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Please coming here everyday to get some useful information about business and finance

My blog is updated everyday

Please coming here everyday to get some useful information about business and finance

My blog is updated everyday

Please coming here everyday to get some useful information about business and finance

My blog is updated everyday

Please coming here everyday to get some useful information about business and finance

Sabtu, 24 September 2011

Facebook's Latest Great Leap Forward Part Of A Proud Corporate Tradition

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It seems like Facebook makes changes every few months and doesn't respond to consumer complaints.

By now, many of us have seen Facebook's latest round of changes. My morning commute was compromised on Wednesday because I couldn't access my usual traffic reports on my Facebook page.

After some research, I found some ways to get rid of a few features that were making me crazy like the real-time ticker. Yesterday, my colleague Dana Farrington shared her thoughts about Facebook's changes and some of these helpful hints.

The changes (and my frustration) prompted a discussion around my desk at work about what other companies have forced unwanted changes on the public.

What happens when companies make changes that consumers don't want, didn't ask for and want things changed back?

Click on the slideshow to see who were the biggest offenders and what companies bowed to public pressure.



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Data Show Housing Market Starting To Brighten

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The New 'Top' Story: Facebook's Flow Of Change

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Facebook CEO Mark Zuckerberg shows Timeline during the f/8 conference in San Francisco, on Thursday. The changes to Facebook continue, but some people are unhappy with the recent tweaks. Enlarge Paul Sakuma/AP

Facebook CEO Mark Zuckerberg shows Timeline during the f/8 conference in San Francisco, on Thursday. The changes to Facebook continue, but some people are unhappy with the recent tweaks.

Facebook CEO Mark Zuckerberg shows Timeline during the f/8 conference in San Francisco, on Thursday. The changes to Facebook continue, but some people are unhappy with the recent tweaks. Paul Sakuma/AP Facebook CEO Mark Zuckerberg shows Timeline during the f/8 conference in San Francisco, on Thursday. The changes to Facebook continue, but some people are unhappy with the recent tweaks.

I logged on to Facebook this week to check out the changes so many people had been griping about in person. "Top News" blared above my News Feed and even more updates spewed in a stream in the right-hand corner of the screen. I reflexively closed the boxes on my profile that explained the "upgrade" and cluttered my view. I was suddenly in the dark, not knowing how to control the information.

The Facebook blog says with the changes, the "News Feed will act more like your own personal newspaper." Ahhhh, I see, it's a digital twist on an old friend: the trusty newspaper. Except with the newspaper, journalists carefully comb through the events of the world and pick out the news that you need to know.

These most recent Facebook changes are meant to cater to all users, the post says, regardless of how frequently they visit the site. For those who are not constantly logged in, a "Top Stories" feed is meant to quickly get them up to date.

"All of your news is now in one place with the most interesting stories featured at the top. If you haven't visited Facebook for a while, the first things you'll see are top photos and status updates posted while you've been away," the company says. "If you check Facebook more frequently, you'll see the most recent stories first."

But when the changes took effect this week, many Facebookers — both avid and casual — joined in a chorus of, "Why is Facebook doing this to me?"

As one Facebook user commented, "How dare you determine which posts are a priority???? Are you limiting political speaeh? WHY dont I have the option to opt opt of this big brother crap????" [sic]

Rather than being outraged that a Top Stories feed exists, some are mad that those "interesting" stories are actually irrelevant, despite the mountain of data Facebook has on their every digital move.

But here's a tip: Users can curate their top stories by clicking on the tabs at the corners of the updates. Stories can be tagged as Top Stories or removed from the Top Stories list. Users can also hide certain friends' updates all together or give Facebook a hint as to what kind of updates they detest. Presumably, that makes a difference as to what appears in Top Stories in the future.

Mashable has an interactive guide to some of the new changes, including the real-time, Twitter-like feed and alterations to the photo album design.

And there's more: At Facebook's annual f8 conference, CEO Mark Zuckerberg announced new music and video sharing features. Timeline, which will allow people to build a profile of digital events, has also been introduced.



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High Costs Make It Harder To Grow Young Farmers

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A Greek Default Would Spread Debt Contagion

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Solyndra Executives Refuse To Testify At Hearing

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Solyndra Chief Executive Officer Brian Harrison (left) and Chief Financial Officer Bill Stover are sworn in at the beginning of a Friday hearing of before a House Energy and Commerce Committee panel. Chip Somodevilla/Getty Images

Solyndra Chief Executive Officer Brian Harrison (left) and Chief Financial Officer Bill Stover are sworn in at the beginning of a Friday hearing of before a House Energy and Commerce Committee panel.

Top executives from a bankrupt California solar energy company have declined to testify before a congressional hearing investigating their half-billion dollar government loan.

Solyndra CEO Brian Harrison and the company's chief financial officer, Bill Stover, both invoked their Fifth Amendment right to decline to testify to avoid self-incrimination.

Harrison told the House Energy and Commerce Committee Friday: "On advice of counsel, I respectfully decline to answer any questions."

Stover did the same.

Lawmakers from both parties said they were disappointed, but said that silence from the two executives would not stop them from pursuing their investigation into a $528 million loan Solyndra Inc. received from the Energy Department in 2009.

The panel's chairman, Rep. Fred Upton (R-MI) compared the Solyndra loan to the Great Train Robbery in England in the 1960s.

"It appears we have a great heist of over half a billion dollars and ... maybe even co-conspirators called the U.S. government," Upton said.

Upton faulted the Obama administration for its role in the loan, saying at a minimum the Energy Department did not complete due diligence on the company, which lost hundreds of millions of dollars in the years before the loan was approved.

He called the loan "reckless use of taxpayer dollars on a company that was known to pose serious risks before a single dime went out the door."

Rep. Cory Gardner (R-CO) said it was important for the committee's investigaton to continue.

"The American people deserve answers. Half a billion dollars is missing," he said.

GOP lawmakers said they were expanding their inquiry into the Solyndra loan, which has become a rallying point for Republican critics of the administration's push for so-called green jobs.

In a letter to Energy Secretary Steven Chu, GOP lawmakers said they were expanding their inquiry into the Solyndra loan, which has become a rallying point for Republican critics of the Obama administration's push for so-called green jobs.

Lawmakers said they want the administration to turn over all communications between the Energy Department and White House related to Solyndra, as well as all communications between Energy and the Treasury, which lent Solyndra the money.

Committee leaders said the Obama administration may have violated the law when it restructured Solyndra's loan in February in such a way that private investors moved ahead of taxpayers for repayment in case of default. The economic stimulus law provides for taxpayers to be ahead of other creditors in the event of bankruptcy or default.

Deputy Energy Secretary Daniel Poneman said Thursday that the restructuring was "entirely legal," noting that another aspect of the law requires Chu and other officials to protect the overall interests of taxpayers. He said the restructuring accomplished that because it gave the struggling company a better chance to succeed.

Solyndra filed for Chapter 11 bankruptcy protection earlier this month and laid off its 1,100 employees.

The Fremont, Calif.-based company was the first renewable-energy company to receive a loan guarantee under a stimulus-law program to encourage green energy and was frequently touted by the Obama administration as a model. President Barack Obama visited the company's Silicon Valley headquarters last year, and Vice President Joe Biden spoke by satellite at its groundbreaking ceremony.

Since then, the company's implosion and revelations that the administration hurried Office of Management and Budget officials to finish their review of the loan in time for the September 2009 groundbreaking has become an embarrassment for Obama as he tries to sell his new job-creation program.



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HP Hires Former eBay Head Meg Whitman As CEO

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Regulators Consider Safety Brakes For Table Saws

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SawStop, a table saw safety tool, senses an electrical current in skin and triggers a brake when a finger comes into contact with the blade. Enlarge Courtesy of SawStop

SawStop, a table saw safety tool, senses an electrical current in skin and triggers a brake when a finger comes into contact with the blade.

SawStop, a table saw safety tool, senses an electrical current in skin and triggers a brake when a finger comes into contact with the blade. Courtesy of SawStop SawStop, a table saw safety tool, senses an electrical current in skin and triggers a brake when a finger comes into contact with the blade.

Federal regulators are moving closer to implementing new safety standards for table saws. Every year, several thousand Americans cut off their fingers using the tools.

Engineers at the Consumer Product Safety Commission, a federal agency tasked with ensuring safety standards on a range of consumer products, say almost all of those injuries could be prevented with a better safety brake system.

Currently, such a brake is only available on one brand of table saw, called SawStop, but the vast majority of saws sold today don't have the safety brake.

CPSC Chairman Inez Tenenbaum spoke at a hearing on the issue Wednesday.

"I have personally met with victims of table saw blade injuries, and I have deep sympathy for the pain and the suffering they've endured and that will continue for the rest of their lives, all due to one split-second miscalculation when using a table saw," Tenenbaum said.

A few months ago, a group of injured woodworkers came to Washington to meet with the CPSC and members of Congress. Their current situations ranged from running small contractor businesses to being on food stamps after mangling their hands on table saws.

The trip was organized by Sally Greenberg, head of the National Consumers League, who also attended this week's hearing.

