Today, the round-up is going to be exclusively on the credit crisis. The crisis has a distinctively European bent to it now as much of the news for the day comes from that area. But, Asia is also getting into the mix.
In the US, the bankruptcy and likely liquidation of Linens ‘n Things shows that too much debt, private equity and a credit crisis can lead to a good company being liquidated. This is a loss to the employees, community and to the economy. Yahoo presents a case of a company that badly mismanaged a merger deal in rejecting an offer from Microsoft due to its leaders’ vanity and hostility to Microsoft. This is a company for which I once worked. It is now an utter shambles.
The biggest news item in the credit crisis is the potential bankruptcy of Iceland. The country has really been hit hard in the credit crisis and has nationalised its largest banks. But, doubt remains whether the Icelandic government has enough money to support these banks and moves by Iceland have sparked a row with the British over Icelandic banks operating in the UK.
In Asia, the central banks have also cut interest rates despite double digit inflation. Clearly everyone is worried about deflation and recession. However, I remain of the view that the problem is largely the availability of credit. Cutting base rates does nothing to address this fundamental issue and increases appetite for risk, which leads to bubbles and malinvestment.
Central banks and monetary authorities should concentrate on credit availability and trust rather than cutting interest rates as a knee-jerk reaction to market volatility.
Finally, right below is a review of Warren Buffett’s biography, “The Snowball,” which I just bought but haven’t read. It comes in at 976 pages, so be prepared.
All you never knew about Warren Buffett – National Post
IMF sees greatest shock since 1930s – FT
Canada rated world’s soundest bank system: survey – Reuters
Iceland
Iceland shares suspended, biggest bank taken over – Reuters
Iceland May Ask for IMF Loan as Well as Borrowing From Russia – Bloomberg
Terror law used for Iceland deposits in UK – FT
UK to sue Iceland over bank deposits – FT
Iceland’s biggest bank gets Swedish loan – FT
Britain
U.K. September House Prices Drop Most in 25 Years, HBOS Says – Bloomberg
U.S. and Britain: Contrasting Bailouts – Deal Book
ING takes charge of Kaupthing Edge and Heritable accounts – Telegraph
Gordon Brown hails £500 billion bank rescue plan – Telegraph
US
National City in sale talks: report – Reuters
Buffett’s Goldman, GE Warrants Worthless After Rout – Bloomberg
Fed offers AIG fresh $37.8bn injection – FT
Yahoo shares plunge as Wall St. cuts target prices – Reuters
September sales disappoint, some forecasts cut – Reuters
California, States Urge Feds to Widen Market Bailout – Bloomberg
Linens ‘n Things to hasten store closings: report – Reuters
Europe
Bank Crisis Is Bypassing Central and East Europe – Deal Book
Germany’s Steinbrueck Wants EU Market Regulator, Tribune Says – Bloomberg
Austria Guarantees All Deposits, Stops Short Selling – Bloomberg
Volvo to axe a further 4,000 jobs – FT
Asia
Asian shares boosted by interest rate cuts – FT
Yen Tumbles as Global Interest-Rate Cuts Revive Risk Appetite – Bloomberg
Asian central banks cut rates – FT
Japan’s Stocks Rebound From Steepest Decline in 21 Years – Bloomberg
Trading suspended in Jakarta – FT
Nikkei dives 9.4 percent, biggest 1-day fall since ’87 – Reuters