar Gains, Oil Falls
Inventories will increase 10 percent in the current crop year to 74.7 million tons of raw sugar, representing 47 percent of annual consumption, according to the ISO.
The surplus will total 1 million tons in the 2008-09 season as producers in Brazil increase output and consumption growth slows, Tom McNeill, director of Societe Kingsman SA in Australia, said today at a sugar conference in Dubai.
Sugar for March delivery slipped 0.03 cent to 12.14 cents a pound as of 5:28 a.m. New York time in after-hours trading on ICE Futures U.S. The contract reached a 17-month high of 13.09 cents on Jan. 17. Crude oil is down 10 percent to $90 a barrel from its record $100.09 in January. By December, crude will tumble to $76, according to analyst forecasts compiled by Bloomberg.
``If you see crude prices fall, you'll see sugar suffer in sympathy,'' said Patrick Armstrong, who manages $900 million at Insight Investment Management Ltd. in London, which added to its sugar holdings last month. ``We came into the year expecting 15 to 20 percent gains, and had most of that'' in the first month, Armstrong said. ``I expect a slowdown from here.''
Volatility, Speculators
Ganes-Chase said millers in Brazil, the biggest market for cane-based ethanol, may use a bigger percentage of the cane crop than last year to make sweetener rather than fuel.
Sugar won't sustain its gain ``until the ethanol market goes global'' with more demand outside Brazil, said Daniel Brebner, the executive director of commodity research for Zurich-based UBS AG, Switzerland's biggest bank.
The volatility of New York sugar futures on Jan. 29, measured by daily price swings over 10 days, was the highest since October 2006 and the greatest among commodities, exchange data show. By Jan. 15, hedge funds had amassed their largest bet ever that prices would increase, according to the Commodity Futures Trading Commission. Over the next two weeks, the number of contracts dropped for the first time since November.
Czarnikow Sugar Ltd., the world's biggest sugar broker, says speculators are underestimating how much sugar will be produced.
Record in Brazil
Brazil, the No. 1 grower, probably will increase raw sugar output by 1.6 percent to a record 33 million tons in the current crop year, according to a Jan. 25 report from F.O. Licht, a researcher in Ratzeburg, Germany. Brazil increased output 17 percent the previous season, according to the U.S. Department of Agriculture.
India, the second-largest producer, became a net exporter in the 2006 marketing year and will have surplus inventories available for shipment through 2010, the ISO predicts. The country's warehouses hold about 14 million tons, said Utpal Choudhury, an analyst at IDBI Capital Market Services Ltd. in Mumbai. The Indian Sugar Mills Association said those reserves will increase to 17 million tons by September.
``The rally is really overextended and prices at 13 cents are not backed by the fundamentals,'' said Sudakshina Unnikrishnan, an analyst at Barclays Capital in London.
Morgan Stanley, the second-biggest U.S. securities firm, says the surplus won't last. Production in the 2009 season will fall short of demand by 1.6 million tons as Indian farmers shift to other crops, the New York-based company said in a Jan. 7 report.
Incentive for Growers
``In India, the price of wheat has exploded, more than sugar. The government is trying to tell the farmers, `Why don't you maximize wheat instead of sugar cane?''' said Jean Bourlot, a managing director and head of the agricultural team at the firm's office in London. ``By the end of 2009, we'll be at 17 cents a pound.''
Sugar for delivery in October 2009 is already more than 14 cents a pound, a sign to Julian Stow, the Singapore-based trading director at ED&F Man Asia Pte., that farmers will keep producing and prevent Morgan Stanley's projected deficit.
``Producers respond quickly to the price gains,'' Stow said. After the rally to a 25-year high of 19.73 cents a pound in February 2006, prices plunged 57 percent in 16 months as farmers increased plantings.
Japanese merger crushed by Chinese dumplings scare
06 February 2008
TOKYO: One of Japan's leading food companies announced Wednesday it was pulling out of a high-profile merger involving the group that imported Chinese-made dumplings containing pesticide.
The move by Nissin Food Products Co., famous for pioneering instant noodles in the 1950s, is the biggest indication yet of the fallout to business of the health scare shaking Japan.
Thousands of Japanese have complained of illness -- with 10 diagnosed with pesticide poisoning -- after eating frozen meat dumplings which had been made in China and sold by a unit of Japan Tobacco Inc. (JT).
JT, looking to branch out amid dwindling tobacco sales, agreed in November to merge its frozen food business with Nissin Food.
But Nissin Food said its board decided to cancel the integration with the now scandal-tainted tobacco giant.
"When food poisoning takes place, it is a universal rule that food makers should immediately take action, such as a recall," Nissin Food president Koki Ando told a news conference.
"But there seems to be a fundamental difference between us and JT about food safety issues," Ando said.
The tobacco company has been denounced for waiting one month to reveal the pesticide discovery, saying it needed time to verify that customers' illnesses were linked to the dumplings.
JT president Hiroshi Kimura said that he would reflect "seriously" on the criticism.
"From the bottom of my heart, I apologise for causing concerns about food safety," he told a separate news conference.
Under the proposed deal, JT last year bought major frozen maker Katokichi Co. Ltd in a friendly one billion-US-dollar takeover. Nissin was then supposed to buy a 49 per cent stake in Katokichi from the tobacco company.
Kimura said Japan Tobacco was still ready to run Katokichi and turned down an offer from Nissin to take the majority stake.
"Considering the situation triggered by our frozen food products, the three companies agreed to decide on the cancellation," Kimura said.
China has been hit by a string of scandals over its products, raising fears for the massive manufacturing industry behind the nation's soaring growth.
The government in Tokyo has demanded that China and Japanese importers pay closer attention to safety following the scare, which has dominated headlines for the past week.
Japanese police said they found high levels of a pesticide, methamidophos, in dumplings made by Tianyang Food Co. near Beijing.
China -- Japan's largest trading partner and its second biggest supplier of imported food -- has vowed an investigation and appealed to Japan not to jump to conclusions.
Japanese Health Minister Yoichi Masuzoe said Tuesday he believed someone deliberately poisoned the dumplings, although the government distanced itself from his remarks.
Another distributor, Japanese Consumers' Co-operative Union, revealed in a late-night press conference Tuesday that a second pesticide, dichlorvos, was also found on dumplings made by the Tianyang factory.
"But given that dichlorvos is a kind of pesticide also used in Japan, we cannot say anything conclusive about the cause of the case," an official with the distributor said.
The market appeared relatively unconcerned about the effects on JT of the Nissin pullout.