"They are in constant pain, they have mounting medical bills, [and] they are unable to make a living, many of them, because they can no longer use their hands," Greenberg said in a phone interview.

A Common Injury

Anne Northup, a current CPSC commissioner and former Republican congresswoman, says government data show these sorts of injuries are common.

"It's not what happened to one person or two people. I mean, 3,500 people a year get a finger cut off, at least, [and] maybe an arm," Northup says. "Now, there's something wrong with the product."

Northup says it's at least worth a hard look to see if the product could be made to be much safer; Tenenbaum agrees.

"The severity of these injuries and the frequency of their occurrence is something that demands action. These injuries can and they should be prevented," Tenenbaum said at Wednesday's hearing.

One thing the commission is considering would be to require a safety brake like SawStop's. An entrepreneur named Steve Gass invented SawStop, which allows the saw to sense when the blade nicks a person skin.

Within 3/1000ths of a second, the brake fires and the blade drops down into the table, preventing injury.

"I have to say, when I saw [Gass'] technology demonstrated I was dazzled," CPSC Commissioner Robert Adler said. "I had trouble believing that it really works. But it does really work, and it seems to me some variation on his approach makes sense."

A Safety Brake Requirement?

SawStop sells thousands of table saws all around the country now, but other major saw manufacturers — including Black & Decker, Ryobi, Bosch and many others — have resisted adopting the SawStop technology for years.

Instead, to address the safety concerns, they have come up with a new and improved plastic guard for the saw blade.

"We think it's an improvement of an existing technology," Caroleene Paul, an engineer with CPSC who's studying the issue, said at the hearing.

But Paul says that table saws have had guards for decades, and woodworkers commonly remove the guards because they get in the way for certain cuts. She thinks the new and improved guards will similarly fail to stop injuries.

"We think the limitations of that technology have been evident in all the table saw injuries that we see each year," she added.

The CPSC staff says requiring a SawStop-type safety brake would prevent many more injuries.

But the commission will have to consider the cost of requiring it. Most table saw manufacturers cite cost as a primary reason they haven't adopted the technology, since the safety brake could add between $100 and $200 to the price of a saw.

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Striving For A Safer Table Saw

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Officials are moving closer to adopting new safety standards. The saws injure thousands each year.

Officials are moving closer to adopting new safety standards. The saws injure thousands each year.

Power tool companies are against mandating a new technology that promises to eliminate injuries.

Power tool companies are against mandating a new technology that promises to eliminate injuries.

Federal regulators are taking steps toward new safety requirements for table saws.



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Manhattan Subway Riders: Can You Hear Me Now?

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World Markets Sink As G-20 Fails To Ease Tensions

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Europe's Debt Crisis Casts Cloud Over U.S. Economy

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Obama's Jobs Bill Pitch: A Bridge To Nowhere?

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Pablo Martinez Monsivais/AP

President Obama on Thursday visited the Brent Spence Bridge, which has been called "functionally obsolete." The president pressed Congress to pass his jobs act, arguing that if the country doesn't invest in restoring the bridge and other infrastructure now, it will pay for it later.

President Obama continued his tour in support of his jobs bill Thursday. The latest stop: Cincinnati, at the base of the double-decker Brent Spence Bridge.

The bridge sits on one of the busiest trucking routes in the country, and it's considered functionally obsolete.

Gerardo Claudio lives in Augusta, Ga., and works all over the U.S. He spends about three weeks on the road every month, which gives him a good look at the nation's infrastructure.

"The roads are in real, real awful condition, should I say," says Claudio, who was in Cincinnati on Thursday.

That has consequences for the type of work he does.

"The van that I drive, I mean right now going through all these potholes and this and that, it takes away from the vehicle value," he says. "It takes away in wear and tear."

Obama: Invest Now, Or Pay Later

The infrastructure deterioration that Claudio experiences is Fred Craig's specialty. Craig, an engineer, works on the Brent Spence Bridge Project.

Craig says the bridge was designed for 80,000 vehicles a day. Today, it carries double that number. The shoulders have been turned into traffic lanes, so when there's an accident, the cars back up for miles. Even so, roughly 4 percent of the country's gross domestic product crosses the bridge.

"Locally, it's very important because it connects northern Kentucky and southwestern Ohio," Craig says. "But nationally it connects the Great Lakes to the Gulf."

Obama argues that if the country doesn't invest in restoring this kind of infrastructure now, it'll pay for it later.

"Cincinnati, we are better than that; we are smarter than that," he told a crowd Thursday. "And that's why I sent Congress the American Jobs Act 10 days ago."

As the crowd cheered "Pass this bill," Obama took his Republican critics head-on.

"You know, we've got a lot of folks in Congress who love to say how they're behind America's jobs creators," he said. "Well, if that's the case, then you should be passing this bill. Because that's what this bill is all about, is helping small businesses all across America."

A short walk from the end of the bridge, Greg Cook runs a sporting-goods store. He says he thinks infrastructure jobs are a Band-Aid for the unemployment problem, and he's not interested.

A Short-Lived Fix?

"It's a short-lived fix," he says. "I mean, the guys will be working on the bridge for a couple years, and then they're out of work again."

Don't patronize us by implying that if we pass the second stimulus, that bridges will get fixed right away. The American people heard the same thing when the administration was selling the first stimulus.

- Senate Minority Leader Mitch McConnell (R-KY)

The truth is, construction on the Brent Spence Bridge would not begin right away even if the bill passes tomorrow. The White House says it never claimed this project was shovel-ready. One reason it was chosen was its political symbolism.

The Brent Spence connects House Speaker John Boehner's home state of Ohio with Senate Minority Leader Mitch McConnell's Kentucky. On the Senate floor Thursday, McConnell said it would be great to fix this bridge, but the president's jobs bill won't get it done.

"Don't patronize us by implying that if we pass the second stimulus, that bridges will get fixed right away," McConnell said. "The American people heard the same thing when the administration was selling the first stimulus."

But small-business owner Jeffrey McClorey says the first stimulus really helped this community. He runs Bromwell's Fireplace and Art Gallery, which calls itself the oldest business in Cincinnati. He says the first stimulus helped spur a mixed-use condo development along the river, called The Banks.

"There's 300 new families living down at The Banks, and more coming. And those people are buying products from me and other people downtown and in the region," McClorey says. "And it also benefits and helps to repopulate the city center, which I think is very important."

This Cincinnati trip is the latest in a series of jobs events Obama has held across the country. Before this he was in Raleigh, N.C.; Richmond, Va.; and Columbus, Ohio. No coincidence those are also swing states he wants to win to get re-elected in 2012.

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Morning Edition– Even knowledge that innocent people have been executed doesn't diminish public support for it.

Even knowledge that innocent people have been executed doesn't diminish public support for it.

A federal loan program to build more fuel-efficient cars became the latest budget flash point.

Michele Norris speaks with our regular political commentators.



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What's Driving The Market Plunge?

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Former eBay Chief Whitman Picked To Head HP

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EasyJet to Run TV Ads to Lure Business Fliers

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September 23, 2011, 11:35 AM EDT By Steve Rothwell

Sept. 23 (Bloomberg) -- EasyJet Plc will next month begin its first major television advertising campaign to lure passengers from carriers such as British Airways and Air France- KLM Group and boost its share of the business travel market.

“We’re very keen to get the message out that EasyJet is flying more and more business people into Europe,” Peter Duffy, EasyJet’s marketing chief, said in a telephone interview today.

EasyJet will air a series of three 20-second clips, featuring music from Liverpool band The Wombats, starting Oct. 5 on television in the U.K. and then in countries in continental Europe, including France and Switzerland.

Chief Executive Officer Carolyn McCall has made raising EasyJet’s share of the business-passenger market a cornerstone of her strategy since taking the helm in July 2010. The carrier said yesterday that it will log record pretax earnings this year as demand for business flights and short-haul travel lifts revenue.

Passengers buying flexible tickets for travel in October and November will be offered a free flight if their plane arrives more than 15 minutes late. The so-called Flexi fares have been on sale since November and are targeted at business passengers who need to change their flights at short notice.

EasyJet surged yesterday after it said it would make a one- off dividend payment of 150 million pounds ($232 million), in addition to paying its first-ever regular dividend payment worth about 40 million pounds. The company said it will report record pretax earnings of 240 million to 250 million pounds for the year ending Sept. 30.

--Editors: Robert Valpuesta, Jerrold Colten.

To contact the reporter on this story: Steve Rothwell in London at srothwell@bloomberg.net

To contact the editor responsible for this story: Chad Thomas at cthomas16@bloomberg.net



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Another Tycoon Defies the Kremlin

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By Henry Meyer

On Sept. 15, Mikhail Prokhorov, Russia’s third-richest man (and owner of the New Jersey Nets), said he was stepping down as chairman of the pro-business Pravoye Delo party because the government had hijacked it. Prokhorov took the post in June with the government’s blessing, and promised to spend almost $90 million to get the party’s candidates elected to Parliament in December. Yet in recent weeks he had repeatedly criticized the country’s leadership, saying that Russia was becoming a “farce and parody of the Soviet Union.”

