By Frank Tang | Reuters
NEW YORK (Reuters) - Gold futures fell more than $100 on Wednesday, one of the steepest falls ever, as strong U.S. economic data and expectations of more Federal Reserve stimulus accelerated profit taking from the safe-haven record high of a day ago.
Selling spiraled out of control as money managers competed to liquidate positions in COMEX futures, which experienced their biggest single-day dollar loss since 1980. Volume looked like a record.
The price of gold bullion is now more than $150 below Tuesday's all time high of $1,911.46 an ounce, downed by intense speculation about whether the Fed will announce new plans to ease monetary policy at a meeting late this week.
Analysts said it was time for gold investors to take money off the table after the rally extended too far, too fast in recent weeks. Bullion rose as much as $400 since July.
"You have a commodity that retail investors, hedge funds and everybody were long, and the technical indicators showed it was overbought. It was just a matter of time before the market starts cracking," said Mihir Dange, COMEX gold options floor trader for Arbitrage LLC.
Spot gold was down 4.1 percent to $1,754.59 an ounce by 3:37 p.m. EDT, off its session low of $1,749.39.
Before gold began recoiling Tuesday from above $1,900, it had risen nearly 9 percent over six sessions.
U.S. gold futures for December delivery settled down $104 at $1,757.30 an ounce. Reuters data showed that is the biggest price drop of the continuous, front-month contract since January 22, 1980, when it tumbled almost $150. On a percentage basis, it was the steepest fall since December 2008, during the financial crisis.
COMEX futures volume topped 430,000 lots, on pace to surpass a record from August 9, preliminary Reuters data showed.
Silver dropped 5.9 percent to $39.34 an ounce.
Gold came under pressure after steadying overnight, after a report showing new orders for U.S. durable goods orders rose 4 percent in July, more than expected and offering hope the ailing economy could dodge a second recession.
Analysts warned of a sharp correction from this month's rally was possible, especially if Friday's central bank meeting at Jackson Hole, Wyoming does not result in a Fed announcement of a third round of government bond buying, or quantitative easing, also known as QE3.
"The correction really should be taking place now, because of all the (bets) on the table," said Ashok Shah, chief investment officer at London & Capital.
"But the journey is not complete until Jackson Hole is done," Shah said. The Fed conference starts on Thursday.
CALL-PUT SPREAD NARROWS, MARGINS EYED
On the options front, the spread between the 25-day implied volatility of COMEX gold and that of put options has narrowed since Monday, a sign that gold option investors were turning bearish.
The CBOE gold volatility index <.GVX> is near at its highest since April 2009.
The CME Group said late Wednesday it would raise maintenance margins for trading COMEX 100-ounce gold futures by 27 percent, after the close of business on Aug 25. The Shanghai Gold Exchange and Hong Kong Mercantile Exchange had raised margins on some of gold contracts this month.
Holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund, fell by nearly 25 tonnes on Tuesday, their biggest one-day outflow since January 25.
Spot platinum dropped 2.8 percent to $1,805.49 an ounce, and palladium was down 1.5 percent at $745.28 an ounce.
Thursday, August 25, 2011
Monday, August 8, 2011
China is the biggest Bubble in History
YouTube ==> http://www.youtube.com/watch?v=p8E0VzbuP7M&feature=related
Top 10 Guide To Survive Hyperinflation (Beta)
Youtube => http://www.youtube.com/watch?v=XJQ1DY9Pdlg&feature=related
Economic Collapse a Mathematical Certainty - Top 5 Places Where Not To Be
Youtube ==> http://www.youtube.com/watch?v=b3-vwYJiD8g
No double-dip recession but Europe a worry: Greenspan
WASHINGTON (Reuters) - Former Federal Reserve Chairman Alan Greenspan on Sunday downplayed the risk of a double-dip recession in the United States, saying its domestic economy was in better shape compared to its European peers.
A double-dip recession "depends on Europe, not the United States," Greenspan told NBC television's "Meet the Press." "The United States was actually doing relatively well -- sluggish, but going forward -- until Italy ran into trouble."
The U.S. economy stumbled badly in the first half of 2011 and came dangerously close to contracting in the January-March period, raising fears that the economy was sliding back into recession.
Those fears were calmed somewhat last week when a debt deal was agreed before the August 2 deadline as well as data showing that employers added 117,000 jobs in July. But Standard & Poor's downgrade of the country's top-notch "AAA" credit rating late on Friday to "AA+" could hurt the recovery.
"With all of this bickering going on, the economy is slowing down," Greenspan said. "You can see it in all the data. I don't see a double-dip, but I do see it slowing down."
Europe, which buys a quarter of U.S. exports and houses the operations of many American companies, would determine the course of the U.S. economy's recovery, Greenspan said.
European leaders are struggling to contain a sovereign debt crisis, which has spread to Italy, the euro zone's third-largest economy, and is causing turmoil in global financial markets.
Greenspan said Italy's troubles could contribute to destabilizing the European and U.S. economies.
"When Italy showed signs of significant weakness in selling its bonds ... it created a massive problem within Europe because Italy is a very large country that ... indeed cannot be bailed out," he said. "And that's what's causing our problem."
Greenspan said despite the S&P downgrade, U.S. Treasury bonds, unlike Italian bonds, were still a safe investment.
"This is not an issue of credit rating. The United States can pay any debt it has because it can always print money to do that. There's zero probability of default," he said. "What I think the S&P (downgrade) did was to hit a nerve. ... It's hit the self-esteem of the United States, the psyche. And it's having a much profounder effect than I conceived could happen."
Markets in the Gulf region and in Israel, among the first to trade since the U.S. credit downgrading, tumbled on Sunday amid worries the U.S. downgrade and European debt woes may trigger another global downturn.
Greenspan said the same was likely to happen worldwide when global markets open on Monday.
Investors try to look past panic
By Rodrigo Campos | Reuters
NEW YORK (Reuters) - Wall Street hit the panic button last week and survived. But the shocks have left investors stranded.
Following its worst week in almost three years, the S&P 500 has fallen into correction territory and year-end forecasts are already being lowered. Safe havens like gold and the Swiss franc rallied.
Economic growth has slowed and budget-cutting legislation recently passed in the U.S. Congress could further dampen economic activity.
That leaves the path uncertain. So what are investors to expect in the weeks ahead?
"In a word, volatility," said Citigroup strategist Jamie Searle.
The CBOE Volatility Index <.VIX>, the market's gauge of anxiety, had its largest daily percentage spike since early 2007 on Thursday.
Another source of worry was thrown into the mix late on Friday when Standard & Poor's stripped the United States of its top-notch triple-A credit rating. In its report on the action, S&P sounded pessimistic that U.S. lawmakers could reach the consensus needed to rein in deficits that were responsible for this ratings cut.
"The long-term implications are daunting," said Jack Ablin, chief investment officer of Harris Private Bank in Chicago. "Short-term, Treasuries remain a premier safe-haven refuge."
The downgrade was seen as compounding uncertainty in Europe, which is facing its own issues related to government debt.
Germany and France on Sunday reiterated their commitment to implementing the decisions of last month's emergency EU summit, in an effort to restore confidence in turbulent financial markets.
The finance ministers of the G7 major powers are "very likely" to hold a conference call later on Sunday to discuss turmoil in the financial markets, according to a British Treasury source, but no details were immediately available.
NO MAGIC FIX SEEN FROM THE FED
Until June, equity investors could count on the Federal Reserve to keep pumping money into the financial system, boosting equity and commodity prices. The $600 billion the Fed used to buy assets in a second round of quantitative easing -- known as QE2 -- flooded markets with cash and helped lower interest rates.
But that is over now.
Following a political showdown in Congress that took the United States to the brink of a debt default amid a bitter battle to rein in spending, few expect more fiscal stimulus. And additional action from the Fed is unlikely after its meeting Tuesday.
"There is certainly not going to be any fiscal stimulus coming, given the debt situation we are in," said Paul Mendelssohn, chief investment strategist of Windham Financial Services in Charlotte, Vermont.
"You've got so much discord and so much dysfunctionality in Washington that (Fed Chairman Ben) Bernanke has to think twice before he does anything."
Fears of another recession have crept back, fed by flagging economic growth and a perceived inability of politicians on both sides of the Atlantic to deal with escalating government debt.
In Europe, a credit crisis that initially hit Ireland, Greece and Portugal escalated and now threatens to engulf Italy, the euro zone's third-largest economy. Bond yields soared last week to highs not seen in more than a decade, worrying investors about Rome's ability to finance -- and balance -- its budget.
During the afternoon of New York's Friday market session, Italy pledged to speed up austerity measures and social reforms in return for European Central Bank help with funding.
The European Central Bank faced a decision on Sunday whether to buy Italian bonds to try to prevent the euro zone debt crisis from widening.
PANIC BEGETS PANIC
Having fallen in nine of the last 10 sessions, the S&P 500 <.SPX> closed the week down 7.2 percent -- its biggest percentage drop since the third week of November 2008.
Selling was broad as average daily volume for the week soared to 11.6 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq. That represents about a 55 percent jump from what was until last week the yearly average of nearly 7.5 billion.
Frantic moves in markets like the ones seen last week go beyond curbing investor confidence. Nervous consumers hold off on spending and corporations do not sell their products and services so earnings do not rise and stock prices fall, creating a vicious cycle.
"We're facing years of markets that will be at times scary and chaotic and that won't be providing the kinds of returns people want to expect from investments," said Rob Arnott, chairman of Research Affiliates in Newport Beach, California, who oversees $80 billion in assets.
"Most people think double-digits in the past was not difficult so, 'I'm going to be conservative and expect 7 to 8 percent.' But that's not what the markets are priced to give you -- it's more like 3 to 5 percent," Arnott said.
Following downgrades to U.S. gross domestic product estimates and weak global figures on factory and services sector activity, hopes for a boom in the second half of the year have evaporated.
"I just don't think 3 percent GDP growth in the second half is anywhere close to realistic at this point," said Keith Davis, a bank analyst and principal at money manager Farr, Miller & Washington in Washington, D.C. "The third quarter is starting off pretty slow, and people are bringing down their numbers."
Credit Suisse equity strategists on Friday cut their year-end estimate for the S&P 500 by 7 percent to 1,350 from 1,450, with 1,400 as the target for year-end 2012.
Contrarian views are nevertheless ready to dismiss the panic and take it as a good time to jump back in.
"The biggest fear in our mind is: 'Is it a self-fulfilling prophecy? Is the market volatility causing people to really pull back?'" said Thomas Villalta, portfolio manager for Jones Villalta Asset Management in Austin, Texas.
"I think you'll see things kind of calm down over the weekend, and I suspect next week will be a better week for the market as people calm down and reassess the situation," he added.
NEW YORK (Reuters) - Wall Street hit the panic button last week and survived. But the shocks have left investors stranded.
Following its worst week in almost three years, the S&P 500 has fallen into correction territory and year-end forecasts are already being lowered. Safe havens like gold and the Swiss franc rallied.
Economic growth has slowed and budget-cutting legislation recently passed in the U.S. Congress could further dampen economic activity.
That leaves the path uncertain. So what are investors to expect in the weeks ahead?
"In a word, volatility," said Citigroup strategist Jamie Searle.
The CBOE Volatility Index <.VIX>, the market's gauge of anxiety, had its largest daily percentage spike since early 2007 on Thursday.
Another source of worry was thrown into the mix late on Friday when Standard & Poor's stripped the United States of its top-notch triple-A credit rating. In its report on the action, S&P sounded pessimistic that U.S. lawmakers could reach the consensus needed to rein in deficits that were responsible for this ratings cut.
"The long-term implications are daunting," said Jack Ablin, chief investment officer of Harris Private Bank in Chicago. "Short-term, Treasuries remain a premier safe-haven refuge."
The downgrade was seen as compounding uncertainty in Europe, which is facing its own issues related to government debt.
Germany and France on Sunday reiterated their commitment to implementing the decisions of last month's emergency EU summit, in an effort to restore confidence in turbulent financial markets.