Its shares were down 1.56 per cent in morning trade to 568,000 yen, despite the benchmark index tumbling more than four percent on concerns over the state of the US economy.
Shares in Nissin, however, plunged 300 yen or 8.38 per cent at 3,280 yen.
Japan Tobacco has been on a major expansion campaign. Last year it bought British rival Gallaher, behind brands such as Benson and Hedges and Silk Cut, for 19 billion US dollars in the biggest-ever foreign acquisition by a Japanese firm. - AFP/ac
G7 Finance Leaders Ready to Act on Global Slowdown
February 8, 2008
TOKYO (Reuters) - Financial leaders from the world's richest nations showed signs on Friday they were ready to work together to tackle a global economic downturn and calm turbulent financial markets.
The credit crisis has sent stock markets tumbling worldwide, economies are weakening and central banks are cutting interest rates while currencies swing, creating a tense backdrop for Group of Seven finance ministers and central bankers meeting in Tokyo over the weekend.
A draft of their communique, obtained by Reuters ahead of its release on Saturday, said the G7 saw heightened economic risk and growth moderating in key economies.
The world economy is facing a "more challenging and uncertain environment" than when they last met in October, it said.
"We will continue to watch developments closely and remain committed to taking necessary action, individually and collectively, in order to secure stability and growth in our economies," the draft read.
This follows European Central Bank President Jean-Claude Trichet on Thursday softening his anti-inflation stance and stressing the high levels of uncertainty caused by financial market turmoil and risks to the euro-zone economy.
Markets read this as a sign that the ECB now is willing to follow fellow central bankers in cutting interest rates if needed to prevent a damaging downturn. The U.S. Federal Reserve, Bank of England and Bank of Canada all have eased monetary policy.
HEALING DIVISIONS
Ahead of the G7 meeting, analysts worried the G7 club faced dangerous divisions over how to calm turbulent markets and ease fears of a worldwide slump from the credit crisis, with Europe and Japan unwilling to join in aggressive stimulus programs.
Last month saw 1.25 percentage points in Fed rate cuts plus a $150 billion fiscal package to tackle credit problems from the subprime mortgage crisis. Whether this is enough to rescue the U.S. economy and avert a worldwide economic slump remains very much in question.
U.S. Treasury Secretary Hank Paulson sought to reassure on that front, saying the U.S. economy is fundamentally healthy.
"I still believe that we are going to continue to grow, although at a slower pace for a while. But the risk is very much to the downside," he told Japan's NHK television.
The G7 financial leaders are not expected to break any new ground on foreign exchange rates at this meeting.
Rather, financial upheaval was in the forefront of ministers minds as they arrived for the Tokyo G7 meeting.
"We will hold frank discussions regarding the subprime impact on financial markets and the global economy," said Japanese Finance Minister Fukushi Nukaga.
COORDINATION SOUGHT
German Finance Minister Peer Steinbrueck in a letter to G7 finance ministers called on his colleagues to address financial market problems.
"Prompt and coordinated action by central banks has helped to ease the immediate problems. Yet the full impact of the subprime crisis on the financial sector is yet to be known," he wrote in the letter seen by Reuters.
He said "political responses" were needed to strengthen risk management, bank capital and transparency in financial markets.
The Financial Stability Forum, a group of central bankers and other regulators studying the subprime mortgage problem and market upheaval, is due to deliver an interim report to the G7 policymakers.
But it was the willingness of central bankers to provide monetary easing that pleased politicians.
"I was pleasantly surprised on reading the declaration of Mr. Trichet," said French Economy Minister Christine Lagarde.
Russia's Finance Minister Alexei Kudrin said policymakers must work together to find solutions to the credit shortage.
"Coordination of efforts may soften the consequences of such crises, first of all a coordination of efforts between central banks on their refinancing rates because this is the key factor supporting the financial system," Kudrin told reporters in Moscow before heading to Tokyo.
British Finance Minister Alistair Darling played down the prospect of any coordinated steps to boost global growth at the G7. "The first thing is that conditions in different countries are not the same," he said.
Whether the emerging economies can come through the U.S. shakeout relatively unscathed will be on the agenda when G7 officials meet with finance ministers of China, Indonesia, South Korea and Russia for dinner on Saturday.
The head of the Asian Development Bank, Haruhiko Kuroda, said on Friday fiscal stimulus could be an option for emerging Asian economies if global growth slows further but the main concern for now is to contain inflation.
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Buffett: Bank woes are “poetic justice”
Feb 7, 2008
TORONTO (Reuters) - The woes in the U.S. financial sector are “poetic justice” for bankers who designed and sold complex investments that have since gone sour, billionaire investor Warren Buffett said on Wednesday.
The head of the Berkshire Hathaway Inc group of companies also played down worries about a credit crunch by saying that recent interest rate cuts mean low-cost funds are readily available.
But he warned that the U.S. dollar will continue to slide unless the country can rein in its yawning trade deficit -- the “biggest factor” behind the decline. Still, he said, the U.S. economy will “do very well over time.”
Buffett, one of the world’s wealthiest people, appeared to see irony in the fact that many of the banks who marketed complex investments which have now crashed are bearing much of the fallout.
“It’s sort of a little poetic justice, in that the people that brewed this toxic Kool-Aid found themselves drinking a lot of it in the end,” he said.
Buffett, a legendary investor who has amassed a huge fortune through plays in a wide range of industries, has bet against the U.S. dollar in the past.
In 2005, Berkshire had made a $21.8 billion bet that the U.S. dollar would fall. It later unwound that successful position as it found other non-U.S. investments.
Buffett said on Wednesday in Toronto that the turmoil that has rocked the U.S. economy in recent months has imbued the markets with a healthy degree of caution, while the rate-cutting response from central bankers has ensured that cheap money remains available for borrowing.
“I wouldn’t quite call it a credit crunch. Funds are available,” Buffett said during a question and answer session at a business event. “Money is available, and it’s really quite cheap because of the lowering of rates that has taken place.”
He added: “What has happened is a repricing of risk and an unavailability of what I might call ‘dumb money,’ of which there was plenty around a year ago.”
Buffet was in Toronto for the Canadian launch of corporate-news firm Business Wire, which Berkshire bought in 2006.
Buffett tends to favour companies with relatively simple businesses, strong management, consistent earnings, good returns on equity, and little debt.
As of late last year, Berkshire’s businesses employed about 220,000 people and the number is growing as the group continues to expand its portfolio of companies. The units generated a $10.27 billion profit on revenue of $90.2 billion from January to September.
