Our blog's intention is to request the US government to grant us a chance to defend our mother country Japan at the American court of law regarding the resolution "Comfort Women" passed July 30, 07.


Impasse on Greek Debt Threatens EU Deal

By James G. Neuger and Aaron Kirchfeld - Oct 26, 2011 5:55 PM CT

 European Union talks with banks on bondholder losses as part of a second Greek bailout ran aground, dimming the chances for a comprehensive strategy at a summit to stamp out the debt crisis.

A statement issued close to midnight in Brussels by the Institute of International Finance, the bank lobby, said there was no agreement “on any element of a deal.”

“Work’s not been done yet, but everyone’s coming here today with the goal to progress quite a bit,” German Chancellor Angela Merkel told reporters as she arrived for the summit yesterday at about 5 p.m.

The Greek stalemate darkens the summit’s prospects, since a deal struck at an earlier meeting yesterday on recapitalizing banks and later talks on bolstering the euro area’s 440 billion- euro ($608 billion) rescue fund hinge on steering debt-laden Greece toward financial health.

While policy makers and bondholders were converging on a 50 percent writedown of Greek debt, clashes over collateral to underpin the transaction will limit the summit to issuing a mandate for further talks, an EU official said in Brussels on condition of anonymity.

European leaders convened for the second summit in four days -- and the 14th in 21 months -- amid mounting global exasperation over their failure to extinguish the two-year-old crisis that now threatens to ravage Italy and France and brake the world economy.

Stocks Gain
U.S. stocks gained and the euro erased declines on hopes for progress. The Standard & Poor’s 500 Index added 1.1 percent in New York trading. The euro slid 0.1 percent to $1.3891 at 12:50 a.m. in Brussels.

The outlines of a deal to safeguard banks emerged, centering on a June 30, 2012 deadline for lenders to reach core capital reserves of 9 percent after writing down their sovereign debt holdings, according to a statement after all 27 EU leaders met.

A group of 70 European banks will need to raise 106 billion euros in the next eight months to meet the goal, the European Banking Authority, the banking regulator, said. Greek banks need 30 billion euros; those in Spain need 26.2 billion euros. In France, the need totals 8.8 billion euros and in Italy, it’s 14.8 billion euros.

Dividends, Bonuses
Institutions falling below the target would face “constraints” on paying dividends and awarding bonuses. The leaders showed little appetite for an EU-run plan, bowing to German calls to make European money available only as a last resort.

Details need to be worked out by EU finance ministers, EU President Herman Van Rompuy said in a statement without announcing when that will be done.

The bank-aid program “will only go ahead when the other parts of a full package go ahead and further progress on that needs to happen tonight,” U.K. Prime Minister David Cameron told reporters after he left and the heads of euro states continued their deliberations.

Euro leaders won’t rule out a forced Greek writedown, while continuing to pursue a “voluntary” solution that would scale up a July accord that foresaw 21 percent losses for bondholders, the EU official said.

Bank Lobbying
The IIF, which lobbies on behalf of 450 financial firms, sweetened its offer yesterday, proposing to go beyond the 40 percent losses it mooted last week, said two people with knowledge of the talks.

“We remain open to a dialogue in search of a voluntary agreement,” Charles Dallara, the IIF’s managing director, who was in Brussels, said in the statement. He said there was no deal on the details of any transaction or the size of the writedown.

Merkel and French President Nicolas Sarkozy, leaders of Europe’s two biggest economies, peeled away to meet Dallara, Van Rompuy and International Monetary Fund Managing Director Christine Lagarde in an effort to break the deadlock. The summit reconvened at about 12:45 a.m.

Leaders weighed two options for extending the reach of the fund: using it to insure bond sales and to finance a special investment vehicle that would court outside money, including from the IMF.

Sarkozy plans to call Chinese leader Hu Jintao today to discuss China contributing, said a person familiar with the matter.

While markets clamor for a signal that the euro area will devote 1 trillion euros or more to combating the crisis, the EU won’t be able to produce a number until late November, the EU official said.

To contact the reporters on this story: James G. Neuger in Brussels at; Aaron Kirchfeld in Brussels at

To contact the editor responsible for this story: James Hertling at



France · Germany · Japan · Currencies · Real Estate .Euro Erases Loss as EU Reaches Bank Agreement; Loonie Gains Versus Dollar

By Allison Bennett and Catarina Saraiva - Oct 26, 2011 4:22 PM CT

The yen traded at 76.10 per dollar as of 9:45 a.m. Tokyo time from 76.09 in New York yesterday, when it climbed to a record 75.74. Photographer: Tomohiro Ohsumi/Bloomberg
.The euro pared its loss against the dollar as European Union leaders said they reached agreement on a plan to recapitalize the region’s banks.