The finance ministers of the G7 major powers are "very likely" to hold a conference call later on Sunday to discuss turmoil in the financial markets, according to a British Treasury source, but no details were immediately available.
NO MAGIC FIX SEEN FROM THE FED
Until June, equity investors could count on the Federal Reserve to keep pumping money into the financial system, boosting equity and commodity prices. The $600 billion the Fed used to buy assets in a second round of quantitative easing -- known as QE2 -- flooded markets with cash and helped lower interest rates.
But that is over now.
Following a political showdown in Congress that took the United States to the brink of a debt default amid a bitter battle to rein in spending, few expect more fiscal stimulus. And additional action from the Fed is unlikely after its meeting Tuesday.
"There is certainly not going to be any fiscal stimulus coming, given the debt situation we are in," said Paul Mendelssohn, chief investment strategist of Windham Financial Services in Charlotte, Vermont.
"You've got so much discord and so much dysfunctionality in Washington that (Fed Chairman Ben) Bernanke has to think twice before he does anything."
Fears of another recession have crept back, fed by flagging economic growth and a perceived inability of politicians on both sides of the Atlantic to deal with escalating government debt.
In Europe, a credit crisis that initially hit Ireland, Greece and Portugal escalated and now threatens to engulf Italy, the euro zone's third-largest economy. Bond yields soared last week to highs not seen in more than a decade, worrying investors about Rome's ability to finance -- and balance -- its budget.
During the afternoon of New York's Friday market session, Italy pledged to speed up austerity measures and social reforms in return for European Central Bank help with funding.
The European Central Bank faced a decision on Sunday whether to buy Italian bonds to try to prevent the euro zone debt crisis from widening.
PANIC BEGETS PANIC
Having fallen in nine of the last 10 sessions, the S&P 500 <.SPX> closed the week down 7.2 percent -- its biggest percentage drop since the third week of November 2008.
Selling was broad as average daily volume for the week soared to 11.6 billion shares traded on the New York Stock Exchange, NYSE Amex and Nasdaq. That represents about a 55 percent jump from what was until last week the yearly average of nearly 7.5 billion.
Frantic moves in markets like the ones seen last week go beyond curbing investor confidence. Nervous consumers hold off on spending and corporations do not sell their products and services so earnings do not rise and stock prices fall, creating a vicious cycle.
"We're facing years of markets that will be at times scary and chaotic and that won't be providing the kinds of returns people want to expect from investments," said Rob Arnott, chairman of Research Affiliates in Newport Beach, California, who oversees $80 billion in assets.
"Most people think double-digits in the past was not difficult so, 'I'm going to be conservative and expect 7 to 8 percent.' But that's not what the markets are priced to give you -- it's more like 3 to 5 percent," Arnott said.
Following downgrades to U.S. gross domestic product estimates and weak global figures on factory and services sector activity, hopes for a boom in the second half of the year have evaporated.
"I just don't think 3 percent GDP growth in the second half is anywhere close to realistic at this point," said Keith Davis, a bank analyst and principal at money manager Farr, Miller & Washington in Washington, D.C. "The third quarter is starting off pretty slow, and people are bringing down their numbers."
Credit Suisse equity strategists on Friday cut their year-end estimate for the S&P 500 by 7 percent to 1,350 from 1,450, with 1,400 as the target for year-end 2012.
Contrarian views are nevertheless ready to dismiss the panic and take it as a good time to jump back in.
"The biggest fear in our mind is: 'Is it a self-fulfilling prophecy? Is the market volatility causing people to really pull back?'" said Thomas Villalta, portfolio manager for Jones Villalta Asset Management in Austin, Texas.
"I think you'll see things kind of calm down over the weekend, and I suspect next week will be a better week for the market as people calm down and reassess the situation," he added.
Debt issuers brace for impact from U.S. downgrade
By Paritosh Bansal and Dan Wilchins | Reuters
NEW YORK (Reuters) - A downgrade of United States' top-tier credit rating has Wall Street scrambling to figure out the knock-on effects for the financial system, from mortgages to banks to markets that rely on U.S. Treasuries for collateral.
The immediate effects of the Standard & Poor's downgrade of the country's AAA credit rating late on Friday are likely to be modest, largely because it was expected and already at least partly discounted, experts said.
Many downplayed the likelihood of the sort of financial contagion experienced when Lehman Brothers went under in September 2008. Few had expected it to have to file for bankruptcy, and few were prepared for the fallout. Money market funds froze, some major commercial banks collapsed, and many major dealers and finance houses teetered on the edge of failure.
But even if that type of scenario is unlikely this time, bankers, lawyers and investors wonder if there could be longer-term consequences of S&P's downgrade, given that U.S. sovereign credit is bedrock to the world financial system.
The analysis is complicated because so many of the potential stress points for the financial system are relatively opaque areas like over-the-counter derivatives markets.
Adding to the difficulties is the concern that the downgrade is only one of the many issues roiling global markets. The European debt crisis is spreading, with Italy and Spain coming under the gun after Greece, and data in recent weeks point to a weaker U.S. economy than many investors had thought and have led to fears of another recession.
"I actually think it is going to end up having more of an impact than some of the news stories are suggesting," said Thomas Stoddard, a senior managing director at Blackstone Group who focuses on financial services investment banking.
"Not having the U.S. as triple-A is just going to pop up in more places and have more frictional costs than people might suspect," Stoddard added.
A number of entities that are key players in the U.S. financial system -- including mortgage finance companies Fannie Mae and Freddie Mac, and securities clearinghouses like the Options Clearing Corp Depository Trust Co -- are likely to be downgraded by Standard & Poor's on Monday.
For Fannie Mae and Freddie Mac, losing their triple-A rating could lift borrowing costs, potentially making mortgages more expensive for consumers and adding to stress in the already unstable U.S. housing market.
Last month, S&P said it may also cut ratings for companies like the Depository Trust Co, which facilitates payment transfers among major banks, and several Federal Home Loan Banks and Farm Credit System Banks.
On Friday evening, when S&P cut the United States' sovereign rating by one notch to "AA-plus," it said it would offer more detail about the ratings for these companies on Monday.
DERIVATIVES MARKETS
Another source of potential stress is derivatives markets, where investors and banks often collateralize their positions using U.S. Treasuries.
If banks start demanding more Treasuries to collateralize the same exposure, investors could be forced to sell assets to come up with extra collateral, causing broader market declines. As long as Treasury yields are at all time lows, that risk seems relatively low, said a hedge fund trader who spoke on condition of anonymity.
Some derivatives transactions may have ratings triggers built into them that unwind the deals if the U.S. is downgraded, the trader said, but he said it is difficult to know how many such transactions are out there.
OCC, the world's largest equity derivatives clearing organization, said on Sunday it has no current plans to adjust its current valuations or haircuts on Treasuries used as collateral.
There are some factors working in markets' favor, analysts noted.
For one thing, major U.S. banks are better capitalized as credit losses have slowed. The U.S. banking system had $1.51 trillion of equity capital at the end of the first quarter, compared with $1.29 trillion in the fourth quarter of 2008. That roughly 17 percent of extra capital is supporting about 3 percent fewer assets than it used to.
If stresses become strong in areas like the repo market, a massive market that banks use to fund securities short-term, dealers are fairly sure the Federal Reserve can jump in to offer support, as it did during the credit crunch, the trader said.
Any impact in the derivatives market will be less than what the pessimists fear, said Michael Holland, founder of asset manager Holland & Co. "I don't expect major disruptions in markets just from the downgrade."
BORROWING COSTS
Borrowing costs for companies with top ratings like Microsoft Corp and Exxon Mobil Corp could drop, because triple-A rated debt may be even more attractive to some investors now, analysts said. Some companies have at times had more available cash on their balance sheets than the U.S. government in recent weeks.
In general, corporate borrowing costs may not rise following the U.S. downgrade. Last week, when many in the market were expecting the U.S. to be downgraded, six U.S. companies issued 30-year bonds, which is unusually long-dated for the corporate market.
Even highly-rated corporate bonds have seen their risk premiums rise in recent sessions, signaling that portfolio managers are still concerned about credit risk. As turmoil in Europe ratchets higher, those risk premiums may rise more. But investors' willingness to buy long-term corporate debt signals some confidence in the sector.
"To a certain extent, corporate debt may look even more attractive, especially cash-rich balance sheet companies with lots of liquidity," said Chip MacDonald, a financial services partner at law firm Jones Day.
STATE FINANCES
States that rely heavily on federal government spending -- such as Virginia and Maryland, which are home to many federal employees and defense contractors -- could suffer if Congress and President Barack Obama slice the federal budget more deeply.
A downgrade of Fannie Mae and Freddie Mac would affect billions of dollars of debt issued by public housing authorities secured by federally guaranteed mortgages.
Hospital credits could be weakened if the federal government slashes programs such as Medicaid -- the health plan for the elderly, poor and disabled that accounts for as much as 30 percent of state spending. Stocks in the health care sector sold off last week, amid fears of declining government support for spending in the sector.
"The degree of dependence on the federal government now becomes a state credit issue," said Philip Fischer a managing principal at eBooleant Consulting, in a recent report.
S&P is also expected to immediately downgrade pre-refunded bonds. When municipal bonds are refunded, investors are typically repaid from Treasuries held in escrow.
Debt issued by AAA-rated universities and colleges with global reputations might rise in price, said Evan Rourke, a portfolio manager, with Eaton Vance, citing Harvard and Princeton as examples.
Indeed, the immediate impact of the downgrade might be muted by the tax-free market's traditional strengths.
"I don't see a tremendous flight out of municipals. You might see credit spreads widening for lower-rated issues but we also think a lot will hold their ratings," Rourke said.
(Reporting by Paritosh Bansal and Dan Wilchins, additional reporting by Joan Gralla, Ben Berkowitz and Ann Saphir; Editing by Marguerita Choy)
NEW YORK (Reuters) - A downgrade of United States' top-tier credit rating has Wall Street scrambling to figure out the knock-on effects for the financial system, from mortgages to banks to markets that rely on U.S. Treasuries for collateral.
The immediate effects of the Standard & Poor's downgrade of the country's AAA credit rating late on Friday are likely to be modest, largely because it was expected and already at least partly discounted, experts said.
Many downplayed the likelihood of the sort of financial contagion experienced when Lehman Brothers went under in September 2008. Few had expected it to have to file for bankruptcy, and few were prepared for the fallout. Money market funds froze, some major commercial banks collapsed, and many major dealers and finance houses teetered on the edge of failure.
But even if that type of scenario is unlikely this time, bankers, lawyers and investors wonder if there could be longer-term consequences of S&P's downgrade, given that U.S. sovereign credit is bedrock to the world financial system.
The analysis is complicated because so many of the potential stress points for the financial system are relatively opaque areas like over-the-counter derivatives markets.
Adding to the difficulties is the concern that the downgrade is only one of the many issues roiling global markets. The European debt crisis is spreading, with Italy and Spain coming under the gun after Greece, and data in recent weeks point to a weaker U.S. economy than many investors had thought and have led to fears of another recession.
"I actually think it is going to end up having more of an impact than some of the news stories are suggesting," said Thomas Stoddard, a senior managing director at Blackstone Group who focuses on financial services investment banking.
"Not having the U.S. as triple-A is just going to pop up in more places and have more frictional costs than people might suspect," Stoddard added.
A number of entities that are key players in the U.S. financial system -- including mortgage finance companies Fannie Mae and Freddie Mac, and securities clearinghouses like the Options Clearing Corp Depository Trust Co -- are likely to be downgraded by Standard & Poor's on Monday.
For Fannie Mae and Freddie Mac, losing their triple-A rating could lift borrowing costs, potentially making mortgages more expensive for consumers and adding to stress in the already unstable U.S. housing market.
Last month, S&P said it may also cut ratings for companies like the Depository Trust Co, which facilitates payment transfers among major banks, and several Federal Home Loan Banks and Farm Credit System Banks.
On Friday evening, when S&P cut the United States' sovereign rating by one notch to "AA-plus," it said it would offer more detail about the ratings for these companies on Monday.