The rising cost of food
Wheat price surge raises inflation fears
Chris Flood
8 February 2008
A fall in US inventories of wheat to a 60-year low drove prices of the grain sharply higher on Friday to a fresh record, intensifying fears of rising global food price inflation.
US wheat futures – global benchmarks for the grain – have jumped by their daily trading limit each day this week. Prices for Minneapolis wheat, the US variety most suitable for making flour, rose 10.7 per cent on the week, extending its price surge since the beginning of the year to 50 per cent.
“We are in uncharted territory,” said James Bower of Bower Trading. “The market is desperately trying to tell global producers that we need more acres for wheat production.”
The price gains came after the latest update from the US Department of Agriculture fuelled concerns over low inventory levels. The USDA reduced its estimates for wheat stocks at the end of the 2007/08 marketing year to 272m bushels, compared with its January estimate of 292m bushels.
“The US has sold too much wheat and will have to import, probably from Canada, to satisfy its domestic requirements,” said a hedge fund manager. “This will have a major impact on the rest of the world if consuming countries can’t buy US wheat and Europe becomes the global supplier.”
Global stocks of wheat are expected to fall to a 30-year low as consuming countries have scrambled to ensure they have enough supplies for domestic consumption.
“With global inventories at very tight levels, we expect to see further upward pressure across grains prices,” said Sudakshina Unnikrishnan of Barclays Capital. “The question for the market is how these high prices will influence US farmers’ decisions to allocate land to crops this year.”
Record wheat and soyabean prices mean these crops are expected to win land at the expense of corn cultivation in 2008. The USDA will update the market on farmers’ planting intentions in March.
Analysts say India and China should allow domestic wheat prices to rise to attract land away from cotton. India says it expects to produce 74.81m tonnes of wheat in 2008, down from 75.81m tonnes last year.
India, the world’s second-largest wheat consumer, has imported wheat for the past two years but it says it might not need to import this year if favourable weather boosted production.
But Mark Samson of US Wheat Associates, the wheat marketing group, said India might have to buy 3m tonnes of wheat in the year starting in April, a 68 per cent rise on the previous year.
As a result of the price pressure, the Minneapolis Grain Exchange will remove the daily price limit on the spot-month hard red spring wheat contract for trading on February 25, the first time it has done so.
Biofuels Are Bad for Feeding People and Combating Climate Change
By displacing agriculture for food—and causing more land clearing—biofuels are bad for hungry people and the environment
By David Biello
February 7, 2008
Converting corn to ethanol in Iowa not only leads to clearing more of the Amazonian rainforest, researchers report in a pair of new studies in Science, but also would do little to slow global warming—and often make it worse.
"Prior analyses made an accounting error," says one study's lead author, Tim Searchinger, an agricultural expert at Princeton University. "There is a huge imbalance between the carbon lost by plowing up a hectare [2.47 acres] of forest or grassland from the benefit you get from biofuels."
Growing plants store carbon in their roots, shoots and leaves. As a result, the world's plants and the soil in which they grow contain nearly three times as much carbon as the entire atmosphere. "I know when I look at a tree that half the dry weight of it is carbon," says ecologist David Tilman of the University of Minnesota, coauthor of the other study which examined the "carbon debt" embedded in any biofuel. "That's going to end up as carbon dioxide in the atmosphere when you cut it down."
By turning crops such as corn, sugarcane and palm oil into biofuels—whether ethanol, biodiesel, or something else—proponents hope to reap the benefits of the carbon soaked up as the plants grow to offset the carbon dioxide (CO2) emitted when the resulting fuel is burned. But whether biofuels emit more or less CO2 than gasoline depends on what the land they were grown on was previously used for, both studies show.
Tilman and his colleagues examined the overall CO2 released when land use changes occur. Converting the grasslands of the U.S. to grow corn results in excess greenhouse gas emissions of 134 metric tons of CO2 per hectare—a debt that would take 93 years to repay by replacing gasoline with corn-based ethanol. And converting jungles to palm plantations or tropical rainforest to soy fields would take centuries to pay back their carbon debts. "Any biofuel that causes land clearing is likely to increase global warming," says ecologist Joseph Fargione of The Nature Conservancy, lead author of the second study. "It takes decades to centuries to repay the carbon debt that is created from clearing land."
Diverting food crops into fuel production leads to ever more land clearing as well. Ethanol demand in the U.S., for example, has caused some farmers to plant more corn and less soy. This has driven up soy prices causing farmers in Brazil to clear more Amazon rainforest land to plant valuable soy, Searchinger's study notes. Because a soy field contains far less carbon than a rainforest, the greenhouse gas benefit of the original ethanol is wiped out. "Corn-based ethanol, instead of producing a 20 percent savings [in greenhouse gas emissions], nearly doubles greenhouse emissions over 30 years and increases greenhouse gases for 167 years," the researchers write. "We can't get to a result with corn ethanol where we can generate greenhouse gas benefits," Searchinger adds.
Turning food into fuel also has the unintended consequence of driving up food prices, reducing the access of the neediest populations to grains and meat. "It's equivalent to saying we will try to reduce greenhouse gases by reducing food consumption," Searchinger says. "Unfortunately, a lot of that comes from the world's poorest people."
"We are converting their food into our fuel," Tilman notes. " The typical driver of an SUV spends as much on fuel in a month as the poorer third of the world spend on food."
The studies do find some benefit from biofuels but only when planted on agricultural land too dry or degraded for food production or significant tree or plant growth and only when derived from native plants, such as a mix of prairie grasses in the U.S. Midwest. Or such fuels can be made from waste: corn stalks, leftover wood from timber production or even city garbage.
But that will not slake a significant portion of the growing thirst for transportation fuels. "If we convert every corn kernel grown today in the U.S. to ethanol we offset just 12 percent of our gasoline use," notes ecologist Jason Hill of the University of Minnesota. "The real benefit to these advanced biofuels may not be in displacement of fossil fuels but in the building up of carbon stores in the soil."
Of course, there is another reason for biofuels: energy independence. "Biofuels like ethanol are the only tool readily available that can begin to address the challenge of energy security," Bob Dinneen, president of industry group the Renewable Fuels Association said in a statement. "The alternative is to continue to exploit increasingly costlier fossil fuels for which the environmental price tag will be great."
But the environmental price tag of biofuels now joins the ranks of other, cheaper domestic fuel sources—such as coal-to-liquid fuel—as major sources of globe-warming pollution as well as unintended social consequences. As a result, 10 prominent scientists have written a letter to President Bush and other government leaders urging them to "shape policies to assure that government incentives for biofuels do not increase global warming."
