10/24 News Summaries: Hedge & Private Equity Funds, I-Banks, Stock Options; China; Real Estate Markets; Geopolitics and More

October 24 (Econotech FHPN) -- I am posting the news summaries below separately rather than appended to one of my articles, due to length. I will post my own much shorter article incorporating comments on these summaries soon.

The following areas are covered in the summaries: Hedge & Private Equity Funds, I-Banks, Stock Options; China; Real Estate Markets; Financial Markets – U.S.; Financial Markets – Global; Economy & Business – U.S.; Economy & Business – Global; India; Geopolitics; Politics – U.S.; Social – Global; Social – U.S.

If you have time for one area, I would recommend the first, a focus of my web site compared with most other sites, because it is a crucial subject that is deliberately kept not very visible to those outside the financial elite. The first three areas are particularly important in this business/credit cycle, along with geopolitics.

My intent in posting these summaries is to provide you with key facts and figures for critical issues that cut across specialist boundaries, with an emphasis on the unnecessary negative aspects of the overly speculative global financial system.

Whatever useful information may be found in these summaries is solely due to the hard-working mainstream journalists and commentators who write the articles and develop the sources (which I regrettably usually omit to save space).

Note well that inclusion of an item does NOT in any way indicate that I agree with its views, especially with respect to Op-eds, which are indicated by showing their authors. The summaries are usually listed in reverse chronological order, except when I wish to highlight them, as with the articles in the first section below.

Hedge & Private Equity Funds, I-Banks, Stock Options

Cheap credit is everywhere … the most avid consumers of leveraged loans have been private equity groups. Many corporate executives sniff at what they see as financial engineering, especially when private equity groups quickly sell their investment or lock in their returns by floating a portfolio company on the stock market. It is even harder for a CFO to announce that he is planning to trash his employer’s credit rating just for the sake of returning capital to investors. The current situation has created an arbitrage that is being exploited by private equity groups at the expense of public shareholders. Either defaults begin to rise and corporate credit conditions tighten again, limiting the scope for buy-outs, or companies will inevitably conclude that they should be more aggressive in their borrowing. (Peter Thal Larsen, FT, Sep 26)

Mr. Tepper is head of Appaloosa Management, a $4.5 billion hedge fund that owns 9.3% of Delphi's stock … Mr. Tepper says he is not causing economic pain -- he is just capitalizing on it … Delphi wants to close many plants and lay off thousands of people. It also intends to cut wages and benefits … On [Tepper’s] desk sit three plastic pigs. He jokes that he rolls them for guidance on difficult trades. If all three snouts point down, in the eating position, it's a signal to buy. "The media says that hedge funds are the new masters of the universe," he chuckles. "We're just a bunch of schmucks" … Appaloosa has delivered its investors an average annual return of 33.9%, after Mr. Tepper's 20% share of profits and 2% management fee are taken into account. (WSJ, Sep 30)

While Apollo Management and Texas Pacific Group were in supposedly secret talks to acquire Harrah's Entertainment for $15.1 billion, the takeover already was a done deal in the market for credit-default swaps. Seemingly omniscient derivatives traders also determined that Kohlberg Kravis Roberts, Bain Capital, Merrill Lynch and Thomas Frist would buy HCA in the weeks before a $33 billion leveraged buyout of the hospital operator was announced. And they did the same thing two weeks before Anadarko Petroleum's $21 billion agreement to buy Kerr- McGee and Western Gas Resources … the suspicion of insider trading is increasing. (Bloomberg, Oct 10)

Goldman Sachs has managed to do in China what nobody on Wall Street has done anywhere: earn almost $4 billion from a six-month-old investment. That, at least, is the profit so far on the $2.6 billion Goldman put up for about 5 percent of Beijing-based ICBC. The China bonanza is the result of more than 70 visits by former Goldman Chief Executive Officer Henry M. Paulson Jr., who became the 74th U.S. Treasury Secretary last June. Goldman is the only foreign securities firm [in China] allowed to both trade stocks for brokerage clients and arrange share sales for companies. (Bloomberg, Oct 23)

overseas firms that invested $17 billion in China's four biggest publicly traded banks in the past two years. The mainland lenders have handed investors $10 billion in gains since they first sold shares in Hong Kong last year … China's government encouraged lenders to find cornerstone investors to help improve management and corporate governance, as well as to bolster their balance sheets ahead of IPOs. Goldman paid about 1.22 times the Chinese bank's 2005 book value. ICBC is selling its Hong Kong shares at between 1.95 times and 2.23 times. (Bloomberg, Oct 9)

Goldman will announce on Oct. 25 its new class of partners, who will join the 287 who currently hold that title. Last year, that group shared more than $2 billion, or about 20% of the total compensation Goldman paid to its more than 25,000 employees world-wide. That averages out to about $7 million per partner. Goldman's partners also are offered opportunities to invest beside the firm when it buys stakes in other companies, which can be lucrative. (WSJ, Oct 13)

Merrill Lynch pumped more money into leveraged buyouts and trading bets … [ML’s] return on equity was 18.6 percent in the second quarter, about half of Goldman's which gets almost two-thirds of its revenue from trading and principal investments. (Bloomberg, Oct 16)

Top US policymakers believe fresh regulation of hedge funds may be needed to avoid a catastrophic hedge fund failure and that relying on banks and other counterparties to manage their exposure to the booming industry may no longer be enough. The development marks a shift in thinking on hedge fund oversight since a US court in June struck down a rule that hedge fund managers register with the SEC … One focus of concern was that hedge funds had access to financing from multiple prime brokers … official said. “The real concern is the transmission mechanism of the failure of a hedge fund into entities of a size that really are of systemic consequence.” (FT, Oct 15)

Germany was also expecting opposition from the UK to its plan to examine the risk posed by the activities of hedge funds. "We tried to get hedge funds on to the [G8] agenda in 2005 but we hit a brick wall from Britain and the US," the official said. (FT, Oct 19)

Hedge funds present a risk to the financial markets and tighter regulations are needed, a majority of private economists said in a new WSJ.com survey … little is known about their borrowing. Banks have been aggressive in extending credit, sometimes requiring little or no collateral on loans … Geithner, president of the NY Fed, recently called upon regulators to examine whether banks and securities dealers are requiring sufficient collateral from hedge funds … Thomsen, the SEC's director of enforcement, said the agency will be monitoring hedge funds through their relationships with broker dealers, and those ties will face more scrutiny. (WSJ, Oct 13)

U.S. leveraged-buyout activity is on pace for a record. 371 leveraged buyouts worth about $124.6 billion have closed in the first nine months, a 50% increase from the $83.1 billion in deals for the same time period a year ago … LBOs should easy surpass the 2005 record, when 356 deals worth $131.5 billion were closed … The total for deals announced but not yet closed this year is a whopping $238.7 billion across 405 deals, up from $111 billion across 317 deals at this time last year. (WSJ, Oct 9)

Takeovers involving European companies have climbed to $1.26 trillion this year from $819 billion in the same period a year ago. Prospects for slower earnings growth and expansion of private-equity funds are encouraging purchases … Finance has been the most active, with $341 billion of deals involving banks and insurance companies.Utilities rank second for both deals and performance. The transaction value totals $251 billion. Private-equity firms record $160 billion they have raised this year. (Bloomberg, Oct 9)

Carlyle Group agreed to reduce the size of a planned investment in a Chinese company in an effort to close a deal that has stirred government and public concern about foreign inroads into China's economy. revised agreement with Xugong Group Construction Machinery, under which Carlyle will purchase 50% of the company, rather than the controlling 85% stake … Increasing numbers of Chinese officials and scholars have been speaking out against the strong market position some foreign companies have achieved in China. (WSJ, Oct 18)

Buyout firms should give up on taking control of companies in Asia because of rising nationalism and sensitivity toward overseas investments, said Hsu Ta-lin, chairman and founder of H&Q Asia Pacific. Having veto rights, or negative control, and maintaining good relations with management will help keep buyout firms involved in major decisions, Hsu told … ``It's increasingly hard to buy control of companies in Asia and I do think negative control is probably a way to it,'' said Frank Tang, managing director of Temasek Holdings Pte, Singapore's state-owned investment company. (Bloomberg, Oct 11)

As dozens of collateralized loan obligations (CLO) structures have set up shop, buy-out groups have been issuing waves of leveraged loans into this pool of demand. Investment bankers have also been creating tailor-made instruments for buy-out groups. These instruments have been gobbled up so eagerly by hedge funds and other investors that the price of raising funds has fallen to extraordinarily low levels. many buy-out firms have started to raise cash to pay themselves dividends … if big corporations are not willing to leverage themselves up, they could fall victim to hostile bids from private equity groups themselves. (Gillian Tett, FT, Sep 26)

``People are saying too much money is chasing too few deals, yet the future for private equity funds is bright,'' said Tsusaka, the Tokyo-based head of TPG Newbridge. ``Some Japanese companies have trouble cutting costs and dealing with competition. We can be a strategic partner” … Japan may attract $6 billion of private equity this year against $4.7 billion in 2005. (Bloomberg, Oct 3)

the sea of cash flooding the Gulf these days has produced an explosion of investment companies. New names spring up almost every week. Arab companies' acquisitions abroad are announced with as much frequency … Kuwait-based Global Investment House estimates that $4.8bn of private equity funds were raised in the Middle East and North Africa region between 1994 and 2005, 41 per cent of which were raised in 2005 alone. The industry could break the $10bn mark in fundraising by 2007 … According to the Institute of International Finance, Gulf oil producers' current account surplus will increase 37 per cent this year to $227bn. (FT, Oct 19)

Some countries that have pioneered "flat" taxes could be forced to abandon them, according to research published by the IMF, which said the advantages of imposing a single tax rate had been exaggerated … the discussion of the flat tax "had been marked more by rhetoric and assertion than by analysis and evidence" … Flat taxes fail to deal with "the difficulties that almost all countries now perceive in taxing internationally mobile capital income." It predicted that some countries might be forced to decouple the taxation of capital income from that of labour income. It also highlighted political difficulties arising from the tendency of workers on middle incomes to lose out from flat tax reforms. (FT, Oct 19)

the truth was that in many — perhaps most — cases, executive pay still had little to do with performance. For one thing, the great bull market of the 1990’s meant that even companies that didn’t do especially well saw their stock prices rise. after a downward move in the stock price, executive stock options would often be repriced or swapped. What’s wrong with backdating stock options? There’s a tax evasion aspect, but the main point is the bait-and-switch. The public was told that gigantic executive paychecks were rewards for exceptional performance, but in practice executives were lavishly paid simply for showing up at the office. there’s no reason to believe that the [corporate governance] problem has been solved. (Paul Krugman, NYT, Oct 20)

Former NYSE chairman Dick Grasso must return tens of millions of dollars in compensation to the exchange, a New York state judge ruled on Thursday. Mr Spitzer filed a high profile law suit in 2004 arguing that the $139.5m in salary, bonus and benefits paid to Mr Grasso in 2003 for his eight years as NYSE chairman violated New York law requiring that compensation for executives at not-for-profit organisations be “reasonable” and “commensurate with services performed.” (FT, Oct 19)

By 2004, Vega was managing more than $12 billion, making it the largest fund in Europe. Vega's biggest hedge fund has lost about 17% so far this year, most of it during August and September. Mr. Mehra says Vega now manages about $5 billion. Along with billions of dollars in energy losses recently racked up by Amaranth’s Brian Hunter, the downturn at Vega serves as a stark reminder of the risks that individual traders continue to represent at some large hedge funds. (WSJ, Oct 17)

Some of Germany's family-owned companies now regard buyout firms as saviors, not the asset-stripping ``locusts'' that Franz Muentefering, now labor minister, branded them last year. The extent to which family enterprises open up to new investors will shape the corporate landscape of Europe's largest economy. They employ more than two-thirds of the country's workers. Family-run companies make up the backbone of medium-size enterprises, known in Germany as the Mittelstand. (Bloomberg, Oct 18)

To tap the $1.2 trillion hedge fund industry, firms are pushing analysts to spot trades across industries, markets and borders. [Merrill’s] Browning says she wants her analysts to turn up not only winners for the long haul but also quick, profitable trades employing convertible bonds and derivatives … Now that hedge fund managers, rather than in-house bankers, are paying the bills, the hot-money crowd gets top treatment. (Bloomberg, Oct 3)

U.S. buyout funds produced annual returns of 13.3 percent during the past two decades, compared with the 11 percent gain in the benchmark Standard & Poor's 500 stock index, according to Thomson Financial and the National Venture Capital Association … Calpers's holdings in funds that make takeovers and invest in startup companies rose 19 percent in the 12 months ended June 30, according to the report on the Web site. The S&P 500 climbed 8.6 percent in the same period, including reinvested dividends. (Bloomberg, Oct 3)

Their pockets bulging with cash, private equity firms may have found a new area to place their multibillion-dollar bets: the gambling industry. Harrah’s Entertainment, the largest casino operator in the United States, said today that Apollo Management and Texas Pacific Group had offered to acquire it for about $15.05 billion in cash, or $81 a share. The announcement ignited speculation that the American casino business, whose thicket of regulations has previously kept investment firms at bay, could attract more such proposals. (NYT, Oct 2)

September has been a rough month for the $1.2 trillion industry. In addition to Amaranth's meltdown, regulators in the U.S. and Malaysia are investigating Mount Kisco, New York-based Aeneas Capital Management LP after bets on Malaysian stocks caused losses of about 60 percent in one of its funds, people familiar with the situation said earlier this month. (Bloomberg, Sep 29)

European investors who lend in leveraged buyouts face greater risks as borrowers chip away at creditor rights, S&P said. Buyout firms who borrow to fund acquisitions are offering investors less protection against default as they rewrite loan documents in their favor. Weaker loan contracts let companies cut their debt at a slower pace and give lenders fewer voting rights in the event of a bankruptcy. Borrowers also have to set aside less cash to prepay their loans. interest margins to compensate investors for taking greater risk have declined. (Bloomberg, Sep 28)