DERIVATIVES MARKETS
Another source of potential stress is derivatives markets, where investors and banks often collateralize their positions using U.S. Treasuries.
If banks start demanding more Treasuries to collateralize the same exposure, investors could be forced to sell assets to come up with extra collateral, causing broader market declines. As long as Treasury yields are at all time lows, that risk seems relatively low, said a hedge fund trader who spoke on condition of anonymity.
Some derivatives transactions may have ratings triggers built into them that unwind the deals if the U.S. is downgraded, the trader said, but he said it is difficult to know how many such transactions are out there.
OCC, the world's largest equity derivatives clearing organization, said on Sunday it has no current plans to adjust its current valuations or haircuts on Treasuries used as collateral.
There are some factors working in markets' favor, analysts noted.
For one thing, major U.S. banks are better capitalized as credit losses have slowed. The U.S. banking system had $1.51 trillion of equity capital at the end of the first quarter, compared with $1.29 trillion in the fourth quarter of 2008. That roughly 17 percent of extra capital is supporting about 3 percent fewer assets than it used to.
If stresses become strong in areas like the repo market, a massive market that banks use to fund securities short-term, dealers are fairly sure the Federal Reserve can jump in to offer support, as it did during the credit crunch, the trader said.
Any impact in the derivatives market will be less than what the pessimists fear, said Michael Holland, founder of asset manager Holland & Co. "I don't expect major disruptions in markets just from the downgrade."
BORROWING COSTS
Borrowing costs for companies with top ratings like Microsoft Corp and Exxon Mobil Corp could drop, because triple-A rated debt may be even more attractive to some investors now, analysts said. Some companies have at times had more available cash on their balance sheets than the U.S. government in recent weeks.
In general, corporate borrowing costs may not rise following the U.S. downgrade. Last week, when many in the market were expecting the U.S. to be downgraded, six U.S. companies issued 30-year bonds, which is unusually long-dated for the corporate market.
Even highly-rated corporate bonds have seen their risk premiums rise in recent sessions, signaling that portfolio managers are still concerned about credit risk. As turmoil in Europe ratchets higher, those risk premiums may rise more. But investors' willingness to buy long-term corporate debt signals some confidence in the sector.
"To a certain extent, corporate debt may look even more attractive, especially cash-rich balance sheet companies with lots of liquidity," said Chip MacDonald, a financial services partner at law firm Jones Day.
STATE FINANCES
States that rely heavily on federal government spending -- such as Virginia and Maryland, which are home to many federal employees and defense contractors -- could suffer if Congress and President Barack Obama slice the federal budget more deeply.
A downgrade of Fannie Mae and Freddie Mac would affect billions of dollars of debt issued by public housing authorities secured by federally guaranteed mortgages.
Hospital credits could be weakened if the federal government slashes programs such as Medicaid -- the health plan for the elderly, poor and disabled that accounts for as much as 30 percent of state spending. Stocks in the health care sector sold off last week, amid fears of declining government support for spending in the sector.
"The degree of dependence on the federal government now becomes a state credit issue," said Philip Fischer a managing principal at eBooleant Consulting, in a recent report.
S&P is also expected to immediately downgrade pre-refunded bonds. When municipal bonds are refunded, investors are typically repaid from Treasuries held in escrow.
Debt issued by AAA-rated universities and colleges with global reputations might rise in price, said Evan Rourke, a portfolio manager, with Eaton Vance, citing Harvard and Princeton as examples.
Indeed, the immediate impact of the downgrade might be muted by the tax-free market's traditional strengths.
"I don't see a tremendous flight out of municipals. You might see credit spreads widening for lower-rated issues but we also think a lot will hold their ratings," Rourke said.
(Reporting by Paritosh Bansal and Dan Wilchins, additional reporting by Joan Gralla, Ben Berkowitz and Ann Saphir; Editing by Marguerita Choy)
That 1937 feeling all over again
By Emily Kaiser | Reuters
SINGAPORE (Reuters) - Federal Reserve Chairman Ben Bernanke, an expert on the Great Depression, once promised that the central bank would never repeat its 1937 mistake of rushing to tighten monetary policy too soon and prolonging an economic slump.
He has been true to his word, keeping interest rates near zero since late 2008 and more than tripling the size of the Fed's balance sheet to $2.85 trillion. But cutbacks in government spending may end up having a similarly chilling effect on the economy, and there is little Bernanke can do to counter that.
Back in 1937, the U.S. economy had been growing rapidly for three years, thanks in large part to government programs aimed at ending the deep recession that began in 1929.
Then the central bank clamped down hard on lending, and federal government spending dropped 10 percent. The economy contracted again in 1938. The jobless rate soared.
"Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again," Bernanke said back in 2002 at a conference honoring legendary economist Milton Friedman's 90th birthday.
Bernanke convenes the Fed's next policy-setting meeting on Tuesday, facing growing concern that the United States may be slipping into another recession while Europe staggers toward a deeper debt crisis. Standard & Poor's decision on Friday to lower the U.S. credit rating adds yet another element of uncertainty.
His options are limited.
Nigel Gault, chief U.S. economist at IHS Global Insight, said the Fed could promise to keep interest rates near zero or its balance sheet swollen for even longer than investors anticipate. Or it could buy even more U.S. government debt.
"It is hard to see any of these options as 'game changers,'" Gault said. "The Fed would be doing them not because it could be sure they would make a huge difference, but because it would feel the need to do something."
Gault put the odds of another recession at 40 percent.
However, Friday's U.S. employment figures soothed recession fears, showing the economy created 117,000 jobs in July. That was up from a revised 46,000 in June and prior months payrolls were revised up slightly. The unemployment rate slipped to 9.1 percent but mostly because workers dropped out of the labor force.
"While I do not think this sounds the all-clear signal, it does quell some of the conversation that the U.S. is falling back into a recession," said Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York.
"Having said that, there are still plenty of headwinds, like Europe. I am also very encouraged to see the upward revisions to the previous months. This report pulls us back from the ledge a little bit."
HITTING A POTHOLE
Full employment is one of the Fed's prescribed goals, and it is clearly falling short. Government spending cuts are making matters worse. Friday's employment report showed a net loss of 37,000 government jobs last month.
State and local governments with balanced budget rules had little choice but to cut jobs in order to make ends meet. The federal government has no such restriction, but its spending outside of defense fell at a 7.3 percent annual rate in the second quarter, crimping economic growth.
Michael Feroli, an economist with JPMorgan in New York, said he had held out some hope that Congress would approve some form of additional fiscal support in the coming months, but the debt ceiling fight showed lawmakers dead set against that.
"It now looks likely that growth could hit a pothole early next year," Feroli said.
He cut his growth forecast for the first half of 2012 to 2.0 percent from 2.5 percent. At that sluggish pace, the jobless rate won't fall much below 9.0 percent, keeping the Fed on hold until at least the middle of 2013, Feroli said.
Without fiscal help, the Fed will be under greater pressure to find some other way to lift growth. Another round of government bond purchases would no doubt elicit wails of protest from emerging markets, which contend that the Fed's easy money spills into their economies, driving up inflation.
China, whose $1.16 trillion in Treasury holdings are second only to the Fed's, has not been shy about expressing its concern over the state of U.S. public finances and the dollar's slide.
Yang Jiechi, China's foreign minister, said on Friday that Washington should enact "responsible monetary policies" to ensure global economic stability, a thinly veiled reference to the Fed's bond-buying programs.
China releases its monthly economic data this week. The figures are expected to show double-digit gains in industrial output and retail sales, suggesting the country's economic growth remains robust.
Strong growth in China has helped to lift the rest of Asia, outside of Japan, which is still hurting from the March earthquake and tsunami. But all bets are off if conditions worsen significantly in the United States.
"Our view is that the region can 'decouple' from modest slowdowns, and we think the ongoing slowdown qualifies as modest," said TJ Bond, emerging Asia economist at Bank of America-Merrill Lynch in Hong Kong.
"We would start to worry if the U.S. tipped over into recession."
(Editing by Dan Grebler)
SINGAPORE (Reuters) - Federal Reserve Chairman Ben Bernanke, an expert on the Great Depression, once promised that the central bank would never repeat its 1937 mistake of rushing to tighten monetary policy too soon and prolonging an economic slump.
He has been true to his word, keeping interest rates near zero since late 2008 and more than tripling the size of the Fed's balance sheet to $2.85 trillion. But cutbacks in government spending may end up having a similarly chilling effect on the economy, and there is little Bernanke can do to counter that.
Back in 1937, the U.S. economy had been growing rapidly for three years, thanks in large part to government programs aimed at ending the deep recession that began in 1929.
Then the central bank clamped down hard on lending, and federal government spending dropped 10 percent. The economy contracted again in 1938. The jobless rate soared.
"Regarding the Great Depression. You're right, we did it. We're very sorry. But thanks to you, we won't do it again," Bernanke said back in 2002 at a conference honoring legendary economist Milton Friedman's 90th birthday.
Bernanke convenes the Fed's next policy-setting meeting on Tuesday, facing growing concern that the United States may be slipping into another recession while Europe staggers toward a deeper debt crisis. Standard & Poor's decision on Friday to lower the U.S. credit rating adds yet another element of uncertainty.
His options are limited.
Nigel Gault, chief U.S. economist at IHS Global Insight, said the Fed could promise to keep interest rates near zero or its balance sheet swollen for even longer than investors anticipate. Or it could buy even more U.S. government debt.
"It is hard to see any of these options as 'game changers,'" Gault said. "The Fed would be doing them not because it could be sure they would make a huge difference, but because it would feel the need to do something."
Gault put the odds of another recession at 40 percent.
However, Friday's U.S. employment figures soothed recession fears, showing the economy created 117,000 jobs in July. That was up from a revised 46,000 in June and prior months payrolls were revised up slightly. The unemployment rate slipped to 9.1 percent but mostly because workers dropped out of the labor force.
"While I do not think this sounds the all-clear signal, it does quell some of the conversation that the U.S. is falling back into a recession," said Tom Porcelli, chief U.S. economist at RBC Capital Markets in New York.
"Having said that, there are still plenty of headwinds, like Europe. I am also very encouraged to see the upward revisions to the previous months. This report pulls us back from the ledge a little bit."
HITTING A POTHOLE
Full employment is one of the Fed's prescribed goals, and it is clearly falling short. Government spending cuts are making matters worse. Friday's employment report showed a net loss of 37,000 government jobs last month.
State and local governments with balanced budget rules had little choice but to cut jobs in order to make ends meet. The federal government has no such restriction, but its spending outside of defense fell at a 7.3 percent annual rate in the second quarter, crimping economic growth.
Michael Feroli, an economist with JPMorgan in New York, said he had held out some hope that Congress would approve some form of additional fiscal support in the coming months, but the debt ceiling fight showed lawmakers dead set against that.
"It now looks likely that growth could hit a pothole early next year," Feroli said.
He cut his growth forecast for the first half of 2012 to 2.0 percent from 2.5 percent. At that sluggish pace, the jobless rate won't fall much below 9.0 percent, keeping the Fed on hold until at least the middle of 2013, Feroli said.
Without fiscal help, the Fed will be under greater pressure to find some other way to lift growth. Another round of government bond purchases would no doubt elicit wails of protest from emerging markets, which contend that the Fed's easy money spills into their economies, driving up inflation.
China, whose $1.16 trillion in Treasury holdings are second only to the Fed's, has not been shy about expressing its concern over the state of U.S. public finances and the dollar's slide.
Yang Jiechi, China's foreign minister, said on Friday that Washington should enact "responsible monetary policies" to ensure global economic stability, a thinly veiled reference to the Fed's bond-buying programs.
China releases its monthly economic data this week. The figures are expected to show double-digit gains in industrial output and retail sales, suggesting the country's economic growth remains robust.
Strong growth in China has helped to lift the rest of Asia, outside of Japan, which is still hurting from the March earthquake and tsunami. But all bets are off if conditions worsen significantly in the United States.
"Our view is that the region can 'decouple' from modest slowdowns, and we think the ongoing slowdown qualifies as modest," said TJ Bond, emerging Asia economist at Bank of America-Merrill Lynch in Hong Kong.
