As I perused The Guardian's online newspaper today, I came across two articles in which I wish to discuss. The first article pertains to Turkey and the EU (what we discussed in class today), and the second article has an interesting subject and also has US involvement.
Title of Article: Gul sworn in as Turkey's president
Source: The Guardian (8/29/07)
Link: http://www.guardian.co.uk/turkey/story/0,,2157875,00.html
Yesterday, Abdullah Gul, a British-educated economist as well as a Muslim democrat, was sworn in as the 11th president of Turkey. This election marks the end of the military and bureaucratic elite ruling, a title held by them for the past 84 years. Soon after he was elected, Gul vowed to be a more active president and push modernizing reforms, which he hopes will in turn promote Turkey's role in the world. Gul, who recently received praise for his handling of Turkey's bid to join the EU, vows to do such things because of the country's great desire to join the prestigious EU.
Gul also plans to leave the AK party, which he helped found, to impress his skeptics who aren't buying into his vow of impartiality (most likely another ploy to gain membership into the EU). Turkey would obviously benefit from being able to join the EU (although some residents most likely think otherwise), but only time will tell if Gul's attempts will pay off, or if members of the EU will again turn down Turkey's request on account of the impending movement of people freedom and the various other benefits Turkey will receieve if accepted.
Title of Article: PartyGaming revenues drop 70%
Source: The Guardian (8/29/07)
Link: http://business.guardian.co.uk/story/0,,2158213,00.html
PartyGaming, the world's most lucrative gaming market and operator of the PartyPoker and PartyCasino websites, posted a pre-tax loss of $47m (£23.4m) for the first half of 2007 on account of the recent US ban on all online gambling. Revenues also plunged for the business, down 70% to $212.5m. This US ban knocked PartyGaming out of the FTSE 100 index after wiping out three-quarters of its business.
On the brighter side, shares in the website rebounded by nearly 10% to 25p this morning, which is a welcome change from the sharp fall yesterday. Trading figures are still matching up to City expectations as well and the website is still averaging about 1,192 new members each day. Mitch Garber, the website's chief executive, is currently working with the US Department of Justice towards a satisfactory resolution; however, the website is planning to expand its business to China and Russia to make up for the loss of business in the US.
This is obviously a major setback for the PartyGaming business. Three-quarters of its business has just been wiped out, so it's going to be tough to try and regain their losses. Administrators are handling it well, however, with talks with the US and plans to expand their business to other foreign countries. Let's just hope that China and Russia don't put a ban on all online gambling as well or PartyGaming may have to call its bluff.
Wednesday 29 August 2007
Monday 27 August 2007
8/27/07
Title of Article: Five rate rises bring housing boom to August standstill
Source: The Guardian (8/27/07)
Link: http://business.guardian.co.uk/story/0,,2156784,00.html#article_continue
As per our discussion in class today with the UK (and US) housing market status, I found it rather fitting to use this article I found on the Guardian online website as my journal entry for the day. According to the article, five interest rate rises in just a year has caused the once booming and successful house-price market to record its slowest growth in twenty months for the month of August. Hometrack, the housing intelligence company, warns consumers of a weaker market in the months to come if nothing is done about this recent slow growth rate in house prices.
Richard Donnell, Hometrack's head of research, reports that the increase in interest rates over the past twelve months has pushed the average debt servicing costs to a fifteen-year high. High interest rates will most likely continue to hinder market activity levels as well as have an effect on house price inflation for the next twelve to eighteen months.
London has been the driving force behind the market boom, but now even this city is faltering. London still recorded a rise in prices in August, but this 0.1% increase is very minimal compared to the 1.8% increase seen in March.
Apparently, this slower growth in property prices has been going on for quite some time. In June, 27.9% of postal districts saw an increase in prices. This percentage dropped to 14.6 in July and dropped even more in August to 9.3%. Buyer confidence is weakening now which will, according to Donnell, create a snowball effect in which the market sentiment will be further underminded followed by weaker levels of demand and ultimately causing the rate of house price growth to become further underminded as well.
A sign of a weaker market is a decrease in the amount of people able to secure the asking price of their home. If this falls below 94%, there will be a greater chance of small month on month falls in underlying prices. The amount of people able to secure the asking price of their home was at a recent high of 95.6%; it has since fallen to 94.9%. With this, if this percentage gets much lower, the UK housing market may be seeing a smaller fall in underlying prices.
In my opinion, the housing market needs to lower their interest rates so that buyer confidence will rise once again and asking prices will be achieved. Increasing the interest rates increases the cost of money, so no wonder no one is buying and everything is at a stand still. They need to revamp the weak market, increase the percentage of postal districts seeing an increase in prices, and lower the average debt servicing costs. Lowering interest rates, however, may cause higher inflation, so a happy medium between interest rates and inflation needs to be reached. Maybe if interest rates were lowered just enough so that the inflation would balance with the rates, then the market can return back to its booming and successful self.
Source: The Guardian (8/27/07)
Link: http://business.guardian.co.uk/story/0,,2156784,00.html#article_continue
As per our discussion in class today with the UK (and US) housing market status, I found it rather fitting to use this article I found on the Guardian online website as my journal entry for the day. According to the article, five interest rate rises in just a year has caused the once booming and successful house-price market to record its slowest growth in twenty months for the month of August. Hometrack, the housing intelligence company, warns consumers of a weaker market in the months to come if nothing is done about this recent slow growth rate in house prices.
Richard Donnell, Hometrack's head of research, reports that the increase in interest rates over the past twelve months has pushed the average debt servicing costs to a fifteen-year high. High interest rates will most likely continue to hinder market activity levels as well as have an effect on house price inflation for the next twelve to eighteen months.