"We shouldn't abandon biofuels," Searchinger says. But "you don't solve global warming by going in the wrong direction."
From Japan, Lessons in What Policies to Shun
By STEVE LOHR
February 9, 2008
In broad strokes, the parallels are alarming. After a long boom, the Japanese economy in the 1990s, as America’s today, was jolted by a sharp plunge in the real estate market.
In Tokyo, the government bankers and policy makers were slow to recognize the scope of the problem. Bad loans piled up. The financial troubles rippled through the economy as consumer spending and job growth fell.
The Japanese slump proved extraordinarily long-lived, ending only a few years ago, a stretch of stagnation known as Japan’s lost decade. It was a humbling and lasting setback for a nation once feared and admired as a model of economic dynamism.
The shadow of Japan hangs over the American economy these days. The United States is sliding into a housing-driven downturn, economists say, just as it also appears to be losing some of its global edge from the productivity-enhancing gains driven by the technology investments of recent decades. For Japan, experts point out, the housing bubble burst just as the rise of China as an export power hurt Japanese manufacturers.
A lengthy slowdown, they say, could alter the economic psychology of America, echoing the Japanese pattern, as the nation enters a period of diminished confidence that restrains consumer spending and business investment.
“I think there are a lot more similarities than people are willing to admit,” said Clyde V. Prestowitz, president of the Economic Strategy Institute, a Washington-based policy research organization that has long promoted American industry.
“The American economy is very fragile now,” said Mr. Prestowitz, who was a trade negotiator with Japan in the Reagan administration.
But the extreme Japanese experience, most analysts agree, stands less as a prediction of America’s fate than as a cautionary example. A Japan-style quagmire, they say, is an outcome that can be avoided in the United States with sound economic policy.
Japan’s central bank and finance ministry, economists say, waited far too long — years — before taking steps to revive Japan’s economy in the 1990s.
The Federal Reserve, while slow to see the credit crisis spilling into the broader economy last year, has acted much more decisively in recent weeks. The Fed has twice cut short-term interest rates sharply, lowering its benchmark rate to 3 percent, reflecting both the central bank’s anxiety and its determination to try to lift the economy despite serious concerns about the risk of higher inflation.
Ben S. Bernanke, the Fed chairman, is a former professor at Princeton University and a student of Japan’s policy missteps. And while a number of experts fault Mr. Bernanke for what they see as the Fed’s poor communications with both Main Street and Wall Street, the central bank’s recent moves suggest that he has taken those lessons to heart.
His past comments, however, indicate that Mr. Bernanke thinks that low interest rates alone are not enough to revive an ailing economy. In a 2003 speech in Tokyo, for example, he offered a prescription for Japan’s malaise: a more aggressive monetary policy and “explicit, though temporary, cooperation between the monetary and fiscal authorities” to stimulate the economy.
Washington understands that message. Congress — America’s fiscal authority — moved unexpectedly rapidly to approve a $168 billion stimulus plan that includes household tax rebates, temporary tax cuts and incentives for business investment.
“The United States is moving faster than the Japanese did,” said Charles Yuji Horioka, a professor of economics at Osaka University. “So far, so good. But American policy makers have to be ready to take further steps as needed.”
The American economy, many economists predict, will deteriorate further before things turn around. The government’s report last week that employment fell in January, the first decline in more than four years, was the latest sign of trouble. The depth and duration of the downturn, economists say, will largely depend on how much more bad news is coming from banks and other financial institutions.
Nouriel Roubini, an economics professor at the Stern School of Business at New York University, warned that the roughly $100 billion in bad loans reported by banks to date could increase nearly tenfold, as the defaults spread beyond the subprime mortgage loans to consumer loans, credit cards and corporate lending.
In his view, the American economy is already in recession and faces a lengthy downturn of a year or more, before growth recovers.
Still, even Mr. Roubini sees scant chance of the United States following Japan’s path. “I’m very pessimistic, but I don’t think it will be anything like Japan,” he said.
Compared with the boom-bust cycle in Japan, the American housing market looks positively sedate. In the major metropolitan regions of the United States, house prices rose 82 percent from the end of the last recession in November 2001 to their peak in June 2006, according to the Standard & Poor’s Case-Shiller home price index. Since the peak, house prices have declined about 10 percent, and most economists expect a further decline of 10 to 15 percent.
In Japan, housing prices in the major metropolitan regions nearly tripled from 1985 to 1991, then proceeded to lose two-thirds of their value over the next 14 years. Today, prices have risen slightly, according to Japanese government statistics. Still, Japanese house prices last year were only slightly higher than the level before the boom, more than two decades ago.
In Japan, government officials not only tolerated the housing price bubble, economists say, they actively encouraged it. Fearful that a strengthening yen was hurting Japanese exporters, the Ministry of Finance urged banks to lend to real estate developers so that a building boom and increased consumer spending would lift the economy.
Japan’s post-bubble recession should have lasted from 1992 to 1994, according to Adam S. Posen, a senior fellow at the Peterson Institute for International Economics in Washington. But Japanese officials were too conservative and too protective of failing banks, he said, and thus prone to policy steps that were counterproductive, like the decision in 1997 to raise Japan’s sales tax to 5 percent, from 3 percent.
“What kept Japan down was repeated macroeconomic policy mistakes,” Mr. Posen observed.
Japan’s close-knit business and government culture, economists say, slowed its response to the crisis and prolonged the slump. The industrial groups, or keiretsu, had tight links with banks, so when a bank got in trouble it was often quietly bailed out temporarily with loans or investments from other members of the corporate group. Japanese bank regulators, economists note, tended to be friendly and permissive.
Eventually, Japan experts say, banking regulation and disclosure rules were tightened up.
“In America, we force the bad news out faster than the Japanese did, and we deal with it faster,” said Edward J. Lincoln, an economist and director of the Japan-U.S. Center for Business and Economic Studies at New York University. “That should limit the damage from the economic shock instead of drag it out, as they did in Japan.”
Though not expected to reach the proportions it reached in Japan, the economic pain in America could be considerable, some analysts warn. They see disturbing parallels with Japan in that the depths of the financial troubles in United States are still not known, and the shock of the housing market slump may bring a lasting recalibration of the national mood, lowering expectations and confidence.
In Japan, the slump lasted longer than expected not just because of policy mistakes, notes Kenneth S. Rogoff, a professor of economics at Harvard University, but also because of some underlying global economic shifts. Starting in the 1990s, he said, Japan’s exporters began facing stiffer competition from other nations in Asia, particularly China.