Fees earned by buyout firms such as Blackstone Group and Texas Pacific Group are too high and could dampen their enthusiasm to make money for clients, according to the manager overseeing Britain's largest corporate pension fund. The 2 percent management fee typically charged by private equity companies is too much guaranteed income when a fund can be as large as $15 billion of assets … This year there have been a record $435 billion worth of announced private equity and management buyout transactions. (Bloomberg, Sep 28)

The difference between a good deal and a bad one often boils down to little more than hubris, or just plain ego, which can cause a buyer to overpay. "It's not that sellers are smarter than buyers," "It's just that buyers are overconfident in their ability to value what they're going to buy." Hubris is a theme among mergers-and-acquisitions experts when they are asked why so many deals go bad. a deal's return tends to be negative if stock -- an often inflated but cheap currency -- is used rather than cash. (WSJ, Oct 21)

China

profits of [China’s] industrial companies have soared by an average of 36% a year since 1999. The average pre-tax return on equity by state-owned firms increased from 2% in 1998 to 13% in 2005; private companies' return went up from 7% to 16%. most corporate investment is now financed out of companies' own cashflows and only one-third from outside sources. Since 1998 wages have gone up by no less than 14% a year, while export prices have fallen. [But] productivity has grown even faster than wages, expanding by 20% a year in industry, cutting unit labour costs. the share of national income going to workers has declined, while that to firms has increased. The growth rate in China's total factor productivity has been one of the fastest in the world over the past decade. [return on capital] has risen steadily since the late 1990s. A fifth of all industrial firms (and a third of state-owned enterprises) continue to lose money. (Economist, Oct 19)

there is a growing perception that foreign companies have done too well from their investments. The Party leadership has publicly accused a few of capturing "excessive" market shares, acquiring too many stakes in China's strategic industries, and buying state assets at bargain prices. Above all, there seems to be a concern that overseas investors own too much of the technology crucial to China's economic development … The main focus is on making it more difficult for foreign companies to operate in China … China is also attempting to build "national champions" … China's economic nationalism is a marginal adjustment to, rather than a fundamental repudiation of, Beijing's broader embrace of globalization. (Harry Harding, Eurasia Group, WSJ, Oct 24)

Profits at Chinese industrial companies increased 29.6 percent in the first nine months from a year earlier. Higher earnings may ease concerns about overcapacity, causing the government to refrain from taking additional steps to curb investment. (Bloomberg, Oct 24)

China plans to sell up to 60 billion yuan ($7.6 billion) of asset-backed securities this year, letting the country's insurers invest in the financial product. The central bank is allowing banks to start selling asset- backed securities so they can raise cash and better manage risks. China's government also wants to develop the bond market to reduce companies' reliance on bank loans. (Bloomberg, Oct 24)

Mainland Chinese investors pay an average of over 50 percent more for stocks that are traded for less in Hong Kong after a rally in China's stock market this year. Companies with a market value less than $200 million show the biggest price differences. 24 mainland-listed shares trade at an average 25 times estimated earnings. their Hong Kong counterparts can be picked up for an average 16 times. Both hold the same equity value in their underlying companies and pay the same dividend. Investors can't profit from the pricing gap because of restrictions on currency conversion and stock ownership. Only qualified foreign and domestic investors picked by China's regulators can trade equities in both markets. (Bloomberg, Oct 24)

China can sustain economic growth of around 10 percent even as the government curbs investment because households are becoming more prone to spend, said a researcher at the State Council's Development Research Center. Exports will grow about 20 percent next year, slowing from 26 percent average monthly expansion so far this year. Adjustments to export tax rebates are unlikely to ``greatly affect'' overseas. (Bloomberg, Oct 23)

JPMorgan Chase and Deutsche Bank raised their estimates for economic growth in China as a two- year push by Premier Wen Jiabao to encourage consumer spending begins to gain traction. Growth in retail sales, a proxy for consumer spending, has averaged 13.5 percent this year, up from 12.9 percent in 2005. In September, sales increased 13.9 percent. The pickup came as overall economic expansion slowed to 10.4 percent in the third quarter from 11.3 percent in the previous three months. (Bloomberg, Oct 23)

Taiwan's opposition Nationalist Party wants to negotiate a peace agreement with China if it wins the presidential election in 2008, seeking to end five decades of hostility, Chairman Ma said. The party aims to conclude a deal by 2012 that would ensure Taiwan's security from attack in exchange for a guarantee that the island won't seek independence. China's government has been forging closer ties with the Nationalists as it seeks to isolate the island's pro-independence President Chen. Taiwan companies have invested as much as $150 billion in mainland China, the island's largest trading partner. (Bloomberg, Oct 23)

The record-breaking initial stock sale of China's biggest bank underscores how eager global investors are to write fat checks to sate the capital needs of China's companies. attracted $350 billion of demand from global investors. The domestic portion drew $80 billion. All that for a $21.9 billion deal. Since the beginning of the decade, Chinese companies have raised more than $100 billion from equity markets. About half of that has come in the past two years, and largely from the country's biggest banks. This year, Chinese companies are on track to account for about 10% of the global total. (WSJ, Oct 21)

ICBC raised $19.1 billion in the world's biggest initial public offering, after attracting orders equivalent to double Citigroup Inc.'s market value … ICBC priced at the top of the range as investors sought more than $500 billion of stock, betting [it] will be a proxy for China's economic expansion. ICBC may replace Mitsubishi UFJ Financial Group as the world's fifth-biggest bank should the stock rise next week. (Bloomberg, Oct 20)

China's government said it has curbed a surge of risky investment spending while suffering only a minor slowdown in economic growth, remarks that suggest Beijing is less likely to try to clamp down on an expansion. China's GDP rose an inflation-adjusted 10.4% in the third quarter from the same period a year earlier. The figure was slower than the 11.3% annualized growth in the second quarter. its economy expanded 10.2% in 2005, 10.1% in 2004 and 10% in 2003. Inflation also remains low, at less than 2%. the benchmark lending rate is about 6%, aren't high enough to deter companies from taking out loans. (Asia WSJ, Oct 20)

an engineering project is attempting to divert billions of tons of water from China's flood-prone south to the Yellow River and the cities that rely on it. [China] has one-quarter of the per capita water resources of the world average; in Beijing, it is one-thirtieth. Some 136 cities face severe shortages. More than 300 million people, almost a quarter of the population, lack access to clean drinking water, as more than half of major waterways are badly polluted. The entire project, which could take decades to complete at an estimated cost of more than $60 billion, would build three canals. Many worry that funneling water north fails to address problems of waste and inefficiency. (WSJ, Oct 20)

China's rapid economic growth and major international events like the 2008 Beijing Olympics are giving a boost to the nation's tourism sector. Some tourism shares have doubled in price since the start of the year. government efforts to promote more travel to and within the country. By 2010, China's National Tourism Administration expects total tourism revenue to reach $160.6 billion, thanks to 10% average annual growth. Last year, tourism revenue grew 12%, [to] 4% of the nation's gross domestic product. (WSJ, Oct 20)

The largest SOEs are reporting burgeoning profits and financing new investments themselves, but they are the exceptions: in 2005, the 10 largest accounted for more than 53 per cent of total SOE revenues and the 165 SOEs owned by the central government for more than 70 per cent of profits. The implication is that banks' exposures are likely to be greater to the thousands of smaller government-dominated firms whose profits appear to be much less certain. (Dobson and Kashyap, FT, Oct 19)

In the four months to September China's trade surplus totalled $63.2bn, almost exactly matching its increase in reserves over the same period of $62.9bn. With net foreign direct investment still flooding in at $5bn a month, the balance between trade surplus and reserves growth suggests that capital has begun to flow out of China. China has now had four successive months of net capital outflows, excluding the trade surplus and incoming investment … economists divided over whether they provide cast-iron evidence that speculative inflows have dried up. (FT, Oct 19)

China said its top statistician, Qiu Xiaohua, was fired because he was linked to misuse of Shanghai's state pension fund, a scandal that has already brought down the city's party chief Chen Liangyu … At least 16 billion yuan of China's national social security fund, valued at more than 1.8 trillion yuan in 2005, has been embezzled since 1998, the official Xinhua News Agency said on Sept. 15. (Bloomberg, Oct 19)

China's economic expansion slowed for the first time in a year. GDP in the third quarter rose 10.4 percent from a year earlier after gaining 11.3 percent in the prior three months. Second-quarter growth was the fastest in more than a decade … China had 118 million tons of excess steel production capacity last year, more than the entire 112 million-ton output of Japan, the world's second-largest steelmaker. There is also surplus capacity in areas. ``Excess capacity is so large in some industries that their ability to service their debt is in question,'' threatening to push some banks into insolvency, Nicholas Lardy, a fellow at the IIE in Washington, wrote … Money supply grew 16.8 percent in September, the slowest pace in more than a year. (Bloomberg, Oct 19)

Multinational companies are following export-focused producers from Hong Kong and Taiwan, which reacted earlier to price competition and rising costs by moving inland. (Bloomberg, Oct 18)

Wal-Mart, the world's largest retailer, agreed to buy Trust-Mart, a shopping chain in China, for about $1 billion … Buying Trust-Mart will more double Wal-Mart's stores in China's $841 billion retail market. Expansion in [China] may counteract slowing U.S. sales and bolster revenue from overseas after its mid-year withdrawal from Germany and South Korea. (Bloomberg, Oct 16)

China still needs to restrict spending on new projects to control ``excessive'' investment growth, said Ma Kai, head of the National Development and Reform Commission, the country's top economic planning agency. Almost 50 percent of new projects in the coking industry are ``problematic,'' as are 42 percent in the coal industry, 39 percent in the steel alloy industry and 26 percent in the power industry, Ma said today. (Bloomberg, Oct 16)

[China’s] luxury-goods market is growing as much as 60 percent a year … an estimated 300,000 U.S.-dollar millionaires in China … About 200 million Chinese live on less than $1 a day. (Bloomberg, Oct 16)

The Shanghai Composite Index, which tracks performances in the bigger of two Chinese stock exchanges, rose 53 percent this year, the sixth-best performer out of 80 global indexes tracked by Bloomberg. (Bloomberg, Oct 13)

China's securities regulator said shareholders must return any fund that may have been misused by the year's end or they will face ``legal responsibilities.'' Up to 102 Chinese publicly traded companies, or 7 percent of the 1,400 listed, have had 25.4 billion yuan ($3.2 billion) of funds misappropriated by their parents or affiliates (Bloomberg, Oct 13)

The U.S. may file new complaints with the WTO because China is showing signs of ``backtracking'' on its pledge to allow foreign investments and cut subsidies, the top U.S. trade official said. China is favoring domestic producers including steel producers and hasn't done enough to crack down on intellectual property violations. (Bloomberg, Oct 13)

China’s top communists underlined the growing authority of President Hu Jintao by calling on party cadres to focus more on his doctrine of “building a harmonious society” … more a change of emphasis than a break from the approach taken by Mr Jiang … (FT, Oct 12)

China's government said it will double social security coverage to at least 1 billion people by 2020. The party will build more low-cost houses. China's annual urban unemployment rate surged to a record 8.4 percent at the end of 2005. (Bloomberg, Oct 12)

IBM has moved its global procurement headquarters to southern China from New York to ``capitalize on emerging market opportunities.'' IBM spends 30 percent of its $40 billion annual procurement in Asia. This is the first time the company is moving the headquarters of one of its biggest divisions to China … The move ``places us closer to the core of the technology supply chain.” (Bloomberg, Oct 12)

China's crude oil imports rose 16 percent in the first nine months of 2006. China's oil demand may rise 6.4 percent to 7 million barrels a day this year, the IEA forecast . imports around two- fifths of the crude it uses … The oil import bill for the world's second-largest consumer of the fuel increased 50 percent to $51.3 billion in the nine months. (Bloomberg, Oct 12)

China had its second-largest ever trade surplus in September. The gap narrowed to $15.3 billion from a record $18.8 billion in August. For the first nine months, China's trade surplus reached $110 billion, exceeding last year's total … China had a $14.1 billion surplus with the U.S. last month, and sold $8.8 billion more of goods to the EU than it bought … China's exports rose 30.6 percent last month from a year earlier, while imports increased 22 percent … China's current account surplus widened to $91.6 billion in the first half from $67.3 billion in the year-ago period. The U.S. had a $431.6 billion shortfall on the current account in the first six months. (Bloomberg, Oct 12)

[In China] to qualify for the top 500 today a person must be worth at least $100m compared with a cut-off of $6m for a top 50 listing eight years ago … China's richest mostly live in Guangdong or Zhejiang provinces, and are often active in real estate or manufacturing … there are no information technology entrepreneurs in Hurun's top 10 for the first time since 2003. (FT, Oct 11)

China Petroleum & Chemical Corp.'s yuan shares fell as much as 21 percent after the approval of a plan to reduce the amount of stock tied-up in government holdings expanded the supply of shares in the market. China has intensified efforts to make more than $200 billion of state-owned stock tradable. Listed companies accounting for more than 90 percent of stock market capitalization have already taken such steps before a year-end deadline. (Bloomberg, Oct 10)

Each of the overseas strategic investors agreed not to sell their shares until April 2009. They are only able to dispose of 50 percent of their stake before Oct. 2009. (Bloomberg, Oct 9)

China aims to develop at least 10 accountancy firms capable of comprehensive, international standards of service within the next decade by a "bigger, stronger" policy intended to cut reliance on foreign groups. Policymakers are concerned that the weakness of China's accounting infrastructure and doubts about the reliability of corporate accounts could hamper the movement of capital. (FT, Oct 4)

Morgan Stanley has acquired a small commercial bank in China, allowing the Wall Street firm to offer structured derivative products, home mortgages and corporate loans to Chinese customers. The deal comes as Chinese regulators have shut the door on foreign investors seeking to acquire local securities firms. Morgan Stanley, which has a 34% stake in China's biggest brokerage, has been seeking other ways to expand in China. (WSJ, Oct 3)