London has been the driving force behind the market boom, but now even this city is faltering. London still recorded a rise in prices in August, but this 0.1% increase is very minimal compared to the 1.8% increase seen in March.
Apparently, this slower growth in property prices has been going on for quite some time. In June, 27.9% of postal districts saw an increase in prices. This percentage dropped to 14.6 in July and dropped even more in August to 9.3%. Buyer confidence is weakening now which will, according to Donnell, create a snowball effect in which the market sentiment will be further underminded followed by weaker levels of demand and ultimately causing the rate of house price growth to become further underminded as well.
A sign of a weaker market is a decrease in the amount of people able to secure the asking price of their home. If this falls below 94%, there will be a greater chance of small month on month falls in underlying prices. The amount of people able to secure the asking price of their home was at a recent high of 95.6%; it has since fallen to 94.9%. With this, if this percentage gets much lower, the UK housing market may be seeing a smaller fall in underlying prices.
In my opinion, the housing market needs to lower their interest rates so that buyer confidence will rise once again and asking prices will be achieved. Increasing the interest rates increases the cost of money, so no wonder no one is buying and everything is at a stand still. They need to revamp the weak market, increase the percentage of postal districts seeing an increase in prices, and lower the average debt servicing costs. Lowering interest rates, however, may cause higher inflation, so a happy medium between interest rates and inflation needs to be reached. Maybe if interest rates were lowered just enough so that the inflation would balance with the rates, then the market can return back to its booming and successful self.
8/19/07
Title of Article: Banks in dark over final cost of credit turmoil
Source: Financial Times (8/19/07)
As we all know, there was a recent financial meltdown within the UK. This article discussed the problems banks now face because of the meltdown. All in all, bank companies are not exactly sure what the damage will be in the coming weeks; they really don't even know what the damage is to date. However, they do know that a big problem is lurking: they are unable to sell their leveraged loans, which means that they might have to mark them down; something they do not want to do, but, if forced, may have to.
According to analyst Howard Mason, the big bank company Citigroup could face up to 20% or 1.5 billion dollars in loses at the end of the quarter; however, Citigroup plans to cushion their huge loss by lowering staff pay. This, in my opinion, could cause tremendous problems. With lower pay, employees will most likely go on strike and create even more turmoil for the bank. A better, more efficient solution to their debt problems needs to be conjured up in order to avoid the impending doom Citigroup will face.
The worst performer over the past month has been Lehman Brothers as their shares have decreased 26%. This may or may not be the case in the coming weeks as sector share prices for all banks are likely to keep fluctuating for quite some time. Only time will tell what will happen to these big bank groups; who will end up on top...and on the bottom.
Since this article was about the turmoil banks may face due to the meltdown, I was puzzled when I came across this statement: "Bear Stearns jumped 13% and Lehman Brothers rose 6%." I don't know if I don't understand this because I have no background in Economics, but why would bank percentages increase at a time of financial turmoil? Also, the article mentioned that Lehman Brothers was the worst performer over the past month so how could their percentage rise? This is something I will definitely need to bring up with you, Professor Shackleford. Maybe you could tell me exactly what this percentage is and what it means for these bank companies.
Overall, I believe all banks will come out of this mess just fine, as long as they don't cause more problems by lowering staff pay or doing anything else of the sort (i.e. Citigroup). Banks can always borrow the money they need from the Fed, get out of debt, and return back to normal functioning. Unless another catastrophic event occurs, I believe we will be reading about the bounce-back banks will be going through in the next few weeks.
Source: Financial Times (8/19/07)
As we all know, there was a recent financial meltdown within the UK. This article discussed the problems banks now face because of the meltdown. All in all, bank companies are not exactly sure what the damage will be in the coming weeks; they really don't even know what the damage is to date. However, they do know that a big problem is lurking: they are unable to sell their leveraged loans, which means that they might have to mark them down; something they do not want to do, but, if forced, may have to.
According to analyst Howard Mason, the big bank company Citigroup could face up to 20% or 1.5 billion dollars in loses at the end of the quarter; however, Citigroup plans to cushion their huge loss by lowering staff pay. This, in my opinion, could cause tremendous problems. With lower pay, employees will most likely go on strike and create even more turmoil for the bank. A better, more efficient solution to their debt problems needs to be conjured up in order to avoid the impending doom Citigroup will face.
The worst performer over the past month has been Lehman Brothers as their shares have decreased 26%. This may or may not be the case in the coming weeks as sector share prices for all banks are likely to keep fluctuating for quite some time. Only time will tell what will happen to these big bank groups; who will end up on top...and on the bottom.
Since this article was about the turmoil banks may face due to the meltdown, I was puzzled when I came across this statement: "Bear Stearns jumped 13% and Lehman Brothers rose 6%." I don't know if I don't understand this because I have no background in Economics, but why would bank percentages increase at a time of financial turmoil? Also, the article mentioned that Lehman Brothers was the worst performer over the past month so how could their percentage rise? This is something I will definitely need to bring up with you, Professor Shackleford. Maybe you could tell me exactly what this percentage is and what it means for these bank companies.
Overall, I believe all banks will come out of this mess just fine, as long as they don't cause more problems by lowering staff pay or doing anything else of the sort (i.e. Citigroup). Banks can always borrow the money they need from the Fed, get out of debt, and return back to normal functioning. Unless another catastrophic event occurs, I believe we will be reading about the bounce-back banks will be going through in the next few weeks.
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