U.S. Economic/Financial News
Fourth-Largest Auto-Parts Maker To Auction Off Assets
The bankrupt Collins & Aikman auto-parts maker filed a revised plan on Dec. 22 to exit from court protection, and instead shut down its operations. The firm, the fourth-largest in the U.S., operates 45 North American plants employing 12,000 workers, Bloomberg reported Dec. 27.
The most likely buyer of the ruined firm is Wilbur Ross. Ross and other vulture funds had been trying to buy the company, and now will get it dirt cheap. The court filing comes as a shock, because until recently, the firm had been intending to reorganize, and rebuffed buyout offers.
Since February 2006, five major U.S. auto suppliers have sought bankruptcy court protection. Collins & Aikman will auction its assets and pay off securitied creditors and those holding priority claims; shareholders will get nothing.
Increasing Instability in U.S. Housing Bubble
When the U.S. Commerce Department released information on U.S. existing home sales Dec. 27, the media spinmeisters went into high gear, pointing out that between October and November, these sales rose a miniscule 0.6%heralding this as the end of the housing collapse. But they overlooked the real trajectory: Existing home sales (at an annualized rate) fell to 6.28 million in November 2006, compared to 7.03 million in November 2005, a fall of 750,000 homes, or 10.7%. Inventories of unsold homes are still very high: 3.82 million homes are listed on the market for sale.
Meanwhile, mortgage lending firms are going belly-up. On Dec. 20, Harbourton Mortgage Investment Corporation (HMIC), a mortgage banking operation that provided financing to builders and developers of residential real estate, was closed down permanently by its parent company. HMIC was losing money heavily. On Dec. 4 and Dec. 6, respectively, Sebring Capital Partners, and Ownit Mortgage Solutions, both lenders in the sub-prime mortgage market, shut down their operations for good. These constitute ever widening oscillations in the mortgage lending market.
New Congress Already Hit with Anti-Nuclear Propaganda
On Dec. 27, a letter was delivered to Congressional leaders from 102 "business," "consumer," and "environmental" groups, asking Congress, when it reconvenes, to change the (as yet, unpassed) Fiscal Year 2007 budget for the U.S. Department of Energy, in order to increase funding for "sustainable" energy programs. These include the "soft" energy sources, such as wind, solar, and geothermal, and energy conservation "technologies." Playing upon the Congress's belief that cutting spending is necessary in order to reduce the deficit, the anti-nukes recommend that the increased money for "sustainable" technologies be taken largely from the nuclear energy research and development programs.
The first signature on the letter is that of a Sylvia Zisman, Abolition Now Campaign, Springfield, N.J. Other signers are mainly the anti-nuclear political partisans one would expect, such as Greenpeace and Friends of the Earth, plus energy "efficiency" and alternative energy businesses.
NYU Economics Prof Warns of Real Estate Crash
New York University economics professor and chairman of the Global Economics think tank, Nouriel Roubini, has given gloomy warnings about the state of the U.S. economy. According to Financial Times Deutschland Dec. 28, he angered people when in August he predicted a 70% probability that the U.S. economy will go into recession. FTD refers to Roubini having stated that the real estate crash in the U.S. will have a major effect on the real economy, a "burn out" of U.S. consumers who see their capital shrinking from falling real estate prices. Given that 40% of new jobs had been created in the year 2001 in the real estate sector bubble, this crisis will lead to major unemployment and shrinking incomes for many U.S. households. To this must be added higher energy costs and the high interest rates of the Fed, according to Roubini, whose prognostications have reportedly angered Fed chairman Ben Bernanke, and "are seen by many as 'voodoo economics,' says the FTD.