Mr. Rogoff sees a similar drag on the American economy from the slowdown in the rapid growth in productivity that began in the mid-1990s, often attributed to technology-driven gains. Last year, he said, the government revised its estimate of the productivity growth rate since 2003 down to about 1.6 percent a year, far lower than 2.5 percent average in the years before.
“It certainly appears that the U.S. productivity miracle is over,” Mr. Rogoff said. “Our resilience as an economy is way down. So it looks like the United States will experience a milder version of the Japanese disease.”
Company Default Risk Soars to Record on CDO Selloff Speculation
By Abigail Moses
Feb. 8 (Bloomberg) -- The risk of companies defaulting soared to a record on speculation collateralized debt obligations packaging credit derivatives are being unwound, according to traders of credit-default swaps.
Contracts on the benchmark Markit CDX North America Investment-Grade Index jumped 6.5 basis points to 130 in New York, according to Phoenix Partners Group. That's the highest since the index started in 2004. The Markit iTraxx Europe index rose to a record 97.75, according to JPMorgan Chase & Co. and closed at 95.5 at 5 p.m. in London.
``There is speculation structured products are being unwound,'' said Jim Reid, head of fundamental credit strategy at Deutsche Bank AG in London.
CDOs package credit-default swaps, bonds or loans and use the income from that debt to pay investors in the CDOs. The value of assets held by CDOs has dropped as losses on mortgage-linked securities increased. Managers are now having to buy protection to offset losses, driving credit-default swap indexes higher.
Credit-default swaps are financial instruments based on bonds and loans that are used to speculate on a company's ability to repay debt. They pay the buyer face value in exchange for the underlying securities or the cash equivalent should a borrower fail to adhere to its debt agreements. A rise indicates worsening perceptions of credit quality; a decline, the opposite.
CPDO Unwind
Structured debt securities are being liquidated as losses on subprime securities mount. A constant proportion debt obligation sold by Zurich-based UBS AG collapsed after a drop to 10 percent of net asset value forced the fund to sell its holdings, Moody's Investors Service said in November. CPDOs are securities that pay investors from income earned by selling credit-default swaps.
Barclays Capital was scheduled to liquidate a $430 million collateralized loan obligation managed by Aladdin Capital Management LLC this week, according to Fitch Ratings. CLOs with about $1.7 billion in loans managed by Hartford Investment Management Co. and arranged by Citigroup Inc. may also be wound down, Fitch said. Citigroup said yesterday it doesn't plan to liquidate the debt. CLOs buy high-yield, high-risk loans and package them into new securities.
Credit-default swaps on Alcatel-Lucent SA, the world's largest maker of telecommunications equipment, rose 28 basis points to 596 basis points today, according to CMA Datavision, after the Paris-based company reported the biggest quarterly loss since its creation in 2006.
Insurance Cost
A basis point on a credit-default swap contract protecting $10 million of debt from default for five years is equivalent to $1,000 a year.
Contracts on Merrill Lynch & Co., the world's largest brokerage, rose 10 basis points to 170, according to Phoenix Partners Group in New York. U.S. prosecutors in Manhattan want to check information collected by the Securities and Exchange Commission in an investigation of Merrill Lynch's mortgage bonds, the Wall Street Journal reported, citing people familiar with the matter.
Capital One Financial Corp., the credit-card issuer in McLean, Virginia, rose 15 basis points to 410, according to Phoenix Partners. Credit card delinquencies are rising, the Wall Street Journal reported, citing data from research firm RiskMetrics Group.
Contracts tied to HSBC Finance, the U.S. consumer finance unit of HSBC Holdings Plc., Europe's biggest bank by market value, rose 20 basis points to 205 basis points, according to Phoenix Partners prices show.
SLM Corp. the biggest U.S. student lender, rose 35 basis points to 485 basis points, according to Phoenix Partners.
In Europe, the Markit iTraxx Crossover Index of 50 companies with mostly high-risk, high-yield credit ratings increased 5 basis points to a record 530 today, JPMorgan prices show.
Sugar Supply Signals Bear Market as UBS Sees 18% Drop
By Shruti Date Singh and Marianne Stigset
Feb. 5 (Bloomberg) -- Sugar inventories that rose 19 percent last year will reach a record within months as farmers from Brazil to India contribute to a growing glut.
Sugar probably will fall 18 percent to 10 cents a pound by yearend in New York, according to UBS AG, Westpac Banking Corp. and Judy Ganes-Chase, a former Merrill Lynch & Co. analyst who runs a consulting firm. Brazil's production has surged, and the ethanol made from the commodity may lose appeal as crude oil drops further from its Jan. 3 record high.
``It's hard to imagine an environment where energy prices drop and sugar prices outperform,'' said Christoph Eibl, who manages $1.4 billion in commodities as co-founder of Tiberius Asset Management in Zug, Switzerland.
A decline in sugar would threaten export revenue from Brazil and India, the world's biggest growers, while easing costs for importers Italy and Iran. The sweetener gained 14 percent last month, its biggest advance in two years on the ICE Futures U.S. exchange, before $100-a-barrel oil proved fleeting.
High prices are ``going to encourage producers to not cut back,'' said Ganes-Chase, who runs J. Ganes Consulting LLC from Katonah, New York. ``You are going to wind up with more sugar than expected.''
World sugar supply will exceed consumption by 11.139 million metric tons during the 12 months through September, or 7 percent of demand and up from the record surplus of 11.045 million in the previous marketing season, the London-based International Sugar Organization said in a Jan. 10 report.
Sugar Gains, Oil Falls
Inventories will increase 10 percent in the current crop year to 74.7 million tons of raw sugar, representing 47 percent of annual consumption, according to the ISO.
The surplus will total 1 million tons in the 2008-09 season as producers in Brazil increase output and consumption growth slows, Tom McNeill, director of Societe Kingsman SA in Australia, said today at a sugar conference in Dubai.
Sugar for March delivery slipped 0.03 cent to 12.14 cents a pound as of 5:28 a.m. New York time in after-hours trading on ICE Futures U.S. The contract reached a 17-month high of 13.09 cents on Jan. 17. Crude oil is down 10 percent to $90 a barrel from its record $100.09 in January. By December, crude will tumble to $76, according to analyst forecasts compiled by Bloomberg.
``If you see crude prices fall, you'll see sugar suffer in sympathy,'' said Patrick Armstrong, who manages $900 million at Insight Investment Management Ltd. in London, which added to its sugar holdings last month. ``We came into the year expecting 15 to 20 percent gains, and had most of that'' in the first month, Armstrong said. ``I expect a slowdown from here.''