Manufacturing activity in China expanded at the slowest pace in six months in September amid fewer new orders and exports. The CLSA China Purchasing Managers' Index dropped to a seasonally adjusted 52.4 last month from 52.6 in August … A separate PMI survey, compiled by China's statistics bureau and logistics federation, was released yesterday. Their manufacturing index rose to 57 in September, the highest reading in five months, from 53.1 in August. (Bloomberg, Oct 3)

China, the world's biggest oil user after the U.S., may consume 6.5 percent more of the fuel this year, with demand reaching 7.1 million barrels a day, the International Energy Agency said. Demand may rise 5.5 percent to 7.4 million barrels a day next year. (Bloomberg, Oct 3)

Even in wealthier areas of China such as Shanghai and Guangdong province, officials say the deteriorating environment is a factor behind a rise in birth defects. About 34% of children in China have blood-lead levels that exceed the WHO limit. The situation is considerably worse in factory towns like Xinsi. By comparison, fewer than 1% of children in the U.S. have levels above the WHO limit. (WSJ, Sep 30)

China's economic planners have approved the construction of a natural-gas pipeline from the country's northwest to its south to transport gas imported from Turkmenistan. will be more than double the capacity of the existing West-East pipeline … part of Beijing's plans for as many as six natural-gas pipelines crisscrossing the country. (WSJ, Sep 28)

China estimates that the economic cost from China's industrial pollution reached $64 billion in 2004, or about 3% GDP. The cleanup cost of that mess in 2004 alone would have cost another $36 billion. China actually spent about a third of that amount two years ago. China would need a one-off investment of $135 billion to install the latest pollution-control technology. That's about 7% of China's economic output. from 2006 to 2010, China will commit $175 billion to clean up industrial pollution. some 20% of the population lives in "severely polluted" areas, 70% of the country's rivers and lakes are in grim shape. local environmental regulators owe their allegiance to local Communist Party officials. (BW, Sep 28)

Last year, China was the third-biggest vehicle market, after the U.S. and Japan, with sales of 5.7 million cars, trucks and buses. By 2015, the number of cars and trucks on China's roads will more than triple to 100 million from 31 million today … In the past five years, Chinese oil companies have spent $15 billion buying oil fields and oil companies in 100 countries. (Bloomberg, Sep 27)

Real Estate Markets

The ABX index, which measures the risk of owning bonds backed by home-loans to people with poor credit, rose 30 percent since Aug. 9 to the highest since January. There are more than $500 billion of such notes outstanding. The increase in the index shows traders expect mortgage delinquencies and foreclosures to increase at a time when the number of homes for sale is at a 13-year high. The percentage of home-loan payments more than 60 days delinquent rose to 7.23 percent in July from 5.9 percent a year earlier, the fastest rate of increase since 1998. Most credit-default swap trading is in securities rated BBB or BBB- . Subprime mortgages with those credit ratings historically have had losses of about 5 percent of the loan value. Some investors are betting that losses may increase to 12 to 14 percent in the next three years. (Bloomberg, Oct 23)

The decline in home prices after a five year real-estate boom will cause the economy to slow and force the Fed to lower rates to avoid a recession, McCulley wrote on Pimco's Web site on Oct. 19. ``To think otherwise after a bubble is to not understand bubbles.'' (Bloomberg, Oct 23)

The commercial real-estate cycle appears to have reached its peak and will begin pulling back in 2007, according to a new survey of industry executives … suggests commercial real estate is beginning a return to its norm as an income-producing investment rather than the wildly appreciating asset class it has been this decade. The easy lending of the past several years will tighten next year in part because of worries about the economy. Investors will have to turn to asset management and operating performance to raise returns as investment inflows slow because of lower return expectations. (WSJ, Oct 18)

"[Commercial] Real estate players want to believe that an unprecedented decade-plus of halcyon returns will endure indefinitely, but somehow sense the boom is over," says the ULI report. "Welcome back to reality" … "There is still a ton of capital but it is not as aggressively bid," said one broker. Instead of 20 or more bidders per property, which was the case a year ago, there are now likely to be 10 or fewer. But the industry still does not think a crash is ahead because most long-term property owners have built substantial equity in their assets and because rises in rents could rescue property values. (FT, Oct 19)

new data gave a conflicting picture of the state of the US housing market. New home starts rose 5.9 per cent in September but building permits, a proxy for future construction activity, fell 6.3 per cent to reach their lowest level since 2001. (FT, Oct 19)

NAHB said its index of home-builder sentiment rose slightly to 31 in October from 30 in September. Readings on current conditions remained bleak, but assessments of future sales conditions improved somewhat. NAHB President said that more than 75% of the association's builders are offering "substantial" sales incentives to limit cancellations. "The market correction appears to be approaching the bottom in terms of sales volume, and we expect the supply-demand balance to improve considerably before long." (Oct 18)

``The rate of [real estate] decline is going to dramatically slow,'' Greenspan told an audience of insurance-industry executives in White Sulphur Springs, West Virginia. ``We are beginning to see some evidence that all the data are not going south,'' he said, citing statistics on mortgage applications. (Bloomberg, Oct 10)

“I don’t think that the boom came from a 1 per cent Fed funds rate or from the Fed’s easing. It came from the collapse of the Berlin Wall,” Mr Greenspan told a private audience in Canada on Friday … the collapse of Communism in eastern Europe and the shift towards more market-based economies in China and other parts of the developing world brought “billions of cheap labourers onto the scene”. This, he said, “brought disinflation and lowered inflation risk premiums and long-term interest rates, creating a decline in real interest rates and equity-risk premiums.” In consequence, “the real market value of assets increased faster than GDP.” (FT, Oct 9)

the use of liar loans has become epidemic. In 2005, mortgages underwritten with minimal documentation sometimes accounted for as much as 50 percent of subprime mortgages. almost 60 percent of the stated-income amounts are exaggerated by more than 50 percent. (sfgate.com, Oct 6)

Moody's Economy.com projects that the median sales price for an existing home will decline in 2007 by 3.6 percent, which would be the first decline for an entire year in home prices since the Great Depression of the 1930s. 133 of the nation's 379 metropolitan areas would suffer price declines. account for nearly one-half of the value of the nation's stock of single-family homes … concentrated in the states of California and Florida and the Northeast corridor from southern Maine to just south of Washington, D.C., boom areas of Nevada and Arizona and some depressed sections of the Midwest. 73 were forecast to hit their low point by the end of this year with the rest seeing a trough for prices in 2007 or later. the rebound in prices is not expected to occur quickly. (AP, Oct 3)

``Since the start of 2005, the inventory of unsold new homes has climbed 29 percent, while the stock of unsold existing homes is up a staggering 82 percent,'' Carson says. ``During the sharp, protracted housing downturn of the early 1990s, these inventories actually declined, helping to cushion prices.'' … cancellations are rising, and they aren't being captured in the aggregate statistics because of the way the survey is designed. Hence, sales are being overstated and inventories understated. (Caroline Baum, Bloomberg, Sep 29)

The slowdown of California's housing market has become a drag on the state's economy, but will avoid recession through 2008, according to UCLA Anderson Forecast. through 2008 post overall payroll growth of around 1 percent, a rate similar to that in the first half of this year … California's homes market is "very far from a Great Comeuppance in which the extraordinary appreciation of the last five years is taken away." Without severe job losses forcing home owners to sell houses, home prices in California in five years will be about the same as today. (Reuters, Sep 28)

Financial Markets – U.S.

A three-week rally in U.S. stocks, which lifted the Dow Jones Industrial Average past 12,000 for the first time, slowed this week as concern that profit growth has peaked. For the Dow and the S&P 500, the gains were the smallest since the week ended in Aug. 4, while the Nasdaq's loss snapped a three-week winning stretch. Earnings of S&P 500 companies will climb 8.8 percent in the first three months of 2007. That would snap a string of 14 straight quarters of at least 10 percent growth, the longest such streak in five decades. [Semiconductor stocks] fell 5.1 percent for the week, the biggest such drop since July. (Bloomberg, Oct 21)

Since the beginning of September, so-called consumer- discretionary stocks have been the best performers among the Standard & Poor's 500 Index's 10 industry groups. They beat the benchmark every week until last week, when they dropped as the S&P 500 rose. Third-quarter profit forecasts for the discretionary group were trimmed by 2.4 percent in the past four weeks, the biggest drop among the 10 groups in the S&P 500. Estimates for the fourth quarter were cut by 2.8 percent, and only energy producers had bigger reductions for the period. Retail sales excluding service stations rose 0.6 percent last month, three times the advance in August. (Bloomberg, Oct 23)

Yields on 4 5/8 percent notes due in 2008 were little changed at 4.87 percent last week. That's up from an eight-month low of 4.57 percent on Oct. 4. Two-year note prices tend to move with the central bank's target rate. Ten-year yields, influenced more by perceptions of inflation, yielded 4.79 percent, and are up from a seven-month low of 4.53 percent on Sept. 25. (Bloomberg, Oct 23)

Assets at commodity hedge funds rose 87 percent to $22.5 billion in the past year and may grow to $30 billion in 2007. The number of funds increased to 95 from 70 a year ago. (Bloomberg, Oct 23)

The Chicago Board Options Exchange volatility index, or VIX, dropped 0.27, or 2.5%, to 10.63 -- its lowest closing level since late 2005. (WSJ, Oct 21)

Google gained 7.9%. The Internet titan's third-quarter results soared, with profit growing 92% and revenue rising 70%, as international operations and the company's own sites boosted its online advertising sales. a number of [analysts] upping their estimates to $600 or more. (WSJ, Oct 21)

JP Morgan raised its rating on shares of U.S. homebuilders Standard Pacific Corp., D.R. Horton Inc. and Toll Brothers Inc. on expectations that housing inventories may decline next year. (Bloomberg, Oct 11)

Since 1999, the amount of money invested in commodities by pension funds, mutual funds and endowments has soared almost 17- fold, to $100 billion from $6 billion. Hedge funds, commercial banks and Wall Street firms, meantime, have poured about $50 billion into the market. (Bloomberg, Oct 10)

In 2006, fuel exporters expected to generate a $505 billion surplus, vs. $462 billion from Asian nations … oil-exporting countries have recently taken the lead in buying U.S. bonds and Treasury bills … If they tumble to $50 per barrel, the boom in petrodollar purchases of U.S. securities could evaporate. (BW, Oct 9)

In the past 16 years, the market's worst-performing sector in the first three quarters of the year has produced the best returns in the fourth -- a 12.3% rise, on average, according Birinyi Associates. "Technology is this year's worst performer thus far," (Barron’s, Oct 9)

Google agreed to buy closely-held YouTube in an all-stock deal worth about $1.65 billion. (WSJ, Oct 9)

Sentiment has reached a level of extreme optimism, according to an indicator compiled by Ned Davis Research Inc. (Bloomberg, Oct 9)

Russell said 58 percent and 38 percent of managers surveyed were bullish on ``large-cap'' and ``mid-cap'' growth stocks, respectively … Growth stocks will have to rally to avoid trailing value stocks for a seventh- straight year. The value index has climbed 11 percent this year, while the growth gauge has gained 5 percent. (Bloomberg, Oct 5)

For the year ending August 31, "86.8 per cent of the $118.56bn in equity flows has headed overseas." In the past four months, "domestic funds have witnessed cumulative outflows of $23.72bn, which marks the worst four-month span since October 2002". (FT, Oct 4)
Companies raised $615.3 billion in U.S. bonds this year, compared with $667.3 billion for all of last year and the record of $675.7 billion in 2001 … corporate securities have performed worse than Treasuries the last four times the Fed stopped raising benchmark interest rates. (Bloomberg, Oct 3)

Financial Markets – Global

"I am staggered by the wall of liquidity that exists in the capital markets right now," says Steven Barg, UBS AG's head of equity capital markets for Asia. "The amount of money that has shown up for this [ICBC IPO], what it says in my mind is we are still in early days with respect to China." (WSJ, Oct 21)

Asian stocks advanced, set for a five-month high, on expectations companies including Toyota Motor and Hyundai Motor will report higher profits. (Bloomberg, Oct 23)

Telephone stocks are leading Asian markets higher for a second straight quarter as investors take advantage of increasing prosperity in developing countries and seek shelter from a U.S. economic slump. China Mobile and Reliance Communications have led the MSCI Telecommunication Services Index to a 3.5 percent advance this quarter. The industry's gauge is also beating the MSCI Asia-Pacific Index for the full year, which hasn't happened since 1999. China and India are together adding about 10 million subscribers each month. About 30 out of every 100 people in China had phones at the end of last year, and the ratio in India was 8.2. The U.S., the world's biggest economy, had 68. The phone-stock index has climbed 13.1 percent for the year. (Bloomberg, Oct 23)

For the fourth quarter, the [European] oil and gas index has rallied 4.7 percent as the Stoxx 600 has gained 3.6 percent. The group was the second-worst performer from January through September, when its gauge slipped 0.8 percent as the Stoxx 600 climbed 10 percent. The proportion [of global fund managers] holding fewer [energy] shares than are represented in benchmarks exceeded those that had so-called overweight positions for the first time since early 2002. Earnings growth for oil and gas companies in the Stoxx 600 will plummet this year to 8.6 percent from 42 percent in 2005. In 2007, profit may rise 0.4 percent, the smallest gain among the 18 groups. (Bloomberg, Oct 23)

European stocks rose for a fourth week, the longest winning streak in seven months. The Dow Jones Stoxx 600 Index at the highest since February 2001. Stocks have risen 17 percent from their low on June 13 as takeovers, a three-month retreat in oil prices and better-than- expected earnings bolstered prospects for profit growth and underpinned stock values. Earnings for Stoxx 600 companies are expected to increase 13 percent this year, down from 25 percent in 2005. (Bloomberg, Oct 21)

mutual-fund managers are working harder to find investment opportunities in previously untapped places, with countries such as Vietnam, Malaysia, Bulgaria and Botswana among the stops on their itinerary. Many of these frontier emerging markets are small, and trading liquidity is often a problem. some global investors have moved to their largest "underweight" position in such stocks in five years. the souring outlook to a price drop in oil and basic materials. Investors have net underweights on those two sectors, which are highly correlated with developing economies. (WSJ, Oct 19)