The Kremlin has not commented on Prokhorov’s outburst, which recalls the clash between former oil baron Mikhail Khodorkovsky and then-President Vladimir Putin. Khodorkovsky ended up in jail, his oil empire dismantled. Ariel Cohen, a senior research fellow in Russian and Eurasian Studies at the Heritage Foundation in Washington, says the Kremlin does not want another Khodorkovsky trial, which generated bad publicity. Yet even if Prokhorov does not end up behind bars, his companies could suffer from frosty relations with the state.

Prokhorov owns a 36.4 percent stake in London-listed Polyus Gold International, Russia’s biggest gold producer, which he wants to merge with a global mining group. Potential partners may now shy away from a deal, for fear that Russian authorities could retaliate by snarling Polyus’s projects in red tape. The company may also find it more difficult to tap capital markets until the uncertainty surrounding Prokhorov has diminished, Yael Levine and Carroll Coley of the Eurasia Group consultancy wrote on Sept. 20. Other Prokhorov holdings include his 49.9 percent stake in investment bank Renaissance Capital, which has been picked to handle state company privatizations, and a 17 percent share of Rusal, the world’s biggest aluminum maker, which has government permission to run much of its trading business in low-tax offshore havens.

Prokhorov hasn’t directly criticized President Dmitry Medvedev, or Putin, who is now Prime Minister. He has however called Vladislav Surkov, a top aide to Medvedev who is also close to Putin, a “puppeteer” who tried to control the political system.

The government initially welcomed Prokhorov’s role at Pravoye Delo (which means “Right Cause”). The Kremlin wanted to raise Pravoye Delo’s profile to demonstrate business backing for its policies. Then Prokhorov began saying that he might seek the Prime Minister’s job or run for President. The billionaire naively assumed the Kremlin would give him free rein, says Mikhail Kasyanov, a former Prime Minister under Putin who is now in the opposition Parnas party. “He agreed to be a puppet and at last realized that he can’t go through with it.”

Prokhorov has admitted he miscalculated. “Despite 20 years in business, strangely enough, I still had some illusions,” he said in a Sept. 16 post on his blog. “I proposed change, but the system wasn’t ready.”

The bottom line: With presidential elections next year, oligarch Mikhail Prokhorov has noisily accused the Kremlin of manipulating the political system.

With Carol Matlack

Meyer is a reporter for Bloomberg News.



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Moody's Cuts Credit Agricole and Societe Generale

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Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at YCMNet Advisors, Bob Rice, general managing partner at Tangent Capital Partners LLC, Paul Martino, managing director at Bullpen Capital, and Paul Bard, director of research at Renaissance Capital LLC, talk about Zynga Inc.'s plan to raise $1 billion in an initial public offering and the outlook for the company. (Excerpts. Source: Bloomberg)



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Italy Credit Rating Cut by S&P

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Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at YCMNet Advisors, Bob Rice, general managing partner at Tangent Capital Partners LLC, Paul Martino, managing director at Bullpen Capital, and Paul Bard, director of research at Renaissance Capital LLC, talk about Zynga Inc.'s plan to raise $1 billion in an initial public offering and the outlook for the company. (Excerpts. Source: Bloomberg)



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BNP Paribas, SocGen Jump on Speculation France May Bolster Banks

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September 23, 2011, 1:48 PM EDT By Fabio Benedetti-Valentini

Sept. 23 (Bloomberg) -- BNP Paribas SA and Societe Generale SA, France’s biggest banks by market value, rose in Paris trading on speculation the French government will take steps to bolster their capital.

BNP Paribas jumped 2.26 euros, or 9.8 percent, to 25.32 euros in Paris trading. Societe Generale gained 8.8 percent to 16.65 euros and Credit Agricole SA, the country’s third-largest lender, gained 4.8 percent to 4.43 euros. All three banks slumped more than 50 percent in the past three months as Europe’s sovereign debt crisis intensified.

“Increasingly nervous wholesale funding and equity markets may trigger short-term French government action to support its banks,” Royal Bank of Scotland Group Plc analysts Jorge Mayo and Stefan Stalmann wrote in a note today. “The French government would be more likely to resort once more to loss- absorbing instruments other than common equity.”

The capital injections would amount to 16 billion euros ($21.6 billion) for BNP Paribas, 4 billion euros for Societe Generale and 14 billion euros for Credit Agricole, according to the RBS note.

This level of recapitalization for the three banks would represent about 2 percent of France’s gross domestic product, the RBS analysts said. “Its debt/GDP would rise from 87 percent to about 89 percent, which looks broadly manageable and may avoid a rating downgrade,” they wrote.

Measures the banks have already announced to shrink their balance sheets “would allow for repayment of government capital out of internally freed-up capital, and any issuance of common equity could be executed in a much less stressed market place at higher prices,” the RBS analysts said.

A Paris-based spokeswoman at BNP Paribas SA declined to comment when reached by phone, as did spokeswomen at Societe Generale and at Credit Agricole.

--Editor: Frank Connelly,

To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net.

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net



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G-20 Pledges to Tackle ‘Renewed’ Challenges, Presses Europe

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September 23, 2011, 2:49 PM EDT By Simon Kennedy and Scott Rose

(Updates with markets in third and sixth paragraphs. See {EXT4 } for more on the European debt crisis.)

Sept. 23 (Bloomberg) -- Group of 20 finance chiefs pledged to address rising risks to the global economy and pushed Europe to contain its sovereign debt crisis after concern the world is on the brink of another recession sent stocks tumbling.

Policy makers are “committed to a strong and coordinated international response to address the renewed challenges facing the global economy,” G-20 finance ministers and central bank governors said in a statement late yesterday in Washington. Many urged Europe to implement a July promise to expand the powers of its rescue fund, Japanese Finance Minister Jun Azumi said.

The previously unplanned communique suggests authorities are alert to worries among investors, while they stopped short of outlining fresh policies to buoy growth. Speculation the G-20 may act to prevent the debt crisis from worsening left U.S. stocks swinging between gains and losses, European equities rebounding and Treasuries falling a day after the MSCI All- Country World Index dropped into a bear market for the first time in more than two years.

“Verbal support without any concrete action is no longer convincing,” said Joe Lau, an economist at Societe Generale SA in Hong Kong. “Investors are now looking for viable credible actions from policy makers and, given the amount of nervousness and uncertainty out there, that may not even be enough.”

The European Central Bank may act to address risks to growth as soon as next month, Governing Council members Luc Coene and Ewald Nowotny said. An interest-rate cut isn’t ruled out, and the extension of long-term loans to banks is another possibility, Coene said in an interview.

Stocks Rebound

The Standard & Poor’s 500 Index added 0.4 percent at 2:24 p.m. New York time. Earlier today, it increased as much as 1 percent and slumped 0.7 percent. The Stoxx Europe 600 Index rose 0.6 percent after tumbling 2.6 percent. Ten-year Treasury yields increased 8 basis points to 1.80 percent after falling to a record low of 1.67 percent. Silver plunged 17 percent to extend its worst two-day slide in 31 years, and gold and copper retreated about 6 percent.

The euro region vowed in the G-20 statement to increase the flexibility of the European Financial Stability Facility and to “maximize its impact” by the time the group next meets in Paris on Oct. 14-15. Some policy makers signaled earlier in the day they may use leverage to increase the firepower of the EFSF, which was designed to stem the sovereign-debt crisis.

‘Fragility’

The G-20 officials cited “financial system fragility” and “heightened downside risks from sovereign stresses” among the threats to growth. They said they will ensure banks are adequately capitalized and have access to liquidity, while reiterating an aversion to volatility in currency markets.

The statement was released as the International Monetary Fund and World Bank prepare to start their annual meetings today, with data this week highlighting economic weakness around the globe and the IMF cutting its forecasts for global growth this year and next to 4 percent.

U.S. consumer confidence dropped last week to its lowest point since the recession ended in 2009, and the output of European service companies and manufacturers this month shrank for the first time in more than two years. A preliminary index of purchasing managers suggested Chinese manufacturing may contract for a third month in September, the longest period in two years. FedEx Corp., an economic bellwether delivering goods from financial documents to pharmaceuticals, cut its full-year profit forecast as demand dropped in the U.S. and Asia.

‘Danger Zone’

“The world is in a danger zone,” World Bank President Robert Zoellick told reporters. Pacific Investment Management Co. Chief Executive Officer Mohamed El-Erian warned a fresh financial crisis is brewing, and Royal Bank of Scotland Group Plc and JPMorgan Chase & Co. predicted a euro-area recession and interest rate cuts from the ECB are imminent.

European authorities have drawn the most criticism for failing to contain a debt crisis that began in Greece two years ago and has since left that country on the verge of default, Portugal and Ireland requiring bailouts, and speculators threatening to dump the bonds of Italy and Spain.

In a sign of growing irritation around the world, U.K. Chancellor of the Exchequer George Osborne said today the euro area needs to act by the time G-20 leaders meet in Cannes, France, during the first week of November. “Patience is running out in the international community,” Osborne told reporters.