Volatility, Speculators
Ganes-Chase said millers in Brazil, the biggest market for cane-based ethanol, may use a bigger percentage of the cane crop than last year to make sweetener rather than fuel.
Sugar won't sustain its gain ``until the ethanol market goes global'' with more demand outside Brazil, said Daniel Brebner, the executive director of commodity research for Zurich-based UBS AG, Switzerland's biggest bank.
The volatility of New York sugar futures on Jan. 29, measured by daily price swings over 10 days, was the highest since October 2006 and the greatest among commodities, exchange data show. By Jan. 15, hedge funds had amassed their largest bet ever that prices would increase, according to the Commodity Futures Trading Commission. Over the next two weeks, the number of contracts dropped for the first time since November.
Czarnikow Sugar Ltd., the world's biggest sugar broker, says speculators are underestimating how much sugar will be produced.
Record in Brazil
Brazil, the No. 1 grower, probably will increase raw sugar output by 1.6 percent to a record 33 million tons in the current crop year, according to a Jan. 25 report from F.O. Licht, a researcher in Ratzeburg, Germany. Brazil increased output 17 percent the previous season, according to the U.S. Department of Agriculture.
India, the second-largest producer, became a net exporter in the 2006 marketing year and will have surplus inventories available for shipment through 2010, the ISO predicts. The country's warehouses hold about 14 million tons, said Utpal Choudhury, an analyst at IDBI Capital Market Services Ltd. in Mumbai. The Indian Sugar Mills Association said those reserves will increase to 17 million tons by September.
``The rally is really overextended and prices at 13 cents are not backed by the fundamentals,'' said Sudakshina Unnikrishnan, an analyst at Barclays Capital in London.
Morgan Stanley, the second-biggest U.S. securities firm, says the surplus won't last. Production in the 2009 season will fall short of demand by 1.6 million tons as Indian farmers shift to other crops, the New York-based company said in a Jan. 7 report.
Incentive for Growers
``In India, the price of wheat has exploded, more than sugar. The government is trying to tell the farmers, `Why don't you maximize wheat instead of sugar cane?''' said Jean Bourlot, a managing director and head of the agricultural team at the firm's office in London. ``By the end of 2009, we'll be at 17 cents a pound.''
Sugar for delivery in October 2009 is already more than 14 cents a pound, a sign to Julian Stow, the Singapore-based trading director at ED&F Man Asia Pte., that farmers will keep producing and prevent Morgan Stanley's projected deficit.
``Producers respond quickly to the price gains,'' Stow said. After the rally to a 25-year high of 19.73 cents a pound in February 2006, prices plunged 57 percent in 16 months as farmers increased plantings.
Japanese merger crushed by Chinese dumplings scare
06 February 2008
TOKYO: One of Japan's leading food companies announced Wednesday it was pulling out of a high-profile merger involving the group that imported Chinese-made dumplings containing pesticide.
The move by Nissin Food Products Co., famous for pioneering instant noodles in the 1950s, is the biggest indication yet of the fallout to business of the health scare shaking Japan.
Thousands of Japanese have complained of illness -- with 10 diagnosed with pesticide poisoning -- after eating frozen meat dumplings which had been made in China and sold by a unit of Japan Tobacco Inc. (JT).
JT, looking to branch out amid dwindling tobacco sales, agreed in November to merge its frozen food business with Nissin Food.
But Nissin Food said its board decided to cancel the integration with the now scandal-tainted tobacco giant.
"When food poisoning takes place, it is a universal rule that food makers should immediately take action, such as a recall," Nissin Food president Koki Ando told a news conference.
"But there seems to be a fundamental difference between us and JT about food safety issues," Ando said.
The tobacco company has been denounced for waiting one month to reveal the pesticide discovery, saying it needed time to verify that customers' illnesses were linked to the dumplings.
JT president Hiroshi Kimura said that he would reflect "seriously" on the criticism.
"From the bottom of my heart, I apologise for causing concerns about food safety," he told a separate news conference.
Under the proposed deal, JT last year bought major frozen maker Katokichi Co. Ltd in a friendly one billion-US-dollar takeover. Nissin was then supposed to buy a 49 per cent stake in Katokichi from the tobacco company.
Kimura said Japan Tobacco was still ready to run Katokichi and turned down an offer from Nissin to take the majority stake.
"Considering the situation triggered by our frozen food products, the three companies agreed to decide on the cancellation," Kimura said.
China has been hit by a string of scandals over its products, raising fears for the massive manufacturing industry behind the nation's soaring growth.
The government in Tokyo has demanded that China and Japanese importers pay closer attention to safety following the scare, which has dominated headlines for the past week.
Japanese police said they found high levels of a pesticide, methamidophos, in dumplings made by Tianyang Food Co. near Beijing.
China -- Japan's largest trading partner and its second biggest supplier of imported food -- has vowed an investigation and appealed to Japan not to jump to conclusions.
Japanese Health Minister Yoichi Masuzoe said Tuesday he believed someone deliberately poisoned the dumplings, although the government distanced itself from his remarks.
Another distributor, Japanese Consumers' Co-operative Union, revealed in a late-night press conference Tuesday that a second pesticide, dichlorvos, was also found on dumplings made by the Tianyang factory.
"But given that dichlorvos is a kind of pesticide also used in Japan, we cannot say anything conclusive about the cause of the case," an official with the distributor said.
The market appeared relatively unconcerned about the effects on JT of the Nissin pullout.
Its shares were down 1.56 per cent in morning trade to 568,000 yen, despite the benchmark index tumbling more than four percent on concerns over the state of the US economy.
Shares in Nissin, however, plunged 300 yen or 8.38 per cent at 3,280 yen.
Japan Tobacco has been on a major expansion campaign. Last year it bought British rival Gallaher, behind brands such as Benson and Hedges and Silk Cut, for 19 billion US dollars in the biggest-ever foreign acquisition by a Japanese firm. - AFP/ac
G7 Finance Leaders Ready to Act on Global Slowdown
February 8, 2008
TOKYO (Reuters) - Financial leaders from the world's richest nations showed signs on Friday they were ready to work together to tackle a global economic downturn and calm turbulent financial markets.
The credit crisis has sent stock markets tumbling worldwide, economies are weakening and central banks are cutting interest rates while currencies swing, creating a tense backdrop for Group of Seven finance ministers and central bankers meeting in Tokyo over the weekend.