Lead rose 2.7 percent in London, earlier touching the highest ever. Nickel climbed 1.2 percent to the highest since at least 1987. (Bloomberg, Oct 13)

Shares of Nippon Building Fund Inc., Japan's biggest real estate trust, reached a record last week as land prices and rents soared … The 37 stocks in the TSE REIT Index sell on average for 33.3 times earnings for the past year. The companies in the Nikkei 225 sell for 25.1 times earnings, collectively. (Bloomberg, Oct 12)

Gulf oil producers will continue buying dollar-based assets with their windfall revenues, but not all the money will flow into the US, according to [the IMF]. Gulf oil producers will record current account surpluses of $239bn this year, rising to $259bn in 2007. (FT, Oct 10)

The fourth quarter has been the best time to own Asian technology stocks during the past decade … Since 1996, a gauge of technology companies in the MSCI Asia-Pacific Index has gained an average of 10 percent in the fourth quarter … The MSCI information-technology index has risen 3 percent this year, the second-worst performance. (Bloomberg, Oct 9)

President-elect Felipe Calderón recently admitted that violence has escalated out of the control of the authorities in several states and in Mexico City … Big investors appear to shrug off the violence, as they have the disputes after Mr Calderón's election. "It's not a concern," said Damian Fraser, chief Latin America strategist of UBS Warburg. "Investors look at the sound economic figures and that gives them confidence." As Mr Fraser spoke last week, the IPC index of the Mexico Stock Exchange set fresh records. (FT, Oct 4)

The MSCI World Index, consisting of stocks in 23 developed markets, rose 4.1 percent during the third quarter. The MSCI Emerging Markets Index, whose members come from 25 markets, also advanced 4.1 percent for its seventh gain in the last eight quarters. Both indexes have gained in every fourth quarter since 2000. (Bloomberg, Oct 2)

Of the $50 trillion invested worldwide, commodities represent less than 0.25 percent of the total … the CRB index ended the third quarter down 12 percent, its largest decline since at least 1956. (Bloomberg, Oct 2)

STMicroelectronics NV, Europe's largest maker of computer chips, may be targeted for a takeover, according to traders betting on the creditworthiness of companies in the credit-default swap market. (Bloomberg, Sep 28)

Economy & Business – U.S.

173 members of the S&P 500 have reported results for the third quarter. 72 percent topped analysts' estimates, more than the 57 percent average since 1992. Google climbed to an all-time high, as analysts raised their predictions for the stock following the company's report that profit almost doubled. (Bloomberg, Oct 23)

Excluding costs for asset writedowns and shedding jobs, [Ford’s] loss was $1.2 billion, or 62 cents, in line with analysts' estimates. The price of credit-default swaps based on $10 million of Ford bonds fell to $650,000, from $660,000 on Oct. 20. A decline in price indicates improvement in the perception of credit quality. (Bloomberg, Oct 23)

Ford CFO Don Leclair said the auto maker will continue to have negative cash flow "for the next couple years" and disclosed Ford's intention to pursue financing backed by its own assets, a move that prompted two credit-rating firms to say they will re-examine their ratings of some of Ford's debt. With $23.6 billion in cash and equivalents, Ford isn't in imminent danger of a cash squeeze. Ford went through $3.1 billion in cash in the third quarter, and expects to burn $3.6 billion in the fourth quarter. (WSJ, Oct 24)

The Fed's [staff] number-crunchers threw out previous conclusions about how fast the economy can grow without fueling inflation. They concluded that the speed limit is lower than previously thought. The implication: Unless the economy slows more than the Fed now expects, the central bank may have to resume raising interest rates sooner rather than later to control inflation. In effect, policy makers were told last month that time is running out for inflation to fall. (Bloomberg, Oct 23)

GDP probably rose at an annual rate of 2 percent from July through September, after a 2.6 percent gain in the previous three months, according to the median estimate of economists in a Bloomberg News survey. The report is also projected to show consumer spending, which accounts for about 70 percent of the economy, grew at an annual rate of 3.1 percent last quarter, up from a 2.6 percent gain the previous three months. (Bloomberg, Oct 22)

GM said Friday that vehicle sales fell 3% in the third quarter, mostly due to the auto maker backing away from lower-margin sales and long-running promotions in the crucial U.S. market. The decline follows GM's 2.3% drop posted in the first half of the year. GM's closely watched U.S. market share, which fell below 24% in the first quarter of the year, recovered to 25.1% in the three months ended in September. GM’s sales in China, where it passed Volkswagen to become the market leader earlier in 2006, gained 37% in the third quarter. Sales to Russia and India surged 64% and 18%, respectively. (WSJ, Oct 21)

A streak of 10 percent-plus growth in quarterly earnings at S&P 500 companies is forecast to end. First-quarter profits will increase 8.8 percent. Double-digit rises in the third and fourth quarters would push the winning streak to 14 quarters, the longest in five decades. (Bloomberg, Oct 20)

The Conference Board index of leading indicators edged up just 0.1% to 137.7 in September, but noted that consumer expectations have improved. The index fell by a revised 0.2% in August. "The economy has slowed but the evidence to date doesn't suggest it will stall or go into a recession," said Ken Goldstein, an economist with the private research group. "To the contrary, the economy retains considerable strength," given the rise in stock prices and drop in energy prices. employment remains robust and inflation relatively low. (WSJ, Oct 20)

Four major pharmaceutical companies posted stronger profits, largely driven by cost-cutting strategies and higher drug prices. But sales continue to be constrained by competition from generic alternatives and concerns about drug safety. [Pfizer] warned that it would return to revenue growth only in 2009, after many of the patent expirations had passed. Indian generic-drug maker Ranbaxy said third-quarter net profit increased nearly eightfold from a year earlier. India's largest drug maker by sales (WSJ, Oct 20)

Caterpillar shares had the biggest drop in 19 years. Sales gained 17 percent. Sales of construction equipment will be less than the company anticipated as a housing slump triggers a period of slack economic growth. Caterpillar said that third-quarter [GDP] growth was possibly less than 2 percent. The slowing U.S. economy will prompt the Federal Reserve to cut interest rates in first half of 2007, probably by 50 to 100 basis points, Caterpillar said. In 2007, revenue will be little changed to up 5 percent. (Bloomberg, Oct 20)

economic growth [probably] down to a 1 percent to 2 percent annual rate in the third quarter. The key issue for the Fed is whether declining home prices will cause consumers to cut back on their spending as their housing ``wealth'' shrinks. So far there is no evidence of such a spillover from housing to the rest of the economy. (John Berry, Bloomberg, Oct 20)

Citigroup said earnings fell 23% in its latest quarter from a year ago, when a big asset sale boosted revenue, but its results also suffered from worse-than-expected performance in its capital-markets businesses. "Overall, top-line growth was sluggish in the global consumer business and investment-banking results were hurt by weaker trading and lending results," wrote analysts at Goldman Sachs. (WSJ, Oct 19)

The three-month annualised rate of core inflation, which peaked at 3.8 per cent in May, fell for the fourth consecutive month to 2.7 per cent. (FT, Oct 19)

Apple's revenue from its music businesses, including iPod and song sales through the iTunes Store, account for 42% of total company revenue. (WSJ, Oct 19)

It's one of the ironies of the current Internet that success is often uncorrelated with a company's R&D budget or the number of programmers on its staff. As proven with social networking sites such as MySpace, what makes for success is often being in the right place at exactly the time that a particular fad breaks your way. (WSJ, Oct 18)

Total revenues for the third quarter of 2006 of $22.6 billion increased 5 percent (4 percent, adjusting for currency) from the third quarter of 2005. (Business Wire, Oct 17)

Toni Sacconaghi, an analyst with Sanford C. Bernstein & Co., said, "The [IBM] surprise was the strength in revenue." (Oct 18)

IBM delivers a classic UPOD -- underpromise, overdeliver -- with its third-quarter earnings beat. The estimates finally got down to where they could be beaten. And voila, you have a $90 stock. (Jim Cramer, RealMoney, Oct 18)

Output at the nation's factories, mines and utilities fell 0.6% in September after a flat performance in August (WSJ, Oct 18)

core [producer] prices fell at an annual rate of 0.3% in the third quarter after rising in the previous two quarters at 2.3% and 3.9% rates, respectively. (WSJ, Oct 18)

Analysts see profit at S&P 500 financial companies rising 30 percent this quarter, the same as last quarter. Forecasts for the S&P 500 call for growth to slow to 10.8 percent from 13.9 percent. The financial industry will account for 48 percent of the S&P 500's third-quarter growth. (Bloomberg, Oct 16)

Analysts foresee an 11.5 percent [earnings] increase this quarter, followed by 9.5 percent in the first quarter and 7.5 percent in the second. The fourth-quarter projection has fallen from 14 percent on June 30. (Bloomberg, Oct 9)

Goldman Sachs Group Inc. says the Federal Reserve's benchmark rate will fall from its current 5.25 percent during 2007, ending the year at 4 percent. The economic gurus at JPMorgan Chase & Co. see it rising to 6 percent. (Bloomberg, Oct 16)

retail sales excluding the volatile gas and automobile industries posted a robust 0.8% increase last month … the University of Michigan said its preliminary index estimate of consumer sentiment in early October soared to 92.3 from 85.4 in September, marking the highest level of consumer confidence in more than a year. (WSJ, Oct 14)

Federal Reserve Bank of Chicago President Michael Moskow said central bankers may need more rate increases to curb inflation, bringing to five the number of Fed officials since Oct. 4 who have played down a possible rate cut. (Bloomberg, Oct 13)

IBM has moved its global procurement headquarters to southern China from New York to ``capitalize on emerging market opportunities.'' IBM spends 30 percent of its $40 billion annual procurement in Asia. This is the first time the company is moving the headquarters of one of its biggest divisions to China … The move ``places us closer to the core of the technology supply chain.” (Bloomberg, Oct 12)

Minutes of the Fed's Sept. 20 failed to mention any prospect of an interest-rate cut. Instead, officials saw a ``substantial risk'' that inflation won't ease as they predict. The report follows a week of comments by Fed officials and economic reports that led traders to reassess the outlook for rates in coming months. (Bloomberg, Oct 12)

The Federal Reserve said consumer spending and demand for services quickened across the U.S. last month even with ``widespread cooling'' in the housing market, evidence the economy may be poised for a so-called soft landing. (Bloomberg, Oct 12)

The thesis, put forward by Fed vice-chairman Don Kohn last week, and endorsed by Alan Greenspan, the former Fed chairman on Friday, argues that the trough in housing market activity could be near, and that the economy should come through it in reasonable shape. (FT, Oct 10)

Just as Microsoflt Corp. is about to roll out the latest version of its cash-cow Office applications, Google Inc. is beefing up efforts that could win away some of the customers Microsoft is targeting. (WSJ, Oct 11)

Upon learning of the [employment] undercount, the Growth Gang said, I told you the household survey is more accurate than the establishment survey … (In other words, the household survey captures all those ``consultants'' who sit at home and blog in their PJs.) (Caroline Baum, Bloomberg, Oct 12)

The economy grew at an annual rate of 2.5 percent last quarter and will maintain that pace in the final three months of the year, according to the median forecast of 79 economists surveyed … For all of 2007, the economy will probably grow 2.6 percent after expanding 3.3 percent this year. It would be the weakest performance since 2003. (Bloomberg, Oct 11)

Jim Hackett, chief executive of Anadarko, the leading independent oil company, says the biggest advances took place in the mid-1980s, with 3-D seismic technology and horizontal drilling. "Since then, we have had evolutionary advances, which are magnificent and phenomenal, but they are not revolutionary." (FT, Oct 10)

The Federal Reserve could "sit back" and let the bond market automatically stabilise the US economy, even amid concern over the housing-led slowdown, Bill Poole, president of the St Louis Fed, has told the FT. His comments follow Alan Greenspan's assessment that the worst of the housing correction may already have passed. (FT, Oct 10)

[Buffett’s] memo said many perpetrators of corporate scandals acted because they felt others were doing it. (FT, Oct 10)

So far, the resilience in consumer spending lines up better with the wealth argument than it does with the equity withdrawal story … the amount of cash homeowners are extracting from their home equity has dropped 43% since the third quarter of last year, to an annual rate of $497.2 billion in the second quarter. As a share of aftertax income, the amount has been cut almost in half to 5.2%. (James Cooper, BW, Oct 9)

Economic growth since early 2000, when the Dow reached its previous peak, hasn’t been exceptional. But after-tax corporate profits have more than doubled, because workers’ productivity is up, but their wages aren’t — and because companies have dealt with rising health insurance premiums by denying insurance to ever more workers … government officials will do everything they can to come down on the side of the wage-cutters. (Paul Krugman, NYT, Oct 6)

Bernanke said the U.S. housing market is in a ``substantial correction'' that will lop about a percentage point off economic growth in the second half and restrain the expansion next year. (Bloomberg, Oct 5)

Taken together, the comments [by the Fed’s Bernanke and Kohn] undermine any suggestion that the Fed is already leaning towards interest rate cuts. Rather, they suggest it is likely to remain on pause for what could be an extended period while policymakers evaluate incoming data on growth and inflation. (FT, Oct 4)

Toyota Motor Corp.'s U.S. sales surged 25 percent in September … Asian automakers 39.9 percent of the U.S. market … Toyota has claimed the No. 3 rank in the U.S. this year. (Bloomberg, Oct 4)

Wal-Mart is pushing to create a cheaper, more flexible work force by capping wages, using more part-time workers and scheduling more workers on nights and weekends … workers assert that the company is making changes with an eye to forcing out longtime higher-wage workers. Investment analysts and store managers say Wal-Mart executives have told them the company wants to transform its work force to 40 percent part-time from 20 percent. Wal-Mart denies it has a goal of 40 percent part-time workers, although company officials say that part-timers now make up 25 percent to 30 percent of workers, up from 20 percent last October. Wall Street analysts praising the new approach to managing its workers … A big area of discrepancy between what Wal-Mart says and what the workers say is whether the company has a policy of “open availability.” (NYT, Oct 2)

