U.S. Economic/Financial News
U.S. Unemployment Rate Hits 14-Year High of 6.5%
Nov. 7 (EIRNS)The official U.S. unemployment rate climbed to 6.5% in October, the U.S. Bureau of Labor Statistics reported today. Employers cut 240,000 workers last month, after a loss of 284,000 in September. Employment has fallen by 1.2 million jobs since January 2008.
In October, the number of long-term unemployed (those jobless six months or more) rose by 239,000, to 2.3 million; the number of persons who work part time for economic reasons (which includes those who would like to work full time) increased by 645,000 workers, to total 6.7 million.
Last month, manufacturing employment lost 90,000 jobs; construction, 49,000; professional, business, and employment services lost 51,000; retail lost 38,000, and financial activities lost 24,000 jobs.
Hedge Funds Selling Billions, as Investors and Lenders Demand Money
Nov. 7 (EIRNS)The Wall Street Journal and others have now admitted that hedge fund sales of billions of dollars in securities to meet demands for cash from their investors and their lenders are a major factor in the drop of markets around the world.
Today's Wall Street Journal spotlights Kenneth Griffin's $16 billion Citadel, which has lost 40% of its value, and is being asked by several major banks to post additional collateral to cover big losses on its investments. Besides selling to cover losses, hedge funds are sitting on cash, as they face mounting redemption requests from investors who are only allowed to withdraw money a few times a year. Corporate raider Carl Icahn has received $1 billion in redemption notices from his $7 billion fund. Highbridge Capital Management, a $17 billion fund, has received redemption notices that will pull out more than 15% of its capital, while Highbridge's largest fund lost 22%. Seems the bridge is burning at both ends. And so it goes for Och Ziff Capital Management, Plainfield Asset Management, and Blue Mountain.
EIR's John Hoefle commented, "What we have is a run on the entire system, as the derivatives unwind. Everybody is trying to cash out, but can't do it, because the assets have vaporized. In September, the system fell off a cliff; now, we see the results." With many companies that are going bankrupt, the real reason is not collapsing sales, etc., but rather their derivative investments, Hoefle said.
'Big Three' Automakers Near Death, Beg for Bailout
Nov. 7 (EIRNS)Desperate auto companies General Motors and Ford released their huge 3Q losses today, following meetings by the companies and United Autoworkers president Ron Gettlefinger with House Speaker Nancy Pelosi and Senate Majority Leader Harry Reid yesterday.
Ford posted a $2.98 billion 3Q operating loss, and said it used up $7.7 billion in cash.
GM, which reported a $4.2 billion 3Q operating loss, and has lost almost $73 billion since the end of 2004. It said that it may not have enough cash to keep operating this year.
GM has suspended merger talks with Chrysler. Chrysler is not required to report its earnings, since was swallowed by private equity fund Cerberus.
The Big 3 now are demanding $50not $25billion. The obtuse Pelosi insists that any money be tied to producing fuel-efficient cars sooner, while it is clear the companies will be bankrupt within weeks. President-elect Barack Obama is quoted as favoring $50 billion in aid to the industry, but is also emphasizing fuel-efficient cars.
GMAC, GM's financing arm, is separately trying to get Treasury TARP money, which may mean converting GMAC quickly into a bank holding company. Meanwhile, GMAC has left thousands of individuals with $15 billion of junk-rated debt called "SmartNotes," which were sold in denominations of $1,000, and have now lost two-thirds of their value.