The shared currency also eliminated declines against the yen after reports China may be willing to respond to a European request to help fund a package to solve the euro region’s debt crisis. The dollar strengthened against the Japanese currency before the Bank of Japan concludes its two day policy meeting, after reaching a record low. Canada’s dollar and Mexico’s peso were the best performers against the euro as U.S. durable goods orders were stronger than expected.

“The market seems to have reacted a bit positively to the mere dribble of information we’ve received,” said John McCarthy, managing director of currency trading at ING Groep NV in New York. “A lot of people are on the sidelines waiting until everything’s clear. There’s some conclusions. Whether or not it’s sufficient, we’ll have to see.”

The euro was little changed at $1.3906 at 5 p.m. in New York, after falling 0.8 percent earlier. It rose 0.1 percent to 105.93 yen, after earlier declining 1 percent. Japan’s currency fell 0.1 percent to 76.18 per dollar, after strengthening to a record 75.72.

The leaders of the 27-member European Union released a statement after the meeting in Brussels today.

The implied volatility for one-week euro-dollar options, which indicate expected swings in the underlying currencies, rose 65 basis point to 15.98 percent. It touched 18.48 percent on Oct. 21, the highest since Oct. 6.

Bank of Japan
In the past month the yen has reached record strength against the dollar on Oct. 21, Oct. 25 and today.

Bank of Japan officials will discuss more monetary easing at the meeting, the Nikkei newspaper reported Oct. 25. Measures to mitigate the impact of the strong yen on Japan’s economy may include expanding a 50-trillion yen ($660 billion) asset purchase program by 5 trillion yen and purchasing bonds with maturities longer than two years, the Nikkei said without citing anyone.

“Every day, week, we seem to get a little bit lower for the dollar-yen and the Bank of Japan is very nervous about this,” John Taylor, founder of the world’s largest currency- hedge fund, in an interview on Bloomberg Television’s “In the Loop” with Betty Liu. But they know that if they call up their G-10 friends, they will say ‘forget about it, we have other problems, like Europe - you guys go away’.”

“I’ve ordered my staff to be prepared to take action at any time,” Finance Minister Jun Azumi told reporters in Tokyo. He declined to comment on the timing of any yen sales in parliament today and said conducting coordinated intervention in the currency market is a “difficult thing.”

European Pass
“There’s a lack of liquidity right now because most people are smart enough not to do anything until things are official,” said Brian Taylor, chief currency trader a Manufacturers & Traders Trust in Buffalo New York. “They always seem to give a pass to Europe, there seems to be jawboning, talking about a plan, talk about creating a plan and people go crazy and buy euros.”

The euro depreciated 3.2 percent in the past six months, the second-worst performer among 10 developed-nation currencies tracked by Bloomberg Correlation-Weighted Currency Indexes. The yen gained 13 percent and the dollar has advanced 3.7 percent, the indexes show.

EU leaders have set a deadline of June 30, 2012, for banks to have core capital reserves of 9 percent after writing down their holdings of sovereign debt. The reserves must be of the “highest quality,” the leaders said in a statement after a summit today.

Chinese Speculation
China has an open attitude and will discuss options for cooperation with EU officials, AFP said. Other large emerging countries such as Brazil and Russia favor using the International Monetary Fund as a way of getting any aid to Europe, Agence France-Press said, citing unidentified officials.

French President Nicolas Sarkozy plans to call Chinese President Hu Jintao tomorrow to discuss China contributing to a planned euro-area investment vehicle, a person familiar with the matter told Bloomberg News.

The U.S. is the largest trading partner of Canada and Mexico, buoying the Canadian currency 1.2 percent to C$1.0042 per U.S. dollar. Mexico’s peso rose 0.9 percent to 13.4023 per dollar.

Orders for U.S. durable goods excluding transportation equipment rose in September by the most in six months, showing manufacturing is supporting the expansion. Demand for goods meant to last at least three years, outside of airplanes and automobiles, climbed 1.7 percent, figures from the Commerce Department showed today in Washington.