No ‘Blank Check’

In Washington, officials from China and Japan, the second- and third-biggest economies, indicated that their support for Europe will have limits and the region needs to solve the debt crisis itself. Japan’s Azumi said that while his nation can buy EFSF bonds if needed, there is no “blank check.”

“At the margin we can do quite a bit to help,” Chinese central bank Deputy Governor Yi Gang said in a panel discussion at the IMF. At the same time, “the real solution of the European sovereign debt crisis has to be done by Europeans themselves.”

Finance officials from Brazil, Russia, India, China and South Africa -- the so-called BRICS -- said in a statement they are “open to consider, if necessary, providing support through the IMF or other international financial institutions in order to address the present challenges to financial stability.”

U.S. Treasury Secretary Timothy F. Geithner predicted Europe will act “with more force” to end its troubles.

More Scope

For now, European parliaments are focused on approving a plan to widen the scope of the 440-billion euro ($593 billion) EFSF to allow it to buy the debt of stressed euro-area governments, aid troubled banks and offer credit lines. Its current role is to sell bonds to fund rescue loans for cash- strapped governments.

The ratification process, which has so far been completed by just six nations, has drawn fire from some investors for being protracted and failing to provide the fund with enough cash to prevent the turmoil spreading beyond Greece. Curbing the scope of policy makers to do more is the suspicion that taxpayers in AAA-rated countries such as Germany and Finland would balk at stumping up even more rescue money.

Speculation has grown that Europe may eventually ratchet up the fund’s spending power through leverage, with European Union Monetary Affairs Commissioner Olli Rehn and French Finance Minister Francois Baroin indicating yesterday they may be willing to do so. One proposal is for the facility to use bonds as collateral to borrow more cash from the ECB.

Another idea is to mimic a U.S. program established following the 2008 collapse of Lehman Brothers Holdings Inc. by allowing the fund to offer the ECB credit protection for buying more sovereign bonds. European governments are also exploring speeding the setup of a permanent rescue fund to next July, a year ahead of schedule, an internal working paper shows.

--With assistance from Cheyenne Hopkins, Sandrine Rastello, Mark Deen, Rainer Buergin, Meera Louis, Gonzalo Vina, Matthew Bristow, Alaa Shahine, Gabi Thesing, Sho Chandra, Shamim Adam, Belinda Cao, Aki Ito and Ian Katz in Washington. Editors: Chris Anstey, Paul Panckhurst

To contact the reporters on this story: Scott Rose in Washington at rrose10@bloomberg.net; Simon Kennedy in Washington at Skennedy4@bloomberg.net

To contact the editor responsible for this story: Chris Wellisz at cwellisz@bloomberg.net



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Europe Weighs Speedier ESM Enactment to Stem Crisis, Draft Shows

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September 23, 2011, 1:53 PM EDT By James G. Neuger

(See EXT4 for more on the European debt crisis.)

Sept. 23 (Bloomberg) -- European governments are exploring speeding the setup of a permanent rescue fund as the urgency mounts to halt the debt crisis, an internal working paper shows.

Drawing on paid-in capital, the fund will wield a 500 billion-euro ($677 billion) war chest that could help shield countries like Italy. It also includes provisions for sharing costs with bondholders for countries with “unsustainable” debt.

Senior finance officials next week will examine the cost advantages of creating the fund, known as the European Stability Mechanism, in July 2012, a year ahead of schedule, according to a staff paper prepared for the meetings and obtained by Bloomberg News.

As Greece’s prospects darken and the 18-month debt crisis threatens to tip Europe back into recession, the euro area’s managers have gone into overdrive in pursuing measures to contain its spread.

Faster ESM enactment would yield a “more effective financing structure” that cuts the extra debt of donor countries by 38.5 billion euros, saving Germany alone 11.5 billion euros, the paper said. “This gain is to be considered as a minimum,” it said.

Discussions of the ESM timeline and further enhancements to the temporary rescue fund are proceeding at the technical level to maximize the crisis-fighting options for the political leadership.

Temporary Fund

Public debate has broken out over what to do after the upgrade to the temporary fund, the 440 billion-euro European Financial Stability Facility, in about mid-October. The EFSF depends on national guarantees in contrast to the ESM’s capital pool.

One option, inspired by the U.S. response to the 2008 financial crisis, is to use leverage to add to the EFSF’s firepower, European Union Economic and Monetary Commissioner Olli Rehn and French Finance Minister Francois Baroin said yesterday.

While U.S. Treasury Secretary Timothy Geithner pitched that idea at a Sept. 16 meeting with euro-area finance chiefs in Poland, it met initial resistance from Germany, Europe’s dominant economy.

Another variant, proposed by economists Daniel Gros and Thomas Mayer, is for the EFSF to operate like a bank and borrow from the ECB, using the bonds it purchases as collateral.

‘Increase Unavoidable’

Boosting the EFSF is “unavoidable” in the long run and may be followed by joint euro bonds, Klaas Knot, the Dutch representative on the European Central Bank’s policy council, said in a De Telegraaf interview published today.

Set up in May 2010 after stopgap loans to Greece failed to restore market confidence, the EFSF was given a three-year lifespan amid expectations that the crisis would run its course.

As Ireland and Portugal succumbed to speculative attacks, Germany then pushed for the permanent fund. Its statutes need to be approved by the 17 euro-area countries and it requires all 27 EU countries to pass a treaty amendment to become operational.

Ratification discussions have barely gotten under way. Germany won’t consider its ESM approval timetable until the reinforced EFSF is in place, the government said last week. German lawmakers vote to ratify the package next week.

European Commission spokesman Amadeu Altafaj said the current focus is on the EFSF upgrade and declined to comment on measures beyond that.

While speedier enactment would require donor countries to pay in as of 2012, those costs would be more than offset by switching away from the EFSF’s guarantee system, the working paper said. However, aid recipients would also have to contribute.

--With assistance from Mark Deen in Paris, Rainer Buergin in Berlin and Martijn van der Starre in Amsterdam. Editors: James Hertling, Patrick Henry

To contact the reporter on this story: James G. Neuger in Brussels at jneuger@bloomberg.net

To contact the editor responsible for this story: James Hertling at jhertling@bloomberg.net



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Europe’s Debt Crisis Has Become a German Identity Crisis

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Photo Illustration by Bloomberg

By Brendan Greeley

(Corrects third paragraph to clarify Europe’s treaty requirements for state bailouts and Schäffler’s voting record among Free Democrats.)

“Germans, we don’t look to see what’s in our own national interest,” says Frank Schäffler. “We’re drunk with Europe.” Schäffler, a member of the Bundestag, Germany’s lower house of Parliament, is speaking on the phone from his home district of Bünde. In two sentences he highlights the bedrock assumptions of postwar German politics: Greater European integration is always and necessarily a good thing, and Germany has no interests of its own. “As a good German,” Schäffler explains, “one has to be a good European.”

The debt crisis in Europe has become a crisis of German identity. The rising likelihood of a Greek default has left the Continent’s most powerful nation with an unpalatable choice: back away from its insistence on responsibility and monetary stability and agree to help purchase Greece’s sovereign debt; or hold fast and risk the collapse of the euro. To a considerable degree, the future of Europe’s banking system, its monetary union, the fate of the global economy, and Barack Obama’s Presidency now rest on how Germans decide to act. And to understand why Germans are struggling with the role they’re being asked to play in the 21st century, you need to understand that they are still very much attempting to atone for the 20th.

Schäffler is a member of the Free Democrats, a small party of what Americans would call libertarians, serving as the junior coalition partners to Angela Merkel’s much larger and more conservative Christian Democrats. In the summer of 2010, the leaders of the euro zone countries put together the European Financial Stability Facility, which can issue up to €440 billion ($600 billion) worth of bonds to tide over countries having trouble staying liquid. More than a quarter of this capacity came from Germany. The euro zone countries lent their credit to the facility, too, which is what bothers Schäffler. Europe’s legal foundations rest on multistate treaties, and the most recent treaty, awkwardly, contains what has come to be known as the “no bailout clause”: No member state should be liable for the fiscal decisions of another. Any new bailout plan, then, requires a new treaty and a new round of ratifications. When the temporary facility went to the Bundestag for a vote, Schäffler, along with only one other member of his party, voted no. For direct bilateral aid to Greece, he voted no as well, completely alone among the Free Democrats. “Within the party,” he says, “they told me ‘that’s not what you do.’ ”

Barely a year later, Greece is even closer to default, and Merkel is sending back a new treaty amendment that would replace the temporary “facility” with a permanent “mechanism”—a blueprint, in other words, for future bailouts. The party leadership of the Free Democrats has signaled a yes vote, but Schäffler has drafted a pledge demanding that all party members agree on whether they in fact want to vote as instructed. The measure is likely to collect enough signatures to force his party to take an internal vote.