The Institute for Supply Management's manufacturing index dropped to 52.9, the lowest since May 2005. (Bloomberg, Oct 2)

A mathematical model of the economy developed by Federal Reserve economist Jonathan Wright puts the chances of a recession over the next year at about 40 percent. (Bloomberg, Oct 2)

the possibility of a disorderly unwinding of the external deficits … The rest of the world may no longer need further increases in the US external deficit. But it would not want to see it contract too brutally or too quickly either. If US domestic demand weakened, however, a big correction of the external deficit is exactly what most Americans would want, since that would be preferable for them to a domestic recession. They would wish to export their slowdown. (Martin Wolf, FT, Sep 28)

Sheldon Adelson, named the third richest man in the U.S. last week by Forbes Magazine, has set his sights on No. 1. Adelson, who controls 69 percent of Las Vegas Sands, has amassed a $20.5 billion fortune developing casinos and the Comdex computer-industry show. (Bloomberg, Sep 27)

Economy & Business – Global

IMF figures show that Asia, not America, has been the main driver of global demand. growth in Asian [consumer] spending this year will be half as big again as that in America. Asia's consumer market already exceeds America's if converted at purchasing-power parity. the bulk of growth in China, India and Japan in recent years has been driven by domestic demand. Buoyant Asian demand should help keep Europe afloat, for European exporters are a lot more dependent on Asia, and a lot less dependent on America, than they used to be. Europe's recovery is not purely export-driven. Most of the euro area's current growth comes from domestic demand, as spending by firms and households has perked up. (Economist, Oct 19)

During the past five years America has accounted for only 13% of global real GDP growth, using purchasing-power parity (PPP) weights. Asia has accounted for over half of the world's growth since 2001. Even in current dollar terms, Asia's 21% contribution exceeded America's 19%. Since 2001 the increase in emerging Asia's trade surplus has added less than one percentage point a year on average to the region's average growth rate of almost 7%. China's domestic demand has been growing by an annual 9% in recent years. The IMF estimates that in Asia as a whole real growth in consumer spending has averaged a healthy 6.3% a year in 2005 and 2006. America's share of Asia's total exports has fallen from 25% to 20% over the past five years. Even if economies can decouple, global financial markets tend to be more tightly linked. (Economist, Oct 19)

OPEC's oil production cuts will be ``significantly less'' than the agreed size of the reduction, amid doubts some members of the group will act at all, the London-based Centre for Global Energy Studies said. CGES, which was founded by former Saudi Oil Minister Sheikh Zaki Yamani, said OPEC's determination to reduce supply shows the organization is trying to defend a price of ``at least $55 a barrel for its basket of crudes.'' The OPEC basket price stood at $54.56 on Oct. 19. (Bloomberg, Oct 23)

OAO Russian Railways, the country's rail monopoly, plans to buy $4.2 billion of new freight and passenger train cars through 2008 to keep pace with surging demand for public transport and cargo shipments. The government incorporated Russian Railways three years ago and plans to raise billions of dollars selling shares in the company or its units by 2010. Sales last year surged 55 percent. The company transports 40 percent of Russia's freight (Bloomberg, Oct 23)
Crude oil fell for a second day because of speculation OPEC will fail to cut production by as much as planned. The producer group isn't likely to improve on its poor track record for compliance with production cuts, enabling further increases in inventories. U.S. stockpiles of heating oil and diesel are 15 percent higher than the five-year average for this time of year. Crude supplies are 14 percent higher than the average. (Bloomberg, Oct 23)

Judging by the sharp drop in oil prices Friday, OPEC's agreement to cut output by 1.2 million barrels a day may seem a failure, but analysts say the cut is likely to keep prices from plunging. at $56.82 a barrel, the lowest level for a front-month contract in 11 months. Despite similar pronouncements in the past, OPEC has never fully delivered on a production-cut promise, and this one isn't likely to be an exception. the group is likely to cut enough output to stabilize prices, although the cut may not be enough to push prices significantly higher. the cartel, heavily dependent on oil revenue, is likely to show relatively good compliance. (WSJ, Oct 21)

The move by two ratings agencies to downgrade Italy's credit is intensifying worries that the underpinnings of the euro may be destabilized by the worsening finances of one of the currency zone's major economies. euro countries moving at different speeds and in different directions. That is straining the one-size-fits-all monetary policy overseen by the ECB. (WSJ, Oct 20)

Tata Steel’s $8 billion takeover of Corus Group, formerly British Steel, leads $88 billion of takeovers of British companies by foreign buyers this year. The U.K. is the most popular shopping ground in Europe for buyers outside the region, as France and Italy fend off predators with a mix of takeover regulations and labor rules. The value of takeovers by foreign buyers in the U.K. is more than double the combined total for Spain, France and Germany. (Bloomberg, Oct 20)

Energy is at the heart of EU-Russian ties, with oil and gas making up more than 60 percent of Russian exports to Europe. The EU became Russia's largest market when 10 countries, including seven former Soviet satellites, joined the bloc in 2004. Putin today also rejected calls to introduce investment rules modelled on the EU's free-market principles. The EU is pushing for an energy agreement with Russia, saying a free-market framework would bring in foreign capital to upgrade Russia's energy production. (Bloomberg, Oct 20)

near Sakhalin Island, culminating a $17 billion project led by Exxon Mobil and local partner OAO Rosneft. About 350 miles to the south, at the tip of the island, engineers for a $22 billion venture led by Royal Dutch Shell. The Shell project has no Russian partners. The attack on Shell is more about OAO Gazprom's attempt to get a piece of the project than protecting wildlife, analysts say. Sakhalin, just 25 miles north of Japan, contains the equivalent of 45 billion barrels of oil, equal to the North Sea's reserves, Shell estimates. About 30 percent of Russia's energy exports will flow to Asia by 2020, up from 3 percent today, President Vladimir Putin said. through 2030 oil and gas use in the region will more than double to 113 million barrels a day, almost equal to the combined consumption of Europe and North America. (Bloomberg, Oct 19)

productivity increased in the dozen euro nations at an annual rate of 2.6 percent in the first half of 2006, double the pace of the prior six years … At Wolfsburg, Germany-based Volkswagen, workers will put in an additional 4.2 hours a week for no extra pay, close to its aim of trimming 20,000 jobs in western Germany … Japan annual productivity gains are running about 2 percent, up from the 1.2 percent average between 1995 and 2002 … . (Bloomberg, Oct 16)

severe price declines are affecting the way liquid-crystal-display makers do business, Samsung Electronics said [it] will concentrate more on maintaining profitability in its LCD operations than on capital spending. Samsung has been able to capitalize on cash reserves generated from its other businesses -- making chips and cellphones -- to invest in more-advanced LCD technology ahead of rivals. That has enabled the company to gain dominance in the market by boosting output at lower manufacturing costs. (WSJ, Oct 20)

Samsung reported a better-than- expected 16 percent gain in third-quarter profit, buoyed by sales of liquid crystal display televisions and mobile phones … said fourth-quarter earnings will rise as it rolls out new mobile phones and increases production of LCD TVs. Samsung also raised its capital spending budget for chips … The stock has gained 12 percent in the past three months. (Bloomberg, Oct 16)

The Bank of Japan kept interest rates unchanged for a third month, judging that the economy's growth isn't fast enough to raise the lowest borrowing costs among major economies … `The economy is expanding moderately,'' the bank said today, leaving its assessment of the world's second-largest economy unchanged for a third month. (Bloomberg, Oct 13)

Japan's producer prices rose the most in more than 25 years in September, increasing pressure on companies to pass on costs to consumers to protect profits. (Bloomberg, Oct 13)

Commercial land prices in central Tokyo rose 14 percent in the year ended July 1, five times the pace of the previous 12 months … The vacancy rate for Tokyo office space fell to 2.98 percent in August from July, the lowest rate since December 1991. It's down from a high of 8.57 percent in August 2003. (Bloomberg, Oct 12)

The inflation rate in Germany dropped to the lowest in more than two years in September after oil prices retreated from a record. Consumer prices rose 1 percent from a year earlier after gaining 1.8 percent in August. (Bloomberg, Oct 12)

Australian employers hired six times as many workers as expected in September and the jobless rate held at a 30-year low. The nation's currency rose and bonds fell as traders bet the central bank will raise interest rates again this year … worsening a shortage of skilled workers. That's fueled wage increases. (Bloomberg, Oct 12)

Political uncertainty and deficit problems, notably in Central and Eastern Europe and Latin America, have resurfaced as major concerns. The situation could worsen in the event that a protracted slowdown in the U.S. begins to affect global growth. The market has seen a clear change of sentiment in September. Investors scaled back risky positions amid political crises in Poland, Hungary and Brazil, falling commodity prices, and speculation about an Ecuadoran debt default. Those factors triggered sell-offs in some high-yielding and high-volatility currencies. (MarketWatch, Oct 11)

Analysts said Gazprom's decision on Shtokman was almost certainly linked to frustration at what Moscow saw as US foot-dragging on the WTO deal and a broader increase in perceived US hostility towards Russia. While the Kremlin has denied linking the two issues, most observers believe they became heavily entangled this summer … the explanation from Alexei Miller, Gazprom's chief executive, that the shortlisted foreign partners had not offered suitable assets in exchange, might contain some truth … many previous deals had turned out to be highly unfavourable to Russia. (FT, Oct 11)

Gazprom said yesterday it would develop Russia's massive Shtokman natural gas field alone - and switch eventual output from the US to Europe - dashing the hopes of foreign companies vying for stakes in the $20bn project … The announcement highlights the Kremlin's determination that Russian companies should take the lead in developing the country's oil and gas. It follows pressure on the Royal Dutch Shell-led Sakhalin-2 project, and signs that state-controlled Gazprom wants to buy out private Russian shareholders of TNK-BP, the Anglo-Russian joint venture. The news is a particular setback for the US (FT, Oct 10)

Europe's economy is heading for a ``slight'' slowdown in 2007 as interest rates rise, Germany boosts sales taxes and the U.S. growth engine loses steam, European finance ministers said. (Bloomberg, Oct 10)

Japanese machinery orders rose less than expected in August, 6.7 percent … declined 16.7 percent in July, their biggest drop in almost 20 years … Japan's largest companies said they plan to increase spending 11.5 percent this year, the central bank's Tankan survey showed on Oct. 2, which would be the fastest since the year ended March 1991. The survey also showed confidence rose to a two-year high in the September quarter. (Bloomberg, Oct 10)

European finance chiefs hailed budget cuts in Germany, France and Italy, saying Europe's top three economies will simultaneously squeeze their deficits below euro limits in 2007 for the first time in seven years. France, which pushed its deficit below the ceiling of 3 percent of gross domestic product last year, will be joined by Germany this year and by Italy in 2007. (Bloomberg, Oct 10)

Toyota to maintain an unprecedented pace of capital spending -- well more than $10 billion a year -- in the next several years, putting pressure on rivals … Roughly 50% of the planned spending level will be earmarked for building up manufacturing capacity outside Japan, chiefly in North America … operating-profit margin will likely improve to 10% over the medium to long term. (WSJ, Oct 9)

Japanese wages still haven't reversed their decade-long slide even with the nation's economic expansion now in its 56th month. While businesses plan to increase their capital expenditures at the fastest pace in 16 years, higher raw- materials and fuel costs are making them reluctant to raise pay … wages fell almost 10 percent between 1997 and 2005, an average cut of more than $3,400 … savings rate declined from to 2.4 percent from 10.4 percent. Pay increases in the first half of 2006 did little to reverse that trend. Wages rose about the cost of filling a Toyota Corolla's gasoline tank. (Bloomberg, Oct 9)

Earnings growth for Stoxx 600 members will slow to 12 percent this year from 25 percent in 2005. Analysts expect an 8.6 percent increase in 2007, which would be the smallest since 1999. Earnings fell in 2001 and 2002. (Bloomberg, Oct 9)

So far this year, a record $1.3 trillion has been spent on European mergers and acquisitions, compared with $819 billion for the same period last year. (Bloomberg, Oct 7)

[Japan’s] leading index sank to 20 percent in August, from 27.3 percent in July. A number below 50 indicates the economy will slow in three to six months. The report reflects concern among exporters. Wages in Japan fell in August… Japan's expansion is expected to slow to an annual pace of 2.4 percent in the fourth quarter from 3.1 percent in the third, according to the median forecast of 15 economists. (Bloomberg, Oct 6)

A sharp drop in French industrial productivity gains over the past five years has cost the economy the opportunity to create more than 700,000 jobs and risks exposing the country to a flood of low-cost imports, an influential [McKinsey] report warned yesterday … Contrary to conventional wisdom, McKinsey found that French industry -contributes as much to the creation of national wealth as do services-led economies, such as the UK and US. But this base is under threat. (FT. Oct 5)

The yen's weakness this year has taken experts by surprise … strong flows of money into financial assets denominated in dollars and euros from investors in Asian exporting nations and oil-producing countries … Japan short-term interest rates have remained very close to zero in the past several years, investors have been investing large portions of their assets overseas … The "real effective" exchange rate of the yen against major currencies is at the lowest level since 1985. By this measure, the yen has shed nearly 30% of its value since 2000 … pretax profit of Japan's top 400 companies increases by 0.6% a year for every one-yen rise in the dollar's value. (WSJ, Oct 3)

The purchasing managers' index for the euro zone's manufacturing sector was unchanged at 56.6 in September … Analysts said the data confirmed that the Czech and Hungarian economies, in particular, are beginning to cool two years after accession to the European Union boosted trade and investment in the region. (WSJ, Oct 3)

Many of the world's steelmakers are expressing growing concern about global oversupply and increasing exports from China, the world's largest steel producer and consumer, and warning Chinese producers to rein in their production … expects apparent steel use to increase 9% this year to 1.12 billion metric tons consumed globally, up from 1.03 billion metric tons last year, with growth slowing to 5% in 2007. (WSJ, Oct 3)