To contact the reporters on this story: Allison Bennett in New York at; Catarina Saraiva in New York at



Eurozone ‘Collapsed’, Euro to Vanish, FinansInvest CEO Says

By Benjamin Harvey and Sibel Akbay - Oct 25, 2011 8:51 AM CT

"ユーロ圏は既に崩壊している。通貨のユーロは、金融危機によって破壊されている。ひとつの通貨(ユーロ)は崩壊していると思う”と義律詩ア国有銀行のブローカー。伊勢平次郎 ルイジアナ

...The eurozone has “already collapsed” and is disappearing as the region is on the brink of a banking crisis that will destroy the currency, said Zafer Onat, the chief executive of FinansInvest, a Turkish broker owned by National Bank of Greece SA. (ETE)

“I believe that the European monetary union doesn’t exist anymore,” Onat said in an interview in Istanbul today. “I think it already collapsed but no one has said it yet. Now we are in a deadlock. One of the world’s major reserve currencies will disappear.”

The U.S. is unlikely to come to the eurozone’s rescue and the euro’s departure will benefit the dollar, which will be “very strong,” Onat said. He blamed slow-moving European politics and an inability to act for Europe’s debt crisis.

A meeting of European Union finance ministers is scheduled for tomorrow. Chancellor Angela Merkel and fellow leaders were due to return to Brussels tomorrow for a second summit in four days to hammer out a deal to resolve the debt crisis.

“Europe’s problem all comes from doing nothing,” he said. “They just sat and talked.”

Turkey will be affected by a global downturn, “but it will be minimal compared to other countries” on the back of a strong and well-capitalized banking sector, he said. “The global problem from too much leverage doesn’t exist in Turkey,” Onat said. “Turkey’s average household is not leveraged at all; we are just starting to be.”

To contact the reporter on this story: Benjamin Harvey in Istanbul at

To contact the editor responsible for this story: Mark Bentley at


Spain Slipping on Deficit Means Chances of Contagion Increase: Euro Credit

EU会議で決まったギリシア救済策は、ギリシア経済は破綻していることを示している。明日火曜日にほぼ会議は終わり水曜日に伸びても、その日のうちにユーロ圏金融危機の最終解決策は発表されるのだ。だが、次は、スペインだ。このEU会議中にも、スペイン国債の利回りは5.5%に上昇した。欧州の銀行総裁らは、来年のスペインの国債赤字はGDPの67%となり、2007年の赤い字の二倍なのだと。結局、スペインの国債利回りは7%だろうと言っている。この意味するところは、ギリシアからスペインへと国家経済の破綻が飛び火したということだ。今日月曜日のNYも、日経も、アジアも株価は上がった。だが、まだまだユーロ危機が去ったということではない。イタリアも危険だからである。伊勢平次郎 ルイジアナ

By Angeline Benoit - Oct 24, 2011 5:01 PM CT .

October. 19 (Bloomberg) -- Spain's credit rating was cut for the third time since June of last year by Moody’s Investors Service on weaker growth prospects and "continued vulnerability of Spain to market stress" that is driving up the cost of borrowing. Mark Barton and Linzie Janis report on Bloomberg Television's "Countdown." (Source: Bloomberg)
.Spain will struggle to meet its deficit-reduction target this year as economic growth slows, threatening further debt-crisis contagion as Europe fails to erect a fail-proof firewall.

“They will never make it,” said Ludovic Subran, chief economist at credit insurer Euler Hermes SA in Paris. “Our September forecast sees Spain’s deficit at 7 percent” of gross domestic product this year, he said, adding that the prediction was made before the nation’s credit rating was cut this month.

Spain’s benchmark 10-year bond climbed seven basis points to 5.54 percent yesterday after European leaders ruled out tapping the European Central Bank’s balance sheet to boost the region’s rescue fund. The government has aimed for a deficit equal to 6 percent of GDP this year, down from 9.2 percent in 2010. Data on the deficit for the first nine months of 2011 will be published sometime this week.

European leaders’ failure to end the debt crisis risks “a vicious circle” in which “deficit reduction weighs on growth, rendering targets unachievable and triggering more downgrades, eventually leading” to default, said Angel Laborda, chief economist at savings-bank foundation Funcas in Madrid. Policy makers must ensure that euro-area nations’ debt will be repaid even without growth, he said.

EFSF Changes
At the Brussels summit over the weekend, Germany defeated French efforts to enable the region’s rescue fund, the European Financial Stability Facility, to borrow potentially limitless sums from the ECB. Policy makers may use the 440 billion-euro ($610 billion) EFSF to guarantee government-bond sales as a way to extend its reach. A second option is to set up an EFSF- insured fund that would seek outside investment. The blueprint probably won’t come together until another summit tomorrow.