Even though Schäffler’s gambit has little chance of actually stopping German participation in future euro zone bailouts—Merkel can find enough votes among opposition parties to get the mechanism approved—the mere prospect of a referendum within a single party has given Schäffler a curious kind of leverage. In Berlin and each of Germany’s states, the leaders of his party have been forced to take positions both on his pledge (reluctant acceptance) and the bailout mechanism (reluctant support). Film crews now trail Schäffler to town halls merely because he’s not doing what he’s supposed to. “What’s un-German,” says Schäffler, who looks like a 15-year-old with grey hair, “is not just that you say ‘no,’ but that you attempt to find a majority for your position.”



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Charlie Rose Talks to Tony Blair

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By Charlie Rose

“The Palestinians are perfectly entitled to come and say, ‘We want to be recognized as a state’”

“The Palestinians are perfectly entitled to come and say, ‘We want to be recognized as a state’” Stefan Wermuth/Reuters

Can you concoct a formula that’s attractive to the Palestinians, to say we’ll negotiate hard for this and it’ll have to happen quickly—and if it fails, then we’ll support statehood?
A lot of countries feel tremendous sympathy for the Palestinians. But they would like to see a revived negotiation given the chance. I think that if revived negotiation were given the chance and then it all just broke apart, people would be looking for other ways to solve this. I know people say, “Well, we started the negotiation before.” [But] if you got a serious negotiation going again, then my view is that all countries, actually, even those who are traditionally very close to Israel, would be saying, “Right, we really want this to work.”
Is there anything you can say to the Palestinians to dissuade them from demanding statehood now?
Put it the other way around. I think the Palestinians are perfectly entitled to come and say, “We want to be recognized as a state.” And that process doesn’t happen overnight, by the way. So that will take some time. I think what is difficult is that people say, “We demand recognition as a state, but we’re not prepared to have this negotiation on terms that are fair.” Now, obviously those terms have got to be fair. But I said all the way through that it’s inevitable the Palestinians will come to the UN this week. The question is, can we combine whatever happens at the UN with a relaunched negotiation? If we can, then I think we’re in the business of advancing this thing. If we can’t, then, you know, from the Israeli perspective—and they’ve also got their view on this—they will say, “Well, you’ve chosen to go through the UN rather than through a negotiation.”
Explain how you combine their presence at the UN with renewed negotiations. What’s the recipe?
It could work in a number of different ways. What is important is to launch a negotiation so that we have a situation where the Palestinians and the Israelis are trying to resolve these issues. And the only way you will resolve them is on the ground. I’ve just come back from my 71st visit there. You know, I’m there the whole time. It’s on the ground you need change. If you don’t get the change on the ground, then you can pass, frankly, any number of resolutions, but you won’t get peace.
Are the Israelis saying, “We will not negotiate if the Palestinians go ahead with the statehood request?”
I think what the Israelis are saying is this can only be resolved by negotiation. It’s not for me to say what they might do. And I think it depends, in a way, not just on what happens at the UN but the atmosphere around how it happens. The truth is, in the last few years, what Prime Minister Salam Fayyad has done under President Abbas’s leadership has been to create institutions of statehood that are strong and now recognized, for example, by the IMF and the World Bank and others, as those of a fully functioning state. Now, we’ve still got of course the split between Gaza and the West Bank, and this is a problem. Because of the improved security that the Palestinians have put in on the West Bank in a place like Janin in the northern part of the Palestinian territory, we got the Israelis to open up the border. The result of that has been literally millions of dollars flowing into the economy of Janin. So over the past two or three years, the Palestinian economy on the West Bank has been growing in double figures.
Do you hold up the example of stability in Ramallah to the Israelis—and the idea that it can spread?
A few years back, you could say, well, it’s not quite clear what works. Now it’s absolutely clear. What’s clear is the Palestinians are taking their obligations of rule of law and law and order seriously, which Fayyad has done. It then requires—frankly from Palestinians … as a whole, because this is the only way you’ll ever get a deal—to say Gaza and the West Bank is one state under one authority and one rule of law. That’s something the Palestinians are going to have to sort out for themselves.
And how does the Arab Spring affect all of this?
Most people are saying that because of all the uncertainty in this region and this sort of revolution that’s going on, this is the worst time to make peace. My counter to that is, actually, it’s the best time to make peace. It’s the one thing that will allow Israel and Palestine to be part of the mood of change in the region and not be seen as something that has to be changed.

Watch Charlie Rose on Bloomberg TV weeknights at 7 p.m. and 10 p.m. ET.

Emmy Award-winning journalist Charlie Rose is the host of Charlie Rose, the nightly PBS program.



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The Russian Twins Behind Hit iPhone App Cut the Rope

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By Julia Ioffe

Cut the Rope creators Semyon (left) and Efim Voinov in Moscow

Cut the Rope creators Semyon (left) and Efim Voinov in Moscow Anna Skladmann for Bloomberg Businessweek

When they were 10, fraternal twins Efim and Semyon Voinov received a British-made ZX Spectrum personal computer from their parents. It was 1991 in late Soviet-era Moscow, and such things were rare. The Voinovs put the Spectrum to good use. They picked up programming and quickly graduated from playing games to designing their own.

That childhood hobby has rewarded the twins, now 29, big-time. Last October the Voinovs’ latest project, a game called Cut the Rope, exploded into the iPhone App Store, quickly reaching No. 1. In July the Android version debuted and also hit the top spot. It’s the first game to knock the megahit Angry Birds off the top roost, and has now been downloaded more than 50 million times. The in-game ads and 99¢ sales pile up: Although the brothers won’t talk figures, they’ve earned “several million dollars” from the game, says Mikhail Lyalin, executive chairman of the Voinovs’ year-old company, ZeptoLab. In a country saturated with programming talent, they’re among the first Russian developers to turn their attention to the smartphone market. And they’re likely not the last. Last year, Russians had 6 million iPhones and other mobile devices, though they generally arrive late to this corner of the world. That figure is expected to triple in 2011.

The brothers are rooted firmly in the Soviet heritage of science and engineering. “Everyone in our family is either a physicist or a chemist,” says Efim. Yet because their formative years coincided with the collapse of the Soviet education system, they are, like many of their coding compatriots, largely self-taught. While studying unrelated topics at university, they worked part-time as game programmers. They published some of their creations on a small site called PalmGear.com, and occasionally “we would get checks from America for $50,” says Semyon. “That was a lot of money for us back then.” After they graduated in 2004, Lyalin hired the brothers to work at a gaming company he owned, Reaxion, where they gained experience developing for different mobile platforms.

In the summer of 2010, the brothers left Reaxion to form ZeptoLab. “Zepto,” a math prefix meaning 10-²¹, was meant to signify how truly boutique their operation was: twin brothers working at home with their cat. After success with another game, Parachute Ninja, which was downloaded 3 million times, Efim and Semyon began prototyping the game that would become Cut the Rope. The objective is to get a shiny lollipop into the mouth of a little green monster, named Om Nom, by slicing swinging ropes at the right time. Efim, who typically writes code for the twins’ games, studied a kinetics textbook to understand how ropes move. Semyon, the designer, aimed to make Om Nom maximally cute. “I wanted it to have an emotional attraction,” he explains. “Like a child or a pet that needs to be fed.”

As the game shot up the rankings, the Voinovs started getting offers from Silicon Valley, they say, though they turned them all down. “We’re fine for now,” says Efim. Their focus is on expanding the business: They’ve moved into a real office, hired five people, and in August released a sequel, Cut the Rope: Experiments. They’re also taking a cue from the success of Angry Birds and expanding the brand into comics, stuffed animals, and more. After that? They’re hoping for “a little bit of a breather, so we can create a completely new project,” says Efim.

The bottom line: Cut the Rope has been downloaded more than 50 million times and earned its twin creators “several million dollars.”

Ioffe is a Bloomberg Businessweek contributor.



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Most U.S. Stocks Rise, Treasuries Retreat as Gold, Silver Plunge

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September 23, 2011, 2:50 PM EDT By Michael P. Regan and Rita Nazareth

Sept. 23 (Bloomberg) -- Most U.S. stocks gained, halting a four-day slump, European equities rebounded and Treasuries fell amid speculation policy makers will act to prevent the debt crisis from worsening. Silver, gold and copper sank.

The Standard & Poor’s 500 Index added 0.3 percent at 1:43 p.m. New York time after plunging 7.1 percent in the first four days of the week. More than three stocks gained for every two that fell on U.S. exchanges. The Stoxx Europe 600 Index rose 0.6 percent after tumbling 2.6 percent. Ten-year Treasury yields increased eight basis points to 1.80 percent after falling to a record low of 1.67 percent. Silver plunged as much as 18 percent to extend its worst two-day slide in 31 years, and gold and copper retreated more than 6 percent.

Europe’s governments are speeding the setup of a permanent rescue fund, an internal working paper shows. The European Central Bank may step up efforts to ease financial-market tensions, including offering banks 12-month loans, Governing Council members said. About $3.5 trillion had been erased from global equity values this week before today, driving the MSCI All-Country World Index into a bear market and price-earnings ratios down to the lowest levels since March 2009.