"We would start to worry if the U.S. tipped over into recession."
(Editing by Dan Grebler)
Friday, August 5, 2011
Dow falls 512 in steepest decline since '08 crisis
The Star Online > Business
Published: Friday August 5, 2011 MYT 8:51:00 AM
Updated: Friday August 5, 2011 MYT 10:01:40 AM
NEW YORK: Gripped by fear of a new recession, the stock market suffered its worst day Thursday since the financial crisis in the fall of 2008. The Dow Jones industrial average fell more than 500 points, its ninth-steepest decline.
The sell-off wiped out the Dow's remaining gains for 2011. It put the Dow and broader stock indexes into what investors call a correction - down 10 percent from their highs in the spring.
"We are continuing to be bombarded by worries about the global economy," said Bill Stone, the chief investment strategist for PNC Financial.
Across the financial markets, the day was reminiscent of the wild swings that defined the financial crisis in September and October three years ago. Gold prices briefly hit a record high. Oil fell even more than stocks - 6 percent, or $5.30 a barrel. And frightened investors were so desperate to get into some government bonds that they were willing accept almost no return on their money.
It was the most alarming day yet in the almost uninterrupted selling that has swept Wall Street for two weeks. The Dow has lost more than 1,300 points, or 10.5 percent. By one broad measure kept by Dow Jones, almost $1.9 trillion in market value has disappeared.
For the day, the Dow closed down 512.76 points, at 11,383.68. It was the steepest point decline since Dec. 1, 2008.
Thursday's decline was the ninth-worst by points for the Dow. In percentage terms, the decline of 4.3 percent does not rank among the worst. On Black Monday in 1987, for example, the Dow fell 22 percent.
Two weeks ago, investors appeared worried about the deadlocked negotiations in Washington over raising the ceiling on government debt. As soon as the ceiling was raised, investors focused on the economy, and the selling accelerated.
On Thursday, growing fear about the weakening U.S. economy was joined by concern in Europe that the troubled economies of Italy and Spain might need help from the European Union.
NEW YORK: An electronic board displays trading activity on the floor of the New York Stock Exchange on Thursday, Aug. 4, 2011 in New York. Gripped by fear of another recession, the financial markets suffered their worst day Thursday since the crisis of 2008. The Dow Jones industrial average fell more than 500 points, its ninth-steepest decline ever. (AP Photo/Jin Lee)
The European Union has already given financial assistance to Greece and Ireland, two countries that have struggled to pay their debts. A financial rescue package for Italy or Spain might be more than the group of countries can handle.
Traders also unloaded stocks before Friday's release of the government's unemployment report for July, which is expected to show weak job growth and perhaps a rise in the unemployment rate, which is 9.2 percent.
Together, they produced "a perfect storm of selling," said Ryan Larson, head of U.S. equity trading for RBC Global Asset Management.
Until a week ago, Wall Street had mostly convinced itself that the U.S. economy would improve in the second half of the year. Gas prices were falling, and Japanese factories were resuming production after disruptions from the March earthquake.
Then one report after another began to show that the economy was much weaker than first thought.
Manufacturing is barely growing. The service sector, which covers about 90 percent of the American work force, is growing at the slowest rate in a year and a half. People spent less in June than in May, the first decline since September 2009.
And the overall economy is expanding at the slowest pace since the end of the Great Recession. It grew at an annual rate of just 0.8 percent for the first six months of this year, raising the risk of another recession.
In an indication of how frightened investors are, Bank of New York Mellon said it would start charging large investors to hold their cash because they are depositing so much. The bank's clients include pension funds and large investment houses that are selling stock and need to deposit the proceeds.
Mark Luschini, chief investment strategist for Janney Montgomery Scott, an investment firm in Philadelphia, said his clients saw the move from stocks into cash as "a parking lot to sort things out."
"With the scars of 2008 still fresh," he said, "some clients don't want to miss the chance to pre-empt further damage should it come."
Wells Fargo Advisers, a financial management company in St. Louis, said clients were more nervous.
"I wouldn't say they're totally panicking. But obviously nerves are rattled," said Scott Marcouiller, chief technical market strategist there. "And I think that is simply because of the speed of the decline."
Other market indicators reinforced the risk-averse mood. Gold, which is seen as a safe investment when the stock market is turbulent, set a record price, $1,684.90 an ounce, before falling to finish the day at $1,659. Adjusted for inflation, gold is still far below the record reached in 1980.
The yield on the 10-year Treasury note fell to 2.42 percent, its lowest of the year, and the yield on the 2-year Treasury note hit its lowest ever, 0.265 percent. Bond yields fall when demand for bonds increases.
The yield on the one-month Treasury bill fell to almost nothing - 0.008 percent. Investors were willing to accept paltry returns in exchange for holding investments they believed to be stable.
The sell-off was broad. All 10 industry groups in the Standard & Poor's 500 index fell. Energy companies lost almost 7 percent, materials companies were down 6.6 percent, and industrial companies lost more than 5 percent.
For a time, Kraft Foods was the only stock to rise among the 30 that make up the Dow industrials. Kraft announced Thursday that it would split in two, with one company focusing on snacks and the other groceries. But the selling eventually dragged Kraft under, too, and its stock finished down 52 cents, at $33.78.
Steep stock market losses like the ones of the past two weeks can be self-reinforcing. A drop in stocks erodes household wealth and raises doubts about the economic outlook.
The result can be what economists call a vicious cycle. Stock losses take a toll on consumer confidence and make people more reluctant to spend money. Consumer spending makes up 70 percent of economic output in the United States.
Kevin Cook, senior stock strategist for Zacks Investment Research in Chicago, said investors' worst fears probably won't come true.
"This is not 2008 again," he said. "We don't have a liquidity crisis, we don't have a credit crisis - this is just profit taking."
Cook said he believes the S&P 500, which closed Thursday at 1,200.07, will trade between 1,150 and 1,250 between now and Oct. 1, at least until investors have enough information to determine whether the economy is in recession again.
Even taking into account the recent declines, stocks are still considered to be in an impressive bull market that began March 9, 2009, when the market reached its recession low.
The Dow closed that day at 6,547. Since then, it is up about 74 percent.
One year ago, the Dow closed at 10,680. About a month later, the stock market began a rally that took the Dow almost to 13,000. The catalyst was an announcement by Federal Reserve Chairman Ben Bernanke that the Fed was preparing to launch a program to buy $600 billion in government bonds to keep interest rates low and help stocks rally.
The sell-off now comes at a time when corporate profits are growing. For the S&P 500, a measure called the forward price-to-earnings ratio has fallen to about 12, well below its long-term average of 16. That means that investors who buy now are paying less for each dollar in profits.
Based on what an investor now pays for corporate profits, stocks are now trading at their lowest levels in 20 years, said Tim Courtney, chief investment officer of Burns Advisory Group in Oklahoma City.
But few companies were spared in the sell-off Thursday. Just three of the 500 stocks in the S&P 500 moved higher. General Motors fell 4 percent despite beating analyst estimates for its quarterly earnings. - AP
Here's a look at the Dow's 10 worst days since 1899:
By percent decline:
- Oct. 19, 1987: 22.6 percent, or 508 points
- Oct. 28, 1929: 12.8 percent, or 38 points
- Oct. 29, 1929: 11.7 percent, or 31 points
- Nov. 6, 1929: 9.9 percent, or 26 points
- Dec. 18, 1899: 8.7 percent, or 6 points
- Aug. 12, 1932: 8.4 percent, or 6 points
- March 14, 1907: 8.3 percent, or 7 points
- Oct. 26, 1987: 8 percent, or 157 points
- Oct. 15, 2008: 7.9 percent, or 733 points
- July 21, 1933: 7.8 percent, or 8 points
By points:
- Sept. 29, 2008: 778 points, or 7 percent
- Oct. 15, 2008: 733 points, or 7.9 percent
- Sept. 17, 2001: 685 points, or 7.1 percent
- Dec. 1, 2008: 680 points, or 7.7 percent
- Oct. 9, 2008: 679 points, or 7.3 percent
- April 14, 2000: 618 points, or 5.7 percent
- Oct. 27, 1997: 554 points, or 7.2 percent
- Oct. 22, 2008: 514 points, or 5.7 percent
- Aug. 4, 2011: 513 points, or 4.3 percent
- Aug. 31, 1998: 513 points, or 6.4 percent
Source: Dow Jones Indexes, a division of CME Group Inc.
Meanwhile AP repored from London: Fears that the U.S. economy may be heading back into recession and that Italy and Spain won't be able to deal with their debts battered stocks, the euro and oil prices Thursday.
The selling pressure in stock markets accentuated through the day as investors fretted over the U.S. economic recovery, a day before crucial non-farm payrolls for July, which often set the tone in markets for a week or two after their release.
Investors, already fidgety after the protracted U.S. debt deliberations, and worries that Italy and Spain are getting deeply embroiled in Europe's debt crisis, searched for assets considered safer, such as gold.
"$2.3 trillion of value wiped off equities worldwide over a handful of days and the cost is still rising," said Howard Wheeldon, senior strategist at BGC Partners.
In Europe, most markets shed more than 3 percent of their value.
Of the major markets, France's CAC-40 tumbled 3.9 percent to 3,320.35.
Germany's DAX tumbled 3.4 percent to 6,414.76.
Britain's FTSE 100 index of leading British shares ended 3.4 percent lower at 5,393.14.
Among major stock markets, only Tokyo's Nikkei 225 index actually traded up 0.2 percent to 9,659.18 after the Bank of Japan intervened to sell the yen and buy the dollar.
That drove the dollar above 80 yen Thursday for a brief while from 76.99 late Wednesday. By late afternoon London, the dollar was 2.4 percent firmer at 78.97 yen.
Japanese Finance Minister Yoshihiko Noda said financial authorities decided to intervene in the currency markets because the strong yen could hurt the country's export-dependent economy and slow its efforts to recover from the March 11 earthquake and tsunami.
The dollar had fallen as low as 76.29 yen on Monday. It hit a record post-World War II low of 76.25 yen in the days following the March 11 earthquake and tsunami.
A strong yen is painful for Japan because it reduces the value of foreign earnings for companies like Toyota Motor Corp. and Nintendo Co. and makes Japanese goods more expensive in overseas markets.
The intervention was coupled with monetary policy easing by the central bank's board. The bank expanded an asset purchase program to 50 trillion yen ($638.3 billion) from 40 trillion yen. It also kept its key interest rate in a range of zero to 0.1 percent.
Japan's moves came only a day after the Swiss National Bank intervened to slow a rise in the Swiss franc, another currency perceived as a save-haven at a time investors are fleeing risky assets such as shaky European government bonds.
Investors have been looking for safe havens to park their cash after figures earlier this week pointed to a dangerous slowdown in the U.S. economy at a time when Europe's debt problems appear to be engulfing big economies like Italy and Spain.
Yields on Spanish and Italian bonds stabilized Thursday, still much higher than just a month ago but further away from the 7-percent level generally seen as a nation's breaking point. The yield, or interest rate, of Italian 10-year bonds was 6.19 percent, while its Spanish equivalents were at 6.21 percent.
The rise in the yields of both Italian and Spanish bonds came despite indications that the European Central Bank intervened in the markets to prop up their bonds.
Questions about the bond-buying program, left unused for four months, dominated Trichet's news conference following Thursday's widely anticipated decision to leave the ECB's main interest rate unchanged at 1.5 percent.
Trichet left open the possibility of reopening the bond-purchase program but appeared determined to keep market traders off-balance about the bank's actual intentions.
"I never said it was dormant," he said, adding that the bank would reveal any purchases at the regular Monday disclosure.
"You will see what we do," he said. "If we intervene, we intervene, and we will publish the amount of what we have done."
Elsewhere in Asia, Hong Kong's Hang Seng shed 0.5 percent to 21,884.74 while China's Shanghai Composite Index advanced 0.2 percent to 2,684.04.
South Korea's benchmark Kospi dropped 2.3 percent to 2,018.47.