“There is insufficient firepower to meet all the potential liquidity needs,” David Mackie, chief European economist at JPMorgan Chase & Co., said of the proposed EFSF enhancements in an Oct. 18 note to investors.

Ten-year Spanish yields are 342 basis points higher than German bunds of similar maturity, down from a euro-era high of 418 basis points on Aug. 5 and an average of 15 basis points in the first decade of monetary union.

With the region’s highest jobless rate of 21 percent crimping household spending, Spain’s economy slowed in the second quarter, expanding 0.2 percent, compared with 0.4 percent in the first three months of 2011. Quarterly growth will remain at levels similar to the April-June period for the rest of 2011, Prime Minister Jose Luis Rodriguez Zapatero said on Sept. 14.

IMF Estimates
The International Monetary Fund predicts an economic expansion of 0.8 percent this year. The government says it may miss a 1.3 percent target for growth in 2011, when it forecasts debt will rise to 67 percent of GDP, almost double the 2007 level.

While the European Union said yesterday that Spain is on track to meet its deficit goal for 2011, economists are revising their forecasts to reflect dwindling Spanish tax revenue, rising borrowing costs, and fiscal slippage in the semi-autonomous regions and in the social-security system.

Euler Hermes based its deficit forecast on a growth estimate of 0.7 percent after taking into account Spain’s austerity efforts in August. Bank BBVA and Intermoney Valores changed their estimates to 6.5 percent from 6 percent, while Moody’s Investors Service expects a gap of 6.5 percent in 2011 and 5.2 percent next year, compared with the government’s 4.4 percent goal. Economists surveyed by Bloomberg News predict 6.3 percent, according to the median of 10 forecasts.

Regional Slippage
Funcas is revising its forecast to 7.5 percent to 8 percent, compared with a previous 6.8 percent, on expectations that the regions will deviate from their 1.3 percent deficit target by at least a percentage point after they froze fiscal- consolidation efforts in the run-up to May’s local elections. Recent data show an increase in public-sector employment as regions and town halls increased headcount “until the day before the elections,” Laborda said.

Spain’s region of Castilla-La Mancha was cut five levels to junk on Oct. 20 by Moody’s, which also downgraded nine other regions on “growing liquidity pressures” and difficulties “reining in their cost base.” It’ll be “very difficult” for the 17 regions to reach their 2011 deficit goal of 1.3 percent, opposition leader Mariano Rajoy said on Cope radio yesterday.

Social security, forecast to post a surplus of 0.4 percent of GDP this year, also is coming under pressure with joblessness jumping the most since January in September.

Jobs Fallout
The system “is the main risk for Spain’s public deficit,” said Luis de Guindos, who served in several roles including as deputy finance minister in former Prime Minister Jose Maria Aznar’s Peoples Party-led government.

Rajoy, whose party is ahead in the polls to win a majority in the Nov. 20 general election, has pledged a stricter budget law, spending limits for the regions, and tax breaks to encourage companies to hire workers and become more competitive. Rajoy said Sept. 15 that if elected, he won’t budge from next year’s 4.4 percent shortfall goal “under any circumstances.”

“Missing the deficit target would destroy private-sector demand for your bonds,” said Harvinder Sian, an interest-rate strategist at Royal Bank of Scotland in London. “If you start seeing big figures like 7 percent, then it’s very problematic.”



U.S. Stock Futures Drop as European Leaders Rule Out Using ECB for Rescue

By Rita Nazareth - Oct 23, 2011 5:08 PM CT .

EC会議二日目(日曜)欧州中央銀行の総裁らは、"ECGの原資を国債デフォルト危機に面する国の救済には使わない”と決定した。これを受けて、米国日曜日6時PMの先物買いは、SP500インデクスの、0.6%下落している。ウオール街のベルが鳴る月曜日の朝の下げ幅は未知だ。EU会議は、残る手段の前倒しを進める。そして、26日(水曜)に、最終案が発表される。世界は、息を飲んで欧州国債危機(キャッシュが無くなる問題)の行方を見つめている。一方、米国企業の191社が今週に企業成績を発表する。10月には入ってから、75%の米国企業は予想を越える好成績だった。つまり、アメリカだけが回復して行く。伊勢平次郎 ルイジアナ

U.S. stock futures fell, following the Standard & Poor’s 500 Index’s longest weekly rally since February, after officials ruled out tapping the European Central Bank’s balance sheet to boost the region’s rescue fund.