“You’d expect to see some stability after an aggressive selloff, but it’s Friday and the question is: do investors want to go long over the weekend?” Alan Gayle, a senior strategist at RidgeWorth Capital Management in Richmond, Virginia, which oversees about $48 billion, said in a telephone interview. “The ECB is saying good things, but the market is looking for more tangible steps.”

Stability Mechanism

Stocks drifted between gains and losses for most of the day before heading higher after a staff paper obtained by Bloomberg News showed that senior European finance officials next week will examine the cost advantages of creating the rescue fund, known as the European Stability Mechanism, in July 2012, a year ahead of schedule. The fund will have 500 billion-euros ($677 billion) that could help shield countries like Italy and includes provisions for sharing costs with bondholders for countries with “unsustainable” debt.

Group of 20 officials said after talks in Washington that they were “committed to a strong and coordinated international response to address the renewed challenges facing the global economy.” U.S. stocks tumbled this week after the Federal Reserve said there were “significant downside risks” to gross domestic product. The S&P 500 has fallen 17 percent since April 29 amid concern about a global economic slowdown.

Benchmark measures for 32 out of the 45 nations in the MSCI All-Country World Index have posted 20 percent declines from their respective peaks, meeting the common definition of a bear market, according to data compiled by Bloomberg. The MSCI gauge passed that threshold yesterday, extending its slump since May 2 to 22 percent. Among the countries with the 20 biggest losses from their highs, 18 are located in Europe. The exceptions are Hong Kong and Brazil.

Financials Lead Gains

All 10 of the main industry groups in the S&P 500 rose, with financial firms and companies that rely on discretionary consumer spending climbing more than 1 percent to lead gains. Ford Motor Co. rallied 3.2 percent after saying U.S. sales of pickups are at their highest pace since December.

The S&P 500 is trading for 12.4 times earnings in the last 12 months, within 2 percent of a low of 12.2 reached Aug. 8, data compiled by Bloomberg show. The ratio would have to narrow another 18 percent to match its level on March 9, 2009, the start of the bull market in which the gauge rose as much as 102 percent, the data show.

Valuations

The price-earnings ratio as of yesterday was 5.1 percent below the S&P 500’s average valuation of 13 at its lowest point in the last nine bear markets, data compiled by Bloomberg show. To reach the lowest of those, 7 on June 21, 1982, the index would have to fall 43 percent to about 640, based on profit in the last 12 months of $91.41 a share.

Gold futures fell as much as $110 to $1,631.70 an ounce as some investors sold the metal to cover losses in other assets. Silver tumbled as much as 18 and extended its two-day slump to 26 percent, the most since 1979. The S&P GSCI Index of commodities slumped 1.1 percent to the lowest level on a closing basis in almost 10 months.

European stocks erased losses as Societe Generale SA and BNP Paribas SA, France’s biggest banks, climbed more than 8.7 percent to lead a rally in financial shares. The Stoxx Europe 600 Index declined to the lowest level since July 2009 yesterday, extending the loss from this year’s high on Feb. 17 to 26 percent. The index lost 6.1 percent this week, the most since Aug. 5.

European Lending

A measure of banks’ reluctance to lend to one another in Europe rose for a third day to the highest since March 2009. The Euribor-OIS spread, the difference between the three-month euro interbank offered rate and overnight index swaps, climbed to 89 basis points as of 5:10 p.m. in London, from 85 yesterday, Bloomberg data show.

Money-market mutual funds reduced lending to European banks further last month, with the biggest U.S. funds cutting their holdings to the lowest in at least five years, as the region’s sovereign debt crisis worsened. The 10 biggest U.S. funds eligible to purchase corporate debt, with a combined $676 billion, reduced European bank assets to 42 percent of holdings, the lowest level since at least 2006, Fitch Ratings said today in a report.

Among European bonds, yields on Italian and Spanish debt fell, while rates on U.K., French and German debt increased. Greece’s two-year yield surged 317 basis points, or 3.17 percentage points, to 69.69 percent.

The MSCI Emerging Markets Index slumped 1.8 percent and is down 11 percent over five days, set for its biggest weekly loss since 2008. South Korea’s Kospi Index tumbled 5.7 percent for the biggest drop among global equity gauges, while Russia’s Micex Index fell 4.5 percent.

--With assistance from Michael Patterson and Stephen Kirkland in London, Whitney Kisling and Chris Nagi in New York and James G. Neuger in Brussels. Editors: Michael P. Regan, Nick Baker

To contact the reporters on this story: Michael P. Regan in New York at mregan12@bloomberg.net; Rita Nazareth in New York at rnazareth@bloomberg.net

To contact the editor responsible for this story: Nick Baker at nbaker7@bloomberg.net



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ECB May Step Up Crisis Response Next Month

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September 23, 2011, 10:51 AM EDT By Gabi Thesing and Meera Louis

(See EXT4 for more on the European debt crisis.)

Sept. 23 (Bloomberg) -- The European Central Bank may step up efforts to boost growth and ease financial-market tensions as early as next month, Governing Council members said.

Austria’s Ewald Nowotny and Belgium’s Luc Coene said in Washington that potential measures include the reintroduction of 12-month loans to banks. Asked if an interest-rate cut is warranted, Coene said while that wouldn’t help to bring down longer-term borrowing costs, “the ECB has never ruled out things beforehand.”

“If the data in early October shows that things are worse than we anticipated we will look at the kind of decisions we have to take for that,” he said in an interview late yesterday.

European policy makers are under pressure from counterparts around the globe as their failure to contain the region’s sovereign-debt crisis stokes concern the world is on the brink of another recession. Their comments come as European officials debate how to increase the size of their bailout fund to restore confidence in its firepower.

With money-market tensions increasing, the ECB has already reintroduced a six-month loan and continues to offer banks as much cash as they want at its benchmark rate in weekly, monthly and three-month refinancing operations. It last conducted a 12- month loan in December 2009.

“The ECB will probably discuss reintroducing a 12-month tender,” Nowotny told reporters in Washington today. “We could perfectly do that when we feel there is an urgent need for that -- I don’t think so for the moment, but it could be in two weeks,” Coene said. The ECB council next convenes on Oct. 6.

Rate Cut Forecasts

Economists at Barclays Capital, JPMorgan Chase & Co. and Royal Bank of Scotland Plc predict the ECB will also be forced to reverse course on interest rates after raising them twice this year to curb inflation. The benchmark rate is currently 1.5 percent, compared with near-zero for the U.S. Federal Reserve and Bank of Japan, and the Bank of England’s 0.5 percent.

ECB policy makers are attending the annual meetings of the International Monetary Fund and World Bank in Washington. President Jean-Claude Trichet gives a speech here at 4:30 p.m.

German council member Jens Weidmann said a new recession is “unlikely” and the global economic situation is better than current sentiment would imply. Even so, the risk that turbulence on financial markets spills over into the real economy cannot be excluded, he said, adding the ECB has shown in the past that it’s “ready to provide the market with liquidity, also with longer maturities if necessary.”

G-20 Pledge

Finance chiefs from the Group of 20 yesterday pledged a “strong and coordinated international response to address the renewed challenges facing the global economy.”

Many G-20 members pressed Europeans to follow through on a July plan to expand the powers of the region’s rescue fund, Japanese Finance Minister Jun Azumi told reporters.

European parliaments are focused on approving the July agreement to expand the scope of the 440 billion-euro ($594 billion) European Financial Stability Facility to allow it to buy the debt of stressed euro-area governments, aid troubled banks and offer credit lines. Its current role is to sell bonds to fund rescue loans for cash-strapped governments.

‘Problematic Discussions’

“We really, really hope that it will be up and running by mid-October, but you know yourself how problematic the discussions in some countries are,” Nowotny said. After legal ratification, it may take another six to eight weeks for the EFSF to start intervening, he added.

The ratification process has drawn fire from some investors for being protracted and failing to provide the fund with enough cash to prevent the crisis leaking beyond Greece. Curbing the scope of policy makers to do more is the suspicion taxpayers in AAA-rated countries such as Germany and Finland would balk at stumping up even more rescue cash.

That has fanned speculation Europe may eventually ratchet up the fund’s spending power, perhaps by using the bonds it sells as collateral to borrow more cash from the ECB. Another proposal is to mimic a U.S. program established following the 2008 collapse of Lehman Brothers Holdings Inc. by allowing the fund to offer the ECB credit protection for buying more sovereign bonds.

EFSF Firepower

“It is very important that we look at the possibility of leveraging the EFSF resources and funding to have a stronger impact and make it more effective,” European Union Monetary Affairs Commissioner Olli Rehn said in Washington yesterday. French Finance Minister Francois Baroin said separately that policy makers “need the right firewall to prevent contagion” and can discuss giving the fund “the necessary strength.”

Weidmann has said he opposes turning the EFSF into a bank that can refinance itself at the ECB as it would amount to “monetizing state debt.” Coene also said he’s “not sure that will be a good idea.”

Coene signaled reluctance to step up the central bank’s government bond purchase program even after the IMF said Sept. 20 the ECB “must continue to intervene strongly” in European debt markets to “maintain orderly conditions.”