A draft of their communique, obtained by Reuters ahead of its release on Saturday, said the G7 saw heightened economic risk and growth moderating in key economies.
The world economy is facing a "more challenging and uncertain environment" than when they last met in October, it said.
"We will continue to watch developments closely and remain committed to taking necessary action, individually and collectively, in order to secure stability and growth in our economies," the draft read.
This follows European Central Bank President Jean-Claude Trichet on Thursday softening his anti-inflation stance and stressing the high levels of uncertainty caused by financial market turmoil and risks to the euro-zone economy.
Markets read this as a sign that the ECB now is willing to follow fellow central bankers in cutting interest rates if needed to prevent a damaging downturn. The U.S. Federal Reserve, Bank of England and Bank of Canada all have eased monetary policy.
HEALING DIVISIONS
Ahead of the G7 meeting, analysts worried the G7 club faced dangerous divisions over how to calm turbulent markets and ease fears of a worldwide slump from the credit crisis, with Europe and Japan unwilling to join in aggressive stimulus programs.
Last month saw 1.25 percentage points in Fed rate cuts plus a $150 billion fiscal package to tackle credit problems from the subprime mortgage crisis. Whether this is enough to rescue the U.S. economy and avert a worldwide economic slump remains very much in question.
U.S. Treasury Secretary Hank Paulson sought to reassure on that front, saying the U.S. economy is fundamentally healthy.
"I still believe that we are going to continue to grow, although at a slower pace for a while. But the risk is very much to the downside," he told Japan's NHK television.
The G7 financial leaders are not expected to break any new ground on foreign exchange rates at this meeting.
Rather, financial upheaval was in the forefront of ministers minds as they arrived for the Tokyo G7 meeting.
"We will hold frank discussions regarding the subprime impact on financial markets and the global economy," said Japanese Finance Minister Fukushi Nukaga.
COORDINATION SOUGHT
German Finance Minister Peer Steinbrueck in a letter to G7 finance ministers called on his colleagues to address financial market problems.
"Prompt and coordinated action by central banks has helped to ease the immediate problems. Yet the full impact of the subprime crisis on the financial sector is yet to be known," he wrote in the letter seen by Reuters.
He said "political responses" were needed to strengthen risk management, bank capital and transparency in financial markets.
The Financial Stability Forum, a group of central bankers and other regulators studying the subprime mortgage problem and market upheaval, is due to deliver an interim report to the G7 policymakers.
But it was the willingness of central bankers to provide monetary easing that pleased politicians.
"I was pleasantly surprised on reading the declaration of Mr. Trichet," said French Economy Minister Christine Lagarde.
Russia's Finance Minister Alexei Kudrin said policymakers must work together to find solutions to the credit shortage.
"Coordination of efforts may soften the consequences of such crises, first of all a coordination of efforts between central banks on their refinancing rates because this is the key factor supporting the financial system," Kudrin told reporters in Moscow before heading to Tokyo.
British Finance Minister Alistair Darling played down the prospect of any coordinated steps to boost global growth at the G7. "The first thing is that conditions in different countries are not the same," he said.
Whether the emerging economies can come through the U.S. shakeout relatively unscathed will be on the agenda when G7 officials meet with finance ministers of China, Indonesia, South Korea and Russia for dinner on Saturday.