S&P 500 futures expiring in December dropped 0.6 percent to 1,227.50 at 7:03 a.m. Tokyo time. The benchmark gauge has risen for three straight weeks, adding 9.4 percent.

“Ruling out the use of the balance sheet raises the question of how strong the firewall will be,” James Dunigan, who helps oversee $103 billion as chief investment officer in Philadelphia for PNC Wealth Management, said in a telephone interview. “As long as that’s in question, the sense of a crisis won’t go away.”

European leaders outlined plans to aid banks, heading toward a revamped strategy to contain the Greece-fueled debt crisis. The 13th crisis-management summit in 21 months excluded a forced restructuring of Greece’s debt, sticking with the policy of enticing bondholders to accept “voluntary” losses to help restore the country’s finances. The complete blueprint will be formed Oct. 26.

The S&P 500 ended last week at the highest level since Aug. 3, two days before S&P stripped the U.S. of its AAA credit rating, amid optimism Europe’s leaders will announce a plan to contain the debt crisis and after McDonald’s Corp. joined companies beating profit estimates. The stock index has surged 13 percent since Oct. 3, when it closed within 1 percent of a bear market, or 20 percent plunge, from its high in April.

Quarterly Results

This week, 191 companies in the S&P 500 are scheduled to report quarterly results. Profit for all companies in the index climbed 16 percent during the third quarter, and will increase 18 percent to a record $99.32 a share for all of 2011, according to analyst estimates compiled by Bloomberg. About three quarters of the S&P 500 companies that reported results since Oct. 11 beat analysts’ projections, the data showed.

United Parcel Service Inc. (UPS), the world’s largest provider of package deliveries; Caterpillar Inc., the biggest construction and mining-equipment maker; and Texas Instruments Inc., the largest maker of analog chips, are among companies scheduled to report results this week.

“Companies are making money,” Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $47 billion, said in a telephone interview. “It suggests that the economy is growing. If we can ease some of the risks related to the European Union, the market has further room to move higher.”

The S&P 500 rose 9.4 percent this month through Oct. 21, following five months of losses. Gauges of commodity, consumer discretionary and industrial companies, which are most-tied to economic growth, added at least 11 percent. The U.S. economy probably grew in the third quarter at the fastest pace this year, economists said before a report this week.

To contact the reporter on this story: Rita Nazareth in New York at



EU Talks Yield ‘Limited’ Progress on Banks

By Aaron Kirchfeld and Mark Deen - Oct 22, 2011 1:40 PM CT

10.22.11 土曜日、ブリュッセルで行われたEU会議は、10時間後、決定的合意に達しなかった。合意できたのは、ユーロ圏の銀行は、1000億ユーロが必要ということだけだった。この金額は、第一段階の救済に過ぎないのだ。つまり、EUの全銀行の資産計算の9%に当たるものだ。EUは、ギリシア~スペイン~イタリアと、国債支払い不履行が連鎖して起きることを防ぐというファイア・ウオールを築こうとしているのだ。最初、EUは、ギリシア国債の不渡りに対して、21%を差し引いた新国債との交換を考えていた。だが、現在では、50%差し引く案が出ているのだ。ギリシア国債を保有するEUの銀行は反対だ。このEU銀行総裁らの会議は、26日、水曜日まで、6日間のマラソンなのだ。この会議の決定次第で世界の株式市場の動向が決まる。つまり、世界経済の正念場なのだ。伊勢平次郎 ルイジアナ

A 10-hour meeting in Brussels failed to yield a blueprint for banks’ role in a revamped Greek rescue as European finance ministers haggled over what they called a “credible firewall” against fallout from deeper writedowns.

The ministers’ meeting broke up at about 7 p.m. after reaching agreement that European banks may need about 100 billion euros ($139 billion) in capital after marking their sovereign-debt holdings to market values, according to a person familiar with the discussions. This amount is needed to reach a core tier 1 capital level of 9 percent based on a European Banking Authority test, said the person, who declined to be identified because discussions are private.

The struggle to get an accord on bank capital was just one piece of solving the two-year-old financial crisis. Governments also are pushing for deeper writedowns on banks’ holdings of Greek debt, a step the investors are resisting.

“Discussions are making progress, albeit limited,” Charles Dallara, managing director of the Institute of International Finance, the umbrella group for 450 of the world’s biggest financial companies, said in a statement late today.

