Amid all the “feel good” human interest stories about the athletes at the upcoming Olympics, I somehow doubt that this story will be so prominent. It deals with gender testing of the athletes. This is just too funny, especially for those of us who remember the character of unknown gender, “Pat,” from Saturday Night Live. This is a serious issue however, which has historical roots dating back to the Third Reich and continuing through the East German athletic program, where the coaches forced medical cocktails on athletes to make them stronger often with disastrous results for the poor athletes.

Quote:

“For more than a year, officials in Beijing have been designing a special laboratory to determine the sex of any athletes taking part in this year's Olympic games. "Suspected athletes will be evaluated from their external appearances by experts and undergo blood tests to examine their sex hormones, genes and chromosomes for sex determination," says Professor Tian Qinjie. The tests will not be conducted on every female athlete, but will be required if serious doubts have been raised about an individual competitor - invariably one competing in the women's events. "The aim is to protect fairness at the games while also protecting the rights of people with abnormal sexual development," he says.

…

Unsurprisingly, gender-determination tests were seen as degrading, with female competitors having to submit to humiliating and invasive physical examinations by a series of doctors. Later, the IOC decided to use a supposedly more sophisticated genetic test, based on chromosomes. Women usually have two X chromosomes; men an X and a Y chromosome. So, according to the rules of the test, only those athletes with two X chromosomes could be classed as women. However, many geneticists criticised the tests, saying that sex is not as simple as X and Y chromosomes and is not always simple to ascertain.”

Here is the link to the full article:
http://www.guardian.co.uk/sport/2008/jul/30/olympicgames2008.gender

Michael McBride*
J. Michael McBride, P.C.
777 Main St., Suite 1150
Fort Worth, Texas 76102
* Admitted in Texas and New York

Brokerage firm Merrill has announced that it has a third quarter write-down of 5.7 billion and at the same time, as part of this effort to raise capital and face these write-downs, it is selling 8.5 billion in new stock. The primary buyer of the new shares is the government fund of Singapore. See this article from Reuters Online for more information about this latest announcement from Merrill:
http://www.reuters.com/article/rbssFinancialServicesAndRealEstateNews/idUSN2818295020080728?feedType=RSS&feedName=rbssFinancialServicesAndRealEstateNews&rpc=22&sp=true.

Quote:

“The Wall Street investment bank and brokerage announced its plans less than two weeks after posting a $4.9 billion second-quarter loss, hurt by more than $9 billion of write-downs.

Merrill said its stock sale includes $3.4 billion to Singapore's state-run Temasek Holdings Pte Ltd TEM.UL, one of its largest investors, and may grow to $9.8 billion to meet demand. Management also plans to buy 750,000 shares, it said.

Monday's write-down and plans to raise capital may raise further questions about Chief Executive John Thain's ability to turn around Merrill. The company has lost $19.2 billion in the last year and suffered more than $40 billion of write-downs from subprime mortgages and other risky debt.”

Also, here is an article from MarketWatch online which explains the ripple effect of Merrill’s decision to price its CDO’s at a more realistic figure (that is, 22 cents on the dollar):
http://www.marketwatch.com/news/story/story.aspx?guid=%7BB4E21A77%2DF6CB%2D4651%2DBDC2%2D6B490C6F0D26%7D&siteid=rss

Quote:

“However, Merrill's decision has effectively set a new, lower price for some of the most toxic credit assets that banks are holding on their balance sheets.

Mayo's estimate for the $8 billion third-quarter write-down on Citi's CDOs is based on the Merrill sale for 22 cents on the dollar, compared with the current marks at Citi of 53 cents.

The analyst said Citi "should still be able to absorb much of these charges and credit costs in general." However, Mayo, who has a hold rating on Citi shares, added the decision about raising new capital ‘could be closer than we previously thought.’”

Michael

Here is a link to a Business Week article with a fairly lengthy explanation of the drop in the used car market, which particularly discusses the used truck market. One “take away” from this article is that the correction we are now seeing may be too strong and it may thus be a good time to buy a used truck. The second point I would add is that this varies strongly by region, with the Fort Worth gas boom keeping prices on cars and trucks higher than average—for example.

Quote:

"I've never seen anything like it, where segments have fallen as much as they have and as quick as they have," says Ricky Beggs, vice-president and managing editor of Black Book, a widely used industry benchmark for trade-in prices and used-car auction data.

For instance, according to Black Book data, the average trade-in value of a 2006 Chevrolet Tahoe, once one of General Motors' (GM) top sellers, has fallen around 29%, or more than $6,000, since March. The Tahoe is a full-size SUV that also comes in a hybrid version.

Wholesale auction prices for used, full-size SUVs averaged $10,507 in June, according to Carmel (Ind.)-based Adesa, a used-vehicle auction company. That was down an average of $3,167, or 23.2%, vs. the year-ago month. Full-size pickups were down $3,203, or 27.3%, to $8,513, Adesa said. The fall in price for some individual models is much greater than the Adesa average.