The head of the Asian Development Bank, Haruhiko Kuroda, said on Friday fiscal stimulus could be an option for emerging Asian economies if global growth slows further but the main concern for now is to contain inflation.
命里有时终须有, 命里无时莫强求...
有一种爱叫做放手 ─ ─ 阿木
如果两个人的天堂
象是温馨的墙
囚禁你的梦想
幸福是否象是一扇铁窗
候鸟失去了南方
如果你对天空向往
渴望一双翅膀
放手让你飞翔
你的羽翼不该随伴玫瑰
听从凋谢的时光
浪漫如果变成了牵绊
我愿为你选择回到孤单
缠绵如果变成了锁链
抛开诺言
有一种爱叫做放手
为爱放弃天长地久
我们相守若让你付出所有
让真爱带我走
有一种爱叫做放手
为爱结束天长地久
我的离去若让你拥有所有
让真爱带我走说分手
如果两个人的天堂
象是温馨的墙
囚禁你的梦想
幸福是否象是一扇铁窗
候鸟失去了南方
如果你对天空向往
渴望一双翅膀
放手让你飞翔
你的羽翼不该随伴玫瑰
听从凋谢的时光
浪漫如果变成了牵绊
我愿为你选择回到孤单
缠绵如果变成了锁链
抛开诺言
有一种爱叫做放手
为爱放弃天长地久
我们相守若让你付出所有
让真爱带我走
有一种爱叫做放手
为爱结束天长地久
我的离去若让你拥有所有
让真爱带我走
为了你失去你
狠心扮演伤害你
为了你离开你
永远不分的离去
有一种爱叫做放手
为爱放弃天长地久
我们相守若让你付出所有
让真爱带我走
有一种爱叫做放手
为爱结束天长地久
我的离去若让你拥有所有
让真爱带我走说分手
CEO 實 戰 手 記 ： 打 破 宿 命
黃 毅 力
都時日報 2008年02月06日
www.readmetro.com.hk
不 是 每 一 套 戲 的 主 角 ， 都 是 最 耀 眼 ， 只 要 你 發 揮 人 「 心 」 之 力 量 ， 以 補 天 地 之 不 足 ， 你 也 可 以 成 為 明 日 之 星 。
今 天 是 年 三 十 晚 ， 送 舊 迎 新 ， 今 晚 你 會 怎 樣 過 ？ 未 來 四 天 假 期 ， 你 又 怎 樣 過 呢 ？ 我 今 晚 會 陪 家 人 行 花 市 ， 之 後 ， 睡 三 小 時 ， 明 早 七 時 半 ， 便 與 我 可 愛 的 娘 親 到 黃 大 仙 祈 福 ， 然 後 拜 年 。 在 四 天 假 期 ， 我 會 整 理 文 章 ， 希 望 能 在 二 月 底 出 版 我 第 一 本 書 籍 。 很 多 人 在 新 年 假 期 出 外 旅 行 ， 或 者 是 睡 飽 便 吃 ， 吃 飽 又 去 睡 ， 如 果 你 是 這 樣 的 話 ， 你 的 生 命 便 難 以 改 變 。 唯 一 你 可 變 的 是 相 信 一 些 「 十 九 號 」 玄 學 家 的 指 點 ， 去 攝 太 歲 、 拜 太 歲 ， 認 為 這 樣 趨 吉 避 凶 和 改 命 。 為 了 避 免 大 家 浪 費 時 間 做 這 些 愚 昧 的 蠢 事 ， 昨 天 跟 大 家 「 論 命 」 ， 今 天 和 大 家 「 做 命 」 。
這 個 世 界 ， 由 天 、 地 、 人 鼎 足 而 成 ， 缺 一 不 可 。 人 生 的 命 運 也 是 由 天 、 地 、 人 組 成 。 算 命 算 得 最 準 ， 也 只 能 由 曆 法 中 偷 看 你 的 先 天 運 譜 – 天 運 ， 描 繪 人 生 歷 程 之 初 稿 。 沒 有 人 能 夠 百 分 百 準 確 地 算 出 和 改 變 你 的 命 運 。
地 運 ： 意 思 是 你 身 在 哪 個 國 家 和 社 會 的 生 活 、 國 際 大 勢 環 境 、 時 代 背 景 ， 甚 至 哪 個 家 庭 出 生 ， 歸 納 為 生 存 時 的 生 態 地 理 環 境 。 試 想 想 小 弟 ， 如 果 香 港 沒 有 1997 ， 這 個 有 危 、 有 機 的 黃 金 十 年 ， 我 怎 能 用 「 有 智 慧 就 不 如 趁 勢 」 的 方 法 來 創 出 這 十 年 的 成 就 呢 ？ 如 果 我 是 生 於 新 加 坡 ， 不 用 想 ， 沒 有 這 個 機 會 吧 ！ 如 果 我 不 離 開 警 察 隊 伍 ， 今 天 我 還 是 搭 ? 地 鐵 的 一 個 公 務 員 。
人 運 ： 人 與 人 之 間 產 生 互 相 影 響 的 作 用 ， 就 如 打 ? 波 的 撞 球 定 律 一 樣 。 你 遇 到 貴 人 、 小 人 、 伯 樂 ， 對 你 委 實 有 莫 大 影 響 。 不 論 你 有 多 好 的 命 及 生 存 環 境 ， 一 旦 誤 交 損 友 ， 受 友 人 所 累 或 感 染 ， 你 可 能 沒 有 翻 身 之 日 。
同 年 同 月 同 日 同 時 出 生 的 人 ， 為 何 際 遇 不 同 ？ 很 多 雙 胞 胎 的 例 案 ， 也 是 一 樣 道 理 ， 因 為 雙 胞 胎 在 社 交 、 生 活 圈 子 、 所 到 的 場 所 、 遇 到 的 人 ， 不 可 能 一 樣 的 。 在 醫 學 上 解 釋 ， 他 們 體 內 的 父 系 ， 母 系 ， 因 子 遺 傳 ， 不 可 能 絕 對 相 同 ， 所 以 性 格 也 有 差 異 ， 而 性 格 影 響 個 人 喜 好 、 價 值 觀 和 行 為 。 這 也 是 受 「 人 運 」 的 影 響 ， 只 不 過 是 內 在 性 。
先 天 的 命 盤 不 能 改 變 ， 如 天 賦 的 智 力 ， 遺 傳 ， 夭 壽 ， 病 危 ， 順 逆 年 運 等 ， 但 不 是 絕 對 的 宿 命 ， 後 天 個 人 毅 力 及 態 度 ， 是 可 以 改 變 命 運 歷 程 的 吉 凶 性 質 ， 知 命 而 能 努 力 改 之 。
在 天 的 規 律 中 ， 萬 物 無 分 貴 賤 ， 只 有 其 功 能 作 用 。 所 謂 ： 「 天 生 我 才 必 有 用 」 ， 分 別 是 用 在 甚 麼 地 方 。 有 些 事 物 在 人 們 眼 看 似 無 用 ， 但 實 為 無 用 之 用 ， 也 是 「 必 有 用 」 。 好 像 飛 蟲 的 生 命 最 短 ， 其 作 用 為 大 自 然 清 道 夫 ， 以 及 成 為 其 他 生 物 的 食 物 ， 這 也 是 其 作 用 。 以 人 們 的 眼 光 這 是 賤 命 ， 因 為 工 作 不 高 尚 及 短 壽 。 由 此 可 知 ， 好 命 賤 命 ， 只 是 人 的 觀 點 而 已 。 所 以 ， 應 該 以 樂 天 知 命 的 心 態 面 對 ， 順 應 天 命 ， 在 人 生 舞 台 上 積 極 演 出 你 在 劇 本 上 的 角 色 ， 不 論 你 的 「 命 」 是 主 角 、 配 角 、 導 演 或 是 監 製 ， 都 需 要 演 好 自 己 的 角 色 。 就 算 你 的 命 數 只 能 做 一 個 配 角 ， 但 只 要 透 過 努 力 ， 你 還 是 可 以 得 到 「 最 佳 配 角 」 的 稱 號 。 不 是 每 一 套 戲 的 主 角 ， 都 是 最 耀 眼 ， 只 要 你 發 揮 人 「 心 」 之 力 量 ， 以 補 天 地 之 不 足 ， 你 也 可 以 成 為 明 日 之 星 ； 因 此 你 需 要 認 清 自 己 的 定 位 ， 在 定 位 上 ， 做 到 人 生 一 個 最 好 的 角 色 ， 就 是 我 所 說 的 「 做 命 」 。
一 命 ， 二 運 ， 三 風 水 ， 四 積 德 ， 五 讀 書 ， 讀 書 可 以 改 命 ， 知 識 就 是 力 量 ， 將 力 量 轉 化 成 行 動 ， 就 可 以 行 出 一 條 新 路 。 改 變 地 運 之 元 素 可 以 透 過 移 民 、 出 國 、 轉 工 、 結 交 新 朋 友 、 起 居 飲 食 習 慣 ， 可 以 改 命 ， 因 為 地 運 ， 人 運 之 變 化 ， 但 吉 凶 乃 未 知 數 ， 要 看 個 人 修 行 。 讀 書 可 以 改 命 ， 幫 你 開 啟 智 慧 之 門 ， 改 變 人 生 觀 及 心 態 。 我 本 人 希 望 以 文 章 影 響 你 的 生 命 ， 在 2008 年 ， 小 弟 我 毅 力 希 望 能 夠 成 為 伴 你 每 天 搭 地 鐵 上 班 的 真 朋 友 ， 願 大 家 新 年 快 樂 。 記 住 ， 要 進 步 ， 唯 有 透 過 改 變 ， 這 就 是 「 做 命 」 。
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