Global leaders must find a way to unravel lop-sided trade and investment flows or risk a slump in the U.S. dollar that would create havoc for the world economy, ADB Chief Economist Ali said. An international agreement along the lines of the 1985 Plaza Accord ``on a bigger scale'' is needed to unwind the imbalances that have resulted in the U.S. current account deficit swelling to a record $805 billion. (Bloomberg, Oct 3)

Japan's steel exports rose for a fourth straight month in August, gaining 17 percent from a year earlier. (Bloomberg, Oct 3)

Faster growth in the euro region is boosting tax revenue for governments and paring their need to sell bonds to fund spending. (Bloomberg, Oct 2)

[BOJ] will raise its key overnight loan rate from 0.25 percent by March 31, according to 12 of 16 economists surveyed by Bloomberg News after the central bank published its Tankan business confidence report yesterday … the country's largest manufacturers plan to boost spending by 11.5 percent this year, which would be the largest increase since the year ended March 1991. (Bloomberg, Oct 3)

World oil demand will rise 1.5 million barrels a day next year, or 1.8 percent, to 86.2 million barrels a day, led by China, the International Energy Agency in Paris estimates. (Bloomberg, Oct 2)

Airbus SAS, the world's largest planemaker, will scale back deliveries of the A380 superjumbo for a third time and reduce as much as 2 billion euros ($2.5 billion) in costs by cutting jobs and shifting production. Airbus can probably deliver just four A380s next year, less than half the number predicted in June, because of delays in installing wiring. (Bloomberg, Oct 1)

Sales of bonds backed by home mortgages in Spain may drop for the first time in five years as prices of apartments in Madrid and villas on the Costa del Sol rise at the slowest pace since 2001. [Spains’s] banks will reduce sales of bonds to finance mortgages by 23 percent next year. The banks raised 59 billion euros this year with so-called covered bonds, almost as much as in all of 2005 and the most in Europe. (Bloomberg, Sep 29)

Software used to manage the design and manufacture of the 555-seat A380 at Airbus's Hamburg engineering center isn't fully compatible with that used at company headquarters in Toulouse … hundreds of small changes to electrical wiring in the A380 snowballed into at least a year's delay in delivering the world's biggest passenger aircraft and $2.5 billion in lost profit … Efforts to fiddle with the software to make it compatible failed. (Bloomberg, Sep 29)

The hottest topic on many Brazilian voters' minds isn't this weekend's presidential election. It's the video of a Merrill Lynch banker having a sexual encounter on a Spanish beach with an ex-girlfriend of Brazilian soccer star Ronaldo. The video has crashed computers on trading floors in Sao Paulo and Rio de Janeiro. (Bloomberg, Sep 29)

Inflation in the dozen nations sharing the euro slowed to below the ECB’s 2 percent limit in September for the first time since January 2005 as oil prices fell from a record … Money-supply growth, which the ECB uses as a gauge of future inflation, unexpectedly accelerated in August … The ECB has forecast that euro-area expansion will cool to about 2.1 percent in 2007 from 2.5 percent this year. (Bloomberg, Sep 28)

India

India's success has little to do with the current Indian government, whose reforms have stalled and may even be going into reverse … Maoist guerrillas are active in a quarter of the country's 602 administrative districts. Transport infrastructure is woefully inadequate. Nor is there a coherent energy policy … average age is 23 and there are 300m children aged between six and 16 poised to enter the workforce - but education is poor and jobs are scarce … only 35m Indians - less than 7 per cent of the workforce - are employed in the formal economy and 21m of those work for the government. (Victor Mallet, FT, Oct 19)

[Tata Steel] offered $7.6 billion for London-based Corus Group, the largest takeover attempt by an Indian company. A purchase by the 138-year-old group would catapult Tata Steel up world rankings to become the sixth-largest steelmaker from 56th, and more than quadruple sales to $23 billion. (Bloomberg, Oct 18)

India and Pakistan will resume in mid-November peace talks that have been stalled since bomb blasts in Mumbai in July. (Reuters, Oct 17)

a $17 billion program to more than double the nation's network to 77,690 miles will help end blackouts … State-run Power Grid will contribute 550 billion rupees of the 750 billion rupees to be spent on the network expansion project that began this year and will be complete by 2012, Singh said. (Bloomberg, Oct 17)

Last week Singh doubled the estimate of investment needed in India's roads, ports and other infrastructure to $320 billion by 2012 to accelerate economic growth to as much as 10 percent from the 8.1 percent expansion in the past three years. (Bloomberg, Oct 13)

most traders and analysts don't expect the central bank to raise interest rates when it announces monetary policy for the next three months on Oct. 31 … India now has a natural growth rate of 8 percent, compared with about 6 percent just three years ago … The stock of money in the economy was almost 20 percent higher than a year earlier on Sept. 15. That's 4 percentage points more than at the same time last year. This is clearly an economy that warrants more monetary tightening. And it needs a bigger squeeze in government spending. (Bloomberg, Oct 12)

Infosys Technologies, India's second-biggest provider of computer services, reported a profit that beat analysts' estimates and raised its full-year sales forecast as the size of orders increased. Net income rose 53 percent … Sales gained 50 percent. (Bloomberg, Oct 11)

Reliance Petroleum will borrow $2 billion for expansion, 33 percent more than originally planned … The loan will help fund a $6.1 billion investment to double refining capacity and create the world's largest refinery in India by 2008. (Bloomberg, Oct 9)

Indian Prime Minister Singh may struggle to convince investors to help fund $320 billion of infrastructure spending by 2010 because he can't persuade his government to draw up investment rules … Railway Minister who needs $66 billion to upgrade the world's second-biggest rail network, rejected the plan … Finance Minister estimates shoddy power and transport networks shave 2 percentage points off growth … more than half of India's 1.1 billion people live on less than $2 a day … It takes an average 85 hours to unload and reload a ship at India's major ports, 10 times longer than in Hong Kong or Singapore. (Bloomberg, Oct 9)

in the first nine months of 2006 Indian companies announced a record 112 foreign acquisitions, with a combined deal value of $7.2bn. Last year's deals totalled $4.5bn, which itself was treble the figure for 2004. While the average overseas deal size has grown to $66m, some recent deals are worth half a billion and up … While Indian companies currently lack the scale for very large acquisitions, they could team up with private equity firms and use leverage to take over bigger targets … One noticeable feature of India's overseas expansion is its focus on Europe and the US. (FT, Oct 4)

India will have at least 50 property- related initial public offerings in the next year as the real- estate industry booms. (Bloomberg, Oct 3)

India’s average annual rainfall rate an abundant 46 inches. amount of water available to each Indian is roughly the same as the amount available to the average Sudanese. much of that water escapes as untapped potential, washing into the sea and wreaking havoc … For two-thirds of India’s farmers, who have no access to irrigation, a good monsoon is the difference between survival and penury. For fast-growing cities, the monsoon lays bare the frailties of urban infrastructure. (NYT, Oct 1)

India's economy expanded 8.9 percent in the three months to June 30 from a year earlier followed a 9.3 percent gain in the previous quarter … commercial bank loans are growing at 31 percent on year, among the fastest since the central bank started collating data in 1971 … India's economy has expanded more than 8 percent in five of the past six quarters … PM Singh's decision to increase infrastructure spending by a quarter to 992 billion rupees ($21 billion) in the year that started April 1 in a bid to attract more investment and lift manufacturing to a quarter of the economy from the current 17 percent, half China's level … Manufacturing increased 11.3 percent in the quarter. That's the fastest pace since the government started collating quarterly data in June 2000. (Bloomberg, Sep 29)

Geopolitics

North Korea's declared nuclear bomb test program will increase the incentives for other nations to go nuclear, will endanger security in the region and could ultimately result in nuclear terrorism … demonstrates the total failure of the Bush administration's policy toward that country. For almost six years this policy has been a strange combination of harsh rhetoric and inaction … the greatest danger to the United States from this program is the possibility that the North Koreans will sell one of the bombs or some of their plutonium to a terrorist group … promise retaliation against North Korea if a terrorist detonated a nuclear bomb in one of our cities. It must be backed by a meaningful forensics program that can identify the source of a nuclear bomb. (William J. Perry, Secretary of Defense from 1994 to 1997, WP, Oct 11)

the American era in the region has ended … Much more likely is the emergence of a new Middle East that will cause great harm to itself and the world … What brought it to an end? Topping the list is the Bush administration's decision to attack Iraq and its conduct of the operation and resulting occupation … Other factors include the demise of the Middle East peace process, a failure by traditional Arab regimes to counter the appeal of radical Islamism, and globalisation … The US will continue to enjoy more influence than any outside power, but its influence will be reduced. Washington will increasingly be challenged by other outsiders, including the European Union, China and Russia. Even more important, though, will be the challenges emanating from local states and radical groups. Iran will be one of the two most powerful states in the region. (Richard Haass, formerly Director of Policy Planning for State Dept under Powell, President of the CFR, FT, Oct 17)

“the Bush administration sees diplomacy as something to be engaged in with another country as a reward for that country's good behavior. They seem not to see diplomacy as a tool to be used with antagonistic countries or parties, that might bring about an improvement in the behavior of such entities, and a resolution to the issues that trouble us. Thus we do not talk to Iran, Syria, Hizballah or North Korea. We only talk to our friends -- a huge mistake.” (Donald Gregg was a CIA official since 1951, National Security Adviser to VP George H.W. Bush, U.S. ambassador to South Korea from 1989 to 1993, chairman of the board of the Korea Society, WP, Oct 11)

firing Secretary of Defense Rumsfeld. U.S. will not keep permanent bases in Iraq. Iraq’s prime minister al-Maliki must receive an immediate deadline to start the [reconciliation] process. continue until some agreement is reached on protecting minority rights, dividing up Iraq’s oil revenues, the role of religion in the state, providing an amnesty for insurgents willing to put down their weapons, and demobilizing and disarming the militias. the U.S. should begin its own negotiations with the Iraqi leadership about a timetable for withdrawing American troops — America’s willingness to stay longer will depend on the Iraqis’ willingness to make real compromises. Saudi Arabia and other oil-rich neighbors need to be pressed into providing major financing to underwrite jobs programs and reconstruction. [U.S.] showing a serious willingness to expand its dialogue with Damascus and Tehran beyond the issue of Iraq and to be a genuine broker for Middle East peace. (editorial, NYT, Oct 24)

Iraq plans to boost crude oil production to as much as 4.5 million barrels a day by 2010, the country's oil minister al-Shahristani [said]. Production may rise to 6 million barrels a day by 2012, he said. Iraq's current production is just under 2.5 million barrels a day. Iraq can raise production to 4 million barrels a day using its own capital and technical resources with additional capacity dependent on foreign participation. ``increased production will be directed toward the Asian market.'' (Bloomberg, Oct 24)

Police in Budapest charged at protesters to end a day of riots on the 50th anniversary of Hungary's anti-communist uprising. The violence extended a month of pressure on Prime Minister Gyurcsany to resign. (Bloomberg, Oct 24)

As Rice left China today for Russia, her goal of uniting Northeast Asia in a strong, unambiguous punitive stance against North Korea remained elusive … With no easy answers, a wily adversary in Pyongyang, the North's capital, and limited options, Rice sought Friday to lower expectations, even as she praised China's willingness to consider tougher measures in the interest of regional and global stability … Beijing believes that if it is identified too closely with a U.S. hard-line stance, it loses the opportunity to broker a solution in the future, with the international prestige that entails. (LAT, Oct 21)

As it leads the charge to punish North Korea for testing nuclear weapons, the U.S. is finding its allies are reluctant to enforce even the minimal sanctions imposed by the United Nations -- and that its own, tougher approach has serious gaps as well. Ms. Rice's immediate challenge is to get real cooperation from North Korea's neighbors. Yet she appeared to make little progress on that front during her Asia trip, which ended Saturday. (WSJ, Oct 21)

U.S. intelligence officials and weapons proliferation experts say they are concerned that North Korea could add plutonium to the extensive inventory of arms components and technologies it already has sold to such nations as Syria, Pakistan and Libya. Because of North Korea's track record as an eager exporter of weaponry, some experts are more worried about the government in Pyongyang spreading nuclear technology to other "rogue" nations than about the possibility of it launching a nuclear attack … most experts said the country would probably refrain from doing so. (LAT, Oct 21)

Chinese banks are moving to halt transactions with North Korea as Beijing looks for ways to pressure its recalcitrant ally to abandon any further atomic-weapons tests and return to multilateral disarmament talks. Beijing's steps may be part of a short-term campaign aimed at dissuading Pyongyang from going ahead with a second test, or they may be part of a broader shift by China toward using its economic leverage to force Mr. Kim to give up his nuclear weapons. "They're trying to come up with a balance between punishing North Korea for what it's done, but not squeezing hard enough to break it, because they don't want to fix it," one senior U.S. official said. (WSJ, Oct 20)

The average monthly wage in Hungary was 847 euros ($1,067) at the end of last year, a third of the 2,542-euro average in Germany. The frustrations in Budapest mirror those of people around Eastern Europe as governments from Estonia to Slovakia struggle to fulfill promises that capitalism would bring a better life. Gyurcsany's Socialists were the first Hungarian party to win a second consecutive term since the fall of communism when it won re-election in April. Czechs, Poles and Slovaks have all replaced the parties that led them into the EU two years ago. (Bloomberg, Oct 20)

Whether the NPT survives this combined assault [from N. Korea and Iran] depends on how the big powers rise to the challenge: by co-operating to press both regimes to abandon their nuclear exploits and uphold the rules, or by competing in the wider struggle for regional influence … North Korea is dangerous, but isolated. An Iran with nuclear weapons, says one senior Bush administration official, would be a “game-changer”. (Economist, Oct 19)

The [Proliferation Security Initiative] issue has become a bone of contention between the presidential Blue House and the unification ministry, which do not want to join, and the foreign and defence ministries, which do. with a year to go until the next election and the president languishing at record lows in the polls, the debate in South Korea has become highly politicised. (FT, Oct 19)