Worries over the global recovery hit oil prices hard too. Benchmark oil for September delivery was down $3.37 at $88.56 a barrel in electronic trading on the New York Mercantile Exchange.
In Kuala Lumpur Bernama reported that Bursa Malaysia were sharply lower this morning(Friday) after the massive sell-off of shares in Asian markets and overnight Wall Street, dealers said.
Dealers said investors fled equities market in favour of safe haven assets in view of the wide spreading European debt crisis and gloomy global economic outlook. As at 9.12 am, the benchmark FBM KLCI erased 31.73 points to 1,515.16 after opening 16.95 points lower at 1,529.94.
The Finance Index wiped out 347.59 points to 14,413.26, Plantation Index slipped 162.21 points to 7,576.24 and Industrial Index decreased 51.74 points to 2,753.31.
The FBM Emas Index gave up 226.271 points to 10,453.88, FBM Ace Index fell 143.51 points to 4,072.98 and FBM Mid 70 Index eroded 267.31 points to 11,581.19.
Losers outnumbered gainers 580 to 12 with 56 counters unchanged, 851 untraded and 35 others suspended. Turnover stood at 144.7 million shares worth RM175 million.
Actives, Karambunai Corp slipped half-a-sen to 16.5 sen, Sanichi Technology eased 1.5 sen to nine sen, Axiata Group fell two sen to RM5.05 and Malaysia Building Society-warrant 11/16 dropped 4.5 sen to 75.5 sen.
Heavyweights, Maybank lost 18 sen to RM8.67, CIMB dipped 13 sen to RM8.27, Petronas Chemicals slipped 20 sen to RM6.71 and Petronas Gas fell 40 sen to RM12.94. - AP/Bernama
Published: Friday August 5, 2011 MYT 8:51:00 AM
Updated: Friday August 5, 2011 MYT 10:01:40 AM
NEW YORK: Gripped by fear of a new recession, the stock market suffered its worst day Thursday since the financial crisis in the fall of 2008. The Dow Jones industrial average fell more than 500 points, its ninth-steepest decline.
The sell-off wiped out the Dow's remaining gains for 2011. It put the Dow and broader stock indexes into what investors call a correction - down 10 percent from their highs in the spring.
"We are continuing to be bombarded by worries about the global economy," said Bill Stone, the chief investment strategist for PNC Financial.
Across the financial markets, the day was reminiscent of the wild swings that defined the financial crisis in September and October three years ago. Gold prices briefly hit a record high. Oil fell even more than stocks - 6 percent, or $5.30 a barrel. And frightened investors were so desperate to get into some government bonds that they were willing accept almost no return on their money.
It was the most alarming day yet in the almost uninterrupted selling that has swept Wall Street for two weeks. The Dow has lost more than 1,300 points, or 10.5 percent. By one broad measure kept by Dow Jones, almost $1.9 trillion in market value has disappeared.
For the day, the Dow closed down 512.76 points, at 11,383.68. It was the steepest point decline since Dec. 1, 2008.
Thursday's decline was the ninth-worst by points for the Dow. In percentage terms, the decline of 4.3 percent does not rank among the worst. On Black Monday in 1987, for example, the Dow fell 22 percent.
Two weeks ago, investors appeared worried about the deadlocked negotiations in Washington over raising the ceiling on government debt. As soon as the ceiling was raised, investors focused on the economy, and the selling accelerated.
On Thursday, growing fear about the weakening U.S. economy was joined by concern in Europe that the troubled economies of Italy and Spain might need help from the European Union.
NEW YORK: An electronic board displays trading activity on the floor of the New York Stock Exchange on Thursday, Aug. 4, 2011 in New York. Gripped by fear of another recession, the financial markets suffered their worst day Thursday since the crisis of 2008. The Dow Jones industrial average fell more than 500 points, its ninth-steepest decline ever. (AP Photo/Jin Lee)
The European Union has already given financial assistance to Greece and Ireland, two countries that have struggled to pay their debts. A financial rescue package for Italy or Spain might be more than the group of countries can handle.
Traders also unloaded stocks before Friday's release of the government's unemployment report for July, which is expected to show weak job growth and perhaps a rise in the unemployment rate, which is 9.2 percent.
Together, they produced "a perfect storm of selling," said Ryan Larson, head of U.S. equity trading for RBC Global Asset Management.
Until a week ago, Wall Street had mostly convinced itself that the U.S. economy would improve in the second half of the year. Gas prices were falling, and Japanese factories were resuming production after disruptions from the March earthquake.
Then one report after another began to show that the economy was much weaker than first thought.
Manufacturing is barely growing. The service sector, which covers about 90 percent of the American work force, is growing at the slowest rate in a year and a half. People spent less in June than in May, the first decline since September 2009.
And the overall economy is expanding at the slowest pace since the end of the Great Recession. It grew at an annual rate of just 0.8 percent for the first six months of this year, raising the risk of another recession.
In an indication of how frightened investors are, Bank of New York Mellon said it would start charging large investors to hold their cash because they are depositing so much. The bank's clients include pension funds and large investment houses that are selling stock and need to deposit the proceeds.
Mark Luschini, chief investment strategist for Janney Montgomery Scott, an investment firm in Philadelphia, said his clients saw the move from stocks into cash as "a parking lot to sort things out."
"With the scars of 2008 still fresh," he said, "some clients don't want to miss the chance to pre-empt further damage should it come."
Wells Fargo Advisers, a financial management company in St. Louis, said clients were more nervous.
"I wouldn't say they're totally panicking. But obviously nerves are rattled," said Scott Marcouiller, chief technical market strategist there. "And I think that is simply because of the speed of the decline."
Other market indicators reinforced the risk-averse mood. Gold, which is seen as a safe investment when the stock market is turbulent, set a record price, $1,684.90 an ounce, before falling to finish the day at $1,659. Adjusted for inflation, gold is still far below the record reached in 1980.
The yield on the 10-year Treasury note fell to 2.42 percent, its lowest of the year, and the yield on the 2-year Treasury note hit its lowest ever, 0.265 percent. Bond yields fall when demand for bonds increases.
The yield on the one-month Treasury bill fell to almost nothing - 0.008 percent. Investors were willing to accept paltry returns in exchange for holding investments they believed to be stable.
The sell-off was broad. All 10 industry groups in the Standard & Poor's 500 index fell. Energy companies lost almost 7 percent, materials companies were down 6.6 percent, and industrial companies lost more than 5 percent.
For a time, Kraft Foods was the only stock to rise among the 30 that make up the Dow industrials. Kraft announced Thursday that it would split in two, with one company focusing on snacks and the other groceries. But the selling eventually dragged Kraft under, too, and its stock finished down 52 cents, at $33.78.
Steep stock market losses like the ones of the past two weeks can be self-reinforcing. A drop in stocks erodes household wealth and raises doubts about the economic outlook.
The result can be what economists call a vicious cycle. Stock losses take a toll on consumer confidence and make people more reluctant to spend money. Consumer spending makes up 70 percent of economic output in the United States.
Kevin Cook, senior stock strategist for Zacks Investment Research in Chicago, said investors' worst fears probably won't come true.
"This is not 2008 again," he said. "We don't have a liquidity crisis, we don't have a credit crisis - this is just profit taking."
Cook said he believes the S&P 500, which closed Thursday at 1,200.07, will trade between 1,150 and 1,250 between now and Oct. 1, at least until investors have enough information to determine whether the economy is in recession again.
Even taking into account the recent declines, stocks are still considered to be in an impressive bull market that began March 9, 2009, when the market reached its recession low.
The Dow closed that day at 6,547. Since then, it is up about 74 percent.
One year ago, the Dow closed at 10,680. About a month later, the stock market began a rally that took the Dow almost to 13,000. The catalyst was an announcement by Federal Reserve Chairman Ben Bernanke that the Fed was preparing to launch a program to buy $600 billion in government bonds to keep interest rates low and help stocks rally.
The sell-off now comes at a time when corporate profits are growing. For the S&P 500, a measure called the forward price-to-earnings ratio has fallen to about 12, well below its long-term average of 16. That means that investors who buy now are paying less for each dollar in profits.
Based on what an investor now pays for corporate profits, stocks are now trading at their lowest levels in 20 years, said Tim Courtney, chief investment officer of Burns Advisory Group in Oklahoma City.
But few companies were spared in the sell-off Thursday. Just three of the 500 stocks in the S&P 500 moved higher. General Motors fell 4 percent despite beating analyst estimates for its quarterly earnings. - AP
Here's a look at the Dow's 10 worst days since 1899:
By percent decline:
- Oct. 19, 1987: 22.6 percent, or 508 points
- Oct. 28, 1929: 12.8 percent, or 38 points
- Oct. 29, 1929: 11.7 percent, or 31 points
- Nov. 6, 1929: 9.9 percent, or 26 points
- Dec. 18, 1899: 8.7 percent, or 6 points
- Aug. 12, 1932: 8.4 percent, or 6 points
- March 14, 1907: 8.3 percent, or 7 points
- Oct. 26, 1987: 8 percent, or 157 points
- Oct. 15, 2008: 7.9 percent, or 733 points
- July 21, 1933: 7.8 percent, or 8 points
By points:
- Sept. 29, 2008: 778 points, or 7 percent
- Oct. 15, 2008: 733 points, or 7.9 percent
- Sept. 17, 2001: 685 points, or 7.1 percent
- Dec. 1, 2008: 680 points, or 7.7 percent
- Oct. 9, 2008: 679 points, or 7.3 percent
- April 14, 2000: 618 points, or 5.7 percent
- Oct. 27, 1997: 554 points, or 7.2 percent
- Oct. 22, 2008: 514 points, or 5.7 percent
- Aug. 4, 2011: 513 points, or 4.3 percent
- Aug. 31, 1998: 513 points, or 6.4 percent
Source: Dow Jones Indexes, a division of CME Group Inc.
Meanwhile AP repored from London: Fears that the U.S. economy may be heading back into recession and that Italy and Spain won't be able to deal with their debts battered stocks, the euro and oil prices Thursday.
The selling pressure in stock markets accentuated through the day as investors fretted over the U.S. economic recovery, a day before crucial non-farm payrolls for July, which often set the tone in markets for a week or two after their release.
Investors, already fidgety after the protracted U.S. debt deliberations, and worries that Italy and Spain are getting deeply embroiled in Europe's debt crisis, searched for assets considered safer, such as gold.
"$2.3 trillion of value wiped off equities worldwide over a handful of days and the cost is still rising," said Howard Wheeldon, senior strategist at BGC Partners.
In Europe, most markets shed more than 3 percent of their value.
Of the major markets, France's CAC-40 tumbled 3.9 percent to 3,320.35.
Germany's DAX tumbled 3.4 percent to 6,414.76.
Britain's FTSE 100 index of leading British shares ended 3.4 percent lower at 5,393.14.
Among major stock markets, only Tokyo's Nikkei 225 index actually traded up 0.2 percent to 9,659.18 after the Bank of Japan intervened to sell the yen and buy the dollar.
That drove the dollar above 80 yen Thursday for a brief while from 76.99 late Wednesday. By late afternoon London, the dollar was 2.4 percent firmer at 78.97 yen.
Japanese Finance Minister Yoshihiko Noda said financial authorities decided to intervene in the currency markets because the strong yen could hurt the country's export-dependent economy and slow its efforts to recover from the March 11 earthquake and tsunami.
The dollar had fallen as low as 76.29 yen on Monday. It hit a record post-World War II low of 76.25 yen in the days following the March 11 earthquake and tsunami.
A strong yen is painful for Japan because it reduces the value of foreign earnings for companies like Toyota Motor Corp. and Nintendo Co. and makes Japanese goods more expensive in overseas markets.
The intervention was coupled with monetary policy easing by the central bank's board. The bank expanded an asset purchase program to 50 trillion yen ($638.3 billion) from 40 trillion yen. It also kept its key interest rate in a range of zero to 0.1 percent.
Japan's moves came only a day after the Swiss National Bank intervened to slow a rise in the Swiss franc, another currency perceived as a save-haven at a time investors are fleeing risky assets such as shaky European government bonds.