“I think it has been a helpful element in the beginning but of course it cannot be a structural element of the system,” the Belgian central banker said. “The main reason was that we wanted to keep the transmission of monetary policy as good as possible until the moment that the EFSF will be able to take over” the bond buying, he said.

The ECB was forced to restart the purchases last month after governments failed to convince investors they can solve the crisis which, according to a research paper published by the ECB this week, is putting the survival of the euro at risk. ECB Executive Board member Juergen Stark, a co-author of that paper, resigned this month to protest the bond program.

ECB Vice President Vitor Constancio said in Frankfurt last night that sustained bond purchases by the central bank would only delay the fiscal adjustments that euro-area governments need to make.

So far, only seven of the euro area’s 17 governments have ratified the upgrade of the EFSF.

--With assistance from Rainer Buergin in Washington and Jana Randow in Frankfurt. Editors: Matthew Brockett, Simone Meier

To contact the reporters on this story: Gabi Thesing in Washington at gthesing@bloomberg.net; Meera Louis in Washington at mlouis1@bloomberg.net

To contact the editor responsible for this story: Craig Stirling at cstirling1@bloomberg.net



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Fiat's Marchionne, Italian Credit Rating Downgrade

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Zynga IPO Outlook July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at

July 7 (Bloomberg) -- Michael Yoshikami, chief investment strategist at YCMNet Advisors, Bob Rice, general managing partner at Tangent Capital Partners LLC, Paul Martino, managing director at Bullpen Capital, and Paul Bard, director of research at Renaissance Capital LLC, talk about Zynga Inc.'s plan to raise $1 billion in an initial public offering and the outlook for the company. (Excerpts. Source: Bloomberg)



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Signs of Stress Grow at European Banks

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By Peter Coy

Europe’s debt mess has been festering for so long it sometimes feels more like a chronic condition than a life-or-death crisis. But as negotiations to prevent a Greek default drag on, investors and lenders increasingly are concerned that a banking crisis could break out, dragging down the Continental economy before Greece even has a chance to default. On Sept. 21 the International Monetary Fund estimated that Europe’s banks face more than $400 billion in losses and said that weak banks need to raise capital quickly.

The core of the problem? As the charts on these pages show, some European banks are in peril of losing what they need most: cheap funding. Banks profit by borrowing money for short periods—rolling over some of their debt as often as nightly—to fund long-term loans at higher rates. As concern about their exposure to a sovereign default grows, European banks are paying more to borrow.

Doubt about banks can quickly become self-fulfilling if worried depositors and lenders yank out their money. Remember: Lehman Brothers went from O.K. to dead in less than a week in 2008, when hedge funds and other banks concluded that the company couldn’t pay its bills.

Indicators of stress on European banks have risen sharply since midsummer. The eight largest U.S. money-market funds halved their lending to German, French, and U.K. banks over the past 12 months and stopped financing Italian and Spanish banks, according to data compiled by Bloomberg. Some Italian banks are so desperate for funds that they’re selling bonds to retail customers for five times the interest they offer on savings accounts.

Quarterly financial statements aren’t timely enough to show what’s going on. The smart money pays attention to market indicators that monitor European banks’ health daily—or even minute to minute. One measures the premium banks pay for unsecured three-month loans from one another vs. the superlow overnight rate controlled by the central bank. That signals a growing mistrust among banks. Another is the price of credit default swaps—insurance that pays out if a bank fails to pay its debts.

One arcane but critical sign of distress is the cost of a “basis swap”—a measure of how much European banks pay when they raise dollars by trading euro-denominated loans for dollar loans. The price of basis swaps has risen from 28 basis points (0.28 percentage points) of the deal value in mid-July to 98 basis points on Sept. 20. When the spread exceeds 150 basis points, “we are in large European bank failure zone,” says Conor Howell, head of exchange-traded funds trading at Christopher Street Capital in London.

“There is a vicious cycle,” says Yves-André Istel, a businessman and investment banker who often speaks with high government officials in Europe. “The doubts make the banks pull their horns in, which affects the real economy. As the real economy flattens out or worse, the revenue to the sovereigns is put into question, and the whole cycle heads downward.”

Sovereign debt may be the underlying problem, but “the fuse is shorter on the banks,” so they have to be shored up immediately, says Istel, who is deputy chairman of Swiss luxury goods company Richemont and a senior adviser to investment bank Rothschild. He says each nation should raise a rescue fund that would be available to invest in preferred shares and warrants of that nation’s banks. They should recruit private investors to participate in the funds, Istel says. The mere existence of the funds could shore up confidence while work proceeds on a sovereign-debt fix, he argues. What the indicators are saying is that there’s little time to waste.

The bottom line: Indicators of investor nervousness about the health of European banks are near or above their highest levels since 2008.

With Yalman Onaran, Sarah Jones and James Sterngold

Coy is Bloomberg Businessweek's Economics editor.



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France’s BNP, SocGen Trim Balance Sheets

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September 23, 2011, 5:45 AM EDT By Fabio Benedetti-Valentini

(Updates shares and CDSs in ninth, 14th paragraphs.)

Sept. 23 (Bloomberg) -- BNP Paribas SA and Societe Generale SA, France’s two largest banks, are trimming about 300 billion euros ($405 billion) off their balance sheets as Europe’s deepening debt crisis threatens to make them too big to save.

At the end of March, French financial firms had $672 billion in public and private debt in Greece, Portugal, Ireland, Italy and Spain, according to Basel, Switzerland-based Bank for International Settlements. That’s the biggest exposure to the euro-area’s troubled countries and almost a third more than German lenders. The four largest French banks have 5.9 trillion euros in total assets, including loans and bond holdings, or about three times France’s gross domestic product.

“The banks are entering a slimming cure, which is forced by the sovereign crisis,” said Jerome Forneris, who helps manage $10 billion, including the two French lenders, at Banque Martin Maurel in Marseille, France.

Rather than tap the market for capital, BNP Paribas and Societe Generale are seeking to free up a combined 10 billion euros through asset cuts and disposals. Paris-based BNP Paribas plans to cut $82 billion of corporate- and investment-banking assets, while Societe Generale may exit businesses such as aircraft and real-estate finance in the U.S.

The banks have been forced to act after concerns about their sovereign debt holdings made funds reluctant to lend to them, crimping liquidity options. At the end of 2010, France’s three largest banks had at least 500 billion euros of short-term and interbank funding rolling over within three months or less, according to a Barclays Capital note dated Sept. 7.

‘Problematic’ Rescue

“If liquidity conditions worsen, their size and the weight of their trading books would make it more problematic for the government to replicate a rescue like in 2008,” said Christophe Nijdam, an analyst at AlphaValue in Paris.

France provided about 20 billion euros to bolster capital levels at its largest banks after Lehman Brothers Holdings Inc.’s September 2008 bankruptcy. President Nicolas Sarkozy also set up a 320 billion-euro fund to guarantee bank debt.

“If guarantees had to be put in place again like in 2008, it would represent close to 20 percent of GDP,” Nijdam said. With French public debt set to rise to almost 90 percent of GDP in 2012, it would “be more problematic today,” he said.

Credit markets signal a squeeze at French banks, with increased risk of default. Credit-default swaps on BNP Paribas have soared to 299.6 basis points from 110 in July, according to CMA. Contracts on Credit Agricole SA have climbed to 297 from 130, and those for Societe Generale have surged to 410 from 128.

‘Drastic and Disorderly’

“If it persists, the banks would have no choice but to delever their balance sheets in a very drastic and disorderly fashion,” Mohamed El-Erian, chief executive officer of Pacific Investment Management Co., wrote in an opinion piece on the website of the Financial Times yesterday.

The effort to shrink operations reverses French banks’ buying binge and expansion in the last decade. French lenders spent about $173 billion on acquisitions since 2000, according to Bloomberg data. Outside of France, they invested in Italy, Belgium, Germany and the U.S.

“When the euro was established, there were spots to be among the big regional banking players,” said Francois Chaulet, who helps manage 250 million euros at Montsegur Finance in Paris. “A race for size started not just in France, but throughout Europe. French banks went into southern Europe because these banking markets were still fragmented, with retail-banking margins higher than in northern Europe.”

Tumbling Shares

That expansion has now come back to haunt French banks. Their exposure to Europe’s problem areas and a tightening in U.S. dollar funding are weighing on their shares.

Before today, Societe Generale had declined by 63 percent since the start of July, making it the worst performer in the 46-member Bloomberg Europe Banks and Financial Services Index. BNP Paribas fell 57 percent in the period, the third-worst performance, while Credit Agricole dropped 59 percent, the second-worst performance.

Societe Generale rose as much as 3.4 percent today, while BNP Paribas gained up to 3.6 percent and Credit Agricole added as much as 5.4 percent

Moody’s Investors Service lowered the credit ratings of Societe Generale and Credit Agricole last week and said it may downgrade BNP Paribas.

French financial firms top the list of Greek creditors with about $57 billion in overall exposure to private and public debt at the end of March, according to the BIS.