The deaths of nine soldiers and one marine on Tuesday raised the US death toll for October to 71, putting the month on course to be the third worst for military fatalities since the 2003 invasion. According to Pentagon figures, the military lost 137 troops in November 2004 and 135 in April 2004. (FT, Oct 19)

Rumsfeld's assessment yesterday that stopping North Korea from peddling its nuclear technology abroad was ``practically impossible'' is shared by U.S. weapons analysts and lawmakers. (Bloomberg, Oct 19)

Internal Army reviews and interviews with dozens of advisers show that, thus far, the Army hasn't treated the advisory program as a priority … To fix the advisory program, some military officials say sweeping institutional change is needed. (WSJ, Oct 19)

The North's people are too beaten down and weak to stage a revolution, but Kim knows that a handful of disgruntled generals or disaffected party leaders could bring a sudden end to his brutal reign … If Seoul and Beijing remain reluctant, however, they must be made to understand that they are endangering not only the security and stability of Northeast Asia but also their future relations with the United States. (Aaron Friedberg, former deputy to VP Cheney, WP, Oct 16)

Afghanistan receives $3.1bn in annual revenue from opiates. Direct involvement in the drugs trade allows the Taliban to pay its fighters $8-$10 a day, about 10 times what they could earn from legal activity. (FT, Oct 11)

Over 1,000 Iraqis are fleeing their homes each day because of rampant violence, and revenge killings are "totally out of control," the U.N.'s top humanitarian official said on Wednesday. sectarian violence and military operations had forced over 315,000 to flee their homes in the past eight months. (Reuters, Oct 11)

Nearly one in five soldiers leaving the military after serving in Iraq and Afghanistan has been at least partly disabled as a result of service, according to documents of the VA. veterans granted disability compensation, more than 100,000 to date. About 567,000 of the 1.5 million American troops who have served so far have been discharged. (NYT, Oct 11)

The U.S. Army is planning on the basis that it may have to keep its current high troop levels in Iraq until at least 2010, its chief of staff said on Wednesday. the U.S. has about 141,000 troops in Iraq. (Reuters, Oct 11)

More than 2,660 Iraqi civilians were killed in the capital in September amid a wave of sectarian killings and insurgent attacks, an increase of 400 over the month before, according to figures from the Iraqi Health Ministry. The increase came despite an intensified U.S.-Iraqi sweep of Baghdad that was launched in mid-August to try to put down the wave of violence that has swept over the capital. (AP, Oct 11)

By any yardstick, yesterday's test represents a failure of international efforts to stop Pyongyang from going nuclear. Many commentators will say the Bush administration bears a large part of the responsibility. (FT, Oct 10)

North Korea has never developed a weapons system it did not ultimately sell on the world market, and it has periodically threatened to sell its nuclear technology. President Bush and his aides never gave as much priority to countering a new era of proliferation as they did to overthrowing Saddam Hussein … managing simultaneous crises around the world is straining the system in Washington. (NYT, Oct 10)

North Korea's claim that it has successfully exploded a nuclear device signals a major diplomatic failure by the U.S. and China and threatens to unravel the international treaty system that has contained the spread of nuclear bombs for more than nearly 40 years. (WSJ, Oct 9)
What actions the U.N. now takes will show how much strength remains in the Nuclear Non-Proliferation Treaty, the cornerstone of global arms control … The test appears to represent a stunning failure for the Bush administration's stated goal of blocking the spread of weapons of mass destruction, the foundation of its security policy. (WSJ, Oct 9)

About 4,000 Iraqi police have been killed and more than 8,000 injured over the past two years, the U.S. commander in charge of the police training said Friday. (AP, Oct 6)

North Korea's leadership is under severe economic pressure. Financial sanctions imposed by the US in September last year appear to have had a tougher than expected effect. (FT, Oct 5)

With the Middle East immersed in its worst crisis for years, we call for urgent international action towards a comprehensive settlement of the Arab-Israeli conflict. The outlines of what is needed are well known . (Ad signed by numerous famous former leaders, FT, Oct 4)

Israeli officials and politicians across the political spectrum are convinced Iran represents an existential threat … Saudi Arabia, in what was considered a dramatic move several years ago, offered to get much of the Arab world to recognize Israel in exchange for a withdrawal from all territory Israel occupied during the 1967 war. Israel rejected the idea. (WSJ, Oct 3)

Attempts at forming stable governments in some of the 10 nations that joined the EU in 2004 have foundered as voters cast their ballots for a growing number of parties and as politicians struggle to forge coalitions with a common goal. Alliances have shattered as political leaders seek to implement budget cuts demanded by the EU without breaking campaign spending promises. (Bloomberg, Oct 3)

Senate Majority Leader Frist said Monday that the Afghan war against Taliban guerrillas can never be won militarily and urged support for efforts to bring "people who call themselves Taliban" and their allies into the government. The Tennessee Republican said he learned from briefings that Taliban fighters were too numerous and had too much popular support to be defeated on the battlefield. "It sounds to me ... that the Taliban is everywhere." (AP, Oct 2)

Oil production has returned, at least for the moment, to levels seen at the end of Saddam Hussein’s rule, and electricity production is at higher levels, especially outside of Baghdad. School enrollment continues to increase; childhood vaccination rates are now respectable; Iraq’s media continue to flourish. However, unemployment remains at 30 percent or more. Inflation is up; private sector investment remains weak because of the security environment; GDP growth has been modest and will probably slow because of the decline in global oil prices. Fuel supplies are stagnant in the face of rising demand. (Kamp, O’Hanlon at Brookings, NYT, Oct 1)

Abe said he will balance the country's budget in five years, cut spending to reduce the world's largest national debt and improve relations with China and South Korea … Japan's percentage of elderly is the highest in the world, the ratio of young people is the lowest, and its government debt is forecast to rise to 151 percent of gross domestic product by March. (Bloomberg, Sep 29)

Hezbollah may pay out as much as $180 million in cash for rent and furnishings for people made homeless … U.S. Treasury estimates is a $200 million budget from Iran … more than 130,000 homes are in ruins. The Israeli bombing knocked out most of Lebanon's bridges, half of its highways, its airport, one power station, 14 power generation units, two hospitals and numerous factories. Damage to Lebanon's economy, estimated at $3.6 billion to repair the infrastructure alone, may rise to $9 billion-$11 billion once the loss of earnings from tourism, exports and sales are added. (Bloomberg, Sep 28)

early September poll of 1,150 found: _Almost four in five Iraqis say the U.S. military force in Iraq provokes more violence than it prevents. _About 61 percent approved of the attacks [on U.S. forces] — up from 47 percent in January. A solid majority of Shiite and Sunni Arabs approved of the attacks. The increase came mostly among Shiite Iraqis. _An overwhelmingly negative opinion of terror chief bin Laden and more than half, 57 percent, disapproving of Iranian President Ahmadinejad. _Three-fourths say they think the United States plans to keep military bases in Iraq permanently … The State Department has also conducted its own poll, found that two-thirds of Iraqis in Baghdad favor an immediate withdrawal of U.S. forces. (AP, Sep 28)

Iraqi Kurdish leaders have condemned what they branded national government moves to "sabotage" Kurdish attempts to develop their region's promising oil resources. (AFP, Sep 28)
A quarter of a million Iraqis have fled their homes and registered as refugees in the past seven months, data released on Thursday showed, amid an upsurge in violence that has accompanied the Ramadan holy month. (Reuters, Sep 28)

Anger over the war in Iraq is fueling Muslim radicalism, and the dispersal of terrorist cells around the world poses a greater risk of attacks on the U.S., according to excerpts of a National Intelligence Assessment. while U.S. counterterrorism efforts have ``seriously damaged'' al-Qaeda's leadership, the terrorist movement is growing and becoming more decentralized. The threat of attacks worldwide will increase if current trends continue, it says. (Bloomberg, Sep 27)

A stark assessment of terrorism trends by American intelligence agencies has found that the American invasion and occupation of Iraq has helped spawn a new generation of Islamic radicalism and that the overall terrorist threat has grown since the Sept. 11 attacks. The classified National Intelligence Estimate attributes a more direct role to the Iraq war in fueling radicalism than that presented either in recent White House documents or in a report released Wednesday by the House Intelligence Committee. it asserts that Islamic radicalism, rather than being in retreat, has metastasized and spread across the globe. (NYT, Sep 24)

Politics – U.S.

The Bush administration has dropped the phrase ``stay the course'' from discussions about Iraq as a recent surge in violence has forced a change in tactics on the ground and renewed calls in the U.S. for a different approach to the conflict. (Bloomberg, Oct 23)

Leading Republicans and the Bush administration yesterday projected a deepening sense of American disarray over Iraq, as they argued with each other over the current state of affairs and the way forward. Several senators took issue with the administration's policies in Iraq, distancing themselves from the White House in the run-up to next month's mid-term elections to Congress. Spokesmen scrambled to deny media reports that ran contrary to the official line. (FT, Oct 23)

Two leading Republican senators joined Democrats on Sunday in calling for direct talks with North Korea aimed at easing a nuclear standoff. Sen. Richard Lugar Sen. Arlen Specter Sen. Joseph Biden said Japan, Russia, China and South Korea have privately urged the U.S. to allow direct talks with the North. Lugar and Specter joined Biden in calling for direct talks with Iran. (AP, Oct 22)

Bush said he expects U.S. troops will still be in Iraq when he leaves office in 2009. Republicans Richard Lugar of Indiana and John Warner of Virginia and Democrats Joseph Biden of Delaware and Carl Levin of Michigan agreed that forcing Prime Minister Maliki to confront the militias and craft a political compromise among warring Sunni and Shiite factions is the only way to quell the fighting. (Bloomberg, Oct 22)

perhaps most disruptive to national unity on terrorism, is a widespread sense that some in government have been waving the bloody shirt -- scaring voters with the hobgoblin of Al Qaeda to reap political advantage. If we are going to defeat the enemy, we must learn again to discuss our differences about Iraq and terrorism in civil and analytical terms. We must reject the use of fear and terrorism to divide America for political advantage. And we must not let ourselves get trapped in pointless, partisan debates that result only in having the past obscure the future. (Richard Clarke, former head of counterterrorism at NSC, NYT, Oct 1)

the Bush team goal is to accumulate just enough power to use the energies and passions of the base to effect ideological change in the nation’s laws and institutions, even if — sometimes especially if -- those changes might be at odds with majority public opinion … Democrats chosen alternative -- in which they swallow their true beliefs on important national issues -- demoralizes their own base … the core of their enunciated message — both vowing to stop the president’s right-wing policies and blurring their differences with Republicans on highly charged issues -- has in recent elections been a recipe for defeat … uninspiring to both the Democrats’ base and the center. (Mark Halperin, political director of ABC News, NYT, Oct 1)

Now that the Democrats are strongly favored to capture at least one house of Congress, they’re getting a lot of unsolicited advice, with many people urging them to walk and talk softly if they win. The reason we have so much bitter partisanship these days is that that’s the way the radicals who have taken over the Republican Party want it. As long as polarization is integral to the G.O.P.’s strategy, Democrats can’t do much, if anything, to narrow the partisan divide. Even if they try to act in a bipartisan fashion, their opponents will find a way to divide the nation. The truth is that we won’t get a return to bipartisanship until or unless the G.O.P. decides that polarization doesn’t work as a political strategy. the best thing the Democrats can do, not just for their party and their country, but for the cause of bipartisanship, is stand up strongly for their principles. (Paul Krugman, NYT, Oct 23)

Bush even suggested last week that insurgents in Iraq were stepping up their violence in a bid to influence the elections. Polls in 2006 show a more dramatic tilt toward the Democrats than polling in 1994 showed a tilt toward Republicans. But redistricting has made far fewer congressional districts competitive. (AP, Oct 22)

Prevailing political wisdom holds that the only things that matter are each party's "base" -- that there is no center anymore, and no more swing voters worth chasing. But in the latest WSJ/NBC Poll, support for Republicans [among independent voters] has collapsed. Just 24% of them say they want President Bush's party to control Congress after Election Day. Independents disapprove of Mr. Bush's job performance by 2 to 1. That's a big change from 2004, when Mr. Bush and John Kerry split the votes of independents. (WSJ, Oct 21)

House Republicans are shifting campaign funds to previously safe strongholds, while Democrats with abundant targets and finite resources are facing tough choices on spending priorities. Republicans seeking to preserve their House majority are focusing on holding a shrinking circle of vulnerable seats, while Democrats are trying to exploit an expanding number of inviting targets. (Bloomberg, Oct 20)

with the exception of private fund-raising events, at which he still excels, most of the US president's fellow Republicans are now pretending he does not exist. Mr Bush's approval ratings are even lower than those of his colleagues, whose defeat to the opposition Democrats next month is now widely assumed … The financial edge over the Democrats is sizeable. "We have a $56m advantage," said Ken Mehlman, chairman of the Republican National Committee. (FT, Oct 19)

a new poll shows both President Bush and his party in worse shape among voters than Democrats were in the October before they lost control of Capitol Hill a dozen years ago. Support for the Republican-led Congress has eroded to its lowest point since the party's watershed 1994 victory that brought it House and Senate majorities. (WSJ, Oct 19)

Boiled down to a line, Roveism says that Republicans can win by mobilising and motivating their core supporters. The 2004 election seemed to prove the theory right. My sceptical reaction is that we have not yet had the true test of Mr Rove’s strategy – one that tells us whether it can deliver for Republicans in less propitious circumstances and without a blundering Democratic opponent. But on November 7, we will get it. (Jacob Weisberg, editor of Slate.com, FT, Oct 18)
The American Civil Liberties Union said [the Military Commissions Act] was "one of the worst civil liberties measures ever enacted in American history.” (AP, Oct 17)

A last-minute "October surprise" -- a dramatic news event that shakes up the U.S. election -- could be a big wild card in the final three weeks of the fight for control of Congress. With Democrats threatening to sweep Republicans out of power in Congress in the November 7 elections, a late-breaking foreign crisis, terrorist attack or a new scandal could change the debate and shape the ultimate outcome. (Reuters, Oct 17)