The negotiations were part of a six-day stretch of talks aimed at stopping contagion spreading to Spain and Italy as the turmoil pushes Greece closer to default, roils global markets and dents confidence in the survival of the 17-nation currency. Finance ministers now yield the conference tables after two days of talks to leaders, who meet tomorrow and on Oct. 26.

Pace of Talks
Negotiations among finance ministers from the 27-member European Union, including U.K. Chancellor of the Exchequer George Osborne, were repeatedly extended and the plenary discussion eventually broke off into small groups focused on particular issues after 4 p.m. Brussels time.

“We’ve had a 10-hour meeting, but we have made real progress and we have come to important decisions on strengthening European banks,” Osborne said. “That is just one part of the package and obviously there’s more work to do.”

Vittorio Grilli, the top bureaucrat in Italy’s Finance Ministry, was given the mission by euro-area finance ministers to negotiate deeper writedowns for Greek bondholders, Austria’s Maria Fekter said. She declined to give details of the mandate for Grilli, head of the EU’s Economic and Finance Committee and director general of the Italian Treasury.

Under the terms of a July 21 accord, the banks would take losses of 21 percent on their holdings of the nation’s debt.

Plans now being considered involve an exchange with a 50 percent reduction in net present value, or upfront bond exchanges into either AAA rated bonds from the European Financial Stability Facility or new 30-year Greek government debt, according to people familiar with the matter. Upfront exchanges could involve a 50 percent discount off face value.

“We remain open to explore options on a voluntary approach built on a realistic outlook for the Greek economy and restoration of Greece’s market access,” Dallara said.



China Economy Slowing...To 9.5% In 2011

China’s economy will indeed slow this year, but not by much and not enough to warrant fears of a hard landing.

According to the International Monetary Fund, the Chinese economy will growth a healthy 9.5% in 2011, down from 10.3% growth in 2010. That forecast suggests a relative failure of the central government to slow growth to the 7% it had targeted earlier this year. If the government is serious about slowing the economy in an effort to curb inflation and burst any sectoral bubbles, it might have to consider raising interest rates again, something the market expects to end soon.

Calls for a more flexible forex policy, letting the yuan float against the U.S. dollar, are unlikely. The yuan has been appreciating on average of 5.5% annually to about 6.5 yuan to the dollar.

The IMF warned that the overall global economy was on hair trigger alert, mostly due to the European sovereign debt crisis and the continuing need for monetary stimulus to keep the U.S. out of a recession.

The IMF predicted China’s output would slow next year to 9%.

Asia Pacific is expected to see a growth rate of 6.2% overall in 2011 and 6.6% in 2012, the IMF said Wednesday.

China would continue to outpace other economies but the average economic growth of 9% to 9.5% during 2011-2012 was less than the average of about 10.5% between 2000 and 2007. A combination of weaker international demand for made in China goods and domestic policies have cut into growth.



Short Selling Rises Most Since 2006

経済は後退すると見た、投資家家は「空売り」を増やしている。米国で空売りの対象とあんるのは、アルコア~GE~ファイザーである。米国債の利回り曲線は、ここ12ヶ月の間に、経済は後退60%と指している。その上に、ユーロ圏17カ国は、ギリシアに始まる金融危機の回避に必死である。この意味するところは、「投資とは賭け」だということだ。伊勢平次郎 ルイジアナ

By Lynn Thomasson and Alexis Xydias - Oct 10, 2011 1:07 AM CT .

Ben S. Bernanke, U.S. Federal Reserve chairman, said last week that the central bank can take steps to sustain a recovery that’s “close to faltering.” Photographer: Andrew Harrer/Bloomberg

Short sales in New York-based Pfizer, the world’s biggest drugmaker, rose 22 percent to 111 million shares in the first two weeks of September, exchange data show. Photographer: Munshi Ahmed/Bloomberg

 Investors are increasing bearish trades around the world by the most in at least five years, convinced the lowest valuations since 2009 will prove no barrier to losses after $11 trillion was erased from equities.

Borrowed shares, an indication of short selling, climbed to 11.6 percent of stock last month from 9.5 percent in July, the biggest increase since at least 2006, according to information compiled for Bloomberg by Data Explorers, a London-based research firm. Trades that profit when Chinese equities decline have reached a four-year high and bearish bets in the U.S. are the most since 2009, exchange data show.