Investors have been looking for safe havens to park their cash after figures earlier this week pointed to a dangerous slowdown in the U.S. economy at a time when Europe's debt problems appear to be engulfing big economies like Italy and Spain.
Yields on Spanish and Italian bonds stabilized Thursday, still much higher than just a month ago but further away from the 7-percent level generally seen as a nation's breaking point. The yield, or interest rate, of Italian 10-year bonds was 6.19 percent, while its Spanish equivalents were at 6.21 percent.
The rise in the yields of both Italian and Spanish bonds came despite indications that the European Central Bank intervened in the markets to prop up their bonds.
Questions about the bond-buying program, left unused for four months, dominated Trichet's news conference following Thursday's widely anticipated decision to leave the ECB's main interest rate unchanged at 1.5 percent.
Trichet left open the possibility of reopening the bond-purchase program but appeared determined to keep market traders off-balance about the bank's actual intentions.
"I never said it was dormant," he said, adding that the bank would reveal any purchases at the regular Monday disclosure.
"You will see what we do," he said. "If we intervene, we intervene, and we will publish the amount of what we have done."
Elsewhere in Asia, Hong Kong's Hang Seng shed 0.5 percent to 21,884.74 while China's Shanghai Composite Index advanced 0.2 percent to 2,684.04.
South Korea's benchmark Kospi dropped 2.3 percent to 2,018.47.
Worries over the global recovery hit oil prices hard too. Benchmark oil for September delivery was down $3.37 at $88.56 a barrel in electronic trading on the New York Mercantile Exchange.
In Kuala Lumpur Bernama reported that Bursa Malaysia were sharply lower this morning(Friday) after the massive sell-off of shares in Asian markets and overnight Wall Street, dealers said.
Dealers said investors fled equities market in favour of safe haven assets in view of the wide spreading European debt crisis and gloomy global economic outlook. As at 9.12 am, the benchmark FBM KLCI erased 31.73 points to 1,515.16 after opening 16.95 points lower at 1,529.94.
The Finance Index wiped out 347.59 points to 14,413.26, Plantation Index slipped 162.21 points to 7,576.24 and Industrial Index decreased 51.74 points to 2,753.31.
The FBM Emas Index gave up 226.271 points to 10,453.88, FBM Ace Index fell 143.51 points to 4,072.98 and FBM Mid 70 Index eroded 267.31 points to 11,581.19.
Losers outnumbered gainers 580 to 12 with 56 counters unchanged, 851 untraded and 35 others suspended. Turnover stood at 144.7 million shares worth RM175 million.
Actives, Karambunai Corp slipped half-a-sen to 16.5 sen, Sanichi Technology eased 1.5 sen to nine sen, Axiata Group fell two sen to RM5.05 and Malaysia Building Society-warrant 11/16 dropped 4.5 sen to 75.5 sen.
Heavyweights, Maybank lost 18 sen to RM8.67, CIMB dipped 13 sen to RM8.27, Petronas Chemicals slipped 20 sen to RM6.71 and Petronas Gas fell 40 sen to RM12.94. - AP/Bernama
Monday, August 1, 2011
20 Pain Cures in your kitchen
Make muscle pain a memory with ginger
When Danish researchers asked achy people to jazz up their diets with ginger, it eased muscle and joint pain, swelling and stiffness for up to 63 percent of them within two months. Experts credit ginger's potent compounds called gingerols, which prevent the production of pain-triggering hormones. The study-recommended dose: Add at least 1 teaspoon of dried ginger or 2 teaspoons of chopped ginger to meals daily.
Cure a toothache with cloves
Got a toothache and can't get to the dentist? Gently chewing on a clove can ease tooth pain and gum inflammation for two hours straight, say UCLA researchers. Experts point to a natural compound in cloves called eugenol, a powerful, natural anesthetic. Bonus: Sprinkling a ¼ teaspoon of ground cloves on meals daily may also protect your ticker. Scientists say this simple action helps stabilize blood sugar, plus dampen production of artery-clogging cholesterol in as little as three weeks.
Heal heartburn with cider vinegar
Sip 1 tablespoon of apple cider vinegar mixed with 8 ounces of water before every meal, and experts say you could shut down painful bouts of heartburn in as little as 24 hours. "Cider vinegar is rich in malic and tartaric acids, powerful digestive aids that speed the breakdown of fats and proteins so your stomach can empty quickly, before food washes up into the esophagus, triggering heartburn pain," explains Joseph Brasco, M.D., a gastroenterologist at the Center for Colon and Digestive Diseases in Huntsville, AL.
Erase earaches with garlic
Painful ear infections drive millions of Americans to doctors' offices every year. To cure one fast, just place two drops of warm garlic oil into your aching ear twice daily for five days. This simple treatment can clear up ear infections faster than prescription meds, say experts at the University of New Mexico School of Medicine. Scientists say garlic's active ingredients (germanium, selenium, and sulfur compounds) are naturally toxic to dozens of different pain-causing bacteria. To whip up your own garlic oil gently simmer three cloves of crushed garlic in a half a cup of extra virgin olive oil for two minutes, strain, then refrigerate for up to two weeks, suggests Teresa Graedon, Ph.D., co-author of the book, Best Choices From The People's Pharmacy. For an optimal experience, warm this mix slightly before using so the liquid will feel soothing in your ear canal.
Chase away joint and headache pain with cherries
Latest studies show that at least one in four women is struggling with arthritis, gout or chronic headaches. If you're one of them, a daily bowl of cherries could ease your ache, without the stomach upset so often triggered by today's painkillers, say researchers at East Lansing 's Michigan State University . Their research reveals that anthocyanins, the compounds that give cherries their brilliant red color, are anti-inflammatories 10 times stronger than ibuprofen and aspirin. "Anthocyanins help shut down the powerful enzymes that kick-start tissue inflammation, so they can prevent, as well as treat, many different kinds of pain," explains Muraleedharan Nair, Ph.D., professor of food science at Michigan State University . His advice: Enjoy 20 cherries (fresh, frozen or dried) daily, then continue until your pain disappears.
Fight tummy troubles with fish
Indigestion, irritable bowel syndrome, inflammatory bowel diseases...if your belly always seems to be in an uproar, try munching 18 ounces of fish weekly to ease your misery. Repeated studies show that the fatty acids in fish, called EPA and DHA, can significantly reduce intestinal inflammation, cramping and belly pain and, in some cases, provide as much relief as corticosteroids and other prescription meds. "EPA and DHA are powerful, natural, side effect-free anti-inflammatories, that can dramatically improve the function of the entire gastrointestinal tract," explains biological chemist Barry Sears, Ph.D., president of the Inflammation Research Foundation in Marblehead , MA . For best results, look for oily fish like salmon, sardines, tuna, mackerel, trout and herring.
Prevent PMS with yogurt
Up to 80 percent of women will struggle with premenstrual syndrome and its uncomfortable symptoms, report Yale researchers. The reason: Their nervous systems are sensitive to the ups and downs in estrogen and progesterone that occur naturally every month. But snacking on 2 cups of yogurt a day can slash these symptoms by 48 percent, say researchers at New York 's Columbia University . "Yogurt is rich in calcium, a mineral that naturally calms the nervous system, preventing painful symptoms even when hormones are in flux," explains Mary Jane Minkin, M.D., a professor of gynecology at Yale University .
Tame chronic pain with turmeric
Studies show turmeric, a popular East Indian spice, is actually three times more effective at easing pain than aspirin, ibuprofen or naproxen, plus it can help relieve chronic pain for 50 percent of people struggling with arthritis and even fibromyalgia, according to Cornell researchers. That's because turmeric's active ingredient, curcumin, naturally shuts down cyclooxygenase 2, an enzyme that churns out a stream of pain-producing hormones, explains nutrition researcher Julian Whitaker, M.D. and author of the book, Reversing Diabetes. The study-recommended dose: Sprinkle 1/4 teaspoon of this spice daily onto any rice, poultry, meat or vegetable dish.
End endometrial pain with oats
The ticket to soothing endometriosis pain could be a daily bowl of oatmeal. Endometriosis occurs when little bits of the uterine lining detach and grow outside of the uterus. Experts say these migrating cells can turn menstruation into a misery, causing so much inflammation that they trigger severe cramping during your period, plus a heavy ache that drags on all month long. Fortunately, scientists say opting for a diet rich in oats can help reduce endometrial pain for up to 60 percent of women within six months. That's because oats don't contain gluten, a trouble-making protein that triggers inflammation in many women, making endometriosis difficult to bear, explains Peter Green, M.D., professor of medicine at Colombia University .
Soothe foot pain with salt
Experts say at least six million Americans develop painful ingrown toenails each year. But regularly soaking ingrown nails in warm salt water baths can cure these painful infections within four days, say scientists at California 's Stanford University . The salt in the mix naturally nixes inflammation, plus it's anti-bacterial, so it quickly destroys the germs that cause swelling and pain. Just mix 1 teaspoon of salt into each cup of water, heat to the warmest temperature that you can comfortably stand, and then soak the affected foot area for 20 minutes twice daily, until your infection subsides.
Prevent digestive upsets with pineapple
Got gas? One cup of fresh pineapple daily can cut painful bloating within 72 hours, say researchers at California 's Stanford University . That's because pineapple is natually packed with proteolytic enzymes, digestive aids that help speed the breakdown of pain-causing proteins in the stomach and small intestine, say USDA researchers.
Relax painful muscles with peppermint
Suffering from tight, sore muscles? Stubborn knots can hang around for months if they aren't properly treated, says naturopath Mark Stengler, N.D., author of the book, The Natural Physician's Healing Therapies. His advice: Three times each week, soak in a warm tub scented with 10 drops of peppermint oil. The warm water will relax your muscles, while the peppermint oil will naturally soothe your nerves -- a combo that can ease muscle cramping 25 percent more effectively than over-the-counter painkillers, and cut the frequency of future flare-ups in half, says Stengler.
Give your back some TLC with grapes
Got an achy back? Grapes could be the ticket to a speedy recovery. Recent studies at Ohio State University suggest eating a heaping cup of grapes daily can relax tight blood vessels, significantly improving blood flow to damaged back tissues (and often within three hours of enjoying the first bowl). That's great news because your back's vertebrae and shock-absorbing discs are completely dependent on nearby blood vessels to bring them healing nutrients and oxygen, so improving blood flow is essential for healing damaged back tissue, says Stengler.
Wash away pain injuries with water
Whether it's your feet, your knees or your shoulders that are throbbing, experts at New York 's Manhattan College , say you could kick-start your recovery in one week just by drinking eight 8-ounce glasses of water daily. Why? Experts say water dilutes, and then helps flush out, histamine, a pain-triggering compound produced by injured tissues. "Plus water is a key building block of the cartilage that cushions the ends of your bones, your joints' lubricating fluid, and the soft discs in your spine," adds Susan M. Kleiner, Ph.D., author of the book, The Good Mood Diet. "And when these tissues are well-hydrated, they can move and glide over each other without causing pain." One caveat: Be sure to measure your drinking glasses to find out how large they really are before you start sipping, she says. Today's juice glasses often hold more than 12 ounces, which means five servings could be enough to meet your daily goal.
Heal sinus problems with horseradish
Latest studies show sinusitis is the nation's number one chronic health problem. And this condition doesn't just spur congestion and facial pain, it also makes sufferers six times more likely to feel achy all-over. Horseradish to the rescue! According to German researchers, this eye-watering condiment naturally revs up blood flow to the sinus cavities, helping to open and drain clogged sinuses and heal sinus infections more quickly than decongestant sprays do. The study-recommended dose: One teaspoon twice daily (either on its own, or used as a sandwich or meat topping) until symptoms clear.
Beat bladder infections with blueberries
Eating 1 cup of blueberries daily, whether you opt for them fresh, frozen or in juice form, can cut your risk of a urinary tract infection (UTIs) by 60 percent, according to researchers at New Jersey's Rutgers University. That's because blueberries are loaded with tannins, plant compounds that wrap around problem-causing bacteria in the bladder, so they can't get a toehold and create an infection, explains Amy Howell, Ph.D. a scientist at Rutgers University .