Politicians with profiles that get the most traffic know that on MySpace, it is important to do as the under-30 crowd does: make public what is personal -- and don't skimp on the trivial. (WSJ, Oct 14)

More than 650 economists, including five winners of the Nobel Prize, called for an increase in the minimum wage, saying the value of the last increase, in 1997, has been "fully eroded." the real value of today's federal minimum wage is less than it has been at any time since 1951. Federal minimum wage is $5.15 an hour. (AP, Oct 11)

The polls show Democratic candidates with huge leads over Republicans. said Karlyn Bowman, a public opinion analyst at the conservative American Enterprise Institute. "These are huge, huge, numbers and they are very bad for Republicans," she said. "There is not a shred of good news in these polls for Republicans." (Reuters, Oct 10)

Former Secretary of State Baker said he agreed with Republican Senator Warner that Iraqi leaders have two to three months to demonstrate concrete evidence of progress … Baker's comments and the remarks made last week by Warner are adding to the pressure on the president to change his strategy in Iraq. (Bloomberg, Oct 8)

President Bush, again defying Congress, says he has the power to edit the Homeland Security Department's reports about whether it obeys privacy rules while handling background checks, ID cards and watchlists. (AP, Oct 5)

[Google’s] Schmidt forecast that, within five years, "truth predictor" software would allow voters to check the probability that apparently factual statements by politicians were correct, using software that compared claims with historical data, he said. (FT, Oct 4)

an alliance between the preachers and the plutocrats -- between the religious right, which hates gays, abortion and the theory of evolution, and the economic right, which hates Social Security, Medicare and taxes on rich people. The coalition has always been more vulnerable than it seemed, because it was an alliance based not on shared goals, but on each group's belief that it could use the other to get what it wants. (Paul Krugman, NYT, Oct 2)

As the Democratic strategist James Carville [said] in August, “If we can’t win in this environment, we have to question the whole premise of the party.” (NYT, Oct 1)

Officials said Mr. Cheney’s staff and its bureaucratic allies were closely involved in guiding the talks with Republican senators. Their adversaries in the administration had to scramble just to keep up with details of the bargaining. “Basically, they were left to get back whatever they could from Congress,” one senior administration official said of the Cheney group. “And they did.” (NYT, Oct 1)

Those of us who are not Americans can only look on in wonder at the similar ease with which the ancient rights and liberties of the individual are being surrendered in the United States in the wake of 9/11 … all this represents an historic shift in the balance of power between the citizen and the executive. (Robert Harris, NYT, Oct 1)

in Woodward’s “State of Denial,” President Bush emerges as a passive, impatient, sophomoric and intellectually incurious leader, presiding over a grossly dysfunctional war cabinet and given to an almost religious certainty that makes him disinclined to rethink or re-evaluate decisions he has made about the war … an administration in which virtually no one will speak truth to power, in which the traditional policy-making process involving methodical analysis and debate is routinely subverted. (NYT, Sep 30)

a new book by Woodward says President Bush’s top advisers were often at odds among themselves, and sometimes were barely on speaking terms, but shared a tendency to dismiss as too pessimistic assessments from American commanders and others about the situation in Iraq. (NYT, Sep 29)

The government ends fiscal 2006 tomorrow with a deficit estimated at $260 billion, just under 2 percent of GDP and down from the record $412 billion, or 3.6 percent, reached in 2004 … Tax receipts, which were running more than 10 percent ahead of last year for the entire first half of 2006, have since slowed, outpacing last year by about 8.6 percent. The non-partisan CBO foresees growth in tax revenue slowing to 4 percent for the next two fiscal years, while spending grows at a 5 percent rate. (Bloomberg, Sep 29)

lasting damage to our 217-year-old nation of laws — while actually doing nothing to protect the nation from terrorists … the White House and three Republican senators announced a terrible deal on this legislation … Then VP Cheney and his willing lawmakers rewrote the rest of the measure so that it would give Mr. Bush the power to jail pretty much anyone he wants for as long as he wants without charging them, to unilaterally reinterpret the Geneva Conventions, to authorize what normal people consider torture, and to deny justice to hundreds of men captured in error. (NYT editorial, Sep 28)

“If Bush were the leader he claims to be, he would impose an import fee right now to keep gasoline prices high, and reduce the tax rate on Social Security for low-income workers, so they would get an offsetting increase in income,” argued Philip Verleger Jr., the veteran energy economist. (Thomas Friedman, NYT, Sep 27)

Long criticized by union groups and some U.S. Democrats for not providing employees with adequate pay or benefits, Wal-Mart on Friday gave workers something else: voter registration cards. and said it would give election information to all of its 1.3 million employees before the November 7 midterm vote … Wal-Mart media relations director David Tovar said he believed Wal-Mart workers upset with the [anti-Wal-Mart] campaign could affect the result in key states at the midterm election. (Reuters, Sep 29)

Low-income Americans view the giant retailer more favorably than do the wealthy. While 46 percent of those with household incomes above $100,000 said Wal-Mart is bad for the economy, only 27 percent of those earning less than $40,000 agreed. (Bloomberg, Sep 22)

performing during the meeting will be country singer Garth Brooks, a regular fixture at Wal-Mart events now that his CDs and DVDs are sold exclusively by the retailer. (WSJ, Oct 18)
Wal-Mart Stores Inc. is paying a former advisor to President Clinton at least $3 million over the next two years to direct a rapid-response team to handle mounting criticism of the world's largest retailer. (LAT, Aug 30)

Studies show that most people interested in politics associate nearly exclusively with others who have similar political beliefs. technology may be fueling our nature. Ever larger numbers of people seem to be sealing themselves off in worlds where everyone thinks the way they do. We can now choose cable stations, magazines and blogs that see the world exactly as we do. the fact that people rarely have friends with different views makes it difficult to seek common ground or to examine one's positions closely. (Washington Post, Oct 22)

A tendency to employ critical thinking, according to studies going back a decade, goes along with certain personality traits, not necessarily with intelligence. Being curious, open-minded, open to new experiences and conscientious indicates a disposition to employ critical thinking. So does being less dogmatic and less authoritarian, and having a preference for empirical and rational data over intuition and emotion when weighing information and reaching conclusions. critical-thinking skills are necessary for engaging in critical thinking, but they are not sufficient. You also have to want to think critically. (WSJ, Oct 20)

Building up your own worldview requires disparaging (even unconsciously) that of others. If beliefs that contradict yours have any worth, then by definition they call into question the absolute validity of your own. The result is stronger feelings of hostility toward those with different values and beliefs. These results have been replicated in some 300 lab experiments, including in cultures with very different ideas about an afterlife. Since thoughts of death make people more committed to their worldview, hawks, but not doves, would increase their support for military action in the wake of a terrorist attack. (WSJ, Oct 13)

Social – Global

Spain's economy grew an average of 3 percent a year for the past decade, beating the European Union average and boosting incomes. A government report to be released later this month may show that Spain has the world's highest cocaine use among 15- to 64-year-olds, outpacing the U.S. for the first time. (Bloomberg, Oct 23)

Worldwide migrants sent back more than $167bn in 2005, up by 73 per cent from 2001, according to the World Bank. In Latin America, along with south Asia one of the two regions benefiting most from the trend, remittances are expected to reach more than $60bn this year, an amount that would exceed the combined total of foreign direct investment and official development aid. 73 per cent of Latin American migrants living in the US sent back money to their relatives at home. (FT, Oct 19)

Hundreds of thousands of their young adults have also gone as migrant workers to western Europe. For Romania and Bulgaria this gap is even larger than for the 2004 entrants. Average incomes in purchasing power terms are just 28 per cent of the west European level, compared with 45 per cent in central Europe. So the period of migration for Romanians and Bulgarians might turn out to be even longer than for Poles. An estimated 2m Romanians are employed abroad - about 20 per cent of the working-age population. (FT, Oct 19)

Japan has agreed to reduce its annual fishing quota for southern bluefin tuna by half to 3,000 tons next year because of concern the stocks of the fish are falling to dangerously low levels, the Fisheries Agency said. (Bloomberg, Oct 16)

Bangladesh's microcredit pioneer, Muhammad Yunus, won the Nobel Peace Prize … The bank now has 6.5m borrowers, 97 per cent of them women, an average loan size of almost $130 and a 99 per cent loan repayment rate. Microfinance has played a central part in Bangladesh reducing poverty by almost 10 percentage points over the past five years, to 40 per cent. (FT, Oct 14)

Thousands of people went on a rampage in the Bangladeshi capital, in the latest protests over electricity shortages … A shortage of drinking water and rising prices of essential goods have fueled the anger … At least 18 power generation plants out of a total of 61 are shut for technical faults or maintenance, and plans to build new power stations have not taken off because of lack of funds. (Reuters, Sep 28)

"Bang!" The little puppet boy steps on a mine, and now he only has one leg. The Afghan children watching the video at a school on a Kabul hillside gasp. the creators of Muppet stars have teamed up with two charities to teach children a lesson in survival: how not to get killed or maimed by the millions of land mines still buried in the Afghan soil. (CSM, Oct 5)

Alongside tax breaks and other financial incentives to encourage people to use environmentally friendly vehicles, Stockholm in April began to require many gas stations to sell renewable fuel … Some say the focus on ethanol discriminates against low-carbon-dioxide-emitting diesels and thwarts the development of other technologies. (WSJ, Oct 3)

more than 1 billion people were without clean water in 2004 from sources such as wells or springs, a number which may increase as the population grows. The lack of access to water is especially acute in sub-Saharan Africa, which represents about 11 percent of the world's population but almost a third of all people without access to safe drinking water … Of the 2.6 billion people worldwide without access to proper sanitation, about 2 billion live in rural areas, some two-thirds in sub-Saharan Africa and 37 percent in South Asia. the largest gains were in Asia, especially in India and China. But the report said the majority of people in both countries still have no adequate sanitation. (Reuters, Sep 28)

In Western Europe, the ``Polish plumber'' is a catchphrase for the flood of workers who've migrated since the expansion of the European Union in 2004, sparking resentment … the impact is greater on nations losing craftsmen and laborers … Poland's government says that foreign companies are creating about 51,000 new jobs annually -- far fewer than those being lost to emigration … In Poland, the average monthly wage is $850, while in neighboring Germany, the average is more than $4,000. (Bloomberg, Sep 28)

Civil society may hinge on a tiny piece of tissue at the front of the human brain, a new study suggests. Experiments involving a "fairness" game show that the right side of this region -- called the dorsolateral prefrontal cortex -- helps people suppress selfish urges in obviously unjust situations, even at their own expense. despite a long history of crime, wars and rapaciousness, human beings are innately cooperative. the only species to exhibit "reciprocal fairness" -- the punishment of others' unfair behaviors, even in situations where doing so hurts the punisher. (HealthDay, Oct 5)

Social – U.S.

Immigrants now account for 40 percent of U.S. growth, according to the independent Population Reference Bureau. Twelve percent of U.S. residents, or 34.3 million people, are foreign-born, with the largest number from Mexico. The U.S. ranks third in net immigration. (Bloomberg, Oct 17)

U.S. universities are attracting a declining share of foreign students, at a time when overseas enrollments are soaring. The report follows two last month that warned U.S. colleges are recovering from tougher terrorist-related restrictions on U.S. visas only to find countries such as China and India are making greater efforts to compete for students seen as critical to their economies. (Bloomberg, Oct 16)

The American West is becoming warmer faster on average than the rest of the world. The West is 2 to 3 degrees warmer than its average annual temperature, calculated using more than 100 years of records. data from some 30 computer-modeling studies shows that by mid-century annual average temperatures in the West will be up 4 or 5 degrees. By the end of the century, the West could be 7 to 8 degrees warmer. (AP, Oct 13)

transportation costs in places with cheaper housing are often so high that they wipe out the savings from lower rent or mortgage payments. Such places tend to be farther from employers or short on public transportation, which makes commuting costlier. housing and transportation costs combined eat up an average of 57% of annual income for "working" families with incomes of $20,000 to $50,000 a year. (WSJ, Oct 11)

Harvard University’s Robert Putnam, one of the world’s most influential political scientists. His research shows that the more diverse a community is, the less likely its inhabitants are to trust anyone. This is a contentious finding in the current climate of concern about the benefits of immigration. When the data were adjusted for class, income and other factors, they showed that the more people of different races lived in the same community, the greater the loss of trust. (FT, Oct 8)

The US achieved a clean sweep of this year’s Nobel science awards yesterday when the chemistry prize was awarded to Roger Kornberg of Stanford University for his work on the physical basis of heredity. (FT, Oct 4)

When the results of its latest survey came back, officials at the American Museum of Natural History were hardly astonished. Fewer than half of those surveyed answered correctly when asked how much of the planet is covered in water (about three-fourths). Hardly anyone knew how much of that water is drinkable (about 1 percent). "I haven't been surprised by the public's reaction since our first survey [in 1994], when I saw that 35 percent of the adult population thought that humans lived at the same time as dinosaurs.” (AP, Oct 2)

Between 2000 and 2005, the number of Americans with private health insurance coverage fell by 1 percent. But over the same period, employment at health insurance companies rose a remarkable 32 percent. In the past, they mainly concentrated on screening out applicants likely to get sick. Now, it seems, they're also devoting a lot of effort to finding pretexts for revoking insurance after they've already granted it. They typically do this by claiming that they weren't notified about some pre-existing condition, even if the insured wasn't aware of that condition when he or she bought the policy. (Paul Krugman, NYT, Sep 22)

Where you live, combined with race and income, plays a huge role in the nation's health disparities, differences so stark that it's as if there are eight separate Americas instead of one … Millions of the worst-off Americans have life expectancies typical of developing countries, concluded Dr. Christopher Murray of the Harvard School of Public Health … The study also highlights that the complicated tapestry of local and cultural customs may be more important than income in driving health disparities, said Richard Suzman of the National Institute on Aging, which co-funded the research. (AP, Sep 11)