Buying Binge

In Italy, whose sovereign rating was cut by Standard & Poor’s this week, French financial firms at the end of March carried $410 billion in government and private debt, according to BIS data. That’s the most for financial firms from any foreign country.

French lenders’ debt holdings in Spain stand at $146 billion, in Ireland $30 billion and in Portugal $28 billion.

Credit Agricole spent about 2.2 billion euros in 2006 to amass a controlling stake in Emporiki Bank of Greece SA and then increased its holding over time. Societe Generale has a controlling stake in unprofitable Athens-based Geniki Bank SA. BNP Paribas, which has exposure to Greek sovereign debt, doesn’t have a branch network in the country.

In Italy, French financial companies spent at least 20 billion euros since 2006 to buy banking and insurance assets in the euro-area’s third-largest economy.

‘Not an Issue’

BNP Paribas and Credit Agricole bought two of Italy’s 10 largest lenders. BNP Paribas acquired Rome-based Banca Nazionale del Lavoro SpA in 2006 for 9 billion euros. Credit Agricole’s Cariparma unit in Italy operates about 960 branches.

The three biggest French banks say their exposures are manageable, rejecting suggestions that they need to recapitalize.

“Our situation is under control in terms of liquidity and shareholders’ equity,” BNP Paribas Chief Executive Officer Baudouin Prot said in a French radio interview yesterday. Injection of capital by the state “is neither part of our working hypothesis nor what we want,” he said.

Greece “is not an issue” for Societe Generale, CEO Frederic Oudea said Sept. 12. A hypothetical writedown of as much as 50 percent would result in net losses of between 100 million euros and 150 million euros, he said. The bank said it has “low, declining and manageable sovereign exposure” of 4.3 billion euros to Italy, Spain, Portugal, Ireland and Greece.

Capital Buffers

The European debt crisis has generated as much as 300 billion euros in credit risk for European banks, the International Monetary Fund said this week, calling for capital injections to reassure investors and support lending.

“Without additional capital buffers, problems in accessing funding are likely to create deleveraging pressures at banks, which will force them to cut credit to the real economy,” the IMF said.

French banks have so far rejected such calls.

“French banks have no capital problem,” said Oudea, who is currently the head of the French Banking Federation.

Not all investors and analysts are convinced.

“These banks operate in countries where the public debt is under attack,” said Montsegur’s Chaulet. “That’s the threat.”

Faced with the specter of a Greek debt default, U.S. money- market investors have curbed funding to European banks. At the end of July, the 10 largest U.S. money funds eligible to purchase corporate debt, had cut their exposure to European banks by 20 percent from May 31, according to Fitch Ratings.

Scared Markets

“When the market gets scared, you have this short-dated paper that matures and it is not renewed,” AlphaValue’s Nijdam said. “Because it is in big chunks, the liquidity squeeze can go much faster than, let’s say, a traditional bank run from retail customers.”

French banks say they can cope with the slump in U.S. money-market funding. On Sept. 15, the European Central Bank said it will ensure euro-area lenders access to dollars in coordination with the Federal Reserve.

French banks also have diversified sources of profit, including less cyclical businesses such as insurance, that allowed them to weather the 2008-2009 crisis, said Montsegur’s Chaulet. The lenders’ domestic retail business -- their mainstay -- remains strong, Oudea said this month.

“The banks don’t want to recapitalize and focus on highly profitable businesses or on their domestic retail markets,” said Martin Maurel’s Forneris. “If the sovereign debt crisis is solved, these stocks have a huge potential of rebound over the medium term.”

Underestimated Crisis

For now, the scarcity of short-term U.S dollar funding and sovereign debt crisis that is both deepening and widening is driving banks’ efforts to slim down.

Societe Generale said it plans to free up 4 billion euros in capital through disposals by 2013. Its disposals may come from its Global Investment Management and Services division, Oudea has said, without giving further details. Analysts estimate the bank is shrinking its balance sheet by about 100 billion euros, a number the bank declined to confirm or deny.

BNP plans to cut its total assets by 10 percent, or about 200 billion euros. It’s shrinking its corporate- and-investment banking unit, where there will be “significant” job reductions, Prot said yesterday. On Sept. 19, the bank said it will discontinue its “pure retail” banking activity in Russia, where it operates 26 branches.

BNP Paribas is shrinking its balance sheet after total assets rose 34 percent to 2.24 trillion euros in the three years through June 2010. Total assets were at 1.93 trillion euros in June, about the same size as France’s GDP.

‘Not Enough’

“It’s a step in the right direction, but maybe it won’t be enough,” said AlphaValue’s Nijdam. “To cut the balance sheet, it’s quicker to adjust through the trading books. BNP and SocGen lack the ambition to reduce the size of trading books.”

The banks are also late in taking such steps, said Lutz Roehmeyer, who helps manage about $14 billion at Landesbank Berlin Investment GmbH and holds shares in the two banks.

“They underestimated how big the crisis could get in Europe,” Roehmeyer said. “But this is not a new crisis, it’s just the aftermath of the 2008 banking crisis.”

--With reporting by Abigail Moses in London and Sandrine Rastello in Washington, D.C. and Rebecca Christie in Brussels. Editors: Vidya Root, Frank Connelly

To contact the reporter on this story: Fabio Benedetti-Valentini in Paris at fabiobv@bloomberg.net

To contact the editor responsible for this story: Frank Connelly at fconnelly@bloomberg.net



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Ship Owner to Mothball Supertanker on Glut

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September 23, 2011, 9:55 AM EDT By Michelle Wiese Bockmann

(Updates with daily rents in third paragraph.)

Sept. 23 (Bloomberg) -- A shipowner will mothball a newly built supertanker for the first time since the 1980s as a glut of the ships erodes earnings to an unprofitable $1,000 a day.

The tanker, capable of carrying 2 million barrels of crude, will be sent to a natural harbor in Malaysia, Arild Johannessen, an Oslo-based spokesman for Wilhelmsen Ship Management, which will oversee the deactivation, said by phone today. He declined to identify the ship because the details are private.

Earnings from this class of vessel, which carry about a fifth of the world’s oil, last week averaged $1,000 a day, according to Braemar Shipping Services Plc in London, the U.K.’s second-largest publicly traded shipbroker. Some tankers were contracted speculatively and not secured against long-term charters, according to Holger Romer, spokesman for Hamburg, Germany-based Dr. Peters Group, owner of 19 supertankers.

“If you have a new ship that was ordered in ‘07 and ‘08, it was at a high price and now if you don’t have a charterer, it’s a big problem,” Romer said by phone. Dr. Peters Group owns 19 supertankers, he said.

The largest supertanker fleet in 29 years has cut earnings from the vessels by 96 percent since 2007 when they rose to a record $229,000 a day, according to data from Clarkson Research Services Ltd., a unit of Clarkson Plc, the world’s largest shipbroker.

Orders Surged

Owners ordered the most tankers in about three decades in 2007 and 2008, depressing freight rates to a 14-year low, as the fleet swelled almost three times faster than demand, Clarkson data show.

The last time new tankers were delivered straight from shipyards to anchorages, a process known in the industry as lay up, was in the 1980s, with owners sending the vessels to fjords in Norway, Eleusis Bay in Greece and the waters off Malaysia and Sri Lanka, Hong Kong-based Charles de Trenck at Transport Trackers, an adviser on shipping and trade flows, said today by e-mail.

Prices for new tankers have fallen 35 percent to about $100 million, according to EA Gibson, a London-based tanker broker. Those ordered in 2007 and 2008 require daily earnings of $55,000 to break even, the broker estimated in November.

Running costs, excluding fuel, are $10,645 a day, according to Moore Stephens International, a London accounting firm.

Cold Lay-Up

The mothballing is probably the first time in at least three decades that a new supertanker has been deactivated before trading, according to Halvor Ellefsen, a shipbroker at Galbraith’s Ltd. in London.

“More than anything else, it just shows how many ships there are,” said Ellefsen, who has been a broker since 1987. “Even if this happens on a meaningful scale, it’s hard to see it saving the tanker industry as ships that get laid up will just come back into the market when freight rates jump.”

The particular kind of mothballing for this ship is called cold lay-up, which involves anchoring the vessel in a protected area for a “long period of time,” and shutting all systems, with a minimum crew on board, according to Johannessen.

Warm lay-up means the ship can return to trading more quickly.

The supertanker, along with another of the same type already trading, will join another 15 ships already managed at anchor at Labuan, Malaysia, Johannessen said.

There are 152 supertankers contracted to be built at Asian shipyards, and 570 in the fleet trading today, according to Clarkson. A record 55 of the tankers, also known as very large crude carriers, began trading in 2010, and 41 have joined so far in 2011, Clarkson data show.

There was an overhang of 50 VLCCs, Jens Martin Jensen, chief executive officer of the management unit at Frontline Ltd., the largest supertanker operator, said on a conference call Aug. 26.

--Editors: John Deane, Dan Weeks

To contact the reporter on this story: Michelle Wiese Bockmann in London at mwiesebockma@bloomberg.net

To contact the editor responsible for this story: Alaric Nightingale at anightingal1@bloomberg.net



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