Heal mouth sores with honey
Dab painful canker and cold sores with unpasteurized honey four times daily until these skin woes disappear, and they'll heal 43 percent faster than if you use a prescription cream, say researchers at the Dubai Specialized Medical Center in the United Arab Emirates . Raw honey's natural enzymes zap inflammation, destroy invading viruses and speed the healing of damaged tissues, say the study authors.
Fight breast pain with flax
In one recent study, adding 3 tablespoons of ground flax to their daily diet eased breast soreness for one in three women within 12 weeks. Scientists credit flax's phytoestrogens, natural plant compounds that prevent the estrogen spikes that can trigger breast pain. More good news: You don't have to be a master baker to sneak this healthy seed into your diet. Just sprinkle ground flax on oatmeal, yogurt, applesauce or add it to smoothies and veggie dips.
Cure migraines with coffee
Prone to migraines? Try muscling-up your painkiller with a coffee chaser. Whatever over-the-counter pain med you prefer, researchers at the National Headache Foundation say washing it down with a strong 12- ounce cup of coffee will boost the effectiveness of your medication by 40 percent or more. Experts say caffeine stimulates the stomach lining to absorb painkillers more quickly and more effectively.
Tame leg cramps with tomato juice
At least one in five people regularly struggle with leg cramps. The culprit? Potassium deficiencies, which occur when this mineral is flushed out by diuretics, caffeinated beverages or heavy perspiration during exercise. But sip 10 ounces of potassium-rich tomato juice daily and you'll not only speed your recovery, you'll reduce your risk of painful cramp flare-ups in as little as 10 days, say UCLA researchers.
When Danish researchers asked achy people to jazz up their diets with ginger, it eased muscle and joint pain, swelling and stiffness for up to 63 percent of them within two months. Experts credit ginger's potent compounds called gingerols, which prevent the production of pain-triggering hormones. The study-recommended dose: Add at least 1 teaspoon of dried ginger or 2 teaspoons of chopped ginger to meals daily.
Cure a toothache with cloves
Got a toothache and can't get to the dentist? Gently chewing on a clove can ease tooth pain and gum inflammation for two hours straight, say UCLA researchers. Experts point to a natural compound in cloves called eugenol, a powerful, natural anesthetic. Bonus: Sprinkling a ¼ teaspoon of ground cloves on meals daily may also protect your ticker. Scientists say this simple action helps stabilize blood sugar, plus dampen production of artery-clogging cholesterol in as little as three weeks.
Heal heartburn with cider vinegar
Sip 1 tablespoon of apple cider vinegar mixed with 8 ounces of water before every meal, and experts say you could shut down painful bouts of heartburn in as little as 24 hours. "Cider vinegar is rich in malic and tartaric acids, powerful digestive aids that speed the breakdown of fats and proteins so your stomach can empty quickly, before food washes up into the esophagus, triggering heartburn pain," explains Joseph Brasco, M.D., a gastroenterologist at the Center for Colon and Digestive Diseases in Huntsville, AL.
Erase earaches with garlic
Painful ear infections drive millions of Americans to doctors' offices every year. To cure one fast, just place two drops of warm garlic oil into your aching ear twice daily for five days. This simple treatment can clear up ear infections faster than prescription meds, say experts at the University of New Mexico School of Medicine. Scientists say garlic's active ingredients (germanium, selenium, and sulfur compounds) are naturally toxic to dozens of different pain-causing bacteria. To whip up your own garlic oil gently simmer three cloves of crushed garlic in a half a cup of extra virgin olive oil for two minutes, strain, then refrigerate for up to two weeks, suggests Teresa Graedon, Ph.D., co-author of the book, Best Choices From The People's Pharmacy. For an optimal experience, warm this mix slightly before using so the liquid will feel soothing in your ear canal.
Chase away joint and headache pain with cherries
Latest studies show that at least one in four women is struggling with arthritis, gout or chronic headaches. If you're one of them, a daily bowl of cherries could ease your ache, without the stomach upset so often triggered by today's painkillers, say researchers at East Lansing 's Michigan State University . Their research reveals that anthocyanins, the compounds that give cherries their brilliant red color, are anti-inflammatories 10 times stronger than ibuprofen and aspirin. "Anthocyanins help shut down the powerful enzymes that kick-start tissue inflammation, so they can prevent, as well as treat, many different kinds of pain," explains Muraleedharan Nair, Ph.D., professor of food science at Michigan State University . His advice: Enjoy 20 cherries (fresh, frozen or dried) daily, then continue until your pain disappears.
Fight tummy troubles with fish
Indigestion, irritable bowel syndrome, inflammatory bowel diseases...if your belly always seems to be in an uproar, try munching 18 ounces of fish weekly to ease your misery. Repeated studies show that the fatty acids in fish, called EPA and DHA, can significantly reduce intestinal inflammation, cramping and belly pain and, in some cases, provide as much relief as corticosteroids and other prescription meds. "EPA and DHA are powerful, natural, side effect-free anti-inflammatories, that can dramatically improve the function of the entire gastrointestinal tract," explains biological chemist Barry Sears, Ph.D., president of the Inflammation Research Foundation in Marblehead , MA . For best results, look for oily fish like salmon, sardines, tuna, mackerel, trout and herring.
Prevent PMS with yogurt
Up to 80 percent of women will struggle with premenstrual syndrome and its uncomfortable symptoms, report Yale researchers. The reason: Their nervous systems are sensitive to the ups and downs in estrogen and progesterone that occur naturally every month. But snacking on 2 cups of yogurt a day can slash these symptoms by 48 percent, say researchers at New York 's Columbia University . "Yogurt is rich in calcium, a mineral that naturally calms the nervous system, preventing painful symptoms even when hormones are in flux," explains Mary Jane Minkin, M.D., a professor of gynecology at Yale University .
Tame chronic pain with turmeric
Studies show turmeric, a popular East Indian spice, is actually three times more effective at easing pain than aspirin, ibuprofen or naproxen, plus it can help relieve chronic pain for 50 percent of people struggling with arthritis and even fibromyalgia, according to Cornell researchers. That's because turmeric's active ingredient, curcumin, naturally shuts down cyclooxygenase 2, an enzyme that churns out a stream of pain-producing hormones, explains nutrition researcher Julian Whitaker, M.D. and author of the book, Reversing Diabetes. The study-recommended dose: Sprinkle 1/4 teaspoon of this spice daily onto any rice, poultry, meat or vegetable dish.
End endometrial pain with oats
The ticket to soothing endometriosis pain could be a daily bowl of oatmeal. Endometriosis occurs when little bits of the uterine lining detach and grow outside of the uterus. Experts say these migrating cells can turn menstruation into a misery, causing so much inflammation that they trigger severe cramping during your period, plus a heavy ache that drags on all month long. Fortunately, scientists say opting for a diet rich in oats can help reduce endometrial pain for up to 60 percent of women within six months. That's because oats don't contain gluten, a trouble-making protein that triggers inflammation in many women, making endometriosis difficult to bear, explains Peter Green, M.D., professor of medicine at Colombia University .
Soothe foot pain with salt
Experts say at least six million Americans develop painful ingrown toenails each year. But regularly soaking ingrown nails in warm salt water baths can cure these painful infections within four days, say scientists at California 's Stanford University . The salt in the mix naturally nixes inflammation, plus it's anti-bacterial, so it quickly destroys the germs that cause swelling and pain. Just mix 1 teaspoon of salt into each cup of water, heat to the warmest temperature that you can comfortably stand, and then soak the affected foot area for 20 minutes twice daily, until your infection subsides.
Prevent digestive upsets with pineapple
Got gas? One cup of fresh pineapple daily can cut painful bloating within 72 hours, say researchers at California 's Stanford University . That's because pineapple is natually packed with proteolytic enzymes, digestive aids that help speed the breakdown of pain-causing proteins in the stomach and small intestine, say USDA researchers.
Relax painful muscles with peppermint
Suffering from tight, sore muscles? Stubborn knots can hang around for months if they aren't properly treated, says naturopath Mark Stengler, N.D., author of the book, The Natural Physician's Healing Therapies. His advice: Three times each week, soak in a warm tub scented with 10 drops of peppermint oil. The warm water will relax your muscles, while the peppermint oil will naturally soothe your nerves -- a combo that can ease muscle cramping 25 percent more effectively than over-the-counter painkillers, and cut the frequency of future flare-ups in half, says Stengler.
Give your back some TLC with grapes
Got an achy back? Grapes could be the ticket to a speedy recovery. Recent studies at Ohio State University suggest eating a heaping cup of grapes daily can relax tight blood vessels, significantly improving blood flow to damaged back tissues (and often within three hours of enjoying the first bowl). That's great news because your back's vertebrae and shock-absorbing discs are completely dependent on nearby blood vessels to bring them healing nutrients and oxygen, so improving blood flow is essential for healing damaged back tissue, says Stengler.
Wash away pain injuries with water
Whether it's your feet, your knees or your shoulders that are throbbing, experts at New York 's Manhattan College , say you could kick-start your recovery in one week just by drinking eight 8-ounce glasses of water daily. Why? Experts say water dilutes, and then helps flush out, histamine, a pain-triggering compound produced by injured tissues. "Plus water is a key building block of the cartilage that cushions the ends of your bones, your joints' lubricating fluid, and the soft discs in your spine," adds Susan M. Kleiner, Ph.D., author of the book, The Good Mood Diet. "And when these tissues are well-hydrated, they can move and glide over each other without causing pain." One caveat: Be sure to measure your drinking glasses to find out how large they really are before you start sipping, she says. Today's juice glasses often hold more than 12 ounces, which means five servings could be enough to meet your daily goal.
Heal sinus problems with horseradish
Latest studies show sinusitis is the nation's number one chronic health problem. And this condition doesn't just spur congestion and facial pain, it also makes sufferers six times more likely to feel achy all-over. Horseradish to the rescue! According to German researchers, this eye-watering condiment naturally revs up blood flow to the sinus cavities, helping to open and drain clogged sinuses and heal sinus infections more quickly than decongestant sprays do. The study-recommended dose: One teaspoon twice daily (either on its own, or used as a sandwich or meat topping) until symptoms clear.
Beat bladder infections with blueberries
Eating 1 cup of blueberries daily, whether you opt for them fresh, frozen or in juice form, can cut your risk of a urinary tract infection (UTIs) by 60 percent, according to researchers at New Jersey's Rutgers University. That's because blueberries are loaded with tannins, plant compounds that wrap around problem-causing bacteria in the bladder, so they can't get a toehold and create an infection, explains Amy Howell, Ph.D. a scientist at Rutgers University .
Heal mouth sores with honey
Dab painful canker and cold sores with unpasteurized honey four times daily until these skin woes disappear, and they'll heal 43 percent faster than if you use a prescription cream, say researchers at the Dubai Specialized Medical Center in the United Arab Emirates . Raw honey's natural enzymes zap inflammation, destroy invading viruses and speed the healing of damaged tissues, say the study authors.
Fight breast pain with flax
In one recent study, adding 3 tablespoons of ground flax to their daily diet eased breast soreness for one in three women within 12 weeks. Scientists credit flax's phytoestrogens, natural plant compounds that prevent the estrogen spikes that can trigger breast pain. More good news: You don't have to be a master baker to sneak this healthy seed into your diet. Just sprinkle ground flax on oatmeal, yogurt, applesauce or add it to smoothies and veggie dips.
Cure migraines with coffee
Prone to migraines? Try muscling-up your painkiller with a coffee chaser. Whatever over-the-counter pain med you prefer, researchers at the National Headache Foundation say washing it down with a strong 12- ounce cup of coffee will boost the effectiveness of your medication by 40 percent or more. Experts say caffeine stimulates the stomach lining to absorb painkillers more quickly and more effectively.