Slowing economies are spurring short sellers after indexes in 37 out of 45 major countries tumbled 20 percent, the common definition of a bear market. Bulls say declines have gone too far, with the MSCI All-Country World Index’s valuation at about half the 16-year average, just above the level three years ago, following the collapse of Lehman Brothers Holdings Inc. Losses since May exceed the combined gross domestic product of Brazil, Russia, India and China, data compiled by Bloomberg show.

“The Lehman collapse is way too clear in people’s minds,” said Henrik Drusebjerg, who helps oversee $230 billion as senior strategist at Nordea Bank AB in Copenhagen. “They don’t want to get burned as much again. They know either they get some protection or get out altogether.”

The MSCI All-Country World was little changed at 285.57 at 2:04 p.m. Hong Kong time. Stocks rose last week, sending the global index up 1.8 percent, after efforts by Europe’s policy makers to contain the region’s debt crisis. The gauge of 45 emerging and developed countries sank 18 percent in the third quarter, the biggest drop since the bankruptcy of New York-based Lehman froze credit markets and ultimately pushed the Standard & Poor’s 500 Index to a 12-year low.

Yield Curve
U.S. Federal Reserve Chairman Ben S. Bernanke said last week that the central bank can take steps to sustain a recovery that’s “close to faltering.” Employers added 103,000 workers to payrolls in September and the unemployment rate held at 9.1 percent, the Washington-based Labor Department said Oct. 7.

The bond market indicator that has predicted every U.S. recession since 1970 now shows that the economy has a 60 percent chance of contracting within 12 months. The so-called Treasury yield curve, adjusted for distortions caused by the Fed’s record low zero to 0.25 percent target interest rate for overnight loans between banks, shows that two-year notes yield 20 basis points, or 0.20 percentage point, less than five-year notes, according to Bank of America Corp. research.

Biggest Increases
Alcoa Inc. (AA), the largest U.S. aluminum producer, is the most shorted stock in the Dow Jones Industrial Average with bearish bets making up 4.4 percent of the New York-based company’s shares available for trading, according to Data Explorers. Pfizer Inc. (PFE) and General Electric Co. (GE) had the biggest increases in short interest last month among companies listed on the New York Stock Exchange.

Short selling, where traders borrow shares and sell them, hoping for a decline, is increasing even as equities approach the cheapest valuations on record. The MSCI All-Country World trades at 11.8 times reported profit, compared with 11.9 in the five months after Lehman’s collapse. The measure’s average price-earnings ratio since 1995 is 21, data tracked by Bloomberg show.

European stocks fell the most last quarter among the world’s biggest equity markets, with the DAX Index of German shares and France’s CAC-40 Index each losing 25 percent. Finance leaders have clashed over how to prevent Greece from defaulting on its debt, spurring concern that losses may engulf banks in France and Italy.

‘Everything Necessary’
Angela Merkel and Nicolas Sarkozy gave themselves three weeks yesterday to devise a plan to recapitalize banks, get Greece on the right track and fix Europe’s economic governance. Merkel said European leaders will do “everything necessary” to ensure that banks have enough capital. Sarkozy said they would deliver a plan by the Nov. 3 Group of 20 summit.

Dexia SA (DEXB) plunged 42 percent last week as the French and Belgian governments organized plans to break up the lender after its short-term funding evaporated. Plans to inject capital into Europe’s banks are “well under way,” European Commission President Jose Barroso said last week.

“The downside risk if the euro-zone cracks is so huge that the market could go anywhere,” said Francis Eliot, a strategist at Mansard Capital LLP, whose Mansard Macro Fund returned 3.9 percent last month as the MSCI All-Country World Index tumbled 9.7 percent. “The short trade is a bit crowded, but the risk is downward.”

Stock Valuations
Equity valuations are already pricing in a recession and stocks are unlikely to fall much below the lowest levels of last week, according to Binky Chadha, the New York-based chief U.S. equity strategist at Deutsche Bank AG.

“Valuations and short interest are approaching Lehman levels,” Chadha said in a telephone interview on Oct. 6. “It’s not very easy to continue to take larger and larger short positions.”

Companies in the benchmark gauge for American equities trade at 10.4 times 2012 forecast earnings, compared with the average in economic contractions since 1957 of 13.7, according to data compiled by Bloomberg. At the same time, analysts have cut projections for profits next year to $111.46 a share, the data show.