Here is the link to the whole article:
http://www.businessweek.com/lifestyle/content/jul2008/bw20080725_510059.htm

Michael

Congress approved a long-awaiting housing market rescue bill on Saturday, July 26th, 2008, and President Bush is expected to sign the bill promptly. The bill offers emergency financing to Fannie Mae and Freddie Mac, and creates a $300 billion fund to help distressed homeowners.

America is in its deepest housing slump since the Great Depression, with a record number of foreclosures, anemic home sales, and steadily deflating property values. Fears earlier in the month of a collapse of Fannie Mae and Freddie Mac, which own or guarantee almost half of the country’s $12 trillion mortgage debt, led the Bush administration to end its opposition to a mortgage bailout program.

It is hoped that the emergency measures will bolster investor confidence, but many analysts feel the legislation may be too little, too late to have a dramatic or immediate effect on the downward trend.

The National Community Reinvestment Coalition, comprised of 600 community investment and redevelopment groups, estimated that 2.5 million U.S. households will face foreclosure this year. A NCRC spokesman stated that the legislation “will likely have little effect on the foreclosure crisis gripping the financial markets and economy.”

Connecticut Democratic Senator Christopher Dodd estimates that it will take four months to get the FHA program operating, and housing activists say it may not be fully operational until 2009.

The bill provides for a temporary line of credit for Fannie Mae and Freddie Mac, along with a provision allowing the government to buy shares in those programs, which raises concerns by many about the eventual cost to taxpayers. Texas Republican Senator Kay Bailey Hutchinson stated, “I am troubled by the inclusion of an unlimited U.S. Treasury credit line to Fannie Mae and Freddie Mac.”

Among the bill’s other provisions is the establishment of a $300 billion fund under the Federal Housing Administration to assist homeowners in obtaining more affordable government-backed mortgages, enabling them to escape high-interest subprime and adjustable rate mortgages. However, in order for an estimated 400,000 families to be helped by this program, lenders will be required to accept possible losses on the switchover by borrowers from their original loans to the more affordable new loans.

The legislation provides for about $4 billion in grants to communities to assist in buying, repairing, and renovating foreclosed homes, even though President Bush has expressed opposition to such a provision. The bill also offers tax breaks to encourage home buyers, establishes a national licensing system for mortgage brokers and loan officers, and raises the limit on the size of mortgages that federal agencies can guarantee. It also creates a new regulator over Fannie Mae and Freddie Mac, with increased power over controlling capital levels, executive compensation, and internal finances

“These provisions will go a long way toward restoring confidence in the housing markets by creating a new, stronger regulator with all the necessary tools to oversee Fannie Mae, Freddie Mac, and the Federal Home Loan Banks. OFHEO is ready to move forward quickly as part of the new Federal Housing Finance Agency, created by this bill,” said James Lockhart, director of the Office of Federal Housing Enterprise Oversight.

Presidential candidates John McCain and Barack Obama both expressed their support for the new legislation.

A spokesman for Senator McCain stated that McCain “believes that relief for struggling homeowners is overdue, applauds the passage of this legislation and urges the president to sign it quickly.”

Senator Obama stated that the bill was “urgently needed” and represented “an important start to protecting homeowners and restoring stability to our housing market and our economy.”

http://www.reuters.com/articlePrint?articleId=USN2141192720080727

http://www.marketwatch.com/news/story/massive-housing-relief-bill-awaits-presidents/story.aspx?guid=%7B4F8D1E25%2D5736%2D4F05%2DAEA0%2DC982EE25D3A9%7D&dist=hpts

Kathleen

As has been previously noted here, the Federal Reserve can make money more available to lenders, which it has done, but it cannot force a bank to make a loan. So, in the current economy, lenders are raising their lending standards on all loans, especially loans to businesses.

Quote:

But if the newfound caution of American banks is prudent in the long run, the immediate impact is amplifying the troubles with the economy. The Federal Reserve has been lowering interest rates aggressively to make money flow more loosely and to spur economic activity.

The financial system is not going along: As banks hold on to their dollars, mortgage rates are climbing. So are borrowing costs for corporations.

Some suggest that the banks, spooked by enormous losses, have replaced a disastrously indiscriminate willingness to hand out money with an equally arbitrary aversion to lend — even on industries that continue to grow.

"There's been a lot of disruption in the credit market, and a lot of traditional lenders have really tightened up," said Gregory Goldstein, president of Macquarie Equipment Finance, which leases computer gear and other technology to companies. "Before, some of the standards they lent on were weak, but we think they have overshot and gone too far on the other end."

Here is a link to the full article:
http://www.iht.com/articles/2008/07/28/business/28credit.php?page=1

Michael