Tame leg cramps with tomato juice
At least one in five people regularly struggle with leg cramps. The culprit? Potassium deficiencies, which occur when this mineral is flushed out by diuretics, caffeinated beverages or heavy perspiration during exercise. But sip 10 ounces of potassium-rich tomato juice daily and you'll not only speed your recovery, you'll reduce your risk of painful cramp flare-ups in as little as 10 days, say UCLA researchers.
Health Effects Drinking Honey
For those who love honey. Whoever thought??
Honey is the only food (liquid) on the planet that will not spoil or rot.
It will do what some call turning to sugar. In reality honey is always honey.
However, when left in a cool dark place for a long time it will do what I rather call "crystallizing".
When this happens I would loosen the lid, boil some water, and let the honey container sit in the hot water,
turn off the heat and let it liquefy. It is then as good as it ever was.
Never boil honey or put it in a microwave. To do so will kill the enzymes in the honey.
CINNAMON AND HONEY
Bet the drug companies won't like this one getting around.
Facts on Honey and Cinnamon: It is found that a mixture of honey and Cinnamon cures most diseases.
Honey is produced in most of the countries of the world.
Scientists today also accept honey as a 'Ram Ban' (very effective) medicine for all kinds of diseases.
Honey can be used without any side effects for any kind of diseases.
Today's science says that even though honey is sweet,
if taken in the right dosage as a medicine, it does not harm diabetic patients.
Weekly World News, a magazine in Canada , in its issue, dated 17 January, 1995
has given the following list of diseases that can be cured by honey and cinnamon as researched by western scientists:
HEART DISEASES:
Make a paste of honey and cinnamon powder, apply on bread, instead of jelly and jam, and eat it regularly for breakfast.
It reduces the cholesterol in the arteries and saves the patient from heart attack.
Also, those who have already had an attack, if they do this process daily, they are kept miles away from the next attack.
Regular use of the above process relieves loss of breath and strengthens the heart beat.
In America and Canada , various nursing homes have treated patients successfully and have found that as you age,
the arteries and veins lose their flexibility and get clogged; honey and cinnamon revitalize the arteries and veins.
ARTHRITIS:
Arthritis patients may take daily, morning and night,
one cup of hot water with two spoons of honey and one small teaspoon of cinnamon powder.
If taken regularly even chronic arthritis can be cured. In a recent research conducted at the Copenhagen University ,
it was found that when the doctors treated their patients with a mixture of
one tablespoon Honey and half teaspoon Cinnamon powder before breakfast, they found that within a week,
out of the 200 people so treated, practically 73 patients were totally relieved of pain, and within a month,
mostly all the patients who could not walk or move around because of arthritis started walking without pain.
BLADDER INFECTIONS:
Take two tablespoons of cinnamon powder and one teaspoon of honey in a glass of lukewarm water and drink it.
It destroys the germs in the bladder.
CHOLESTEROL:
Two tablespoons of honey and three teaspoons of Cinnamon Powder mixed in 16 ounces of tea water,
given to a cholesterolpatient, were found to reduce the level of cholesterol in the blood by 10 percent within two hours
as mentioned for arthritic patients, if taken three times a day, any chronic cholesterol is cured.
According to information received in the said Journal, pure honey taken with food daily relieves complaints of cholesterol.
COLDS:
Those suffering from common or severe colds should take one tablespoon lukewarm honey with 1/4 spoon cinnamon powder daily
for three days. This process will cure most chronic cough, cold, and clear the sinuses.
UPSET STOMACH:
Honey taken with cinnamon powder cures stomach ache and also clears stomach ulcers from the root.
GAS:
According to the studies done in India and Japan ,
it is revealed that if Honey is taken with cinnamon powder the stomach is relieved of gas.
IMMUNE SYSTEM:
Daily use of honey and cinnamon powder strengthens the immune system and protects the body from bacteria and viral attacks.
Scientists have found that honey has various vitamins and iron in large amounts.
Constant use of Honey strengthens the white blood corpuscles to fight bacterial and viral diseases.
INDIGESTION:
Cinnamon powder sprinkled on two tablespoons of honey taken before food relieves acidity and digests the heaviest of meals.
INFLUENZA:
A scientist in Spain has proved that honey contains a natural ' Ingredient' which kills the influenza germs and saves the patient from flu.
LONGEVITY:
Tea made with honey and cinnamon powder, when taken regularly, arrests the ravages of old age.
Take four spoons of honey, one spoon of cinnamon powder, and three cups of water and boil to make like tea.
Drink 1/4 cup, three to four times a day. It keeps the skin fresh and soft and arrests old age.
Life spans also increase and even a 100 year old, starts performing the chores of a 20-year-old.
PIMPLES:
Three tablespoons of honey and one teaspoon of cinnamon powder paste.
Apply this paste on the pimples before sleeping and wash it next morning with warm water. If done daily for two weeks,
it removes pimples from the root.
SKIN INFECTIONS:
Applying honey and cinnamon powder in equal parts on the affected parts cures eczema, ringworm and all types of skin infections.
WEIGHT LOSS:
Daily in the morning one half hour before breakfast on an empty stomach, and at night before sleeping, drink honey and cinnamon
powder boiled in one cup of water. If taken regularly, it reduces the weight of even the most obese person.
Also, drinking this mixture regularly does not allow the fat to accumulate in the body even though the person may eat a high calorie diet.
CANCER:
Recent research in Japan and Australia has revealed that advanced cancer of the stomach and bones have been cured successfully.
Patients suffering from these kinds of cancer should daily take one tablespoon of honey with one teaspoon of cinnamon powder
for one month three times a day.
FATIGUE:
Recent studies have shown that the sugar content of honey is more helpful rather than being detrimental to the strength of the body.
Senior citizens, who take honey and cinnamon powder in equal parts, are more alert and flexible.
Dr. Milton, who has done research, says that a half tablespoon of honey taken in a glass of water and sprinkled with cinnamon powder,
taken daily after brushing and in the afternoon at about 3:00 P.M. when the vitality of the body starts to decrease,
increases the vitality of the body within a week.
BAD BREATH:
People of South America , first thing in the morning,gargle with one teaspoon of honey and cinnamon powder mixed in hot water,
so their breath stays fresh throughout the day.
HEARING LOSS:
Daily morning and night honey and cinnamon powder, taken in equal parts restores hearing. Remember when we were kids?
We had toast with real butter and cinnamon sprinkled on it!
Honey is the only food (liquid) on the planet that will not spoil or rot.
It will do what some call turning to sugar. In reality honey is always honey.
However, when left in a cool dark place for a long time it will do what I rather call "crystallizing".
When this happens I would loosen the lid, boil some water, and let the honey container sit in the hot water,
turn off the heat and let it liquefy. It is then as good as it ever was.
Never boil honey or put it in a microwave. To do so will kill the enzymes in the honey.
CINNAMON AND HONEY
Bet the drug companies won't like this one getting around.
Facts on Honey and Cinnamon: It is found that a mixture of honey and Cinnamon cures most diseases.
Honey is produced in most of the countries of the world.
Scientists today also accept honey as a 'Ram Ban' (very effective) medicine for all kinds of diseases.
Honey can be used without any side effects for any kind of diseases.
Today's science says that even though honey is sweet,
if taken in the right dosage as a medicine, it does not harm diabetic patients.
Weekly World News, a magazine in Canada , in its issue, dated 17 January, 1995
has given the following list of diseases that can be cured by honey and cinnamon as researched by western scientists:
HEART DISEASES:
Make a paste of honey and cinnamon powder, apply on bread, instead of jelly and jam, and eat it regularly for breakfast.
It reduces the cholesterol in the arteries and saves the patient from heart attack.
Also, those who have already had an attack, if they do this process daily, they are kept miles away from the next attack.
Regular use of the above process relieves loss of breath and strengthens the heart beat.
In America and Canada , various nursing homes have treated patients successfully and have found that as you age,
the arteries and veins lose their flexibility and get clogged; honey and cinnamon revitalize the arteries and veins.
ARTHRITIS:
Arthritis patients may take daily, morning and night,
one cup of hot water with two spoons of honey and one small teaspoon of cinnamon powder.
If taken regularly even chronic arthritis can be cured. In a recent research conducted at the Copenhagen University ,
it was found that when the doctors treated their patients with a mixture of
one tablespoon Honey and half teaspoon Cinnamon powder before breakfast, they found that within a week,
out of the 200 people so treated, practically 73 patients were totally relieved of pain, and within a month,
mostly all the patients who could not walk or move around because of arthritis started walking without pain.
BLADDER INFECTIONS:
Take two tablespoons of cinnamon powder and one teaspoon of honey in a glass of lukewarm water and drink it.
It destroys the germs in the bladder.
CHOLESTEROL:
Two tablespoons of honey and three teaspoons of Cinnamon Powder mixed in 16 ounces of tea water,
given to a cholesterolpatient, were found to reduce the level of cholesterol in the blood by 10 percent within two hours
as mentioned for arthritic patients, if taken three times a day, any chronic cholesterol is cured.
According to information received in the said Journal, pure honey taken with food daily relieves complaints of cholesterol.
COLDS:
Those suffering from common or severe colds should take one tablespoon lukewarm honey with 1/4 spoon cinnamon powder daily
for three days. This process will cure most chronic cough, cold, and clear the sinuses.
UPSET STOMACH:
Honey taken with cinnamon powder cures stomach ache and also clears stomach ulcers from the root.
GAS:
According to the studies done in India and Japan ,
it is revealed that if Honey is taken with cinnamon powder the stomach is relieved of gas.
IMMUNE SYSTEM:
Daily use of honey and cinnamon powder strengthens the immune system and protects the body from bacteria and viral attacks.
Scientists have found that honey has various vitamins and iron in large amounts.
Constant use of Honey strengthens the white blood corpuscles to fight bacterial and viral diseases.
INDIGESTION:
Cinnamon powder sprinkled on two tablespoons of honey taken before food relieves acidity and digests the heaviest of meals.
INFLUENZA:
A scientist in Spain has proved that honey contains a natural ' Ingredient' which kills the influenza germs and saves the patient from flu.
LONGEVITY:
Tea made with honey and cinnamon powder, when taken regularly, arrests the ravages of old age.
Take four spoons of honey, one spoon of cinnamon powder, and three cups of water and boil to make like tea.
Drink 1/4 cup, three to four times a day. It keeps the skin fresh and soft and arrests old age.
Life spans also increase and even a 100 year old, starts performing the chores of a 20-year-old.
PIMPLES:
Three tablespoons of honey and one teaspoon of cinnamon powder paste.
Apply this paste on the pimples before sleeping and wash it next morning with warm water. If done daily for two weeks,
it removes pimples from the root.
SKIN INFECTIONS:
Applying honey and cinnamon powder in equal parts on the affected parts cures eczema, ringworm and all types of skin infections.
WEIGHT LOSS:
Daily in the morning one half hour before breakfast on an empty stomach, and at night before sleeping, drink honey and cinnamon
powder boiled in one cup of water. If taken regularly, it reduces the weight of even the most obese person.
Also, drinking this mixture regularly does not allow the fat to accumulate in the body even though the person may eat a high calorie diet.
CANCER:
Recent research in Japan and Australia has revealed that advanced cancer of the stomach and bones have been cured successfully.
Patients suffering from these kinds of cancer should daily take one tablespoon of honey with one teaspoon of cinnamon powder
for one month three times a day.
FATIGUE:
Recent studies have shown that the sugar content of honey is more helpful rather than being detrimental to the strength of the body.
Senior citizens, who take honey and cinnamon powder in equal parts, are more alert and flexible.
Dr. Milton, who has done research, says that a half tablespoon of honey taken in a glass of water and sprinkled with cinnamon powder,
taken daily after brushing and in the afternoon at about 3:00 P.M. when the vitality of the body starts to decrease,
increases the vitality of the body within a week.
BAD BREATH:
People of South America , first thing in the morning,gargle with one teaspoon of honey and cinnamon powder mixed in hot water,
so their breath stays fresh throughout the day.
HEARING LOSS:
Daily morning and night honey and cinnamon powder, taken in equal parts restores hearing. Remember when we were kids?
We had toast with real butter and cinnamon sprinkled on it!
Subscribe to:
Posts (Atom)
Posts