Short sales in New York-based Pfizer, the world’s biggest drugmaker, rose 22 percent to 111 million shares in the first two weeks of September, exchange data show. That’s 2.51 times the average trading volume from the past 30 days. The S&P 500’s short interest ratio is 3.19, data compiled by Bloomberg show.

GE, Strategists
Bets on losses in GE, which makes wind turbines and jet engines, climbed 13 percent to 141 million shares between Aug. 31 and Sept. 15, the most since August 2009. Short interest on the Fairfield, Connecticut-based company has more than doubled in 2011 as the stock slumped 15 percent.

Wall Street strategists say the S&P 500, after falling within 1 percent of a bear market last week, will post the biggest fourth-quarter rally in 13 years. The measure will climb 13 percent to end 2011 at 1,300, according to the average estimate of 12 strategists surveyed by Bloomberg.

About 4.1 percent of NYSE shares have been borrowed and sold, up from 3.5 percent at the end of July, data from the bourse shows. U.S. short sales are rising at the second-fastest pace on record after the 2008 financial crisis, according to exchange data dating back to 1995.

March 2009
Bearish bets last increased faster in March 2009, the same month the S&P 500 began a bull market that doubled its value. The surge in equity prices came seven months after NYSE short interest climbed to an all-time high in July 2008. The U.S. equity benchmark rose 2.1 percent to 1,155.46 last week.

“We have more shorts on today than we had six months ago,” said Chris Baggini, a fund manager at Berwyn, Pennsylvania-based Turner Investment Partners Inc., which oversees about $18 billion. “We’re finding more short ideas in the U.S. market that we think we can make money on in an environment that’s slower than it was six months ago.”

Baggini, who spoke in an Oct. 6 telephone interview, helps oversee the Turner Spectrum Fund that climbed 5.9 percent in the 12-months ended Oct. 6. The S&P 500 fell 0.2 percent in that period.

Bets that Hong Kong stocks will fall have risen to the highest level since January 2008 amid falling home sales in China and concern that the world’s second-largest economy is slowing. Wagers on declines reached HK$m12.8 billion ($1.6 billion) on Sept. 30, Hong Kong exchange data show. That’s 14 percent of the total value traded on the city’s stock market, the most since 1999.

Foreign Investors
The MSCI China (MXCN) Index of 148 stocks available to foreign investors has fallen 26 percent since Aug. 1. China’s home prices fell 0.03 percent from a month earlier in September, the first decline in a year, said Soufun Holdings Ltd., the country’s biggest real estate website owner. The central bank has raised interest rates five times in the past 12 months.

Alex Au, who helps oversee $300 million as managing director of Richland Capital Management Ltd. in Hong Kong, said he’s “aggressively” shorting cement stocks on speculation spending on roads and factories will weaken. Anhui-based Anhui Conch Cement Co., China’s largest producer, has lost 47 percent since its July 14 peak. The Richland Asia Absolute Return Fund rose 3 percent this year through Sept. 30, versus the MSCI Asia Pacific Index’s 18 percent drop.

‘Yet to Come’
“The worst is yet to come,” Au said in an Oct. 4 phone interview. “If you look at the fundamentals, you’ll see that a lot of stocks are very cheap and you’ll be tempted to bottom pick, but this is very dangerous.”

Average short interest in Europe as a percentage of shares outstanding has climbed to 2.8 percent, the highest since June, from 2.6 percent at the beginning of September, according to Data Explorers. Regulators in Italy, Spain, France and Belgium banned new short sales on 66 financial firms on Aug. 11, when the Euro Stoxx Banks Index had plunged 33 percent this year.

Filippo Garbarino, who oversees $50 million as manager at Frontwave Capital Ltd. in Chiasso, Switzerland, said he has bet against shares of financial and publishing companies.

“The market is so undervalued right now it’s kind of hard to take a short position,” Garbarino said. “But at the same time given the economy, it is hard to be long.”

To contact the reporters on this story: Lynn Thomasson in Hong Kong at; Alexis Xydias in London at




Author: Nobuyoshi Ozaki

A long forty six years have passed since I stepped on to American soil. I have had various odd jobs in the past until I recently retired. Examples include working with Steven Spielberg as assistant director in a film called "1941." I was supervisor and later became Public Relation representative for Toyota Group - USA. My last occupation was a Senior Research analyst working in Silicone Valley for a major news paper from Tokyo, Japan. My spouse, Christine is a flight attendant, traveling often to the Middle East and Africa. We have spent three quarters of our life together as world adventurers. This photo was taken in Argentina. We now live in swampy Louisiana.